About this site

This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

Towards a Socialist Economy - 1

Trade unionist ALEC ERWIN presents the outlines of an economic programme for reconstruction - and points out the vital role the SACP has to play

Economic reconstruction

In the present ideological climate there is a pervasive attempt to ensure that the SACP plays no role in the formulation of economic policy. The collapse of the USSR and the socialist states of eastern Europe is used to try to sideline the Party in regard to economic issues. Even within the ranks of socialists there is a loss ofmorale, a feeling that we have either to say the same thing as the ANC or say nothing. Others stick mechanically to previous orthodoxy.

The aim of this article is to begin the process of firmly reinserting the SACP into the debate on economic policy. I argue that the SACP is obliged to play a role that could be critical, not only for the future of the working class but for all of South and southern Africa's people.

At present there is a major contestation between two broad approaches to growth. The first stresses the revival of profitability as paramount and redistribution as a secondary consequence of this. The second stresses redistribution as the basis for viable, profitable and long-term growth of the economy.

The great weight of capital - both domestic and international - and powerful institutionssuch as the International Monetary Fund (IMF) and World Bank favour the first approach. This paper builds on documents of the ANC and COSATU to develop the second approach more fully. This second approach is not unique to South Africa. Within the context of the specific conditions in many countries of the so-called ';South" similar broad approaches have been set out.

However, to articulate in theory the second position is one thing, more important is the difficult struggle for its realisation.

The challenge can be stated quite simply: proponents of the first approach say that the second approach is simply not possible. Are they right?

The SACP has to develop a reconstruction programme that addresses the immediate needs of poverty and oppression, that acknowledges the realities of world economic and political power and that lays the basis for a future socialist society.

This is a difficult task. In this discussion paper I will argue that only the SACP has the political capacity to act as the catalyst to meet this challenge. What follows is a framework that will have to be developed and translated into organisational and political reality.

The Essence of the Argument

In the current debate much attention has focused on the significance of the words AND, WITH and THROUGH when they are linked with two other key words - GROWTH and REDISTRIBUTION. So we can have:

. growth AND redistribution; or

. growth WITH redistribution; or

. growth THROUGH redistribution.

This is more than just playing with. words. Stated simply:

Growth AND redistribution implies policies that encourage growth through rising profitability. Redistribution in this model will follow either by the trickle down of income to workers and small business, or by income transfers made by government.

Growth WITH redistribution implies policies that combine growth with certain redistributive activities in the form of social expenditure and welfare. The rate of growth would place limits on the extent of redistribution.

Growth THROUGH redistribution implies policies that make growth dependent on redistribution.

The actual policies being proposed are more complex than this. In fact, in all three cases the slogan does not fully capture the complexities of the policies being proposed. It would, there-fore, be unwise to hinge everything on the slogan of Growth Through Redistribution. However, it would equally he unwise to say there is no real difference between the approaches.

In the introduction I referred to two broad approaches to growth. I will continue to use this distinction. Whilst differing substantially, the first two approaches (growth AND, and growth WITH redistribution) both place greatest emphasis on growth. In my view they can be combined, they are variants of each other,

Growth THROUGH redistribution is substantially different. In this case the essence of the argument is based on an analysis of the social and economic structural features of South Africa. Emerging from such an analysis is a basic standpoint: Not only do we have to ad-dress poverty as a social and political priority, but to do so forms the economic basis for sustained growth.

Poverty must be addressed not just by transfers of income and slowly rising employment. It must be addressed by a dynamic redistribution of resources towards areas of poverty, social deprivation and towards overcoming the structural legacy of apartheid. To achieve this we will have to combine dynamic redistribution with a process of restructuring key areas of our political economy. The old structures are obstacles to growth.

This combination of dynamic redistribution and a restructuring process will generate a growth process that is viable and stable in the long-term. It is important to realise the necessity for restructuring also arises from changes in the world economy that must be accommodated to the benefit rather than the detriment of our economy.

In short, the key differences in the second approach (Growth THROUGH redistribution) as opposed to the first approaches (Growth AND or WITH redistribution) lie in a conception of redistribution as a dynamic process, and one that is broader than income transfers. This different conception of redistribution is linked to a process of economic restructuring. It is this link that sustains growth rather than growth sustaining redistribution.

