"the policy proposals and the implications of the developmental state"

Developmental State

Leon Louw25 July 2012

FW de Klerk

Foundation

Background

RDP

GEAR

ASGISA

NEPAD

NGP

IDP

Provincial programmes

Local government programmes

etc

• Pre-Polokwane (2007): NDR etc

• Not Freedom Charter

• Polokwane:

• Decent jobs (not jobs per se)

• Reducing poverty

• Spurring rural development

• Land reform

• Improving health, education, public service

delivery

• Cutting crime

• Creating economic growth

Background

Zuma:

‘The key to achieving these priorities will be

the building of an effective, developmental

state.’

Background

• Proclaims monumental failure

• Curious references to Asian Tigers, BRIC

• Special Economic Zones (SEZs)

• Lack of reference to rapidly developing

countries, especially Africa

Developmental State: Government “plays an

active role in guiding economic development

and using the resources of the country to meet

the needs of the people … tries to balance

economic growth and social development …

uses resources and state influence to attack

poverty and expand economic opportunities”.

Definitions

Developmental State:

• ‘Greater role for government’

• More government ownership and control

• More:

• consumption of wealth

• Inefficiency

• corruption

• patronage

• Less:

• Wealth

• Efficiency

• freedom

Definitions

• Some detailed, most amorphous

• Much is extreme

• NHI = NHN

• Land

• Mining

• Finance

• Dependency etc

• Intensely racial

• Related pernicious myths:

• Lack of transformation

• China

• Financial crisis

Developmental State

• Development: Improvement in

welfare, quality of life, well-being; satisfying

needs and wants (socio-economic indicators)

• Socio-economic development: measured

with indicators such as GDP, life

expectancy, literacy, employment … and less-

tangible factors such as personal

dignity, freedom of association, personal

safety, participation in civil society.

• Economic growth: Increase in value of

goods and services produced (GDP)

Definitions

Sustainable development: Development that

meets the needs of the present without

compromising the ability of future generations to

meet their own needs (mainly environmental

indicators)

Definitions

Economic development: sustained concerted

actions of policymakers and communities that

promote the standard of living and economic

health … the quantitative and qualitative

changes in the economy … human

capital, infrastructure, competitiveness, environ

mental sustainability, social

inclusion, health, safety, literacy, and other

initiatives. Differs from economic growth …

policy intervention …

Definitions

250 indices of conditions; 150 of policies eg:

• Access to safe water, housing, infrastructure

• Access to internet

• Cars, doctors etc p.c.

• Crime; Corruption

• Food and energy consumption

• Health, life expectancy, obesity etc

• Literacy and higher education

• Clean and safe environment

• Personal satisfaction and welfare

• Environmental sustainability

Development Indicators

Wealth means ‘Everything' is better

0

10

20

30

40

50

60

70

80

90

100

1g 5g 10g 15g 20g 39g 35g 40g 45g

Wealth ($ GDP pc)

'Eve

ryth

ing

'

Wealthier is more Literate

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Poor Rich

Illite

racy

Wealthier is more Developed (UN-HDI)

0

0.2

0.4

0.6

0.8

1

Hu

man

develo

pm

en

t

Poor Rich

Wealthier and Cleaner

20%

40%

60%

80%

100%

1 2 3 4 5 6 7 8 9 10% p

eo

ple

wit

h s

an

ita

tio

n

Poor Rich

Wealth and Safer (purified water)

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10

% p

eo

ple

wit

h s

afe

wa

ter

Poor Rich

Wealthier is Healthier (life expectancy)

30

40

50

60

70

80

1 2 3 4 5 6 7 8 9 10

Lif

e e

xp

ecta

ncy

Poor Rich

Wealthier is Happier

0

1

2

3

4

5

6

7

8

9

10

1g 5g 10g 15g 20g 39g 35g 40g 45g

Ha

pp

ine

ss

Poor Rich

How to be wealthy?

= grow!

20:20 Analysis

How?

Economic freedom and wealth

0

5,000

10,000

15,000

20,000

Unfree 2 4 Free

GD

P p

er

cap

ita (

US

$)

Quintiles3

Economic freedom and growth

-2%

-1%

0%

1%

2%

3%

Unfree 2 3 4 Free

GD

P g

row

th p

er

cap

ita

Economic freedom and ‘poverty’

10

15

20

25

30

35

40

45

Unfree 2 3 4 Free

Hu

ma

n P

ov

ert

y In

de

x

Economic freedom and equality(0 = equality; 100 = inequality)

35

37

39

41

43

45

Unfree 2 3 4 Free

‘Gin

i’ c

oeff

icie

nt

Freedom and corruption

1

2

3

4

5

6

7

8

Low 4 3 2 High

Co

rru

pti

on

10

= c

orr

up

t, 0

= n

ot

co

rru

pt

Freedom and investment

$0

$1,000

$2,000

$3,000

$4,000

$5,000

Low 2 3 4 High

Rule of law

Investm

en

tp

er

ca

pit

a

Freedom and child labour

0

3

6

9

12

15

18

21

Low 4 3 2 High

Pe

rce

nta

ge

of c

hild

ren

(10

-14

)

in la

bo

ur

forc

e

Freedom and political stability

-1.5

-1.0

-0.5

0

0.5

1.0

1.5

Low 4 3 2 High

Po

liti

calS

tab

ilit

y(2

00

4)

-2.5

=lo

w;

2.5

=h

igh

Freedom and unemployment

5

6

7

8

9

10

11

12

13

Low 4 3 2 High

Un

em

plo

ym

en

t(%

of

tota

l la

bo

ur

forc

e, 2

00

0-2

00

2)

Predicted values

Ob

serv

ed

va

lues

-0.1

-0.06

-0.02

0.02

0.06

0.1

0.14

-0.06 -0.04 -0.02 0 0.02 0.04 0.06

Growth vs. freedom + change

Freedom

and

Change

Change

Freedom

-0.091-0.083-0.074-0.065-0.057-0.048-0.039-0.031-0.022-0.013-0.0050.0040.0130.0210.0300.038

Gro

wth

0.14

0.1

0.06

0.02

-0.02

-0.06

2.5

1.5

0.060.02

-0.02

-0.0623

45

67

89

10

Growth vs. freedom + change

Growth & changeGrowth & EFW

0%

NDP

All-embracing; ambitious

‘South Africa can eliminate poverty and

reduce inequality by 2030’

440 pages; 15 Chapters

Development Indicators

Diagnostic Overview

Requires big changes, lacks specifics

(to be addressed in submissions)

Obtuse references to labour policy reform

5,4% growth needs ‘very low-income

employment, survivalist activities and

public employment schemes’

Bargaining that’s ‘conducive to

investment’

Employment

Poverty and Inequality

Chapters

1. Key drivers of change

2. Demographic trends

3. Economy and employment

4. Economic infrastructure

5. Transitioning to a low carbon economy

6. Inclusive rural economy

7. Positioning South Africa in the world

8. Human settlements

9. Improving education, innovation and

training

Chapters

10. Promoting health

11. Social protection

12. Building safer communities

13. Building a capable state

14. Promoting accountability and fighting

corruption

15. Transforming society and uniting the

country

Confused responses

‘Zille gives NDP the nod’

‘NPC to ignore DA's statement’

NGP vs NDP vs DS!

No reference to key global

indices/determinants

‘The longer-term solution to

skewed ownership is to grow

the economy rapidly enough to

focus on spreading

opportunities for black people’

NDP ‘Transformation’

Eg ‘financial inclusion’

Hayek: Government can do more

for the people by doing less

Louw: When things are in the

hands of the state they’re in a hell

of a state

Conclusion

End