The counter‐counterrevolution in development theory on the role of the state in development: Inferences for South Africa?

Abstract

This article considers the evolution of ideas in development theory on the role of the state in development in an attempt to draw inferences for South Africa. It offers a critique of the neoliberal view and presents the revisionists’ insights on why entrepreneurial action, institutional building and effective conflict management by the state can promote development. It is suggested that a number of case studies support the revisionists’ theory that rapid industrialisation calls for the state to provide a vision for structural change and implement industrial policy which incorporates supply‐side incentives and demand‐side controls. A description of the role of the state in South Korean development illustrates the form of state intervention which, according to the new insights, stimulates development and uncovers the conditions needed for effective state action. It becomes clear that there is no theoretical or empirical reason to expect markets to provide rapid industrialisation on their own. With regard to the inferences for South Africa, the argument is that while recent developments in economic theory and history present a clear picture of the institutional configuration needed to launch the economy onto a higher growth path, constraints imposed on state action undermine its creation and explain why government has opted for liberalisation. The implication is that development prospects are at best uncertain and probably poor. Until the neo‐liberal intellectual and policy consensus is questioned, the South African government will not be able to embark on the institution‐building and policy action required for sustainable improvements in welfare outcomes. In the meantime, accelerated growth will depend primarily on the decisions of foreign investors.

Notes

Lecturer, Department of Economics and Economic History, Rhodes University.