The whole economically-aware population of South Africa is celebrating that the three main ratings agencies held off on junking the country’s financial reputation in the past two weeks. I am celebrating too. But a closer look is needed. The statement by Standard & Poors – more strict than Fitch and Moody’s – lacked logic and conviction. Aside from predictable neo-liberal nostrum to cut the budget deficit and reduce labour’s limited influence even further, Standard & Poors neglected some critical economic weaknesses. Credit rating agencies are dangerous institutions. Their mistakes can be catastrophic to investors and the broader economy. As the 2008 world financial meltdown gathered pace, for instance, they gave AAA investment grade ratings to Lehman Brothers and AIG – just before these companies crashed. No wonder the Brazil-Russia-India-China-South Africa 2016 summit in Goa agreed to explore setting up an independent BRICS Rating Agency based on “market-oriented principles” to “f...
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