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'Economic Restructuring in South Africa: The Debate Continues': A Response

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Raphael Kaplinsky (1994). 'Economic Restructuring in South Africa: The Debate Continues': A Response. Journal of Southern African Studies, Vol. 20, No. 4. Taylor & Francis.
Type journal article
Scope Post-1994 South African economy
Method theoretical or conceptual
Period studied 1990–1994
Regions South Africa
Themes transition post apartheid, manufacturing industrial policy, business and state, labour markets wages, unions strikes
Citation key kaplinsky1994

Argument

Kaplinsky, a co-director of the Industrial Strategy Project (ISP), replies to Nattrass's critique of the ISP and MERG programmes for post-apartheid industrial restructuring. He first notes three areas of agreement: the shift in thinking on the developmental state, the need for restructuring with winners and losers, and the value of Evans's 'embedded autonomy'. He then argues Nattrass misrepresents the ISP by conflating it with MERG, by misreading its stance on flexible specialisation, and by wrongly implying it proposes higher wages. He concludes that Nattrass's implicit policy agenda (lower wages, an inactive state, unchanged corporate power) differs little from that of the least progressive elements of South African capital, and that the ISP's institutional, labour-inclusive approach is more politically sustainable.

Evidence and method

No new empirical data. The note engages closely with Nattrass's paper and with ISP and MERG documents, including the Joffe, Kaplan, Kaplinsky and Lewis 1993 IDASA conference paper. It also draws on general references to the industrial organisation literature.

Findings

  • Kaplinsky agrees with Nattrass that the role of the state in industrial policy has shifted towards an emerging consensus on markets and market failure. (p. 3)

    an emerging consensus that a successful response to the challenges of the 1990s and beyond requires attention both to the role played by markets in resource allocation, and to the widespread prevalence of market failure.

  • Restructuring is seen as a social process needing a developmental coalition, compensation and retraining. (p. 3)

    the restructuring agenda will necessarily be a social process and some form of developmental coalition

  • Labour's inclusion is justified by changes in the labour process and political sustainability of accumulation, not by normative concerns alone. (p. 3)

    labour needs to be incorporated in the process of production, both because of changes in the labour process and to ensure the political sustainability of the accumulation process in South Africa.

  • ISP is alert to labour-friendly vs labour-unfriendly flexibility, given strong unions. (p. 4)

    the ISP is explicitly aware that there are labour-friendly and labour-unfriendly approaches to flexibility and many of our policy prescriptions are designed to move towards the former.

  • The ISP does not propose a minimum wage or higher wages; it argues unskilled low-productivity industries cannot compete without protection that harms working-class consumption. (p. 4)

    it is not possible to compete in a range of low-productivity, unskilled labour-intensive industries without high levels of protection which undermine the consumption power of working-class incomes

  • The ISP leaves open currency depreciation, and the authors believed the rand was somewhat overvalued in 1993. (p. 4)

    we believe that the existing exchange rate is somewhat over-valued. However, at this stage we are not able to quantify the extent of this overvaluation

  • He characterises Nattrass's implicit agenda as close to the least progressive elements of capital. (p. 5)

    this is a policy agenda which is little different from that of the least progressive elements of South African capital.

  • He denies that a market-clearing wage above subsistence is evidenced anywhere. (p. 5)

    there is little evidence from South Africa (or indeed any of the OECD countries, let alone other LDCs) that there is a market-clearing wage which is above the level of subsistence.

  • The ISP strategy aims to align incentives with real factor costs while building capabilities through an institutional framework. (p. 6)

    re-orient the incentive system so that it more clearly reflects the real cost of factor inputs