How can a developmental state be cobbled together in the specific political, social and economic environment of a South Africa that at the same time needs to deepen its democracy? This policy brief explores this central question.
The 1997/1998 Asian financial crisis, but also the aftermath of the global democratisation wave following the end of the Cold War, has sparked an intense debate over whether the developmental state, hitherto thought only applicable to authoritarian states, can be developed under democratic conditions. This brought a new model of the developmental state: that of the democratic developmental state into the discourse. Many had argued that a democratic developmental state is “a rare bird on the developmental scene” (White 1988: 44). This, because the aims of a democratic developmental state were “potentially contradictory and difficult to achieve: autonomy and accountability; growth and redistribution; consensus and inclusiveness” (White 1988: 44).
However, many others have increasingly authoritatively argued there is strong evidence for the thesis that developmental states can successfully manage the balance between economic growth and social development and build democratic institutions at the same time (Heller 1999). Dani Rodrik, the Turkish economist, is one of those who has shown, in his groundbreaking research, that democracy is not only compatible with growth and poverty reduction, but may actually be crucial to both (Rodrik 2004). This policy brief argues that for South Africa and many developing countries, the alternatives – to pursuing a democratic developmental state – are ultimately worse.
This policy brief will grapple with the central question: how can a developmental state be cobbled together in the specific political, social and economic environment of a South Africa that at the same time needs to deepen its democracy? It will firstly, look at the obstacles in the path of delivering a democratic developmental state in South Africa. Secondly, it will focus on the steps to be taken if South Africa genuinely wants to deliver a democratic developmental state.
Why the need for a democratic developmental state?
Most successful developmental states have faced a terrible threat and stark choice: either to industrialise quickly, or face being forcefully swallowed by more powerful neighbours. Whilst South Africa does not face the same external threats, its internal threats are equally foreboding: levels of unemployment that has only been seen during the Great Depression of the 1930s, persistently high levels of poverty and increasing inequality. The recent increasing spate of civil unrest suggests that our choices are no less stark. Policy discussions in South Africa, especially within the ANC tripartite alliance political family, are often framed within South Africa’s political ambition to build a “developmental state”.
Yet, in South Africa, there is not only conflicting understanding and confusion over what is meant by a developmental state – or whether it is even possible. But also crucially, little has been said about the ‘democratic’ part of cobbling together a developmental state. Both these lacunae undermine the very effort to create a developmental state. Some dismiss the call for a developmental state as utopian or ideological. They argue that East Asian developmental states cannot be replicated in South Africa. This argument assumes that developmental states only occurred in East Asia, and only within regional specific conditions. This is indeed a narrow reading of what a developmental state is all about.
Others again argue that since East Asian developmental states were created under un-democratic periods, the developmental state in South Africa must then be necessarily autocratic. They further argue that since East Asian developmental states were created under un-democratic periods, there is nothing wrong with putting less emphasis on democracy building, than on pursuing growth. This argument is of course misplaced. Many again only look at one specific reform pursued by developmental states – rather than a more holistic view. This, some may view the developmental state narrowly as one where the state pursues an active industrial policy. Others again, focus only on making the state bureaucracy more efficient, and on improving coordination and prioritisation, and so on. All of these are of course only part-true.
Some support a developmental state because they wrongly argue only the state can deliver development; whereas others again argue only the market can deliver on development. However, the truth is that “neither the ‘market’ nor the “State” can by (themselves) deliver” development (UNCTAD 2007: 61). UNCTAD, in its 2007 report on developmental states, concludes rightly that “the real path to sustainable growth and development emanates from a pragmatic mix of markets and state action, taking into consideration the country-specific development challenges” (UNCTAD 2007: 61).
Furthermore, at the heart of successful developmental states is a mix of several inter-locked conditions: an effective capacity of the state, the presence of key institutions, their inter-arrangements and mix; and their relationships with the market, civil society – business, organised labour, communities, and citizens. Furthermore, at the heart of successful developmental states are not only relevant policies, particularly industrial policy, but specific institutional arrangements, both formal and informal, and public and private, which interface to provide the optimum conditions for economic growth and development.
Finally, South Africa’s Constitution makes a case for a state that is both developmental and democratic. It can be argued that South Africa’s constitution sets the broad outline for a democratic developmental state. The question should then be just how should a democratic developmental state be cobbled together in the specific political, social and economic environment of South Africa.
