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The developmental state is back in vogue in the Global South, where it’s seen as a panacea for sluggish growth, high unemployment, and structural inequality. But not quite in the form that we’re used to. It’s become, as Ben Fine says, something of a floating signifier — an idea of state-led growth that lacks both a theory of the state and the political and economic forces that shape it. South Africa exemplifies these contradictions. Since the mid 2000s both the South African left — particularly those segments assembled around the Congress of South African Trade Unions (COSATU) — and the neoliberal African National Congress (ANC) have actively promoted the idea that South Africa is transforming itself into a modern developmental state. The appeal of the model for countries in the Global South, including powerful elements of South Africa’s left, stems in part from Brazil’s trajectory under former president Lula Da Silva, who supposedly made a left turn during his second term dubbed the “Lula moment.” According to the Lula moment narrative, after stabilizing the economy through strict macroeconomic orthodoxy during his first term, Lula’s Workers’ Party (PT) embarked on an ambitious series of reforms which increased the incomes of the poorest 10 percent of Brazilians by 29 percent, and the national average by 8 percent — moving roughly half of Brazil’s citizens into the country’s lower middle class. This upward mobility was achieved through social welfare policies, such as the Bolsa Família family grant, and by raising minimum wages — by the end of Lula’s second term, Brazil’s minimum wage had grown by 60 percent. Brazil’s Gini coefficient — a measure of inequality — also dropped significantly during this period, from sixty in 2001 to fifty-three in 2012. South African leaders like former COSATU General Secretary Zwelinzima Vavi, trade-union intellectuals like Neil Coleman, and affiliated NGOs have all argued in recent years that South Africa needs its own Lula moment. They say the country is sitting on what Vavi calls a “ticking time bomb” of poverty, unemployment, and inequality that can only be remedied by an interventionist program that uplifts the poor and working class. A turn to developmentalism in South Africa, they say, would represent a decisive break with neoliberal capitalism, and realign the country with the core ideas of the National Democratic Revolution (NDR) — the grounding philosophy of the post-apartheid ruling alliance.

The Failed Zuma Turn The push for South Africa to become a modern developmental state dates back to Thabo Mbeki’s government (1999–2008), when the ANC-aligned left in COSATU and the South African Communist Party (SACP) found themselves increasingly isolated and unable to influence policy within a ruling tripartite alliance — composed of the governing ANC, COSATU, and the SACP — firmly committed to neoliberal orthodoxy. To remedy the situation and increase the power of COSATU and the SACP, Vavi and Blade Nzimande, the Community Party’s leader, made a Faustian bargain with prominent ANC politician Jacob Zuma, who Mbeki had axed as deputy-president in 2005 under a cloud of corruption allegations and his trial for the rape of a family friend. Zuma appeared useful to Vavi and Nzimande — a man they could use to turn the ANC to the left. So along with COSATU and the SACP, the two leaders began a political rescue campaign, painting Zuma as a victim of the paranoid and authoritarian instincts of Mbeki, as a man of the people willing to listen and take direction from the masses unlike the aloof, pipe-smoking, Shakespeare-quoting Mbeki. Aided by several other factions of disaffected ANC members, they brought down Mbeki and replaced him with Zuma in 2007. The move was a disaster for both the SACP and COSATU. Vavi and Nzimande’s hubris blinded them to Zuma’s true nature: a consummate opportunist and political survivor committed not to left principles, but to Zulu nationalism, conservative social values, and enhancing the powers of the state. Instead of the hoped-for left turn, after Zuma was elected president of South Africa in 2009 assaults on the labor movement escalated, along with state repression, corruption scandals, political purges, and increased authoritarianism within the ANC. This brought Zuma and COSATU, particularly those grouped around Vavi, into conflict. By this time, the SACP, purged of its Zuma critics, had become a vicious and increasingly reactionary cluster of demagogues who defended the Zuma line at all costs and offered up increasingly absurd defenses of the president. They commended nearly every act of state repression and attacked anyone even mildly unsympathetic to the ANC. Yet despite its criticism of Zuma, COSATU was not just unwilling to break with the Zuma regime or the ANC, but refused to confront them at all. This unwillingness, particularly in the face of a massive rank-and-file public sector strike in 2010, coupled with ANC’s rejection of COSATU’s desired policies, stoked dissent within the federation. The coalition’s most radical union, the National Union of Metalworkers of South Africa (NUMSA), openly questioned the value of an alliance with the ANC, even as COSATU president S’dumo Dlamini formed an anti-Vavi, pro-Zuma faction. As criticism of Zuma mounted, so too did calls for a new path for South Africa. The developmentalist paradigm became more central to the public narrative, particularly in 2011 at the start of the long run-up to the ANC’s 2013 electoral congress and in the weeks following the 2012 Marikana massacre (in which police gunned down forty-one striking mineworkers). At the time, Vavi avoided the suggestion that there was a political alternative outside the ANC, and many still believed that Zuma’s second term could mirror Lula’s or, at the least, that a new ANC candidate would emerge that could move the country in this direction. Vavi argued that COSATU should grant Zuma a second term but push him harder — in other words, Zuma should become Lula. It was not to be. The Marikana massacre set in motion a series of events that saw the collapse of South Africa’s largest trade union, the expulsion of NUMSA and Vavi, and what looks increasingly like the end of COSATU as anything more than a yellow federation, loyal to the ANC and unable to protect its workers’ interests.