The second, growth THROUGH redistribution, approach is not easy. It offers no short cuts and it implies change, consultation and determination. We need to examine it in more detail.

First, I shall look at the political economy of such an approach and then in more detail at the necessary growth strategy. The two are linked, but that should not surprise us.

The Political Economy of Reconstruction

The SACP and the ANC-led alliance

Poverty must be addressed by a dynamic redistribution of resources towards areas of poverty and social deprivation, and towards overcoming the structural legacy of apartheid

The distinguishing feature of a Marxist socialist party should he that its programme is informed by analysis located in historical materialism. Such an analysis in South Africa at present points, in my view, to the historically specific centrality of the ANC-led alliance in the reconstruction of our society. The three partners could each play a crucial and distinct part in any reconstruction programme. If this is understood and acknowledged, then it is the sum of these three parts that offers the real prospect of achieving reconstruction based on growth through redistribution.

In the case of COSATU, it is not just because it is a large trade union federation that it is an important partner. COSATU remains committed to socialism and it has made an absolutely critical strategic choice. This strategic choice has been to conceive of its role in a way that is much wider than a narrow corporatism. COSATU and its affiliates actively campaign and negotiate for economic programmes that meet the needs of all in South Africa, and not just COSATU members or employed workers.

COSATU is, therefore, well placed to actively initiate programmes towards reconstruction. It is not a passive and reactive trade union movement that could be an obstacle to change. But, at the same time, it remains a trade union movement that is obliged to articulate and defend the interests of its members. There-fore COSATU can be an active component ofreconstruction, but it cannot claim to represent the interests of civics, small business, rural organisations, etc. Its internal democratic structures do not allow for this.

The SACP can, potentially, represent a very much wider constituency than COSATU in the struggle for socialism. As a socialist party it can both represent and retain an unwavering commitment to all repressed classes and strata within society. This commitment to representing class interests on the basis of socialist theory will, however, place limits for the moment on the mass nature of the party. Its constituency for the present is not likely to be mass, even though its membership and support could be very large.

The ANC is also a powerful product of our history. Through strategic choices it made during the course of its own history it is now the only truly national liberation movement that has the will and capacity to unify a nation in South Africa. For all of us who have lived in a divided society, and as we watch the costs of division emerging elsewhere in the world, the value of this unifying capacity is of the utmost importance. It is only by building such a new national unity that we will be able to eradicate the evil effects of apartheid.

The unifying capacity of the ANC lends it a truly mass character which will be its great political strength in the coming period. Yet in the area of economic policy this mass nature, and its resulting multi-class character poses particularly vexing problems. Stated simply the dilemma is this: if the ANC shapes an economic policy that is highly representative of its worker and rural constituency interests it will antagonise other numerically smaller but economically powerful interests. This will undercut not only its national unifying role but it will also subject the ANC to an even more hysterical ideological attack.

If, on the other hand, the ANC's economic programme reflects the interests of domestic and international capital, then it will lose the support of its numerically much larger worker and rural constituency. It could lose this support in the first election. It will most certainly lose it in the second. This is a disastrous prospect since it will also undercut the national unifying project, it will entrench apartheid created divisions and minimise the prospect of democratic stability.

We should not underestimate the signif, cance of this dilemma because it is not something we can stand back and watch resolved in the ANC alone. Its effects will impact on the working class very directly.

One way out of the dilemma is to deny it exists by an ideological sleight of hand. For instance, one might argue that economic realities dictate only one path to growth - the first approach outlined above. Accordingly there is no dilemma, because the second approach (growth through redistribution) is not a realistic prospect. The mass constituency will have to bite the bullet and accept a slower redistribution process. Sometimes this sleight of hand is moderated a little (it is accepted that some redistribution must take place, but its magnitude depends on successful growth) without abandoning the first approach.

This ideological sleight of hand is a persuasive one, because it reflects a truth if certain key structural features of our economy re-main unaltered. But this argument, however persuasive it might be superficially, takes us down a dangerous path. In my view the first approach is likely to fail in the medium-term even on its own economic terms. It is not a sustainable growth option. It will certainly never meet the most basic aspirations of the broad majority of our country.

