Economic Restructuring in South Africa: The Debate Continues

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Nicoli Nattrass (1994). Economic Restructuring in South Africa: The Debate Continues. Journal of Southern African Studies, Vol. 20, No. 4. Taylor & Francis.

Type	journal article
Scope	Post-1994 South African economy
Method	policy analysis
Period studied	1990–1994
Regions	South Africa
Themes	transition post apartheid, manufacturing industrial policy, business and state, labour markets wages, macro fiscal finance debt, comparative theory, politics ideology elections
Citation key	nattrass1994

Argument

Nattrass critically reviews the MERG and Industrial Strategy Project (ISP) restructuring proposals made by the democratic movement as the ANC prepared to govern. She argues that proposals for higher minimum wages, tighter control over the capital market and targeted industrial policy are risky and rest on untested assumptions. She also argues that they neglect business confidence. Drawing on Evans's concept of 'embedded autonomy', she contends that interventionist strategies will succeed only if South Africa builds a meritocratic, efficient state with good ties to the private sector, which the inherited bureaucracy and the negotiated transition make unlikely. She concludes that policy should start cautiously and proceed by trial and error.

Evidence and method

Critical reading of policy documents set against the comparative political-economy literature on developmental states (Evans, Wade, Rodrik, Haggard and Kaufman, Przeworski and Limongi). No original data or archives.

Findings

• The old race/class debate over apartheid and capitalism is treated as obsolete after 1990. (p. 2)

  The race/class debate' over the relationship between apartheid and capitalism is now passe." [

• ANC economic policy shifted between 1990 and 1992 from demand-led 'growth through redistribution' to fiscal discipline. (p. 3)

  ANC economic policy shifted from an emphasis on altering the level and pattern of demand (by boosting government spending and redistributing from rich to poor) as a means of promoting growth, to one which prioritised fiscal discipline and sustainable redistribution."

• MERG's ten-year plan sets growth and job-creation targets, relying initially on public investment. (p. 6)

  The MERG report24 contains a ten-year plan to boost growth to 5 per cent in 2004, and to create 300,000 jobs a year.

• The radical analysis has reversed from low wages promoting capitalism to high wages doing so. (p. 8)

  the radical analysis of South Africa has shifted from an emphasis on how relatively low black wages served to promote capitalist development under apartheid, to one arguing that higher wages will be good for capitalist development!

• MERG's minimum wage proposal is likely to cause job losses in low-wage sectors such as farming. (p. 9)

  Given that MERG proposes a minimum wage of over double the average wage of full-time farm workers, it seems highly plausible to assume that the low-wage sectors will shed labour

• The Singapore high-wage model does not transfer to South Africa's unskilled workforce. (p. 9)

  South Africa, in contrast, is saddled with a predominantly unskilled labour force.

• MERG proposes substantial state control over capital allocation, effectively rationing credit. (p. 10)

  MERG is proposing substantial intervention in the capital market. State bureaucrats will effectively ration credit to favoured companies.

• The apartheid-era civil service and its private-sector links are ill-suited to developmental intervention. (p. 13)

  Existing state-private sector linkages are probably more conducive to rent-seeking than the kind of embeddedness associated with the development state.

• The negotiated transition prevented the bureaucratic rupture seen in Korea and Taiwan. (p. 13)

  the negotiated political transition precluded such a rupture by guaranteeing white civil servants their jobs for five years.

• Capital mobility limits the state's scope to discipline capital, so capital must be courted. (p. 15)

  Disciplining and coercing capital is a great deal more difficult. Capital simply leaves (or does not enter) if the policy environment is perceived as unfriendly.

• Whether interventionism succeeds depends on institutional capacity, and policy should start cautiously. (p. 16)

  The stakes are simply too high for immediate, aggressive interventions.