If this is the New Growth Path what’s the Old Growth Path?

This is the second of three articles about the New Growth Path (NGP) Framework released last week by the Ministry of Economic Development.

One of the architects (I must assume) of the NGP, Neva Makgetla  (an economist long associated with Cosatu and now deputy director general in the Department of Economic Development) recently examined both the Growth, Employment and Redistribution macro-economic policy and the ‘industrial development plan’ alternative usually advanced (in my opinion) by members of the SACP.

Writing in the September 2010 special issue of the African Communist (journal of the South African Communist Party designed as a forum for Marxist-Leninist thought) Makgetla spells out what she thinks are the problems with both polices are.

Her views of what has gone before are interesting because the new policy tries to marry these frameworks by taking only the best of both.

Someone should have warned them that in policy marriages, as in human ones, you take the good with the bad … but more about that in the third post about the NGP which I will probably only get to by Monday.

The ‘anti-poverty framework’ associated with GEAR

“In effect, the transition to democracy built an implicit social compact: business would retain its property rights, and by extension its wealth and standard of living, while government would use its tax revenues increasingly to address backlogs in services for black communities left by apartheid.”

Makgetla sees the 1996 GEAR policy framework as having left in place the basic structure of the Apartheid economy.

Path dependency meant mining and finance continue to dominate and that property relations and inequality remained unchanged.

But the strategy, according to Makgetla, was attractive to successive ANC governments because it was quick to roll out and provided immediate benefits for the poor (particularly through social grants), while (hopefully) stimulating production and generating employment as the poor consume more goods and services.

“(The major benefit of the strategy) from the standpoint of the state was that it did not require explicit intervention in the economy. It relieved the government of responsibility for transforming the economy, with the associated risks of failure and potential conflict with business. Instead, government could focus on the more agreeable task of improving the lives of constituents through the more conventional public functions of providing basic services and housing.”

The risks were largely in lost opportunity – not achieving “new kinds of economic growth and by extension enhanced employment”. Because the strategy was dependent on state revenues, it was ultimately hostage to the booms and busts of the global economy.

Her key assessments of the policy are:

1. the transfers remained too small to provide the hoped improvement in the conditions of life of the poor and therefore the expected increase in demand and economic stimulation;

2. the relatively strong rand meant that new demand for manufactured goods, especially clothing, appliances and household furnishings was largely met by imports, and

3. the poor were ultimately dis-empowered and demobilised by top-down hand-outs that are central to the strategy.

Industrialisation strategy – SACP alternative

This is the policy proposal that ‘stands in’, in Makgetla’s assessment for the traditional left contribution to the policy debate. It is best revealed, in her opinion, by the Industrial Policy Action Plan (1 and 2) of the Department of Trade and Industry.

These strategies are designed to encourage production of manufactured goods, especially for export.

The industrial strategy has the potential, in her opinion, to access larger markets in order to drive mass based production, which in turn will secure more rapid growth and higher employment.

Crucially, the approach is modelled on the relatively rapid development experienced in Asia especially in the 1960s and 1970s.

The version of the strategy she deals with – which is the version in IPAP2 of the DTI – explicitly requires government to change which parts of “capital” it supports i.e. government would need to collaborate more closely with “industrial capital”, while reducing support for mining, farming and finance.

The state should focus its support on conventional manufacturing especially of capital goods, transport, electronics – and to a lesser  degree “light industries” like clothing, food processing and minerals beneficiation. The policy tends to assume that services and production to meet domestic demand are inherently less competitive “and hence less desirable.”

Makgetla thinks there is high political risk for government in this strategy. The chances of failure in such an unequal society are high and if government adopts a strategy largely dependent on its effective intervention in the economy, it will get the likely flak along with the less likely kudos.

Risk is increased because the strategy is hostage to global demand for manufactured goods and RSA will be competing with China and almost every other developing country that sees this kind of strategy as central to their development path.

Finally, the industrialisation strategy supports long term economic growth but not employment and equity, which are not automatic consequences of growth. It ignores labour intensive activities like agriculture, services and construction and often leads to proposals to hold down wages to support competitiveness – she was prescient about that, but then she did help write the NGP!

On Monday I will spell out more specifically what the NGP proposes to do and I will make an assessment as to whether the policy will ever be implemented by this government and if it is, what it’s likely consequences would be.

If any of you are still with me by then, I will be surprised and you will probably be slightly sick of grandiose government policy making.

2 thoughts on “If this is the New Growth Path what’s the Old Growth Path?

  1. NGP , OGP it makes no difference ? The NDR goals as stated in the SACP’S Constitution document remain .( see article below )

    Business Report

    INSIDE

    Terry Bell

    ON WEDNESDAY, SAfm was to have broadcast a discussion and debate about last week’s Cosatu national congress. On Tuesday, the programme was canned: the topic, it was said, had been “done to death”.