Unfortunately the prospects of this path becoming a reality are high, particularly if we take into account the power of organisations such as the G7, the IMF and the World Bank to shape the world economy.

We need to disentangle a few ideas if we are to develop an effective political counter to the sleight of hand. In the first place, while our opponents' projected growth path is dangerous, equally dangerous is an attempt to win mans support on the basis of false and unrealisable promises. A sense of realism on our part is, therefore, crucial.

However, there are two fundamentally different kinds of realism. One is a realism based on an achievable programme, where initial realism is rewarded by a continuous and increasing flow of well distributed benefits to the majority of our people. The other is a shut-upand-wait realism based on political persuasion and discipline but thereafter followed by an inadequate and badly distributed flow of benefits. The latter is a recipe for disaster.

The ANC is under massive pressure to give its blessing and thereby "deliver its constituency" to this second kind of realism.

For big capital and the conglomerates few problems would exist with this option. They would see the ANC come to power without threatening their interests. And when the ANC loses power, as it is liable to do when it fails to deliver anything of substance to its major mass constituency, big capital would be well placed to reassert its direct political power in the new situation.

However, for smaller more competitive capital and petty bourgeois producers, who do not have the luxury of being able to juggle their profits and move them around the world, the position could be less favourable. As we have seen in the stagnant, repressive apartheid economy from 1977 onwards, it is not the large corporations that suffer. It is small to medium business and the petty bourgeois producers that suffer. The collapse of a future ANC government will revert us to this type of stagnant, distorted and repressive economy.

For the mass constituency of the ANC the effects of the second kind of realism will be disastrous. This constituency is aligned to the ANC because the ANC offers it the only political possibility of eradicating apartheid.

The answer to the dilemma is a coherent economic programme of the tripartite alliance.

By beginning from a more analytical, political economy starting-point the SACP can act as a catalyst for and give leadership to an alliance economic programme that has mass support. But, in addition to winning mass support, it must be a programme that acknowledges the realities of present developments in the world economy. It needs to be both a popular programme and one which is sustainable domestically and in the context of world developments.

This combination of mass support and establishing a new location within the world economy will also create the possibility of capital, both big and small, accommodating itself to such a programme. But the key to the success of such a programme depends upon it winning support from a very wide mass constituency and on it being based on a coherent and attainable growth strategy.

A Reconstruction Accord

By beginning from a more analytical, political economy starting-point, the SACP can act as a catalyst for and give leadership to an alliance economic programme that has mass support

In widening the support for an economic programme we need to look at other forces and movements in society and examine the extent to which they could be integrated into an alliance.

The struggle against apartheid and the struggle between a large proletariat and a powerful bourgeoisie has created a high degree of politicisation and mobilisation in civil society. Civics, trade unions, student organisations, women's organisations, rural organisations all exist in greater or lesser degree, and play a wide and active role in socio-economic struggles. They play this role in the socio-economic field precisely because of the gross distortions resulting from apartheid.

As a result these mass organisations could be critical to the Growth through Redistribution path. There are two reasons for this. First, they are located precisely in the areas where redistributive policies will have to be implemented and where restructuring will have to be fought for.

Secondly, if an understanding of what can or cannot be achieved by economic reconstruction is to be developed, then these organisations will be critical. This relates centrally to the issue of realism touched upon above. People become realistic by having to deal directly with problems. They will not be realistic if things are imposed upon them, from above or from without.

This implies, in turn, that while- they are highly politicised, we must not seek to transform these mass organisations into party political entities. Their success in socio-economic, change depends on them not operating in a party political manner.

This point is often not well understood and remains debated within the ANC and SACP, and it is often badly handled by activists. Within the leadership of COSATU, the civics and many rural organisations, it is better under-stood. These mass organisations encounter on a daily basis the power of capital and of the apartheid state and its adjuncts. The success of their resistance depends on maximum unity around concrete issues.

This unity is developed around the issues at hand, be it in the workplace, township, school, health service, rural area or university. For the unity to succeed it must embrace all, irrespective of their race, genderorpolitical affiliation. if one attempts to unify around party political organisation, then it is very difficult to win maximum unity around the immediate issues.

