A developmental state is a concept in political science and economics that refers to a type of government that actively promotes economic and social development within its country. The concept of a developmental state originated in the post-World War II period, when countries such as Japan and South Korea experienced rapid economic growth under government-led development programs. Since then, the idea of a developmental state has been applied to other countries in Asia, as well as some in Latin America and Africa. It is characterised by a high level of state intervention in the economy and a focus on long-term economic planning and industrial policy.
In a developmental state, the government plays a central role in guiding economic development, often through a combination of targeted investments, subsidies, and regulations. The state may also provide extensive support for education and training, and may seek to build a strong national infrastructure.
What is Industrial policy?
Industrial policy is a set of government interventions aimed at promoting the growth and development of a country’s industrial sector. It involves a range of measures and strategies aimed at improving the competitiveness and productivity of industries, as well as creating a conducive environment for industrial growth.
Typically, industrial policies involve a mix of interventions such as providing infrastructure, incentives for investment, trade policies, and support for research and development. The ultimate goal of industrial policy is to accelerate the transformation of an economy from a predominantly agrarian or resource-based one to a more diverse and advanced industrial economy. Industrial policy can also be used as a tool for promoting regional development, creating employment opportunities, and addressing social inequalities. Industrial policy has been widely used by many developed and developing countries, including Japan, South Korea, China, and India, to support their economic growth and development.
Challenges of a predominantly agrarian or resource-based economy
Price volatility: Prices of agricultural commodities and natural resources tend to be volatile, which can lead to income instability for farmers and resource-dependent communities.
Climate and environmental risks: Climate change and environmental degradation can have a significant impact on agriculture and natural resource-based industries. Natural disasters, droughts, and floods can devastate crops, livestock, and infrastructure.
Limited economic diversification: Dependence on a single crop or resource can leave an economy vulnerable to external shocks and price fluctuations. This can also limit opportunities for economic growth and development.
Lack of value addition: A focus on primary production without value addition can lead to low prices for raw commodities and limited economic benefits. Developing value-added industries can create jobs, increase productivity, and generate more revenue.
Limited access to technology and finance: Agriculture and resource-based industries require access to technology, knowledge, and finance. However, rural areas and resource-dependent communities often lack access to these resources, limiting their ability to improve productivity and competitiveness.
Inequality and poverty: A predominantly agrarian or resource-based economy can exacerbate inequalities, particularly in rural areas where access to education, healthcare, and other services may be limited. This can lead to persistent poverty and exclusion.
Importance of the developmental state approach in promoting economic growth and social development
The developmental state approach emphasises state intervention and support for the development of the economy, with a focus on inclusive and sustainable growth. This approach is important in promoting economic growth and social development for several reasons:
Mobilisation of resources: The state can mobilise resources and allocate them towards productive sectors of the economy. This can lead to the development of new industries, the expansion of existing ones, and the creation of employment opportunities.
Coordination of economic activities: The state can coordinate economic activities through the formulation of policies and regulations that promote cooperation between different sectors of the economy. This can lead to greater efficiency, innovation, and competitiveness.
Investment in human capital: The state can invest in education and training to develop the skills of the workforce. This can lead to greater productivity, innovation, and competitiveness.
Promotion of social development: The state can use its resources to provide social services such as healthcare, housing, and education to the population. This can lead to the improvement of living standards, reduced poverty and inequality, and increased social cohesion.
Question: Is it necessary for a country to be a developmental state for it to develop its economy?
No, it is not necessary for a country to be a developmental state to develop its economy. While the developmental state model has been successful in some countries, other countries have pursued different paths to economic development.
For example, some countries have pursued a liberal market-oriented approach, which emphasises free trade, deregulation, and privatisation. Other countries have pursued a mixed economy approach, which combines elements of the developmental state model and liberal market-oriented policies. Still, others have pursued a socialist or planned economy approach, which emphasises state ownership and control of the economy.
Ultimately, the choice of economic development strategy depends on a country’s unique political, social, and economic circumstances. A country must take into account its resources, institutions, and historical context when choosing an economic development strategy. That being said, it is important to note that regardless of the chosen approach, a country must have a clear and effective economic development strategy in place. It must also have strong institutions, including an effective legal system, capable bureaucracy, and transparent governance. Investment in education, infrastructure, and technology is also critical to building a strong and competitive economy.
Capabilities of a developmental State
Strategic Planning: A developmental state is capable of developing and implementing long-term strategic plans for economic development. It takes a proactive approach to economic management, setting goals and priorities and working to achieve them over time.
