ON THE PITFALLS OF A DEVELOPMENTAL STATE

Abstract

1. Introduction Economic transformation has always been the cornerstone of the governing party since it assumed power in 1994. The notion of a developmental state has since the early 1990s been used as a catch-all phrase for the African National Congress (ANC) thinking on economic and social policies. There is even a subcommittee within the ANC called the Economic Transformation sub-committee, which is seen as the custodian of the ruling party's vision for socio-economic change, as well as offering broad guidelines for a range of policies that have to do with the economy. Over the years since the ANC came into power in 1994, the idea of building a developmental state has continued to serve as an organising principle to frame the nature of change desired by the government. It is a notion that is conceptually ambiguous and lacking in precision with respect to policy application. According to Pempel (1997: 139), developmental states define their missions primarily in terms of long-term national economic enhancement, and they actively and regularly intervene in economic activities with the goal of improving the international competitiveness of their domestic economies. According to this definition, the imperative for managing structural change domestically, for example, improving the growth profile of the economy, diversifying the production base, and generating employment is pursued alongside strategies to promote the country as an investment destination to foreign capital. In many instances, the emphasis placed by the governing party on the notion of the developmental state stresses a more teleological thrust expressed in a certain state of completeness, and usually in reference to the typology of East Asian countries. Beyond rhetoric, it is worth probing what exactly does 'developmental state' mean in the post1990 South African context, a period characterised by increasing global integration and emergence of 'footloose' capital favouring locations where the state is seen as less interventionist. 2. Conceptual map By the time that South Africa started its transition from apartheid to democracy in the early 1990s, the pendulum of economic thinking had shifted globally and strongly towards neoliberal restructuring as an article of faith for economic policy making. This came in the wake of the oil crisis of the early 1970s and the attendant recession of the 1980s. In much of the developing world the state was in retreat, and giving way to a deregulation and liberalising agenda that would presumably stem the crisis. To prove its credentials as a responsible international citizen, South Africa drew heavily on the major themes of the Washington Consensus, in both its pure (laissez faire) and augmented versions (a blending of regulatory features and free markets). Given the centrality, though, of the trade unions in the struggle for liberation, and their closeness to the new governing party in South Africa, measures such as flexible labour markets were ignored in favour of a much tighter legislative regime that included the Labour Regulation Act of 1995 and a welter of worker-friendly measures that followed, including the Basic Conditions of Employment Act and Employment Equity Act, amongst others. Trade unions, especially through the association of the Congress of South African Trade Unions (COSATU) with the governing party, were deeply embedded in the post-apartheid economic policy formulation. This was facilitated by the informally structured tripartite alliance summit that also included the South African Communist Party (SACP) as well as through the more formally structured National Economic Development and Labour Council (NEDLAC) that came into existence in 1995. While the broader macro-economic policy framework was crafted in a way that was sensitive to international capital, the more specific and sectoral policy arrangements were oriented more closely to trade unions as a powerful political constituency of the governing party. …