From Apartheid to Neoliberalism - A study of the Economic Development in Post-Apartheid South Africa By Thomas Bakken Abstract This thesis describes the social and economic development in Post-Apartheid South Africa and the role of neoliberal advocates in the shaping of the country‘s broader developmental path after 1994. South Africa‘s ruling party, the African National Congress (ANC), inherited a two folded legacy. On the one hand it took over the most developed economy on the African continent. On the other, a legacy of massive inequality and racial segregation. This thesis describes why a neoliberal trajectory was triumphant in the crossroad where the ANC had the choice between following a progressive developmental path or a neoliberal one, and its impact on South Africa‘s social and economic system. i ii Acknowledgements - I thank Professor Moses for his patience, comments and insights in helping this thesis to completion. - I also thank my one and only: Nina iii iv Content 1.1 - Background and motivation ........................................................................................... 1 1.2 - My argument .................................................................................................................. 3 1.3 - Problem statement ......................................................................................................... 3 1.4 - Research aims ................................................................................................................. 4 1.5 - Research design and methodology ................................................................................ 4 1.6 - Chapter outline ............................................................................................................... 5 1.7 - Literary review ................................................................................................................ 9 Chapter 2 – Theory ................................................................................................................... 13 2.1 - Introduction .................................................................................................................. 13 2.2 - General introduction to Sandbrook et al. (2007) ......................................................... 14 2.3 - Definition of social democracy ..................................................................................... 14 2.3 - Three types of social democracy .............................................................................. 15 2.3.1 - Radical social democracy ....................................................................................... 16 2.3.2 - Classic social democracy ........................................................................................ 16 2.3.3 - Third Way social democracy .................................................................................. 17 2.4 - The independent variables - only one way to social democracy? ............................... 18 2.4.1 - No capitalism, no social democracy ...................................................................... 19 2.4.2 - A strong civil society and autonomous organisations ........................................... 20 2.4.3 - No class compromise, no social democracy .......................................................... 22 2.4.4 - Critical juncture ...................................................................................................... 23 2.4.5 - Geopolitics ............................................................................................................. 24 2.4.6 - Neopatrimonialism ................................................................................................ 25 2.4.7 - The main variable in the study: Neoliberalism ...................................................... 26 Chapter 3 - Is South Africa a social democracy? ..................................................................... 33 3.1 - Introduction .................................................................................................................. 33 3.2 - Social democracy in South Africa: how far, and how deep? ........................................ 34 3.3 - South Africa: a Third Way social democracy ................................................................ 37 3.4 - Conclusion .................................................................................................................... 39 Chapter 4 – The South African case and its economy before 1994 ......................................... 41 4.1 Introduction .................................................................................................................... 41 4.2 - The legacy of Apartheid – and the nature of the decision facing the ANC .................. 42 4.2.1 - South Africa – A history of racial segregation ....................................................... 42 v 4.2.3 - Two nations: race inequality in South Africa today ............................................... 44 4.2.4 - What the first democratic elected government inherited in 1994 ....................... 45 4.3 - The government programs ........................................................................................... 47 4.3.1 - Normative Economic Model .................................................................................. 47 4.3.2 - The election and the Reconstruction and Development Programme ................... 48 4.3.3 - The GEAR Programme ........................................................................................... 51 4.4 - GEAR: what has been achieved? ................................................................................. 55 Chapter 5 – Advocates for the liberalization path .................................................................... 59 5.1 - Introduction .................................................................................................................. 59 5.2 - The corporate sector began to understand the need for change ................................ 60 5.3 - The corporate scenarios ............................................................................................... 61 5.4 - The corporate sector seeks negotiation with the ANC and the democratic movement .............................................................................................................................................. 63 5.5 - International pressure groups ...................................................................................... 65 5.5.1 - The role of the World Bank .................................................................................... 65 5.5.2 - The role of the IMF ................................................................................................ 67 5.5.3 - The role of GATT .................................................................................................... 70 Chapter 6 – Advocates for the Democratic management path and the development of ANC and COSATUs economic policies ............................................................................................ 73 6.1 - Introduction .................................................................................................................. 73 6.2 - The history and ideology of the African National Congress ......................................... 73 6.3 - The ANCs economic policy ........................................................................................... 75 6.3.1 - The ANCs lack of economic policy ......................................................................... 75 6.3.2 - ANCs attempt to make an economic policy .......................................................... 76 6.4 - COSATUs and the democratic movements role in influencing the policy making ....... 78 6.5 - The most coherent alternative to the neoliberal path - The MERG Report ................ 79 6.6 - The development of COSATUs economic policies ....................................................... 82 6.7 - The relationship between COSATU and ANC within the alliance ................................ 83 Chapter 7 - Analysis: Why was the internationalization path eventually successful? Which arguments did the ANC use to justify its choices? ................................................................... 85 7.1 - Introduction .................................................................................................................. 85 7.2 - South Africa: a Third Way social democracy ................................................................ 85 7.3 - How did the ANC legitimize its policies? ...................................................................... 86 vi 7.4 - Why was the logic of neoliberalism successful? .......................................................... 87 7.4.1 - The lack of alternatives in a Post-Cold War era ..................................................... 87 7.4.2 - The neoliberal advocates ....................................................................................... 88 Chapter 8 – Concluding remarks .............................................................................................. 91 Chapter 9 - References ................................................................................................................ I List of Tables Table 1: Social democratic regimes in the periphery ............................................................... 15 Table 2: GEAR, prediction versus actual performance ...........................................................