An Unfinished Revolution NUMSA has taken an increasingly radical line in recent years, arguing not only that the ANC has been captured by capital and is unable to adopt a pro-working-class position, but also that COSATU needs to regain its independence. The aftermath of the Marikana massacre demonstrated the gap between NUMSA and the rest of the labor movement — NUMSA was the only COSATU union to unconditionally condemn the atrocity. In 2013, NUMSA broke with the tripartite alliance and the following year was expelled from COSATU. Many on the Left also began arguing that a developmental state would only be possible through the formation of a new, mass workers party. This new call was a direct result of the twin betrayal of the SACP and the ANC, which post-Marikana investigations revealed had readily condoned murder in defense of capital. NUMSA members (and many others outside the union) came to realize that building working-class hegemony within the party was improbable. But opinions about how to move beyond the tripartite alliance still vary. Many of NUMSA’s leading members and thinkers, like General Secretary Irvin Jim, are former senior SACP members and advocate building a new SACP with mass support outside of the ANC. Others, belonging to different political tendencies, argue that the Brazilian PT represents a more viable model. Despite these differences, there’s a broad consensus on the Left that a new political formation needs to win state power, replace the ANC, and revive the political connections that existed between unions, community organizations, and social movements during the 1980s. On the other side of the political trenches, the technocrats and intellectuals grouped around the ANC’s center are promoting a different model of the developmental state. The ANC, through its National Development Plan 2030 (NDP), is officially attempting to transform South Africa into a developmental state by extending the party’s 1996 Growth Employment and Redistribution (GEAR) policy package. GEAR sought to stimulate growth by privatizing state utilities, shrinking the public sector, and creating favorable business conditions for capital (both foreign and domestic) by relaxing regulations on capital flows and facilitating capital-intensive development projects. Yet despite their differences, both the Left and those aligned with the ANC see the developmental state primarily as an extension of the NDR — or to put it crudely, as the completion of a bourgeois-democratic revolution in the still semi-colonial South African state and economy. The goal is to build a national bourgeoisie capable of revolutionizing the productive forces in South Africa and acting in the greater interests of the nation. Within the national liberation movement during apartheid, the simultaneous desire for freedom and development translated into an overarching focus on seizing state power with the assumption that, once in power, the new democratic leadership would find vast opportunities. This assumption rested on the belief, which continues to permeate developmentalist fantasies, that South Africa is an “exceptional” African state, boasting a diversified economy, a large manufacturing base, good infrastructure, and an advanced culture — all factors that make the country different from its poorer, more “backward” continental neighbors.

