Economic involution in the coal and timber industries of northern Russia .... 1997), attempting to draw away investment from other areas or gambling on.
Developmental Local Government and Local Economic Development: Combining the Macro- and Micro- Institutional Foundations of Development Firoz Khan i (Published in 1998 by the Electoral Institute of Southern Africa, Johannesburg)
i At the time this article was written, the author was employed as Head of Research and Policy at the Centre for
Community and Labour Studies, University of Durban-Westville. His areas of interest and research include: globalisation; local economic development; local government; housing; development planning; industrial policy; public service training and education; public sector restructuring. The views expressed herein are those of the author alone.
On top a thousand threads, at bottom a single needle (Chinese Proverb) Globalisation, the State and Social Capital: Complementarity, Embeddedness and Coproduction The current round of global socio-economic restructuring is shifting the geographic spaces of capital accumulation as power relations are continuously constructed and deconstructed by the cross cutting double dynamic of deterritorialisation and reterritorialisation (O'Tuathail & Luke, 1994). One the one hand, there are tendencies towards the international centralisation of power in transnational institutions/actors/agencies, on the other, there is the tendency towards greater regional/local autonomy. Localisation and globalisation are thus closely yet paradoxically connected (Dunford & Kafkalas, 1992), closing while simultaneously opening up political spaces for social engagement in abstract and absolute senses. The new economic order, from this perspective, has shifted the political terrain above and below the nation-state (Brodie, 1996), thus calling forth oppositional strategies and forms based on local and international strategies (cf Morgan, Power & Wiegel, 1996; Pillay, 1996). In the minds of many, the task before us is not only to think globally and act locally, but also to think globally and transform globally (Escobar, 1995). This outlook compels us to re-conceptualise the relationship between the local and global in a more dynamic manner that breaks decisively with the master/slave binary in which the local is `undone, insignificant, or displaced' (Wilson & Dissanayake, 1996:06) by the omnipotent forces of globalisation. Sociologist provide some useful and helpful pointers in this regard: Globalisation is [thus] not just an `out there' phenomenon. It refers not only to the emergence of large-scale world systems, but to transformations in the very texture of everyday life. It is an `in here' phenomenon, affecting even intimacies of personal identity. To live in a world where the image of Nelson Mandela is more familiar than the face of one's next door neighbour is to move in quite different contexts of social action from those that prevailed previously. Globalisation invades local contexts of action but does not destroy them; on the contrary, new forms of local cultural autonomy, the demand for local cultural identity and self-expression, are causally bound up with the globalising processes (Giddens, 1996:369). It is indeed a pity, or more forcefully, a betrayal of the trust of the newly enfranchised majority, that senior policy makers and high ranking politicians in South Africa have chosen to deliberately ignore this alternative conception of globalisation. In sharp contrast to earlier policy statements, the new leadership has emphasised ideological moderation, the limits of state intervention, the need to make South Africa `sexy' (Deputy President Thabo Mbeki, July 1997:45)1 to foreign investors, and strengthened the commanding position of the private sector in the delivery of basic services and housing. In the minds of many, South Africa's (re)-entry into the community of democratic states and its engagement with the world economy has `scuttled' the post-apartheid government's `harnessing will' as economic and restructuring has shifted during the heady days of transition from being autodriven to being externally coordinated. Rather fiscal policies that are in essence neo-liberal have pervaded any decision; the lack of investment capital for growth has made decisions sensitive to prevailing global free-marketeerism, social reconstruction programmes were toned down...and development and popular empowerment has been subsumed under macro-economic stability based on the anarchy of the market and the political economy of structurally adjusted windfalls (Sitas, 1996:02). In response to the growing chorus of discontent from the African National Congress's `partners' - the Congress of South African Trade Unions, the South African National Civics Organisation and the
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South African Communist Party - that this strategy has provoked, Deputy President Thabo Mbeki has borrowed Margaret Thatcher's famous line: "There is no alternative" (TINA) (June 1997) 2 to squash dissent and opposition. The TINA idea is brilliantly captured in the November 1996 ANC Discussion Document titled - The State and Social Transformation. The section on globalisation makes for interesting and fascinating reading: The economic globalisation and the effect of technological progress on the world scale imposes a certain surrender of a nation state's control over many areas. These areas would include currency and fiscal policies, environmental control and global warming, the effect of the new international division of production and labour and the illegal narcotics trade...The democratic movement must resist the illusion that a democratic South Africa can be insulated from the processes which characterise world development. It must resist the thinking that this gives South Africa a possibility to elaborate solutions which are in discord with the rest of the world, but which can be sustained by virtue of a voluntarist South African experiment of a special type, a world of anti-Apartheid campaigners, who, out of loyalty to us, would support and sustain such voluntarism (37-38). For those of us who are both `slaves' to and `free agents' of the broad project of social transformation, the ANC's thinking on globalisation and the workings of the global economy narrows the development horizon very radically particularly