Towards a MULTI-LEVEL developmental state

The developmental state must harness the power of government at every level to ensure that each part of the country builds on its strengths and develops to its potential, IVAN TUROK argues. However, current institutional capacity is weakest where support is needed most. Development strategies need to be decentralised and strengthened if the full powers of government are to be brought to bear effectively. 
   

The renewed interest in the developmental state idea in South Africa is partly a reaction to the unemployment crisis and concerns about the resilience of the economy to volatile global conditions. Progress has also been slow in tackling the economy’s concentrated pattern of ownership, its narrow base of mining and financial services, and the historic marginalisation of the black population from opportunities of all kinds. Recent economic performance has been modest by international standards, with growth skewed towards low value consumer services such as retail, security and health.

The post-2009 government is seeking to develop a more strategic approach to these challenges, based on long-term planning and coordination, evident in the National Planning Commission.

The creation of decent work is the first of five cross-cutting national priorities. Yet there is great uncertainty as to how to steer the growth path in a more dynamic and yet labour-absorbing direction. Centralised systems of coordination have been emphasised, to the neglect of provincial and local systems. Such arrangements could enable the national development agenda to be more responsive to diverse local circumstances – this is a big and varied country. Decentralised solutions could realise the potential of particular territories through detailed local knowledge and close relationships with vital role-players.

The first key attribute of a developmental state is its ability to make long-term strategic decisions.

What is a developmental state?

The first key attribute of a developmental state is its ability to make long-term strategic decisions in the national interest and resist pressures to satisfy sectional interests. It needs the technical competence and political autonomy to favour activities that create value over opportunistic, ‘rent-seeking’ behaviour that lobbies for special privileges, or extracts value from others without contributing to overall productivity. Sustained economic success comes from linking financial rewards to productive activity and long-term performance, not from enriching a narrow section of the population through administrative or legal mechanisms.

Second, for the government to shift the established growth path requires concerted effort. Different parts of the state need to be aligned so that its full powers as an investor, employer, regulator and provider of services are brought to bear consistently. Otherwise, the agenda is undermined by contradictory actions and speculative tendencies in the private sector looking for easy returns. Developmental states invest to release latent economic potential and make better use of neglected resources such as labour and land. They improve or develop the market by building human capabilities and stimulating productive activity in places that may not occur spontaneously. This requires localised action.

Third, developmental states are democratic in the sense that different actors and interests are brought together to define a common purpose. Partnerships with business, labour and community organisations help to share ideas and resources, and build support and mutual commitment to activities that enhance value, encourage hard work and self-improvement, and increase employment. Cohesive institutions can instil confidence in the future and help to draw in wider investment, effort and energy, thereby stretching resources further.

Partnerships with business, labour and community organisations help to share ideas and resources, and build support and mutual commitment to activities that enhance value, encourage hard work and self-improvement.

What is the role of regions and localities?

There is a tendency to see localities and regions as inert containers for economic activity, and unimportant to national prosperity. Yet places are the locus of land and labour markets, supply chains, and markets for many products and services. These interactions can influence economic outcomes in helpful or harmful ways, affecting productivity, innovation and long-term growth. Places also have distinct economic needs and possibilities, depending on a wide range of factors. Local and provincial policies can develop the knowledge, skills and all-round capabilities of firms and related organisations to sell their products in wider markets.

In practice, there is ambiguity about the specific economic roles and responsibilities of the three spheres of government. The nine provinces have some constitutional autonomy, but are also obliged to work within national legislation and policies. They are also required to assist the capacity-building efforts of local municipalities. The overlap between the three spheres weakens policy coherence, creates gaps and omissions, causes duplication of effort, and generates uncertainty among external stakeholders.

A stronger national economy depends on better functioning local economies and labour markets, based on a broader foundation of resourceful people and competent enterprises. A centralised approach cannot respond with sufficient flexibility to the dynamic conditions in each locality and region, and exploit their specific ideas and opportunities for development. Empowered provincial and local organisations could complement the capabilities of the national state by providing additional energy, initiative and expertise to build place-specific productive assets and distinctive sectoral strengths, not all replicating one standard approach.

What does the evidence reveal?

An analysis of provincial economic policies undertaken during the last year reveals that useful experience has been gained, although practices are uneven. Some strategies seem to be based on limited analysis of what drives and constrains economic development. There is an emphasis on generalised investment attraction and business support, and inadequate coverage of skills issues, physical infrastructure and the spatial economy.

The scale of funding in most regions is modest considering the challenges faced and the national priority of job creation. Resource allocation also shows no obvious relationship to the distribution of social need or economic potential across the country, and the tangible impacts and outcomes are sometimes unclear.

There is a case for giving economic development a higher priority across provincial government, with their technical and organisational capabilities strengthened accordingly.

Organisational capacity is severely constrained in many places, and shortages of professional staff are widespread. There are concerns about the accountability of external agencies and duplication of effort. The commitment to involve business and other role players seems very uneven. Some national departments appear unsupportive of provincial agendas, and many provinces in turn seem insufficiently engaged with local municipalities.

Is there room for improvement?

All this suggests scope for improvement. There is a case for giving economic development a higher priority across provincial government, with their technical and organisational capabilities strengthened accordingly. The responsibilities of different government spheres should be clarified, including explicit guidelines for problem analysis, strategy formulation, resource allocation, capacity building, monitoring and evaluation, and learning from experience.

Stronger backing from government and its agencies, and more dialogue within and between spheres would help to align policies and actions. Uneven capacity across the provinces means they could learn much from each other by sharing knowledge, skills and experience through twinning arrangements and peer review mechanisms. A stronger evidence base would improve understanding of local economic constraints and distinctive opportunities, and help to spread the learning from good practice.

Professor Ivan Turok is deputy executive director, Economic Performance and Development, HSRC. iturok@hsrc.ac.za

This paper summarises some of the arguments of a paper published in Development Southern Africa, 27(4), pp.497-516.