    However, several more politically astute trade unionists begged to differ. Having read through the 3 703-word final declara­tion of the congress, they felt there was Still much to be discussed; much that has been missed by the media. In particular, there is the question of the underlying philosophy – the politics – enunciated quite clearly in the document.

    The passages dealing with this put forward an idea of the future political dis­pensation for South Africa. This is despite the fact that Cosatu general secretary Zwelinzima Vavi has, on more than one oc­casion insisted – correctly – that Cosatu is a trade union federation, not a political party However, this is another area where Cosatu appears to wallow in contradictions related to political parties and policies.

    The congress not only reiterated its support for the governing alliance, it made even clearer its prime allegiance to the SACP as the vehicle to achieve the goal of a “socialist” South Africa. According to the medium-term vision adopted in 2005 by the SACP, this “socialist” vision would be achieved by seizing control of all aspects of society, including Parliament.

    SACP members already dominate the leadership of Cosatu and of the Big Four unions in the federation, although the claimed membership of the communist party – at 73 000 – is less than 4 percent of the claimed membership of Cosatu. Al­though comprising just 11 percent of the latest audited ANC membership figures, SACP members are also very well repre­sented in the leadership structures of the governing party.

    SACP chairman Gwede Mantashe is the secretary-general of the ANC, while Blade Nzimande, the party’s general secretary, is now a cabinet minister, along with one of his central committee members, Noluthando Mayende-Sibaya.

    Deputy general secretary Jeremy Cronin is a deputy minister.

    However, as some critics have pointed out, there have been senior SACP members in previous cabinets, including the one that adopted the now much maligned Growth Employment and Redistribution (Gear) policy

    SACP cabinet ministers at the time, including the then party deputy chairman, Geraldine Fraser-Moleketi, raised no ob­jection to the introduction of Gear, which Cosatu and the SACP now refer to as the “1996 class project”.

    “The institution, and the position held within it, changes the individual, the individual does not change the institu­tion,” notes a “confessed cynic” trade unionist, pointing out that any dissidence simply means that the individual loses the position and lists not only Fraser-Moleketi but other former SACP ministers, such as Alec Erwin.

    But, according to the Cosatu declara­tion, times have changed: Polokwane signalled a new direction. “The installa­tion of the new government, led by comrade Jacob Zuma, provides a new opportunity to redefine and strengthen the state; and to refashion state-society rela­tions,” states the declaration.

    Cosatu pledges to “grasp this historic op­portunity to maximise workers’ gains” and commits the federation to “build Marxism-Leninism as a tool of scientific inquiry”, with the object of building “a socialist movement coalescing around the SACP”.

    The critics, several of whom regarded themselves as Marxists, point out that Cosatu is very short of any clear definition of what is meant by Marxism-Leninism or socialism, other than that they are suppos­edly embodied in the SACR However, the federation’s political commission has now been mandated to “develop a detailed programme for the transition to social­ism”. This must include “a vision for socialism in the 21st century”.

    Cosatu maintains that it is seeking “ideological clarity about where we are; what the forces ranging against the strate­gic interest of the working class are; who are our allies; and clarity about the inter­national ideological warfare.” But the crit­ics also point out that the federation has al­ready outlined the broad tactics necessary for the eventual achievement of “working class hegemony” in decreeing that the SACP is the party of the working class.

    The SACP is therefore seen as the vehi­cle for the transition to a socialist goal as defined by Karl Marx. However, critics, among them older members of the former “workerist” tradition that played a leading role in the formation of the modern trade union movement, maintain that the ideas of the SACP are the antithesis of the theo­ries propounded by Marx or even Lenin’ that they owe much more to the policies of the former Soviet dictator, Josef Stalin.

    These policies include the concept of “socialism in one country” and of the need to pursue “stages” of a democratic “revolu­tion” toward a “socialist” climax. A “van­guard party” is seen as the means toward this end.

    What mainly concerns many critics is that the model society promoted by the SACP remains a version of what existed in the former Soviet Union and eastern Europe.

    In the words of the late anti-apartheid activist Joe Slovo, when he was the chair­man of the SACP, these were regions of “really existing socialism where the element of democracy was missing”. How­ever, Marx maintained that socialism amounted to the extension of democracy from which it follows that without democ­racy there can be no socialism.

    The last SACP congress in exile, held in Havana, Cuba in 1989, also declared that, in “socialist” countries, “a new way of life is taking shape in which there are neither op­pressors nor the oppressed… in which power belongs to the people.” That was only months before the collapse of the Berlin Wall and the mass uprisings that overturned “commu­nist” rule in countries such as Romania.

    Ironically, the chairman of that con­gress and reputedly one of the main authors of that “Path to Power” document was former president Thabo Mbeki, then a politburo member of the SACE

    Given this often confusing situation, the point that the critics make is valid: Cosatu and the country at large need to debate what the SACP sees as the future dispensa­tion for this country – and how it will be achieved.

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