What are the obstacles in the path of delivering a democratic developmental state in South Africa?
Peter Evans (1995) argued that the construction of a developmental state depends ‘on specific historical endowments and the character of the surrounding social structure’. These ‘historical endowments’ and the ‘social structure’ may inhibit or help to build developmental states. What are the specific ‘historical endowments’ and ‘social structures’ that may limit the building of an effective developmental state in South Africa?
South Africa is now one of the most unequal societies in the world. Furthermore, inequality of income is spread mostly across racial lines and is itself a potential source of political instability. Most of the East Asian and many Western European countries started their industrialisation when their populations had reasonable levels of equality – or all were poor. This meant they could focus unencumbered on achieving growth because they started off from a much more equitable base.
Like India, South Africa is also shackled by having to pursue nation-building and economic development at the same time. Furthermore, South Africa will have to, like Malaysia, deliver a developmental state where the population is not racially homogenous – as is the case for the majority of the East Asian developmental states. Thus the East Asian countries had a much longer experience as distinct nations and cultures.
In South Africa, not only will delivery have to take place in the economic and social spheres, but democracy must also be deepened. This will demand that the country successfully manages the balance between economic growth and social development while at the same time building democratic institutions, in order to develop an empowered citizenry with the capabilities to seize and maximise whatever opportunities come before them. It will also demand revitalising civil society to move beyond the politics of protest to the politics of engagement. It will also mean redesigning public and private sector relationships outside of impotent tripartite negotiating platforms.
A successful democratic developmental state requires political will, long-term vision and a determination by the country’s political elite to determinedly drive a broad-based and inclusive development, industrialisation and development project.
The conflicting understanding of and confusion over what is meant by a developmental state; and the lack of consensus about the specific kind of developmental state, the democratic developmental state remain obstacles. Furthermore, a lack of consensus over what economic policies to pursue is a constraining factor.
South Africa’s state has not effectively moved from its apartheid-era culture to a focus on efficiency. This will involve being serious about building an effective and efficient state with strong accountability systems; reimagining the paradigms of ‘delivery’.
Timing is also a very important ingredient for the success of an individual developmental state. The post-war industrialisation of Japan and the other successful East Asian and European developmental states “arose in the framework of a hegemonic international political economy that made possible the co-existence of developmental nationalism and growing openness in world trade” (Loriaux 1999). Clearly, this is not the case now to the same extent as it was for the East Asian economies.
But the global financial crisis that plunged the world economy in crisis also offers developing countries such as South Africa more of an opportunity to not only refashion their own economies but to help re-create a new global financial system, that could provide individual developing countries the policy space to pursue developmental objectives particular to their countries. The global financial crisis has tilted the balance of global power towards emerging markets – opening up the space to shift global trade relations, which has been skewed towards developed economies, to the disadvantage of developing economies.
What steps need to be taken to deliver a democratic developmental state?
Recommendation: secure the necessary political will for seriously implementing a democratic developmental state. Research suggests that a successful developmental state requires political will, long-term vision and a determination by the country’s political elite to relentlessly drive a development and modernisation project.
Recommendation: Clarify where the central coordinating centre is located. Most successful developmental states had a central co-ordinating centre driving economic transformation. From this co-ordinating centre, the state directly coordinated industrial investment; actively directed macro-economic policy towards developmental goals; and jealously protected and promoted the widest national interest, rather than factional, ethnical or regional interests. At the moment, there is confusion over what is the central co-ordinating centre: should it be in government, and where, or should it be located in the ANC-SACP-Cosatu tripartite alliance secretariat.
Recommendation: The National Planning Commission should come up with a long-term economic growth path that has broad-based legitimacy. Very few, if any, developing countries have progressed in terms of economic development, unless they cobbled together a long-term development plan, integrating short-term (present), medium-term and long-term goals. In addition, getting the right policies in place; which includes getting the sequencing right and having the flexibility to change quickly when a strategy is not working, was crucial to the East Asian success. A long-term development plan must have public and stakeholder legitimacy.
Recommendation: Strengthen policy coherence, boost monitoring and evaluation. Successful developmental states boasted high levels of policy co-ordination, linked to a well-established monitoring and evaluation mechanism. There is currently not only mandate creep, between different government departments, ministries, and state-owned companies, but also a silo mentality in operational work, with little co-ordination of core functions, but the state’s monitoring and evaluation capacity is still underdeveloped.
