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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 It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.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 - 3

JJ Kunene looks at the economic role of the slate in a democratic South Africa

Nationalisation and the role of the state

Nationalisation and the role of the state gainst the backdrop of the present international crisis of socialism, the ever present anti-communist onslaught has become emboldened. There is near hysteria if the ANC, COSATU or the SACP make the slightest reference to public ownership or to state intervention in the economy as a way of redressing historical injustices. We are told that these key economic instruments for redistribution have been proved wrong by the crisis in eastern Europe. Nationalisation, we are told, is the policy of the communists, and communism has failed.

These kinds of arguments are false for a least two basic reasons. In the first place, nationalisation and other forms of state intervention in the economy are not in themselves policy objectives of socialism. They are instruments of economic policy making. And, in the second place, they are instruments that have been used (successfully and unsuccessfully) in both capitalist and socialist systems.

This is a very obvious point. But the fact thatits obviousness has escaped so many South Africans suggests that the real ideological assault is aimed, not at nationalisation as such, but at defending entrenched interests and privileges, against any attempt to redistribute.

Unfortunately, one major consequence of the ideological assault on the democratic movement has been a crisis of confidence among socialists and progressives in South Africa. This is reflected in the defensive and apologetic positions so often adopted in response to the attacks. In many instances, over-compensation has meant an alarming retreat from positions of principle.

The State and the economy

In the first place, it is necessary to demythologise the whole question of the role of states in the economy. All states, without exception, intervene in their respective economies. They use their political power to influence, invest, direct, redirect, control and apportion, to a greater or lesser extent, the national resources and the national income. They do this in order achieve specific economic policy objectives which might range from neo-liberal objectives, through social democratic objectives to socialist objectives.

There are a number of different economic instruments through which states intervene in the economy. For instance, taxation is used as a means of mobilising revenue for the state. The budget is used as means of distributing this revenue. Taxation can also be used to provide incentives - for instance to encourage investments and job creation - or disincentives.

State public works programmes (for example the building of dams and roads) to create jobs and develop infrastructure is another example of state intervention in the economy.

State ownership of certain sectors (whether by nationalisation or not) is, therefore, only one of many possible forms of state involvement in the economy. And nationalisation of an existing private company is only one path to state ownership. Another is when the state actually creates a new, state-owned enterprise.

The angry noise about state economic intervention is therefore, often, highly dishonest. But what about the more specific issue of state ownership of enterprises? First let us deal with two common myths in this regard.

Two myths about state-ownership

Myth one: There is the common assumption that state ownership means a lower level of economic performance. In fact, the evidence for this is limited, because private and public enterprises rarely co-exist in equal circumstances. However, what is patently clear is that state interventions, including state ownership, has often been crucial to economic success in newly industrialised countries, including South Africa itself.

Moreover, we always need to be careful what we mean by "economic performance". Ifprofits to shareholders is the criterion of efficiency, then obviously private ownership is likely to be more efficient. But if social usefulness is the criterion then the private sector is often highly inefficient.

The private sector tends to base its planning on private returns, and often short-term re-turns. It is incapable of making useful social calculations of costs and benefits to the overall economy. This is why infrastructure and utilities (for example, transport, communications and electrification) are so often to be found in public ownership. Infrastructure and utilities like these bring economic benefits and empowerment that far exceed private returns.

Myth two: We are told that there is a necessary conflict between state ownership and intervention in the economy on the one hand, and the market on the other.

But consider our own South African realities. The vast majority of our people do not have, and have never had, access to the market because they are denied basic infrastructure and employment. The present regime's attempts to privatise state-owned land will mean that even more of our resources are monopolised by the big conglomerates, while'the exclusion of millions of rural poor from the market will be perpetuated. An increased public sector could well have the effect of expanding, not limiting the market.

Likewise, it has often been argued that public sector investment is necessarily at the expense of the private sector. In the 1970s in South Africa public sector investment easily outstripped private sector investment. When public sector investment was curbed in the 1980s, the private sector did not make up the loss, in fact, it stagnated even more.

The national democratic state In SA

What kind of economic role should a national democratic state in South Africa play? Would this role include nationalisation?

The answer to these questions must be guided by the following (not always easily reconciled) objectives:

     The first task in a national democratic phase is to meet the basic needs of the majority of the people;

     There must be a decisive shift in economic distribution, power and account-ability;

     There must he a transformation of the present system, replacing it with an effective.and popular ad-ministration with the powers and capacity to meet and respond to the people's needs and aspirations;

     The transition from apartheid should take place with the minimum economic destabilisation;

     The form and direction of a future economy should be determined democratically, and must allow for flexibility.

It is my conviction that to achieve these basic goals a future democratic state will have to intervene in the economy through public ownership, including nationalisation.

It must certainly be the sovereign right of a future democratic state to have at its disposal public ownership, nationalisation and any other economic policy instrument to attain its short and long-term policy objectives.

State ownership and nationalisation

In the short-term the case for state ownership will be stronger the more feeble the ability and the greater the unwillingness with which the private sector meets basic democratic policy goals.

There are at least three important areas where,it seems to me, the case for some state owner-ship as an economic instrument would be desirable in the immediate national democratic phase:

1. Redistribution - as a means to meet basic needs and to stimulate growth. Meeting basic needs, whether through redistribution or public provision, is more than a matter of revenue and expenditure.

The state will have to intervene to ensure that a policy of redistribution is not sacrificed to other macro-economic constraints, but that the effects of such constraints are moderated and limited.

2. The effective management of the "dividend" that will result from the ending of apartheid. (Incidentally, ouropponents have been telling us that there will be an insignificant"dividend". This is simply not the case, there are vast static advantages that will flow from the more effective use of resources, as well as more dynamic advantages to our economy that will flow from an end to apartheid). The role of the state will be crucial in identifying what alternative uses have to be guaranteed for the released resources, and the pace and effectiveness with which this can be achieved.

3. The provision of basic services both for the effective development of the economy and for improving the standards of living for the majority of our people. The provision of these services depends upon the transport system, housing, education, food and energy, the labour market, the financial system, ecological management, health and administration.

Apartheid is associated with the violent enforcement of white privilege. Without fundamentally changing this bedrock for the provision of basic services, there is no guarantee that inequalities will be redressed or that there will be an effectively functioning economy.

Nationalisation has been mythologised. Onthe one hand it has been treated as a demon, on the other as a panacea, a magic solution for all problems. We need to move away from mythologies, we need to treat nationalisation seriously as one possible economic instrument in the struggle to democratise our country. *


     To Meet the basic needs of the majority

     To bring about a decisive shift in economic distribution, power and accountability

     The powers to meet the people's needs

     Minimum economic destabilisation

     The form of a future economy should be determined democratically, and be flexible

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.