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This resource is hosted by the Nelson Mandela Centre of Memory, 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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.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 - 2

This SACP Economics Forum paper considers the debates around redistribution and growth Redistribution and growth

Redistribution and growth

The relationship between redistribution and growth is one of the most important issues of economic policy for the immediate post-apartheid period. The acute poverty, inequality and economic stagnation deriving from a combination of apartheid and the post-World War II "growth path" have led the ANC, SACP and COSATU to call for policies to promote both redistribution and growth

The joint ANC-COSATU Workshop on Economic Policy held in Harare in April 1990 (at which the SACP made an input in its own right) can in many ways be regarded as laying the foundations for this common alliance perspective. At that workshop the slogan "Growth through Redistribution" was discussed, although it did not appear as such in the final document emanating from that workshop (ANC-COSATU, Harare 1, 1990).

"Growth through Redistribution" was intended to highlight a di fference with approaches encapsulated in two potentially competing slogans - "Redistribution through Growth" and "Redistribution with Growth".

"Redistribution through Growth" sums up the approach broadly favoured by the present government and much of the business community. While it accepts (at least rhetorically) the need for redistribution, the approach maintains that no significant resources are currently avail-able for redistribution. Growth is thus FIRST needed to create new resources, and it is these new resources, rather than existing wealth, that will be redistributed.

"Redistribution with Growth" was a slogan popular among social-democratically inclined development economists in the early 1970s. It sought to challenge what was seen by more conservative economists as a fundamental dichotomy between growth and redistribution. The more conservative approach maintained that policy makers could choose between re-distribution and growth. But they could not have both. If they chose redistribution they would have to sacrifice some growth and vice versa. The "Redistribution with Growth" school argued against seeing a simplistic trade-off between redistribution and growth. This school argued that it was possible to achieve growth along a path in which all would grow richer, but the living standards of the poor would improve relatively more rapidly and the gap beween rich and poor would narrow. However, while the "Redistribution with Growth" school rejected a simplistic counter-posing of redistribution and growth, it still tended to see redistribution as a secondary consequence of growth rather than as something which could contribute to growth (Kaplinsky, 1991).

"Growth through Redistribution" was intended, in contrast to both these approaches, to indicate an approach in which redistribution would act as a spur to growth. And, moreparticularly, it was an approach in which redistribution was seen as capable of placing the South African economy on a new growth path. Redistribution of income, of educational and training opportunities and of housing and infrastructrualexpenditure, in a context in which there was also a redistribution of political and shop floor power, would all become elements of a demand led spur to growth. It would be growth along a new path giving more emphasis to the basic needs of the majority. At the same time, budgetary policy, educational reform and policies in various other spheres would create the conditions for productive enterprises (private as well as state) to respond to this demand.

Although, as indicated above, the slogan as such did not appear in the Harare 1 Document, it was used in a Document adopted at another ANC Workshop held in Harare later the same year (ANC, Harare 2, 1990). It was also included in documents adopted at COSATU's May 1991 "Economic Policy Conference" and for some time was considered to sum up the essence of the common A NC/SACP/COSATU perspective.

It did not, however, appear in the "Draft Resolution on ANC Economic Policy for National Conference", adopted at an ANC Department of Economic Policy National Work-shop held in Johannesburg in May 1991 (ANC, 1991), nor in the recently-adopted ANC Policy Guidelines, May 31 1992. The reason for this was that a num herof participants felt that it was little more than a faddish slogan, which misleadingly implied that there was one "royal road" to growth, whereas, in reality, promoting growth depended on a range of measures - including investment policies, and export strategy, and so on.

In itself, this need not be a source of major disagreement. All documents emanating from the alliance partners (including the latest SACP Manifesto) have stressed the need for export-oriented policies as an integral component of a growth strategy, and none have defended an inward looking, uni-dimensional approach.

A potentially more serious issue could arise as a result of the mounting pressure from international financial institutions and the South African business community to accept the fundamental proposition of the "Redistribution through Growth" school - that growth will have to take place before redistribution and that "premature" redistribution will harm growth.

