The State and Development

The other day, I was having a conversation with an economist mate of mine from varsity and we ended up discussing the manner in which government operates and the impact this has on the economy.

You see, my economist mate is from the neoliberal school of economics and he feels that the biggest problem that we have in this country is that the state is trying to drive the economy, whereas in his view it should be business that takes the lead in matters economic, with the state in the background merely playing the role of a referee.

His critique was that our plans to develop the economy, create jobs and materially improve the lives of our citizens are too state-centric. He gave the classical neoliberal riposte that the state and its technocrats should not be dictating the pace and direction of economic development. How, pray tell, he asked, can government bureaucrats be left to determine which industries should be stimulated in our economy in order to produce the greatest possible growth and development?

In his view, this is something best left to that nebulous thing called the markets to determine, as markets will by default eliminate those industries which are weak and promote those which are beneficial. He was adamant that we should be sticking to the mantra of “the market knows best” if we really want to build a strong economy.

My argument in return, was that what we need is an economic model that will not only produce growth within our economy, but in effect will develop and enhance the abilities, the capacity of those within the state. That, as opposed to a passive state, which is in the background being led by business, what was needed was a state with enhanced capacity to lead, manage and direct our country’s economic affairs. This of course entails modernisation of state systems and processes as well as a highly competent, efficient, effective bureaucracy.

I argued further that what is most critical is to have a state which can harness big business and other stakeholders within society and make a pact with them to support the state’s developmental objectives. That the state must be able to galvanise business and other segments of society behind a plan where there is national/societal consensus.

He interjected shortly to remind me that state intervention in an economy produces inefficiencies, that state intervention creates uncompetitive, unproductive monopolies as we have seen with some of our parastatals. I, in turn reminded him, that an economy left unchecked by the state produces highly uncompetitive monopolies and oligopolies, as we are currently witnessing in the South African case, where a few big players are able to control the market both on the supply and demand side, to the exclusion of small businesses and new entrants, with the consequence of stifling innovation and growth that is beneficial to all.

I argued that our focus should be mainly on enhancing the capacity of the state to align big business with a national developmental agenda. That our concern should not just be growth, but also economic and social transformation that will bring about structural and systemic changes that produce broader societal development and improvement of people’s lives.

That we should rather be focussed on transformation of the institutions and sectors of society so that we produce inclusive and equitable growth, something that the state as an arbiter is best placed to do. I concluded by highlighting the fact that this is what the current government of the day has been endeavouring to do (despite its many critics) and that as a government of revolutionary democrats and not just liberal democrats, the aim has always been to transform the lives of those at the bottom of society and give them a shot at a better life, something which business left to itself is incapable of advancing. I reminded him of the famous words of one of Africa’s finest sons, Dr Kwame Nkrumah, when he said, ““Seek ye first the political kingdom and all else shall be added unto you”. It is this “all else”, that government is trying to see added to the people I stated, since political power has already been attained.

We decided to halt the conversation right there and then and continue on another day, as we had the small matter of a few pints of Guinness to consume and a game of rugby featuring our favourite team, The Blue Bulls to enjoy. On that very sociable note, I decided to acquiesce.

Mugabe Ratshikuni works for the Gauteng provincial government; He is an activist with a passion for social justice and transformation. He writes here in his personal capacity.