Recommendation: Beef-up the capacity of the state. The state must also have the administrative, technical and political capacity, and competency to set national goals, make use of the market and implement these policies, driven by a bureaucracy that has broad public and political legitimacy.
Recommendation: Implement a zero-tolerance policy against corruption. The state must be strong enough to resist being captured opportunistically by social forces “that might dissuade it from the use of its capacity to design and implement policies” (UNCTAD, 2007) that are focused on economic and social development.
Recommendation: Reinvigorate the idea of social pacts. The nature and relationship between different social institutions are crucial in successful developmental states. The East Asian developmental states formed dynamic alliances, in pursuit of a common goal – economic growth and development – between “political powers and the private sector, and between banks and public and private firms” (UNCTAD, 2007). Managing these, whether through social pacts or through national consensus, is the key ingredient for successful developmental states. For the past few years’ government, organised labour, and business and community organisations have failed to cobble together a national social pact. Perhaps in the short term, it would be best to structure sector-based social pacts.
Recommendation: Renegotiate the ‘reciprocity’ of engagement between the state and civil society. The coordination and cooperation between the state and civil society are also vital for effective state capacity. In fact, the ‘reciprocity’ of engagement between the state and society is crucial for both democracy and development (Weiss 1998). This reciprocal co-operation between the state and civil society – business, organised labour, NGOs, COBs, and communities – enhances the capacity of the state to deliver. To improve the state’s capacity, there needs to be synergy between the state, civil society, and communities. This has been at the heart of successful transformative projects, not only in East Asian developmental states but also in their post-Second World War Western European counterparts.
In successful developmental states, there has been a special institutional link between the state and societal actors, a kind of negotiated relationship, where either the state or social partners or communities, can and do take policy initiatives, but the state retains its guiding role, either by exercising leadership directly, or by delegating it to social partners. There are recent positive examples of potential ‘reciprocity’ between the state and other social partners.
For example, in May 2010, South Africa’s two largest business organisations, Business Leadership South Africa and Business Unity South Africa, pledged to come up with self-generated initiatives to help government lift electricity capacity. Or Business Leadership South Africa’s initiative to double or triple the size of South Africa’s economy within a generation; or their initiative to get company CEO’s to commit to skills development or more responsible corporate behaviour.
Recommendation: Deepen democracy at all levels of South Africa. A democratic state may be better equipped to engage its citizens and society in a “programmatic partnership for national development” (White 1988: 44). A democratic state would offer greater inclusiveness and accountability in reaching developmental goals. As Amartya Sen argues, “development requires the removal of major sources of unfreedom: poverty as well as tyranny, poor economic opportunities as well as social deprivation, neglect of public facilities as well as intolerance or overactivity of repressive states” (Sen 1999: 35).
Evans, P. 1995. Embedded Autonomy: States and Industrial Transformation. Princeton University Press. Page 29.
Heller, P. 1999. The Labor of Development: Workers and the Transformation of Capitalism in Kerala, India. Ithaca, NY: Cornell University Press.
Loriaux, M. 1999. The French Developmental State as Myth and Moral Ambition. In Meredith Woo-Cumings (ed). The Developmental State. Cornell University Press.
Rodrik, D. 2004. Industrial Policy for the Twenty-First Century. A paper prepared for the United Nations Industrial Development Organisation (UNIDO). September
Sen, A. 1999. Development as Freedom. Oxford University Press, pp. 35-53
Sindzingre, A.N. 2004. Bringing the developmental state back in: contrasting development trajectories in sub-Saharan and East Asia. Paper presented at the 16th Annual meeting of the Society for the Advancement of Socio-economics (SASE), Washington DC: George Washington University.
Thun, E. 2006. Changing lanes in China: Foreign direct investment, local government, and auto sector. NY: Cambridge University Press.
UNCTAD, 2007. Economic Development in Africa: Reclaiming Policy Space. Domestic Resource Mobilisation and Developmental States. Report by the United Nations Conference on Trade and Development. New York and Geneva. September 26.
Linda Weiss (1998) The Myth of the Powerless State. London: Polity
White, G. (ed.). 1988. Developmental States in East Asia. MacMillan, p.44
*This Policy Brief was originally published in October 2010 for the Development Bank of Southern Africa (DBSA). It is reproduced here unchanged from the original.