with respect to macroeconomic and industrial policy. Instead of considering what needs to be done and from this going on to consider how the constraints might best be tackled (cf Michie & Harris, 1997), the ANC has approached South Africa's development dilemmas and its engagement with the world economy from a very conservative and politically oppressive angle; i.e. globalisation-from-above. In short, they have accepted the Pax Triadica, Pax Americana and Pax Democratica contours of the New World Order as given, assessed policy manoeuvrability within this context, and then generated policy. The recently introduced macroeconomic policy thus ...sees the world economy as an integrated capitalist system where market forces reign supreme, punishing countries which do not obey the unwritten code of `sound' fiscal, monetary and labour-market policies (Nattrass, 1996:26). This myopic conception of the world economy severely constrains SA's policy options and limits the economic development horizons to `non-offensive'/`sound' strategies; i.e. orthodox, outward-oriented, investor-friendly stabilisation and adjustment policies; flexible labour markets; reduced government spending; exchange control liberalisation; etc. This [it is believed] will send positive signals to the market and thus will boost investor confidence. Private investment will rise as business confidence increases, and as exports rise. Once investment occurs, a rapid expansion in output and employment will soon follow. As more currently unemployed people obtain jobs (even at relatively low wages), the economy-wide distribution will narrow. We thus get the result that promoting the interests of capital (in the sense of creating an `investor friendly' environment) is necessary for growth, and ultimately also good for the poor and unemployed - and hence will promote equity in the long term (Nattrass, 1996:29-30). Building on the in-here/out-there conceptualisation of globalisation, attention to local conjunctures, heterogenieties and political struggles must of necessity be linked to global processes that steer clear of the pitfalls of modernist binaries with its emphasis on the `sublation'/homogenisation of the particular (local) by the universal (global). This insight is a significant advance over territorial conceptualisations of globalisation; i.e. the idea of the local, national and global as separate spheres
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of social organisation and action, emphasising a relational understanding of each as a nexus of multiple and asymmetric interdependencies involving local and wider fields of influence (Amin, 1997). It is the resulting interconnectedness, and hybridisation of social life at every level that is the distinctive aspect of globalisation (Brown, 1996). While conventional analysis of developmental innovation have focused on national macroeconomic regimes and results, the recent literature on globalisation (with its emphasis on hybridisation, multiplexity and interdependencies) has forced comparative institutional scholars to pay closer attention to the interconnections between the micro- and macro- socio-institutional foundations of development. Contemporary development strategies focus attention on macroeconomic results without contributing very much to the understanding of the microinstitutional foundations on which they depend. Too often development theory has operated, de facto, on the premise that the only institutions that mattered were those directly facilitating market transactions. Narrowly focused theories failed to incorporate the importance of informal norms and networks that make people collectively productive. They also detract attention from "soft technologies" of institutional change, which can produce results well out of proportion to the resources required to implement them. Without denying the necessity of exploiting the incentive structure and flexibility that markets provide, it is clearly time for a broader definition of the institutional bases of improved human welfare and enhanced productivity in poor [and wealthy] countries [alike] (Evans, 1996:1033). The beginnings of a broader institutional conceptualisation of development draw their inspiration from two seemingly disparate schools of thought; i.e. social capital (cf Putnam, 1995) and revisionist perspectives on the role of the state in late industrialisation (Bello & Rosenfeld, 1991; Appelbaum & Henderson, 1992; Castells et al, 1990; Ha-Joon Chang & Rowthorn, 1995; Deyo, 1987; Evans, 1995; Wade, 1990; White, 1988; World Bank, 1993). The integration of the two schools under the conceptual rubric of synergy has energised and invigorated the development with theorists and donors alike arguing that civic engagement strengthens state institutions and effective institutions create an environment wherein civic engagement is most likely to thrive. There is evidence that the existence of the state and the rules it establishes and enforces can strengthen and increase the efficiency of local organisations and institutions and that, at least in coalition with other urban-based groups, local organisations and institutions can give rise to collective action increasing the power of the state (Nugent, 1993 cited in Evans, 1996a:3-4). Nurturing civil society is important both for establishing the foundations for durable democratic government and for countering fissiparous tendencies and the impetus toward institutional breakdown that has accompanied political liberalisation...The pluralisation and fortification of associational life supports both democratisation and economic reform efforts in Africa (Gordon, 1996a:1534-1535). Rather that being a zero-sum game, state involvement can facilitate developmentally effective action by citizens. Case studies of countries at different stages of development demonstrates this very clearly. In Taiwan, the interaction of highly bureaucratised government agencies and self-organised local communities accounts in large measure for the unusual success of irrigation schemes (Lam, 1996). In Kerala, the positive cycle of interaction between a highly mobilised industrial workforce and a deeply engaged government demonstrates that redistribution is compatible with accumulation. Government not only supports mobilisation but offers institutional resources that hold the promise of making militancy compatible with accumulation (Heller, 1996). In Brazil, effective delivery of
