The Need of A Developmental State In Economic Transformation – By Tolika Sibiya

“In our context we paid lip service in regards to building a strong, professional and proficient state that directs and support economic growth and development through effective state entities that can drive strategic investments initiatives. In other words, we do not have the necessary mechanisms or instruments such as professional and highly skilled bureaucracy to dispatch and drive our developmental agenda. Though we do have a highly sophisticated and advanced skilled personnel in South Africa. That obstructs any aspirations of having a pointed, objective and rational developmental agenda.”

By Tolika Sibiya (Heads Policy and Research Unit of South African Youth Council (SAYC), and an ANC/ANCYL member of Ward 57, David Webster Branch in Greater JHB Region)

In his book MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975,  the  “father” of the development state concept Chalmers Ashby Johnson argued that the state (not business, or labour) has a focused role when it comes to growth and development of the economy and need to undertake necessary policy measures to accomplish this long-term objective. Mathebula (2016) concurs that central to a developmental state is macro-economic policies to drive growth through industrialization and socio-economic development.

Whilst the notion of a development state arose out of unique settings of the World War era in Japan and other East Asian economies, the main objective behind it was to bring into discourse something new beyond the known differences between America capitalist and Soviet inspired economies and find a middle ground between two dominant economic models of the time with  the state legitimately central in development (Hauge & Chang, 2019).

Wade (1990) posits that for the programme to thrive the state has to take industry into confidence and not be hostile to business functions in the economy as long as disciplinary measures are in place to intervene when it goes astray  for narrow selfish-ends of profit. In this regard, the state has to intervene for the collective interest of the nation rather than reforming and succumbing to principles of laisses-fair. Therefore, the state’s principal goal in this context is to drive economic growth through an industrialization process. Fukasaku (2004) concurs that allowing business and foreign direct investment to trade freely has many rewards to liberalising economies in terms of exports, employment, productivity all of which are crucially to propel growth.

 Asian Tigers   

The concept of development is associated with high levels of growth and development.  It was inspired by unique experiences of Japan in the 1950s, South Korea in the 1960s, and China in the 1980s as Asian countries pursued growth at phenomenal rates. The Asian tigers, as the countries are popular known, are a point of references of nations who, in the context of a developmental state, successfully (though not perfect) ushered in economic growth and recovery post the world war. They employed the Weberian approach to focus on building resourceful and efficient bureaucratic systems that are interrelated which in turn accelerated growth ensuring that socio-economic conditions of poverty, unemployment and underdevelopment occasioned world wars significantly declined.  Albeit, some managed to stabilize and achieve growth equity, others have been sluggish to address inequality,

Amsden (2010) postulates that the success of poverty alleviation methods will not succeed in employment creation unless stimulated by government. Thus, industrial growth is seen as a necessary catalyst for socio-economic transformation and creating employment opportunities. Developmental states have a role to play in economic transformation to address inequalities, poverty and unemployment. It though requires visionary leadership, political commitment to use necessary resources efficiently as well appointment of qualified and capable workforce to drive state institutions. Craig (2017) posits that some African countries notably Ghana, Botswana and Rwanda have followed the developmental agenda or Asian miracles in a fairly successful (not perfect) manner.

The South African case

There is no doubt that the debate in South Africa is still an open-ended discussion with contending views on whether South Africa is a developmental state. Dominant narratives suggest that South Africa is not a developmental state, but work in progress. Mathebula (2016) argues that  South Africa is aspiring to become a developmental state employing the same models of the Asian countries.

Gumede (2008); (2009); (2011) concurs that the South African context of developmental trajectory is rather work in progress because of minimal measures such as appropriate vision, some level of commitment, policies are in place, institutions exist  and a living democracy with fairly free elections.  Ben Turok had similar observations arguing that South Africa fails the test of being a developmental state albeit significant strides have been made towards the right direction.

The features of this broad vision are anchored on state capacity to intervene in the economy in the interest of growth and sustainable development to address socio-economic problems of poverty, inequality and unemployment. Therefore, the desire of the ANC led government to pursue a state led growth is important to transform the economy to arrest poverty and other social disparities that are interconnected. For  Chibba and Luiz (2011) orthodox economics have severe and profound fault lines that have failed in many policy areas, including addressing persistent poverty and inequality. They argue that there is convergence amongst many role players including policymakers and social scientists alike about the severity of failure of the conventional economic policies in comparison to other emerging market economies

Industrialization and Policy nexus

The overarching problem facing South Africa is it’s extreme levels of poverty, racial inequalities and the stubbornly increasing levels of unemployment (Francis, 2001; Statistics South Africa, 2018; Treat et al., 2012; Tregenna & Tsela, 2008; Woolard, 2002). To address the poverty conditions and lack of employment due to growth constrains, industrialization is central to economic growth to create employment and thus reduce poverty.