The “Exceptional” State What then are the prospects for South African development? The short answer is that the ANC doesn’t have a chance of succeeding, because the government remains wedded to a neoliberal growth model that fails to take into account the structural constraints of both the South African and global economy. Meanwhile, the South African left is facing a major political crisis, rendering it equally unable to construct a coherent political strategy or mobilize its taken-for-granted political base, both of which are necessary to build a democratic, interventionist state. To understand why, it is useful to examine South Africa’s political economy. Throughout its entire history, the South African economy has been dominated by what Ben Fine and Zavareh Rustomjee call the Minerals-Energy Complex (MEC) — the super-powerful mining conglomerates that have sat at the center of the country’s economy since the discovery of gold and diamonds in the second half of the eighteenth century. These conglomerates — which gave birth to a core set of industries associated with large-scale mineral extraction, energy provision, and other related sectors — have enormous political and economic clout. The emergent MEC rested not only on the natural riches of South Africa, but also on the brutal and widespread exploitation of low-wage black labor. Historically this labor was reproduced in the native reserves, and later the Bantustans, at minimal cost to capital through the maintenance of pre-capitalist modes of production and family/kinship networks. The large pool of low-wage labor needed for South Africa’s extractive industries was created by destroying the existing African peasantry — dispossessing them of their land, forcibly removing millions of people to fictional “homelands,” and imposing a series of taxes and laws restricting movement, all of which perpetuated a precarious subsistence agricultural model that forced young men to become migrant workers in order to support rural households. South Africa’s entry into the global economy was thus rooted in a system still largely intact today — commodity extraction founded on cheap black labor — with other sectors like manufacturing still directly tied to the MEC. For a time this system was highly successful. Between the 1950s and the early 1970s, apartheid South Africa experienced 6 percent annual growth, second only to Japan. The economy appeared to be diversifying, and the dream of South Africa as an industrial powerhouse seemed on the verge of coming true. But the postwar model of industrialization didn’t end up diversifying South Africa’s economy. It instead further concentrated the MEC’s conglomerate ownership of the engineering sector and numerous others. South African manufacturing became neither export-oriented — like South Korea or Taiwan — nor did it follow Western Europe and the United States, producing sufficient capital goods domestically. Despite boasting living standards comparable to Western Europe for white South Africans and leaping ahead in certain sectors (the world’s first open-heart transplant took place in Cape Town), South Africa remained dependent on importing technology, machines, and equipment — a trend that continues today. Rapid industrialization did, however, have an impact on South Africa’s economy, not least because it produced an unexpected side effect — an increasingly politicized black urban proletariat that eventually formed the core of South Africa’s militant trade union movement in the 1970s and won historic gains. These unions adopted a radical democratic approach to organizing, emphasizing power on the shopfloor, and went on to form COSATU in 1985. The growing militancy (and cost) of labor, combined with the 1970s oil crisis and the associated economic downturn, triggered a decades-long economic slump in South Africa. GDP growth sunk to 1.8 percent in the 1980s and contracted 1.1 percent in the early 1990s. Foreign capital inflows dried up and years of economic sanctions exacerbated the country’s continued inability to absorb surplus labor and sustain a growing manufacturing sector. By 1985, South Africa was facing a serious debt crisis. Corporations had to source funds on the domestic market, resulting in shrinking investments and a wave of mergers and acquisitions in the financial and industrial sectors — further reinforcing MEC power. The state’s attempt to encourage productive investment by loosening restrictions on capital only made matters worse, precipitating an “orgy of speculative investment” and the shrinking of the manufacturing sector. By the late 1980s, the captains of industry were finally coming to the conclusion that apartheid was no longer compatible with economic growth.