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services (sewer systems) depends on joint activity of citizens and government enabling poor neighbourhoods to secure access to expensive infrastructure at cost-effective rates (Ostrom, 1996). In China, synergistic relations between the state apparatus and village and county enterprises provided the basis for a dynamic transition to a market oriented economy (White, 1991; Burawoy, 1996a). These instances of successful development place citizens at the centre of decision making and choices (Flores, 1996) via a process of coproduction through which inputs from individuals who are not `in' the same organisation are transformed into goods and services. Coproduction is premised on collective-collaborative actions of citizens and government agencies which privileges citizens' active participation in the production and consumption of goods and services. The process of coproduction dynamically combines and integrates accumulation, distributional and equity aspects of development through the construction of intimate connections between public and private actors within a welldefined complementary division of labour between the bureaucracy and local citizens. Complementarity suggests a clear division of labour based on the contrasting properties of public and private sectors - thus, the argument goes, governments are `suited' to delivering certain kinds of collective goods which complement inputs more efficiently delivered by private actors. Bringing together the inputs results in greater output than either public or private actors could not muster on their own. While few would disagree that complementarity; i.e. formal public-private partnerships and other hybrids, is critical for success in development projects and programmes, case studies from Africa (Lesotho Credit Union, Sudan Popular Health Programme) and Asia (Pakistan Urban Sanitation Programme, Philippines Urban Upgrading, Bangladesh Immunisation Programme) suggest that implementation arrangements will become increasingly effective to the extent that they can facilitate the creation of social capital itself. Existing stocks of social capital support intersectoral cooperation and mutual influence; intersectoral cooperation and mutual influence can expand those stocks for the future...[R]apid improvements may be possible when development problem solving combines existing social values with new ideas and institutional arrangements that reinforce each other. These cases suggest that active participation in intersectoral problem solving and implementation by NGOs and grassroots organisation can generate social capital that fosters future problem solving, which will generate more social capital...and so on (Ashman & Brown, 1996:477). Complementarity, according to this view, is strengthened when social capital is included, along with goods and services, as a desired outcome of public-private co-operation. Analysis of the three largest special credit programmes 3 for the rural poor in Bangladesh supports this finding and underscores the importance of generating social capital in transforming power relations between men and women. Although the programmes are famous for their capacity to reach the poor and have had notable success in overcoming institutional barriers to lending to women, recent studies suggest that the high degree of male control over BRAC and RPP loans can postpone the appearance of positive social externalities expected from increasing women's control over household income, or worse, that it can undermine household survival strategies where men invest loans badly, forcing women to mobilise repayment funds from resources which could otherwise be used for consumption or savings purposes. The Grameen Bank survey revealed that women have full/significant control over the loans partly because of the GB's strong encouragement of borrowers to invest initial loans in livestock coupled with its insistence that productive investments be registered as women's property. Higher degrees of loan control by women are also assured by the GB's insistence on proof of women's managerial control over enterprises and the long periods that the Bank invests in institutional building, social development and consciousness raising work (Goetz & Gupta, 1996).
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This value-adding conceptualisation of complementarity fundamentally transforms our understanding of mutual support and partnerships by calling into question the contrived `publicprivate' wall so pervasive in the institutional economics and public administration literature. By including the construction and nurturing of social capital in the conventional definition, complementarity is rendered supportive of day-to-day interactions between public officials and communities thereby reinforcing embeddedness; i.e. networks of trust and collaboration that span the public-private divide and binds state and civil society together in a jointly conceptualised and determined project of socio-economic transformation. The interweaving maze of formal and informal ties and networks that trespass the public-private divide constitutes the essence of most contemporary instances of market success (Evans, 1996b). The idea of trespassing compels policy makers and activists to `unpack' and deconstruct the totalising neoliberal impositional claims of the globalisation/restructuring discourse. It is this conservative and politically oppressive discourse that seeks to renegotiate and recode the public and private by radically shrinking the realm of political negotiation and debate and expanding the autonomy of the market and the family. The `re-commodification' of social welfare claims, the `reconstitution' of domestic enclaves, the `delegitimisation' of social citizenship claims, and the `individualisation' of poverty are instrumental in socialising new shared understandings of the `common good' and what it means to be a `citizen': The new ideal of the common good rests on market-oriented values such as selfreliance, efficiency and competition. The new citizen is one that recognises the limits and liabilities of state provision and embraces her obligation to work longer and harder in order to become self-reliant (Brodie, 1996:391). It comes as no surprise that attempts to renegotiate and