An important example of this can he found in the International Monetary Fund's recent discussion document (IMF, 1991). The central conclusion of this document was cast in a relatively innocuous way -"redistribution policies alone will not he sufficient to ensure asustained overall improvement in living standards, but will need to be supported by policies aimed at placing the economy on a higher growth path..." (p.18). But the thrust of the report is to argue that there is little scope for redistribution until there is significant growth. Chapter 6 of the IMF report argues strongly against any increase in taxes or any other policies that would seriously involve redistributing resources from capital or wealthy whites. The scenarios developed in the report caution against any more than a half percent rise in real wages in a context of overall growth of 3,5%. And the only form of redistribution seriously contemplated in the short run is an equalisation of social expenditure in education, health and pensions at levels slightly above the present level paid to African recipients. This implies significant cuts not only for whites, but also for so-called coloured and asian beneficiaries.

These kinds of arguments have been put with increasing forcefulness to the ANC leadership. They were reiterated at the meeting of the World Economic Forum held in Davos in February.

Developing an SACP perspective

We need to guard against a situation in which subtle shifts take place in economic policies - shifts that are not easily noted, but which, in reality, represent profound policy changes

Sticking to the slogan "Growth through Redistribution" is less important than trying to hold the line in terms of the real content of several policies and propositions associated with it. This requires unpacking some of the issues at stake.

1. There is, in fact, already broad agreement across the tripartite alliance that raising living standards will require growth. The size of the South African economy is such that even if we had an egalitarian distribution of income, many of our people would still be living in poverty. South Africa's percapitaGross Domestic Product is around US $2,500 - about one-tenth the average of the advanced, industrialised capitalist countries (OECD members). We cannot in such a situation hope to raise the living standards of our people without significant economic growth.

2. It can also be readily accepted that promoting growth will require a multi-pronged strategy. There is no "royal road" to growth. Growth will depend on investment, a successful export strategy, and so on. If the slogan "Growth through Re-distribution" has been understood as implying an inward-oriented, single-measure strategy, this is not what is, in reality, needed.

3. Where there is a need to be more assertive is in relation to the proposition that there is no scope for any significant redistribution in the short run, and that policies aimed at promoting redistribution would be disastrous for growth. The pressure to substitute the slogan "Growth through Redistribution" with "Redistribution through Growth" aims at nothing less than abandoning attempts to bring about a demand led qualitative shift in the growth path, in favour of a neoliberal, supply-side policy aimed at mere qualitative growth. Not only would this amount to abandoning efforts to run the orientation of the economy towards satisfying the basic needs of the majority, it would also, if any of the arguments about the structural crisis of thepresent South African growth path have any substance, be unlikely to lead to sustainable growth.

That there will be constraints on redistribution imposed by the correlation of forces, internationally as well as domestically, cannot be denied. But we should not allow these to lead to an abandonment of policies seeking to promote demand led growth within a framework which aims at shifting the growth path. To some extent, the capacity of redistribution policies - housing programmes, etc. - to spur demand-led growth, is a technical question. Some of the research work being undertaken within the framework of the, MERG and other projects may help to clarify the potential contribution such programmes could make to growth.

Ultimately, however, policies depend on political choices made between available options. We need to encourage a broader, frank democratic debate about constraints and options available within those constraints.

Above all, we need to guard against a situation in which subtle shifts take place in economic policies, shifts that are not easily noted, but which, in reality, represent profound policy changes. *

References

ANC-COSATU Harare 1 (1990), "Recommendations on Post-Apartheid Economic Policy: Workshop on Economic Policy for a post-apartheid South Africa, 28 April-May 1 1990".

ANC Harare 2 (1990), "Discussion Document: Economic Policy", ANC Department of Economic Policy, September 1990.

ANC (1991), "Draft Resolution on ANC Economic Policy for National Conference", DEP, 11-12/5/1991. ANC (1992) "ANC Policy Guidelines for a democratic South Africa" , National Conference May 1992

IMF (1991), Desmond Lachman and Kenneth Bercuson (eds), "Economic Policies for a New South Africa", IMF Occasional Paper no.91, Washington.

R. Kaplinsky (1991), "A Growth Path for a Post-Apartheid South Africa", Transformation, 16, 1991.

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