Industrialisation is often seen as a gateway to inclusive growth. Zalk (2014) posits that industrial development plays a role by growing the economy for rapid development of society. To achieve economic transformation as one of the economic objectives of the congress alliance, empirical literature is evident in support of industrialization-growth nexus. Thus, it’s important for South Africa to invest energies in shaping policy framework that ensures promotion and sustainability of industrial manufacturing sectors by providing relevant and industry-recognized requisite skills to achieve rapid growth (Guadagno, 2012).

Education and training are central for industrial development because a highly capable and well trained workforce with technical skills is also critical to drive the developmental agenda. After these good policies, state institutions, industrialization which have been pursued by Asian countries were driven to a greater extent by a strong, professional, competent and adept public service.

In our context we paid lip service in regards to building a strong, professional and proficient state that directs and support economic growth and development through effective state entities that can lead strategic investments initiatives. In other words, we do not have the necessary mechanisms or instruments such as professional and highly skilled bureaucracy to dispatch and drive our developmental agenda. Though we do have a highly sophisticated and advanced skilled personnel in South Africa but not in the public service.

Chapter 13 of the National Development Plan (NDP) concurs that whilst progress has been made, there is inadequate capacity that led to unevenness of performance at all levels. This is caused by a set of complicated factors such as tension administrative-political interface, skills deficit, and general erosion of accountability, low staff moral and disregard of authority. The NDP proposes eight targeted areas of intervention which amongst others is developing technical and specialised professional skills. Also, State Owned Enterprises the important state institutions amongst many that needs to drive a clear public interest developmental mandate with a clear governance structures to facilitate and reconcile with economic and social objectives.

Post-1994 Economic Performance

There is no doubt that the transition to a  democratic state was rather a nightmare in South Africa that had a dysfunctional economy that over the years excluded the majority population (Burger & von Fintel, 2009; Statistics South Africa, 2018; Van der Berg, 2011). As result, our economic performance since 1994 has been lacklustre particularly in manufacturing.

Furthermore, existing government policies seem unable to crowd-in needed investment and capabilities to grow a strong and sustainable manufacturing sector. It seems there is no proper and effective coordination and cooperation amongst several ministries engaged in trade and industrial policies. In addition, our state owned entities that should be central in transforming and driving the developmental agenda, are instead swamped with poor governance, weak management thus corruption is inevitable.  Unfortunately, this impedes their effective role in driving the developmental agenda.

In this context, the state broadly lacks the vision, political will and commitment to drive a developmental agenda.

The starting point to drive industrialisation is repositioning of the industrial policy to reduce number of sectors to be prioritized to make a meaningful dent in our growth trajectory. We currently have approximately 15 sectors, and we need to decrease these to at least five sectors minimum and our industrial policy needs to be forceful and large in scale.

In an industrial policy dialogue organized by Trade for Industry Policy Strategies in September 2019, the South Korean developmental economist Ha-Joon Chang commented about Industrialization history of SA, arguing that once upon a time, we were once literally the most industrialized nation outside of the core capitalist world.  He postulated that our per capita manufacturing value added (MVA) in the 1960s was around 61% to that of Japan and 15% compared to the US. Currently, our MVA now sits at 11% compared to Japan.  Even our Brics partners (China and India) have overtaken us in this regard.

Ha-Joon attributed the industrial policy failure to poor and weak coordination in policy development, including an overly restrictive macroeconomic policy. For South Africa to be a democratic developmental state, the government must take control of the socio-economic transformation programme. In the main, South Africa needs a thoughtful reorganization of state-capital relations, if not the complete shakeup of the society itself (Gumede, 2008, 2009, 2011, 2014).  Gumede postulates that anything else would simply scratch the surface and the developmental state aspirations would continue as that (i.e. a dream)  so long as Africans remain worse off in important socio-economic development aspects.

Conclusion

To address the poverty conditions and lack of employment due to growth constrains, industrialization is central to economic growth to open up new industries and create employment thus reduce poverty. It is critical for economic transformation to uplift the poor and vulnerable communities from shackles of squalor conditions which boarders on injustice and indignity. Existing empirical evidence at a global scale seem to support the industrialization- growth nexus. Thus, as a developing country we need to invest in shaping policy structure that ensures not only promotion, but the sustainability of industrial manufacturing sectors.

A developmental trajectory should be centred on a strong, professional, competent and adept public service. National Development Plan (2010) postulates that proficiency, skills and technical capabilities are central to the state’s vision to drive developmental and transformative role

References

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