recodify the public and private from a conservative angle have met with much resistance from those who are committed to expanding the frontiers of socio-material citizenship. The most immediate and fundamental task confronting those of us who are committed to a more humane future is to begin the long process of `reclaiming' and `republic-ising' political spaces and building a new social consensus about the boundaries and content of the public and private. I will return to this theme later. Despite the arguments of the anti-institutionalists, the form in which the pressures, countervailing forces and counter-hegemonic interests are integrated is, however outmoded, still the state. The state still remains pivotal to the redistribution and reconstruction project. It is to this day the main mechanism for social transformation; i.e. for collecting an appropriate fraction of the economy's total income and redistributing it among the population according to some criterion of public interest, common welfare and social needs. The redistributive function is likely to become more important because of the trends in economic development. How much is to be collected, the institutional and political channels for redistribution, the criteria for redistribution, etc, are open questions, but the need to provide for education, health care, income maintenance and a host of other services is not, nor is the indispensability of some sort of public authority for these general purposes (Hobsbawn, 1996). Many commentators and analysts would take issue with Hobsbawn's argument but evidence from detailed case studies of late industrialisers reveals that the development of dynamic productive capacity and processes entails the deliberate creation of `distortions' in the form of firm-specific skills, knowledge-based monopolies and other types of entry barriers. Government's role revolves around `joining' with the private sector to `socially construct competitive assets' (resources, capabilities and organisations) rather than to create perfect markets. To construct socially those competitive assets for production purposes, governments have rigged key exchange prices, such as the price of foreign currency, credit, and
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labour (by weakening its bargaining power); that is they have deliberately got relative prices "wrong." Thus, even if the ultimate correction of market failures aptly describes the government's normative role in the realm of exchange, it is a poor explanatory device for understanding its role in the realm of production, which is better analysed in terms of the "social" (public-private) construction of competitive assets (Amsden, 1997:471). Revisionist histories portray the results of state intervention outside the East Asian Tigers (especially in Chile, Mexico, China and India) as highly problematic, since entrenched urban groups with a vested interest in rent-seeking tend to block industrial and economic reforms (Auty, 1994). Other writers portray state intervention in these countries as nothing short of a monumental flop. While there might be a great deal of truth in the thesis about rent seeking, the idea that state intervention was a colossal flop in countries as diverse as Argentina, Brazil, Chile, China, India, Indonesia, Korea, Malaysia, Mexico, Singapore, Taiwan, Thailand and Turkey does not stand up to the evidence measured in terms of manufacturing output growth rates, output per employee, value-added, etc. Indeed, for the first time in history manufacturing output and manufacturing output per worker increased after World War II faster than in the North Atlantic region. The key question confronting us now is why the remaining latecomers are not industrialising faster and why growth rates differ so much. The answer to these questions lie firstly, in the interface between exchange and production (getting the prices right) and secondly, the use of a methodology that blends competitive asset creation with market failure correction. Neoliberal fixation with getting the prices right and with clearing unproductive industrial debris might have reduced the incidence of market failure but the accelerated dismantling of old social constructions of competitive assets, the dramatic declines in productive capacity and the cutbacks in social spending have undermined `just those factors that underlie sustained economic growth, as is generally agreed' (Chomsky, 1997:12). If this analysis is correct, `then despite all the exchangerelated reforms, a new social construction of competitive assets will be necessary for a resumption of growth' (Amsden, 1997:478).
Transition, Synergies, Local Government and Local Economic Development Case studies of successful engagement with the global economy in the period of neoliberalism demonstrate that the key to success lies in a deft combination of macro- and micro- institutions and infrastructure that build upon on traditional social, territorial, economic and political strengths while substantially changing them at the same time (Gordon, 1994). Instances of successful development are based on pluralist decision-making, reliance on inter-institutional voice, negotiation across different spatial scales and sensitivity to uneven power relations within institutional networks (cf World Bank, 1997). This approach stands in stark contrast to the one that privileges institutional autarchy and purely rationalist decision-making as espoused by the globalisation-from-above advocates. In short, strategic and successful engagement with the global economy depends on the ability of localities to articulate a coherent and flexible organisational presence within a global milieu. This is precisely what happened in the Chinese, Kerala, Taiwanese and Brazilian case studies wherein civic engagement strengthened local state institutions and effective local institutions created an environment in which civic engagement thrived. This synergy between public agencies and community organisations was built around the dynamic integration of complementarity and embeddedness catalysed by institutional entrepreneurship that `scaled up' micro-level social capital to generate solidarity ties that were politically and economically efficacious. The local state in alliance with communities was thus able to effect a state-society led reconstitution and reconstruction of society from below.
