Duma Gqubule asserts in his column Why state can spend itself out of trouble (November 20) that the post-World War 2 experiences of the UK and the US hold important lessons for SA as they demonstrate that increasing public spending can cause the economy to grow and reduce the national debt burden. He is brave but wrong. The UK and the US are special cases of economies that enjoyed the exorbitant privilege of being the sources of international money, otherwise known as reserve currencies — the UK on account of a colonial empire in which the pound sterling circulated as the sole medium of general exchange and the US on account of having been spared any bombs during the war. US production continued unabated and the country became the primary source of agricultural and industrial goods for the non-communist world. Its currency became the principal reserve currency for the post Bretton Woods world. This meant the US and UK could finance their government and external (balance of payments)...
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