A Post-Apartheid False Start In spite of the monumental transition from apartheid to liberal democracy, there was still a fundamental continuity between the 1980s reforms and the economic course the ANC has charted since coming to power in 1994. The demise of apartheid opened up fewer possibilities for structural change than previously assumed. While the alliance between COSATU, SACP, and the ANC has been much romanticized, within two years of coming to power the ANC had adopted the neoliberal GEAR framework without consulting its left partners. The failures of GEAR — it shored up the power of the MEC and finance, while simultaneously decimating huge swaths of South African domestic manufacturing and generating mass displacement and job loss — are central to understanding the current state of the South African economy. Like the National Democratic Revolution narrative, at the core of GEAR was a fantasy of catching up with the West. GEAR sought to attract private capital to South Africa by reducing the deficit, liberalizing financial controls and obstacles to the free flow of capital, privatizing non-essential state enterprises and commercializing other state-run utilities, liberalizing trade tariffs, adding tax incentives to new investors and labor absorbent projects, and stabilizing the exchange rate. The tax system was also restructured along more regressive lines. The new ANC government hoped these policies, in combination with tariff reductions and the introduction of “world-class” manufacturing standards, would help create an export-orientated manufacturing sector in South Africa. But most South Africa companies, particularly in the clothing and textile industries, were unable to compete with cheap East Asian imports and disappeared almost entirely within a few years. Joblessness increased from 32 percent in 1994 to 37 percent in 1999. Meanwhile, many of the largest South African corporations and conglomerates, such as Anglo-American and SA Breweries, moved their headquarters overseas and began to invest heavily in opening up the rest of the African continent for exploitation. At least $100 billion flowed outwards from 2005–2015, and estimates of illegal capital flight between 1994–95 ran at 9.2 percent of GDP. In 2007, during the peak of the recent commodity boom and South Africa’s best economic performance since the end of apartheid, losses to transfer pricing and other forms of illegal capital flight were as high as 20 percent of GDP, while total investment in the economy was a mere 17 percent. Ultimately, GEAR decimated most of South Africa’s industrial base, engendered massive capital flight, produced lackluster economic growth (0.6 percent in 1998 and 1.2 in 1999, against projections of 3.8 percent and 4.9 percent, respectively), and brought hot money inflows rather than foreign direct investment. Instead of increasing employment and dismantling the legacy of apartheid through housing and land reform, the ANC came to rely on the financial sector for economic growth. The share of GDP held by the financial sector grew from 6.5 percent in 1994 to 20 percent in 2009. Awash with credit, South Africa’s non-financial corporations earned increasing profits from financial activities. Household debt also exploded as workers sought to offset declining wages with loans.

The Current Crisis What then is the current state of the South African economy, and what bearing does it have on the project for a developmental state? South Africa, like many other middle-income countries, is suffering from an economic downturn and might soon experience a full-blown recession due to collapsing commodity prices brought on by decreased demand in China (and that country’s current financial crisis), as well as increasing deindustrialization in South Africa. Falling commodity prices are causing companies to lay off workers — manufacturing jobs have declined 16 percent since their peak in 2008, and over 50 percent of jobs added to the economy over the past seven years are in social and community service — primarily low-paying jobs in cleaning and security acquired through labor brokers. Anglo-American plans to slash around 50,000 jobs, and major unrest in the platinum industry (the longest strike in South African history occurred last year) has mining conglomerates looking to eliminate their “risky assets.” Moreover, 180,000 jobs in the steel sector have been declared at risk, a stronghold of NUMSA and a key strategic industry. Powerful factions within the state — particularly capital and those grouped around the treasury — have attempted to use the crisis to deepen neoliberal orthodoxy and push South Africa towards austerity. But the ANC is wary of embracing aggressive belt-tightening, and has so far quelled unrest by increasing public sector jobs. Instead, according to the NDP and other planning documents, the ANC plans to pursue its developmentalist objectives by intensifying its longstanding project of building a national bourgeoisie capable of leading economic growth. The party hopes that formations like the BRICS will provide South Africa the allies it needs for investment. But with Brazil, Russia, and China facing serious economic woes of their own, such aspirational ties might be just that. At the same time, existing state plans for capital-intensive infrastructure projects, such as a new rail network and massive port developments in coastal cities like Durban and Port Elizabeth, have thus far been disappointing. Corruption and incompetence are two reasons for this. The head of the country’s passenger rail service has charged things to the company tab like luxury tickets for him and seven female companions, the rail service’s chief engineer appears to have forged his engineering degree, and roughly $200 million was spent importing train carriages from Spain that don’t fit South Africa’s railway tracks. What’s more, in a situation mirroring the current Petrobas corruption case in Brazil, South African construction companies managed to