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Translating social ties into vehicles for more encompassing forms of organisation is the real key to synergy. This `scaling up' requires a competent, corporately coherent bureaucracy (to ensure that embeddedness does not generate into clientelism) that is sufficiently open to inputs from below. Robust, sophisticated public institutions are an advantage both in the formation of local social capital and the pursuit of developmental ends, not because they are instruments of centralisation but because they are capable of formulating more nuanced ways of distributing power and therefore of supporting decentralisation and openness to local self-organisation (Evans, 1996b:195). Notwithstanding the fascinating insights and policy directions of the literature on globalisation, social capital and state forms as outlined above, civil service reforms in transitional societies are confronted by a range of problems and challenges. Policies are made in a hurry, often under intense external pressure; new legislatures are inexperienced and inundated with massive amounts of new legislation; the executive and bureaucracy is hamstrung by weak staff, poor information and logistical support; and inadequate procedures and lack of clarity concerning clear relations between governmental departments restricts the capacity to implement and monitor change (Collins, 1993). These organisational problems of the public sector have also been compounded by the recent drive towards decentralisation that has accompanied Latin America's, Africa's and Asia's movement towards democracy. While the transfer of political, economic and administrative authority to local governments is potentially a positive development, early stages of decentralisation are inevitably plagued by underperformance and financial disarray. Both institutionally and organisationally, local governments are weak and unable to fulfil their new responsibilities thrust upon them. The weaknesses, bottlenecks and disarray could in the medium to long term accelerate the unravelling of the tattered institutional fabric and undermine the legitimacy of the fragile state. While there appears to be widespread agreement and consensus on the desired package of reforms (introduction of a professional, depoliticised public sector management system; decentralisation of economic and territorial management; privatisation; enhancing skills and institutional capabilities; etc.), there exists enormous differences with regard to pace and focus, the extent to which reforms are driven from externally or from within countries, prioritisation, etc. The common theme though is that institutional capacity building is critical for implementing socio-economic reforms and managing the process itself. If the content of the reform programme is widely agreed upon, the same cannot be said of how one goes about it. Indeed, controversy rages as to the precise sequencing and institutional vehicles for the transforming the civil service and the state's institutional infrastructure in general. One school of thought asserts that economic shock therapy should be undertaken by a technocratic elite closely tied to or located within the executive branch of the state. The second stage of the reform process should then concentrate on institutional consolidation centred around dismantling the state and limiting its scope of intervention, eg. Chile. In the long term, dismantling its interventionist apparatus will strengthen the state. Focusing on indispensable public tasks, shedding discretionary economic interventions that are a magnet for special interests and corruption, and establishing a more sound fiscal situation should all help promote the emergence of a more focused and effective public sector (Naim, 1994:38). But the question is how does one go about creating this type of state form as our knowledge about public administration and available management techniques is extremely limited compared to trade theory, for example, which provides a robust set of targets, tools and principles to (re-)orient government action. The previous Venezulian Minister of Industry sums up the dilemma well:
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While the initial stage of macroeconomic reforms was relatively easy to implement, the next stage - deeper institutional changes - was going to be harder and take much longer. Changing rules is always easier than changing organisations. Opening the stock market to foreign investors or eliminating subsidies can be done with the stroke of a pen and can have immediate results. Building the equivalent of a Securities and Exchange Commission or organising a well-targeted social program to compensate the poor for the loss of subsidies requires complex organisational efforts that take much longer to bear fruit (Naim, 1995:54). The second school of thought argues that democratic consolidation should precede radical economic reforms (Encarcion, 1996). Using post-Franco Spain as an example, he argues that democratising elites attempt to arrange transition events to favour the consolidation of the new democracy. Radical changes to the economy are undertaken after democracy is widely perceived to have been consolidated. A third model of transition, represented by Poland, witnesses political leaders moving quickly quickly to capitalise economically on political gains associated with the transition from `socialism' to capitalist democracy. With the benefit of a broadly based political coalition, Poland's first noncommunist government adopted a programme of economic restructuring, implemented in the form of radical economic shock therapy, that rapidly became the model for the rest of Eastern Europe and the Soviet Union. A cursory review of the dynamics and outcome of the Russian case demonstrates that sudden and abrupt shock therapy is likely to result in massive social unrest and `economic involution' (Burawoy, 1996a:150); i.e. the state eats away at its own foundations by funnelling human, material and financial resources out of production and into exchange. A `top-heavy superstructure of distributive transactions' is built on an `ever-shrinking productive base' (Burawoy, 1996:1109). Economic involution in the coal and timber industries of northern Russia demonstrates the danger of trying to construct markets without simultaneously reconstructing public institutions. The Chinese case represents a fourth hybrid type transition which affords South African policy makers some important lessons. Although the transition has much in common with Chile (economic liberalisation precedes political liberalisation), economic adjustment is gradual, experimental, flexible and ideologically pragmatic. Economic reforms in China are thus radically different from those in Poland and Russia where World Bank neoliberal thinking has been very influential. Specifically the policies of China have differed from those of other post-Stalinist countries in terms of, first, price liberalisation (gradual in China vs. "shock therapy" elsewhere) and, second, the nature of enterprise "restructuring" (elimination