A political party takes positions on many issues within an overall programme. This is both inevitable and correct, a political party seeks to govern. It must have positions on all aspects of government. Support for a political party is, therefore, support for a wider programme of governing, it is not the same thing as wanting to take action on a particular issue.

If COSATU unions demanded ANC membership as a precondition for union member-ship, then workers who may agree with all other workers on work-place issues would now also be obliged to support participation in CODESA and other major policy issues when they joined the union. This kind of precondition would weaken shop-floor unity, and the only beneficiary would be capital.

The COSATU approach avoids this by setting no membership restrict ions. So, even when COSATU enters into the tripartite alliance to achieve certain objectives, it does not deny individual members the right to express their own political choices on issues unrelated to work-place issues. Of course, things are not always so easy. A great deal depends on the organisational practice of unions.

However, in principle, this combination of issue-based politics and party political politicscould - if understood and nurtured - be the key to reconstruction.

In marshalling the power to implement a redistributive and restructuring growth path, a Reconstruction Accord that embraces the organs of civil society could be crucial. The alliance would here be giving leadership, without demanding political loyalty from each member of a mass organisation.

The success of such an Accord, however, depends on whether the economic programme that forms the basis of the Accord meets three criteria:

. it must meet the needs and aspirations of these mass organisations;

. the programme must be achievable within the macro constraints that are the legacy of the past;

. it must acknowledge and accommodate changes in the world economy.

If these three criteria are met, then such a programme will offer stable, viable and sustained economic growth. This sbcio-economic organisational base provides firm ground to negotiate with both capital and the international institutions.

The Meaning of Redistribution

A Reconstruction Accord that goes wider than the tripartite alliance would, as indicated above, need to win the support of a wide range of mass formations. How will this be done?

The approach to growth favoured by capital acknowledges that there is a need to address poverty. The proposed solution is rapid growth initiated by rising profits and by extending and deracialising the capitalist class. This, it is argued, will generate additional employment and create the necessary additional resources for the state to carry out a redistribution process to the poor and needy.

In this approach redistribution takes on a certain meaning. It implies that the revitalisation of existing structures will create surplus resources that can then he transferred to those unable to benefit from the growth within the existing structures. The size of the redistribution depends on the rate of growth - the larger the growth rate the more redistribution there will be.

In the Party we must broaden the definition of redistribution. While we should certainly understand redistribution to include common mechanisms like progressive taxation, wealth taxes and land reform - we must go beyond this kind of conception. This kind of conception of redistribution is particularly inadequate, given the existing structure of the South African economy. The combination of apartheid and a capitalist development based on cheap labour and the minimising of spending on social infra-structure for the majority has had major effectson our economic structures.

Manufacturing has developed on the basis of protection, on the use of unskilled and semi-skilled labour, and on an inappropriate use of technology. This has led to low levels of human resource development, low levels of productivity, bad managerial practices and the wasteful use of the natural, including energy, resources of South Africa.

The basic financial strength of the mining houses led to their "invasion" of all other sectors of the economy and an excessive process of conglomeration. With their stranglehold the conglomerates were able to expand their own profitability despite the increasingly severe structural problems in the economy. These problems started to become apparent from the low levels of foreign investment the economy attracted from the late 1970s.

But the structural problems within the manufacturing sector - its low productivity, high costs, a poor skills base and bad managerial practices - remained hidden for many years. A high gold price and the general use of mineral exports to allow importation of machinery were useful in concealing the problems.

This meant that South Africa's manufacturing and export patterns were increasingly diverging from world trade and production patterns. World trade and production was rapidly moving towards commodoties produced by skilled labour using flexible production methods capable of producing high quality products. Production processes now use lower quantities of raw materials for greater lever of output, thereby reducing markets for raw mineral exports. In addition, to meet these challenges, powerful new regional markets and trading blocs have been developed, particularly in the "North".

The existing structure of the South African economy therefore poses severe problems for the future. If the South African economy re-mains trapped within its present structural mould it will not be capable of significantly competing in the manufactured goods trade, it will be highly vulnerable to import competition, it will not be able to depend on gold or raw materials to increase exports and will no longer have a cushion of very high white standards of living.