fleece the government of $5 billion dollars by overcharging for construction contracts leading up to the 2010 World Cup. Scandals like these are common in South Africa and hamper the state’s ability to deliver on long-term infrastructure projects. More broadly, they are evidence of a state rife with factionalism, patronage networks, and, especially at the local level, an absence of functioning governance mechanisms. It’s telling that despite the country’s abundant natural resources, power outages have become a regular feature of daily life in South Africa, costing the economy billions of dollars a year. South Africa’s new black bourgeoisie lacks the institutional power to remedy any of this — many have lined their pockets with scraps from older and paler capitalists (such as mines purchased with state money by politically connected families), lucrative state contracts, or by playing middleman to foreign companies. Of course, this is nothing unusual. Domestic capitalists have undermined development programs in many postcolonial states, and the old distinction between a comprador bourgeoisie tied to metropolitan firms and a national bourgeoisie invested in building a nation’s productive forces is highly suspect. Perhaps no figure personifies this better than Cyril Ramaphosa, the deputy president of South Africa and a key negotiator during the talks between the ANC and National Party that ended apartheid. Formerly a militant unionist, Ramaphosa has become one of the country’s richest men, acquiring wealth through the active patronage of South Africa’s old apartheid-era captains of industry. He played a key role in putting political pressure on the state to intervene in the wildcat platinum strike at Lonmin (where he sat on the board of directors) and thus is directly linked to the Marikana massacre. The continued power of the MEC amid increasing deindustrialization means that unless there is a major shift in South Africa’s economic strategy there will be no meaningful development. A prerequisite for such a pivot, of course, would be a coalition of political forces that could directly challenge the MEC — a coalition that would have to include the ANC but would also need to be buttressed by strong allies. The natural partners would be the South African labor movement, which on paper is relatively strong with 30 percent union density. But the reality is that the labor movement is in a major crisis as a result of COSATU’s continued alliance with the ANC.

The Lula Myth In many respects, South African labor’s weakness is analogous to that of the Brazilian labor movement. Brazilian unions have been demobilized during the PT’s reign, leaving the current president, Dilma Rousseff, in an extremely weak position following the Petrobas corruption scandal and assaults from an intransigent right-wing. Despite having a large mandate and record approval ratings during the Lula era, the PT failed to build a new political culture through constitutional and political reforms or by tackling an institutionally hostile media. Instead it chose to make alliances with corrupt and reactionary regional power brokers, embracing Brazil’s traditional patronage political culture to gain institutional power at the expense of its trade union and social movement allies. With the revelations that many senior PT members are deeply implicated in one of the largest corruption scandals in Brazilian history, along with an abysmal economic performance, the façade of pro-capital-yet-redistributionist growth has collapsed. Rousseff is attempting to revert to fiscal austerity, and Brazil’s once-militant labor movement is now demoralized and alienated from the PT, facing an economic downturn that might destroy more than 2.5 million jobs in the next year. The economic crisis currently facing Brazil is at its core very similar to the economic crisis in South Africa; both countries rode commodity booms through the mid to late 2000s that disguised core structural weaknesses, and both countries were hollowed out by liberalization policies implemented in the 1980s. South Africa and Brazil share other features as well: Brazilian manufacturing productivity has increased, but the industry has been held back by a lack of a development funds; mass privatizations, downsizings, and the closing of state-owned enterprises have destroyed well-paying, blue-collar jobs; and Brazil has seen the increase of the financial industry’s share of GDP, with finance establishing control over much of the country’s public finances. Yet even if the Brazilian state had the resources for massive infrastructure investment or a long-term plan to extricate itself from the present crisis, it doesn’t have the functional capacity to effectively implement such a plan. As economist Gabriel Palma says, Lulaism never broke with the fundamental neoliberal premise that the only role of economic policy is to generate “credibility,” and to keep the capitalist elite on favorable terms to ensure continued private-sector-led economic growth. When the commodity boom collapsed, the Brazilian economy stagnated and then began tanking as its export markets declined and capital, sensing weakness, pushed hard for an austerity program. The country’s credit rating has now been downgraded to junk status, and in 2015 the economy will have contracted an estimated 2.7 percent. The unemployment rate, while still relatively low, is projected to increase to 8 percent by the end of 2015. Benefits and unemployment insurance are being cut while taxes, water rates, and electricity are increasing. Rousseff seems set to reverse most of the gains made by her party over the last decade. A disturbing sense of passivity and resignation seems to have taken hold on the Brazilian left, with many people hoping to ride out Rousseff’s term and some even hoping for Lula to return once again to save the country. All of this shows that the Lula moment was fleeting and unstable — and not something the Left should attempt to replicate in South Africa.