of structural, noncompetitive bottlenecks at the micro level such as obsolete technology, out-dated product design, and old physical equipment). Eastern Europe has equated restructuring with privatisation while China has directly restructured state-owned enterprises (SOEs) by pouring resources into them and changing their governance structures (rather than property relations). China now has a "mixed economy": private property (foreign or local) may exist but the overwhelming share of manufacturing output is still accounted for by either state-owned firms or collectives (TVEs). As Cui (1994) has quipped, because China has violated a cannon of market theory by not privatising, it may be said to have prospered by "getting the property rights wrong" (Liu, Zhang & Amsden, 1996:276). Space does not permit a detailed discussion of the Chinese market and enterprise reform measures, suffice to say that over the past fifteen years, China has moved from a highly centralised planning system to a very decentralised one in almost all aspects of its economic management: taxation, government spending, credit allocation, production and investment planning, wage and price controls, international trade management, etc. (cf Ma, 1996 for a detailed discussion).4 Decentralisation has
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significantly changed the role of each level of government in economic management and greatly enhanced the role of local government in the reconstruction and reconstitution of society from below. Where does South Africa fit in the transition schema ? South Africa is somewhat of a hybrid. The post-1994 stage of political liberalisation, social negotiation and [partial] institutional consolidation (at provincial and national level) was rapidly eclipsed by economic shock therapy, non-negotiable neoliberal growth strategies, the centralisation of political power and state involution (at local level). The displacemnt and/or marginalisation of the socially negotiated Reconstruction and Development Programme (with its emphasis on first 5 and third 6 phase development planning) to the non-negotiable GEAR (premised on a uneasy combination of second 7 and third phase planning) is likely to weaken the state’s capacity to implement systemic change resulting in disilussionment with state structures and civic disengagement (Swilling, Morojele, Khan et al, 1996; cf Todaro, 1991; Chowdhury & Kirkpatrick, 1994 for a detailed explanation of the three phases). This conclusion is supported by a range of academics and technopols at different conferences and workshops. In his address to delegates at the inaugural conference of the Harold Wolpe Memorial Trust titled The Political Economy of Social Change, Michael Burawoy argued that the neoliberal route being followed in South Africa would open the way for a market led reconstitution from above and the Russian road to involution (1997:16). Approaching the topic from a slightly different angle, Stephen Gelb, one of the authors of GEAR, told conference delegates that the prospects for democratic consolidation in the SA context is very slim as the centralised state increasingly exerts power over society, rather than with and through society (Gelb, 1997). At another conference held during the same month (April 1997), Vella Pillay, Economic Adviser to the Bank of China and, until recently, the Director of the National Institute of Economic Policy, asserted that the retrenchment and continuing emasculation of the state in reconstruction and development is likely to legitimise the existing distribution and ownership of income and wealth, and will do very little to alleviate poverty, address structural unemployment and promote productive investment in the economy. The deflationary thrust of GEAR strategy is likely to intensify poverty as the productive base of the economy shrinks, privatisation kicks in, real investments declines, capital moves off-shore and vicious cuts in social services are executed (Pillay, 1997). The prospect of a East European-/Soviet Union-style socio-economic and institutional involution looms very large in this context. The installation of a developmental local government regime in this policy restrictive, institutionally exclusionary, financially constrained and socially co-optative context is not very promising (Bond, 1997; Khan & Hemson, 1997; Khan, 1997). The common response of city leaders, local government officials and councillors to the conservative macroeconomic policy environment has been to make their localities attractive to inward investors, the international business community, global decision makers and their sidekicks, tourists, etc. Local governments are encouraged to pursue an aggressive stance towards attracting foreign investment by removing obstacles to investment, providing rates holidays for fixed terms, cost provision of electricity and water, and `peppercorn' leasehold for property for periods of up to 25 years. According to the Premier of KwaZulu-Natal, Ben Ngubane, local government need to refine their priorities in this regard (June 1997); i.e. attracting foreign investment, deregulation, privatisation, etc.8 Not surprisingly, many local economic development policies and projects being proposed are in the context of `scavenger' and `beggar-thy-neighbour' strategies which are `tangential' to genuine economic transformation (Bakker & Miller, 1996:338, 339). Projects presented as `developmental' are crudely competitive and socially exclusionary (Grant & Scott, 1996; Killian & Dobson, 1996; Maharaj & Ramballi, 1997), attempting to draw away investment from other areas or gambling on attracting tourist dollars. Property-led development and the emphasis on building cultural and sporting facilities features prominently in most local economic development initiatives (CDE, 1997; Rogerson, 1996). What is perhaps most notable about these `developmental' efforts at so-called
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community economic development is the extent to which they `side-step' the local economic assets embodied by existing firms, skilled labour forces, social infrastructure and natural resources. The reliance on tourism as an economic development strategy...provides a way to justify the traditional municipal projects of the past and avoids confronting the radical characteristics of alternative projects sponsored by less traditional constituencies. With few exceptions the same pattern as found in the tourism projects holds for the other sectoral initiatives. Generally, the analysis of the future directions of particular economic sectors avoids the kind of economic critique necessary for arriving at innovative solutions. Where there has been more detailed and critical sector-specific analysis it is often isolated from the practical task of mobilising community resources. Instead, the grander plans pin hope on encouraging existing firms through either some form of subsidy (funding construction or training) or some form of cost reduction (eliminating clean-up costs or using university research). These traditional static approaches miss the dynamic potential