This will limit the growth rate and make an initial growth spurt short-lived. This will have two further consequences for redistribution. First, a low growth rate will limit the available resources to effect an income transfer. Secondly, the redistribution of products such as housing will he limited by the gap between prices and the incomes of the majority. The state will not be able to close the gap by subsidies because of the first problem - a lack of resources. This will either mean no redistri-bution, or pressure for macro-economic populism, that is, printing money and inflation. Both possibilities spell disaster.

The SACP, therefore, needs to define a growth strategy that widens the concept of redistribution to give it a dynamic character and more content than simple income transfers. Redistribution needs to be seen in a dynamic context and linked with a process of restructuring.

Growth Strategy

To achieve this wider conception of redistribution a growth strategy is required. This is an interconnected set of policy initiatives designed to complement and support each other so as to bring about structural change in the economy. It is not a magic forula, but rather a coherent approach in key areas of the economy.

It should also be stressed that it is not a quick fix designed to kick-start and maintain a momentum in a particular direction. Neither is it a detailed administrative plan to be implemented by the state.

What are the essential features of such a growth strategy?

. a redistribution process that not only deals with income but with the location of employment, production, products and their consumption in the economy. A redistribution of the access to economic power and skills in the economy. This is, in effect, developing the socio-economic capacity of the society across the widest front and involving the maximum number of people.

The point can be illustrated by reference to housing. It is no good providing houses (a form of redistribution) to a community without ensuring an income and human resource base in that community that can maintain the basic services and ensure effective local government.

. this will require a restructuring process in the key areas of:

-. industrial policy;

-. human resource development;

-. access to land and economic resources;

-. the utilisation of energy and mineral re-sources;

-. social and economic relations with southern African countries.

. a redistributive and restructuring process that forms the basis of long-term, viable growth by:

-. expanding and widening (through rising employment) the domestic and sub-continental market;

-. developing human resources to allow for appropriate use of technology, thus increasing productivity, raising incomes and hence deepening the expanding market:

-. expanding full-time, economically viable employment through labour absorbing growth and the beneficiation of our mineral resources;

-. allowing for! sustainable environmental development through integrating environmental protection into industrial policy;

-. realigning the ratio between product prices and wage income, so as to address poverty and to expand exports of manufactured products in a way that sustains the long-term viability and competitiveness of the South and southern African economy within the world economy.

The essehntial features of such a strategy can therefore be stated thus: a redistributive process that embraces more than a transfer of income will require a restructuring of certain key areas in the economy. The redistribution and restructuring combined will lay the basis for viable and sustained growth based on a growing market, higher productivity, expandedemployment and a sustainable export capacity in manufactured products.

This may appear to be a very sweeping approach with no content to it. However, the purpose here is not to present a detailed economic programme. I am concerned to spell out a strategy that locates redistribution as an essential component of the growth process, rather than just an adjunct to it.

In fact, a great deal of policy work within the areas identified in this growth strategy has been and is being done. It now needs to be given coherence by a clear growth strategy.


The SACP needs to define a growth strategy that widens the concept of redistribution to give it a dynamic character and more content than simple income transfers

There are likely to be a number of objections directed at the above strategy. One obvious objection goes: Yes, to talk about redistribution is all very well, but isn't growth needed first to get the resources?

In the first place in reply to this objection we should note that, even in the present situation, there are resources available which are not being used because of a lack of coherent policy. Housing and education are good examples. In the second place, the argument about the non-availability of resources would be stronger if our conception of redistribution was simply income transfers.

Another likely objection is that the strategy would mean that growth would be postponed to a period beyond a lengthy process of redistribution. On the contrary, I have little doubt that a revival of the growth rate is important. The strategy I have outlined in no way argues that we should keep growth down, or allow to it remain static while we redistribute resources. Indeed, experience elsewhere shows clearly that it is best to restructure industry on the upturn of the economic cycle, not on the down-turn.

But is a growth revival possible? The answer must be yes. It will result from the so-called "apartheid dividend" (the benefits that will flow from the demise of apartheid). In the present situation there is gross mismanagement of public sector resources, excessive and expensive duplication and an incapacity to deliver. To mention just one example, there are no fewer than 26 separate agencies to channel funds into housing. The result is that nothing happens. The creation of a unitary state, or even just a unitary policy, will have rapid effects.

