The neoliberal summer is over and South Africa needs to adapt

Prepare for a wilder political and economic ride as the order rapidly fades, for the times they are a-changing

- Natale Labia

“And summer's lease hath all too short a date.” As the Global North looks ahead to colder climes, Shakespeare's remark on the fleeting nature of seasons resonated last week in two speeches that both suggest we are approaching the end of a political and economic summer.

The order built in the past half-century is straining, and its institutions no longer seem suited to the world they were built to govern.

First, at the Federal Reserve's annual gathering in the rarified mountain air of Jackson Hole, Wyoming, chair Jerome Powell delivered what will almost certainly be his last speech at the event before stepping down in May.

It was characteristic Powell: measured, serious and carefully worded. He outlined the central bank's predicament with clarity; a labour market visibly weakening, suggesting the need for lower interest rates, yet with inflation that is uncomfortably elevated.

Powell duly gave a hint as to where the Fed leans. “Adjustment” may be required, he said, which is central banker's code for rate cuts. Markets, expecting bland reassurance, were caught off-guard. The dollar slid, government bond prices climbed, and equities staged a late week rebound. Investors now assume the Fed will cut rates next month and likely at the two meetings thereafter.

But the larger significance of Powell's speech was in its finality. This was the last word of a Fed chair whose tenure embodied the old model of central banking; cautious, technocratic and insulated from politics. That model is now in doubt.

In most respects, this speech marked the closure of the era of Fed independence.

US President Donald Trump has made no secret of his loathing of Powell, whom he has dismissed as a “numbskull” for not bowing to pressure and cutting rates sooner. The Fed is notionally supported by structures that protect its independence, but Trump's record shows his willingness - and ability - to bend institutions to personal ends.