of community economic development as a way to transform the economic and social fabric that underpins innovative investment and quality production (Bakker & Miller, 1996:339). An alternative strategy, which has failed to grab the attention of our well-heeled and well-travelled illustrado salariat (cf Litonjua, 1994), is to mobilise diversity as a source of both social cohesion and urban economic competitiveness and to work with the urban social fragments and hybridity generated by `in here-out there' mingling. This relational approach with its emphasis on hybridity and mingling demonstrates why social relations matter to economic and political activity and how this comes about. It does not imply a focus specifically on formal organisations. It emphasises how organisations - a firm, a local government body, a public agency, a pressure group, a household - are activated by the way people-in-relations realise procedures and activities. In this activating work, an organisation is connected to, and embedded, in the web of relations, a social ecology, which forms the social environment of the various participants. I shall examine this theme shortly through the `constructability' lens.
Summing Up: Defining the Research Agenda The general conclusion that one can draw from much of the literature on public sector reform in transitional societies stresses the need for a strategic approach emphasising interdependence between structural and legal reform on the one hand and institutional capacity building on the other (Collins, 1993a). But reform of institutions and policy regimes takes place in real social and historical time. Democratic consolidation and institutional transformation in the late twentieth century presents formidable challenges to progressive policy makers in the developing world. Highly inegalitarian social structures, grinding poverty, violence, neoliberal hegemony and a host of other conjunctural and conjectural factors intrude/intervene to impede the institutionalisation of democratic organisation and procedures (Sandbrook, 1996). These factors are more often than not overlooked by the transition and democratisation literature which places undue emphasis on contingent process variables thereby encouraging undue optimism about the possibility of consolidating democracy in structurally and culturally unfavourable environments (Ruhl, 1996; Smith, 1993; Green, 1996). Overall, looking at the political and structural factors positively associated with democratic consolidation and synergy; (i.e. egalitarian social structures, engaged and competent public institutions, political competition, etc.) invites pessimistic scenarios and arid prospects for much of the developing world wherein highly inegalitarian social structures are presided over by fragile,
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fragmented governmental apparatuses. Structural reforms implemented by post-transition civilian governments in Africa, Latin America and Asia have more often than not exacerbated social inequalities, further eroded the state's regulatory and strategic capacity, and hastened the emasculation of political parties, social movements and other collective actors. In short, the implantation of exclusionary neoliberal models of accumulation and the replacement of a `statecentred' policy matrix with a `market-centred' one have wrought profound transformations of the state, civil society and political economy which in the long run might undermine democratic consolidation and coproduction. This conclusion seems bleak given the relatively optimistic picture painted by the case studies discussed earlier on. But we must be careful in falling into the modernist trap that glosses over the particular (local) and ignores the fundamental question of how local, national and international processes work upwards to affect the way the "global" is constituted. This approach emphasises the reflexive nature of social interaction and the socially and politically constructed nature of the economy and economic policy (Lovering, 1995). The case studies of China and Taiwan demonstrate this very clearly. In the case of China, successful economic reform embodied sweeping changes in the institutional character and practical roles of local government. As changes took place in their method of economic regulation and as their non-economic functions increased, corresponding changes were wrought in their structure and operational principles. In this process, urban local government has been transformed in several major ways, the most obvious being institutional expansion and proliferation. It has also become very active in the economic sphere, spatial planning and environmental regulation and has over the past decade increasingly shifted its priorities away from purely productive investment to favour social consumption and raising overall urban living standards by improving the management of public utilities and expanding the housing stock. Thus while the Russian government was dissolving into disarray, Chinese administrators retained sufficient coherence to purposefully restructure the system of incentives at the local level in a way that promoted self organisation and entrepreneurship. The "local state corporatism"...underpinning China's surprising rates of rural industrial growth, depends on a set of local ties which bind local state officials and nascent entrepreneurs around a joint project of rural industrialisation...Not only are the ties between local enterprise managements and local officials important, but also the web of relations that allows local officials to work through officials and agencies in the central state apparatus to gain access to credit and scarce raw materials that local entrepreneurs need (Evans, 1996b:186). The central role of ties that span the public-private boundaries in China's transition success story highlights the pivotal role of embeddedness in the `biggest capitalist success story of the twentieth century' - the transformation of the economies of East Asia from the ranks of low productivity agrarian backwaters to the most rapidly growing industrial economies in the world. The question that remains to be answered is whether synergy can be constructed out of small-scale changes implemented in relatively compressed periods of time and in adverse environments. Social capital theorists argue that even when the socio-political context is inauspicious, creative cultural and organisational innovations can still produce results. Employing the notion of `constructability', it is argued that building synergies depends on transforming established worldviews (new definitions and identities can be built on new experiences and interactions), introducing innovative `soft technologies' at the organisational level (combining hierarchy, latitude, initiative and entrepreneurship in intricate ways) and rethinking the nature of the problem that a government agency is trying to develop (constructing synergy can begin with simple redefinition of problems). Taken individually or collectively, any of these strategies can make synergy `constructable' (Evans, 1996b:201-202).