Political stability will have a positive impact on business confidence and will open access to international assistance. increased tourism could also have beneficial growth effects.

The issue at stake, therefore, is not to avoid growth that arises from the "apartheid dividend", but to ensure that it initiates the conditions for the long-term viable growth envisaged by the growth strategy. The existence of a coherent growth strategy with widespread support will also act to increase the "apartheid dividend".

We must avoid a growth spurt that eventually becomes overwhelmed by the structural deficiencies of' the economy, or which is cut short by political instability arising from growing impoverishment.

The role of the state

The strategy i have outlined is based on policy interventions. The state and a planning process arc, therefore, critical. This, of course, will immediately stir up ideological attacks about the state and planning. However, in real policy terms only fringe elements would seriously contend that the future state should have no role to play in reconstruction.

But what exactly is the role that the state should play?

First, let us remember that the strategy envisages a link between redistribution and re-structuring. I have highlighted the need for strengthening mass organisation in this regard. The involvement of mass formations in both redistribution and restructuring is essential if we are to avoid attempts at top-down planning and regulation that lead to an over-extended and ineffective state.

The state needs to plan and facilitate the overall strategy in the reconstruction process. The role of the state is not confined to nationalisation. As indicated above, the state needs to plan, and it needs to establish and facilitate a growth strategy. It will do this by using the public sector to achieve objectives within that strategy. However, over and above this, it will need to work with organised business, trade unions and other mass organisations. This will be done by a combination of consultation, regulation, legislation and support programmes.

The role of the state will, therefore, be extensive. But this does not mean that the state has to take responsibility for all the areas in which it intends intervening. It should be conscious policy to shift much of this burden to mass organisations in civil society. This is opening new areas in the approach to the state and there will be a need to debate it further and clarify it in more detail.

The balance of class forces In reconstruction

It needs to be clear that in stressing redistribution we are not thinking of a once-off transfer of assets from the haves to the have-nots, as alleged by much of the commercial media. In fact, such an approach would he unhelpful, it would not involve the necessary restructuring. The strategy I have been outlining is based on a process, not a once-off act.

This is important because it corrects a number of misconceptions. For instance, many of our comrades believe that to bring about a socialist economy all you need is a seizure of state power and nationalisation. In fact, no socialist economy could simply he brought into being in South Africa with immediate effect because of the structural distortions of our economy. A socialist economy has to he developed, it can-not be brought into existence by political or military means alone.

The issue at stake in the period of reconstruction is whether the process benefits and strengthens the working class, or whether it furtherexploits and weakens the working class. The class composition of a future state will be important in deciding the outcome. Our own history makes this a less than simple issue. A major purpose in struggling for the second (THROUGH redistribution) approach to growth is to have a real impact on the classcomposition of the future state and its policies. Even within this second approach to growth and reconstruction, the private sector will exist and play a very significant role in the economy. The process will involve much negotiation and many agreements with organised business and the capitalist class.

The debate around whether socialists can negotiate with capital or reach agreements with capital is not one of the key issues. The key issues are the conditions within which negotiations take place and the strength of our position in those negotiations. This will be influenced by whether a mass democratic political alliance and an attainable growth strategy linked to that alliance can be achieved.

In saying this it would be naive to expect capital to be happy with such a situation. Capital will do everything to prevent the success of such a project. If we are divided and incoherent in our policies, capital will succeed. The challenge which the SACP must take up is to strengthen the mass forces favouring the redistributive, restructuring growth strategy. It is the only basis for a viable, stable growth path.

Building up a broad-based, mass alliance around a reconstruction pact will present capital with a difficult choice. Apart from challenging its present domination of economic discourse, it will also compel capital to weigh up short-term interests with the longer-term prospect of dealing and operating in a viable, vibrant and stable economy.

Finally, I have not tried to present a more detailed analysis of the link between reconstruction and socialism. This would require a more careful assessment of socialism itself in the light of recent experience. But the proposed policy framework I have outlined is based on the conviction that a link between reconstruction and socialism can, and indeed must, be forged. *

This resource is hosted by the Nelson Mandela Foundation, but was compiled and authored by Padraig O’Malley. Return to theThis resource is hosted by the site.