Effective Governance: A developmental state has a capable and effective government that is able to provide the necessary policies, institutions, and infrastructure to support economic growth. It is often characterized by a high level of bureaucratic capacity and a strong rule of law.
Coordination and Cooperation: A developmental state is able to coordinate the efforts of different stakeholders, including government agencies, private firms, and civil society organizations, to achieve its development goals. It fosters cooperation and collaboration among these groups to ensure that development efforts are aligned and effective.
Technological Capabilities: A developmental state is capable of developing and deploying advanced technologies in strategic industries. It invests heavily in research and development, and fosters innovation and entrepreneurship.
Strong Industrial Base: A developmental state has a strong industrial base that is capable of producing goods and services that are competitive in global markets. It often supports the development of strategic industries through targeted investments and subsidies.
Human Development: A developmental state is committed to improving the quality of life of its citizens, and invests heavily in education, health care, and other social services. It seeks to develop a skilled and productive workforce that can contribute to economic growth over the long term.
Brief history of South Africa’s economy and economic policies since the end of apartheid
After the end of apartheid in 1994, South Africa embarked on a program of economic transformation aimed at promoting economic growth and social development. This program involved a series of economic policies and reforms, including trade liberalisation, deregulation, and privatisation.
One of the earliest policies introduced was the Growth, Employment and Redistribution (GEAR) policy in 1996. This policy focused on reducing the budget deficit and inflation, promoting export-led growth, and increasing foreign investment. However, the policy was criticized for not doing enough to address the country’s high levels of unemployment and poverty.
GEAR was a macroeconomic policy framework aimed at stabilising the economy and promoting economic growth. It emphasised fiscal discipline, reduction in government spending, privatisation, and liberalisation of trade and capital markets. The policy aimed to attract foreign investment and improve the competitiveness of the economy. However, GEAR has been criticized for its emphasis on reducing public spending, which had a negative impact on social services and contributed to high levels of inequality and unemployment.
In response, the government introduced the Accelerated and Shared Growth Initiative for South Africa (ASGISA) in 2006. ASGISA was in response to the slow growth of the South African economy and the need to address high levels of unemployment and poverty. This policy aimed to promote economic growth, reduce unemployment and poverty, and improve access to basic services. The policy also prioritised investment in infrastructure, including energy, transport, and telecommunications. ASGISA also emphasised the need for greater public-private partnerships to drive economic growth and development.
While ASGISA was initially successful in promoting economic growth and job creation, its impact was limited by the global financial crisis of 2008 and subsequent economic downturns. Despite its shortcomings, ASGISA paved the way for a more inclusive economic policy framework, such as the NDP, which places greater emphasis on social development and pro-poor growth. In addition to these policies, the government has also introduced various industrial policies, including the Industrial Policy Action Plan (IPAP) and the New Growth Path (NGP), aimed at promoting the growth and development of key sectors of the economy, such as manufacturing.
Current economic challenges facing South Africa, including inequality, unemployment, and slow economic growth
High levels of unemployment: South Africa has one of the highest unemployment rates in the world, with an official unemployment rate of around 34%.
Inequality: The country also has high levels of income and wealth inequality, with the richest 10% of the population owning more than 90% of the wealth.
Low economic growth: South Africa has experienced low economic growth in recent years, with an average growth rate of around 1% per year between 2014 and 2019, and the COVID-19 pandemic has further worsened the situation.
Fiscal challenges: The country faces significant fiscal challenges, including high levels of government debt and a large budget deficit.
Energy crisis: South Africa has been facing an energy crisis in recent years, with frequent power outages due to an aging and poorly maintained electricity infrastructure.
Corruption and governance challenges: Corruption and governance challenges have also been major issues in South Africa, with state capture revelations and mismanagement of state-owned enterprises. Low business confidence.
Structural challenges: The country also faces structural challenges, such as high transportation costs and a lack of infrastructure investment, which limit economic growth and development.
What is the National Development Plan (NDP)?
South Africa has been attempting to adopt a developmental state approach, but the extent to which it has been successful in implementing this approach has been the subject of debate.
The South African government has made efforts to use state intervention and planning to drive economic development and address the country’s social and economic challenges. The National Development Plan (NDP), which was adopted in 2012, outlines a long-term vision for economic development and social transformation, and includes measures to promote infrastructure development, improve education and healthcare, and address inequality and unemployment.