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In sum, the challenge for the state and civil society is to collectively and collaboratively (re-)define what is produced and to negotiate the terms and conditions of collective action or productive interaction. Reshaping institutions needs to be combined with collaborative redrawing of the boundaries between the public and private spheres which enable `reinvention' of `public sector' products and production methods (Brodie, 1996; Bakker & Miller, 1996). Building and sustaining dynamic synergies and facilitating coproduction thus calls for the creation of a developmentally flexible, democratically-facilitative and politically responsive local government regime that: maximises all strategic opportunities to address poverty, deepens social justice, fosters balanced economic growth, builds a democratic culture, commits material and non-material resources to the creation of vibrant associational life, and forges dynamic complementarity between formal and informal modes of governance (Pieterse, 1997; Smith, 1996). This new interventionist and flexible local government regime ...pushes beyond the historical constraints of both the laissez-faire and developmental states and calls forth the need for the facilitative state whose role will be a new form of interstitial participation focused on optimising the beneficial outcomes of relatively autonomous market, hierarchical and collaborative linkages while minimising the costs and failures of each (Gordon, 1996:51). The combination of the macro- and micro-institutional foundations of development yields rich insights into the contemporary nature of global economic restructuring, and alerts us to the pitfalls and dangers inherent in uncritical endorsement of the dominant discourse. The task before us is to explore how the construction of developmentally-flexible and productive synergies is undermined by administrative, financial, legal and political constraints/obstacles confronting local government. In short, how can we sharpen the local government needle to effect a state-community led reconstitution and reconstruction of society from below ?
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FOOTNOTES 1
From an address by Deputy President Thabo Mbeki to American business moguls, cited in ‘Collision or Compromise’ - Financial Mail, 26 July 1996. 2
cited in WM Gumede, ‘Gear's failure to make visible progress sharpens criticism from ANC's allies’ Sunday Independent, 15 June 1997. 3
The three largest programmes are the Grameen Bank (GB); Bangladesh Rural Advancement Committee (BRAC) (NGO initiative); and the Government's Rural Poor Programme (RPP). 4
Excessive monetary growth is generated by a very confused and complex monetary regime. The decentralised banking system has substantially weakened the central bank's ability to control the money supply. This has led to alternating cycles of decentralisation and recentralisation. Monetary expansion is usually accompanied by waves of decentralisation, while monetary contraction is normally associated with centralisation. 5
Regime-driven national development planning that is informed by Keynesian welfarist assumptions or central planning prescriptions. Methodologies and approaches include master planning (survey-analysis-plan-action); aggregate growth models to set national strategic goals; detailed input-output models; national and regional planning; long-term planning time frames (7-10 years or more); closed system analysis (policy outcomes, second phase planners argue, can be predicted by building comprehensive forecasting or scenario models that take into account the multiplicity of variables that can affect the outputs and outcomes of a given set of policies); planning premised on deterministic views of socio-economic behaviour; social cost benefit analysis 6
In third phase development planning, government sets up a strategic framework for guiding the way public institutions operate within the market to promote development, rather than plans for public investments that are unrelated to the market or aimed at ameliorating the effects of the market. Methodologies and approaches include disaggregated growth models; 1-3 yr time horizons with strategies; open systems analysis (external factor and interdependencies); scenario planning; planning as a continuous process 7
Deregulation, privatisation, deficit-reduction, etc. Methodologies and approaches include a combination of the aggregate growth model (indicators and their manipulation); input-output models (clusters, strengths and weaknesses); social cost-benefit analysis; national development plans with static (no strategy) medium term (3-7 years) time horizons; probability analysis (scenario planning); closed system analysis (forecasting). 8
cited in Arde, G. ‘Municipalities urged to attract foreign investment’ - Natal Mercury, 16 June 1997
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