However, critics argue that the South African government has not done enough to implement the NDP and other developmental state policies effectively. Challenges such as corruption, policy uncertainty, and weak institutional capacity have hindered the government’s ability to implement its plans and achieve its development goals. Therefore, while South Africa may aspire to be a developmental state, there is ongoing debate about the extent to which it has been successful in implementing this approach and achieving its development objectives.
Goals of the NDP
The National Development Plan (NDP) is a comprehensive policy document that outlines a long-term vision for economic development and social transformation in South Africa. The plan was adopted in 2012 and covers the period from 2012 to 2030.
The overarching goal of the NDP is to eliminate poverty and reduce inequality by growing the economy and creating jobs. The plan aims to achieve this by focusing on six priority areas:
Economic growth: The NDP calls for an average economic growth rate of 5.4% per year over the period 2012-2030. To achieve this, the plan proposes measures to promote investment, support small and medium-sized enterprises, and develop infrastructure.
Employment: The NDP aims to create 11 million jobs by 2030, reducing the unemployment rate from 25% to 6%. The plan proposes measures such as investing in infrastructure, promoting entrepreneurship, and improving education and training.
Education, skills and innovation: The NDP calls for a focus on improving the quality of education and expanding access to skills development opportunities. The plan proposes measures such as increasing funding for education, improving teacher training, and promoting research and development.
Health: The NDP aims to improve the health and well-being of all South Africans. The plan proposes measures such as improving access to healthcare services, promoting healthy lifestyles, and strengthening health systems.
Social protection: The NDP proposes measures to reduce poverty and inequality, including expanding social protection programs such as social grants, and improving access to basic services such as water, sanitation, and electricity.
Building safer communities: The NDP aims to reduce crime and build safer communities. The plan proposes measures such as increasing community policing, improving the justice system, and addressing the underlying causes of crime.
The NDP also includes measures to address cross-cutting issues such as climate change, regional integration, and good governance. The plan emphasises the importance of partnerships between government, business, civil society, and other stakeholders in achieving its objectives.
The NDP is intended to guide government policy and decision-making over the long term, and has been described as a blueprint for South Africa’s development. However, its implementation has been the subject of ongoing debate and criticism, with some arguing that progress has been slow and that more needs to be done to address the country’s challenges.
Criticisms of the NDP
There are various criticisms of the National Development Plan (NDP), including:
Lack of implementation: One of the biggest criticisms of the NDP is the slow pace of implementation. The plan has been in existence since 2012, but progress has been slow in many areas. Some critics argue that the government lacks the political will to implement the plan effectively.
Inadequate consultation: Another criticism is that the NDP was not developed through adequate consultation with stakeholders. Some argue that the plan does not reflect the needs and priorities of all South Africans, particularly those living in poverty.
Insufficient focus on inequality: While the NDP recognizes the importance of addressing inequality, some argue that the plan does not go far enough in tackling this issue. Critics argue that the plan’s focus on economic growth and job creation will not necessarily lead to a more equal society.
Overemphasis on market-driven solutions: Some critics argue that the NDP places too much emphasis on market-driven solutions to South Africa’s economic challenges, rather than more government intervention and support for small and medium enterprises.
Lack of attention to corruption: Critics also argue that the NDP does not adequately address corruption, which is seen as a major obstacle to economic growth and development in South Africa.
Assessment of South Africa’s progress towards a developmental state
The success of the National Development Plan (NDP) in South Africa is a matter of ongoing debate and interpretation. While progress has been made in some areas, significant challenges remain in achieving the goals set out in the plan.
In terms of economic growth, South Africa has not yet achieved the 5.4% average annual growth rate set out in the NDP, with growth rates averaging around 1-2% in recent years. This has made it challenging to create the 11 million jobs envisaged in the plan, and unemployment remains high at around 34% (including discouraged job seekers).
On the positive side, progress has been made in expanding access to education and improving the quality of healthcare services. The number of students enrolled in tertiary education has increased, and more children are attending preschool. The government has also expanded access to healthcare services, including the introduction of a national health insurance scheme.
However, progress has been slow in some areas, such as reducing poverty and inequality. While the number of people receiving social grants has increased, poverty and inequality remain persistent problems in South Africa. The country also continues to face significant challenges in reducing crime and building safer communities.
With that being said, it is worth noting that the NDP was just a mere attempt to achieving a developmental State agenda. The policy is inadequate due to its lack of strategy, at best it is just a list of goals, there is no concrete strategic plan to achieve the very same goals.
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