TRANSFORMATION 12 (1990) ARTICLEDEMOCRATISING ECONOMICGROWTH:ALTERNATIVE GROWTH MODELSFOR THE FUTUREStephen GelbThe debate about future economic strategies and development paths forSouth Africa is being conducted at present in terms of two separate concerns- redistribution and growth. The former is a response to the need to redressthe extreme inequalities in distribution of income and wealth, and the relateddisparities in living standards, for which South Africa is notorious, and whichhave historically been expressed essentially in racial terms. The latter is aresponse to the severe decline in South Africa's economic growth perfor-mance over recent years, which has evidently coincided with, and been linkedto, the change in the political balance which has now finally brought us to theedge of negotiations.I take as implicit both the need for significant reorganisation of oureconomy and society to redress racial inequalities in distribution of economicpower and resources, as well as the explanation (at least in broad terms) forthe existing situation, as put forward during the 1970s by the 'radical' view ofSouth African development. This paper begins instead with an examinationof the nature of South Africa's economic decline and of the obstacles whichexist to restoring sustained growth in the future. It then continues with anexamination of the business/government attempt to counter this decline. Thefourth section spells out in broad terms an alternative approach to restoringeconomic growth, one which is being debated and developed by economistsand others linked with the ANC and its allies.South Africa's Economic CrisisThe essence of the argument (developed at greater length elsewhere) isthat, considered in the context of a long-run perspective on capitalist growthand development, the South African economy has been in an economic crisissince 1974. The popular connotation associated with 'crisis' is an idea ofcollapse or breakdown. But the original, more useful, meaning of the term is'turning point'. In this sense a crisis in a capitalist economy implies that thesystem cannot continue to develop along the same path as before - it must25GELB TRANSFORMATION'adapt or die', as PW Botha eloquently expressed it more than a decade ago.South African capitalism reached a turning point in the mid-1970s,reflected in both the decline of the long-run growth rate of the GNP, as wellas the more unstable and volatile shorter-run cyclical fluctuations since thattime, as compared with the period following World War II. These changes inthe pattern of GNP growth have been linked to the failure of the 'growthmodel' - the combination of patterns of production, distribution and con-sumption, in other words, the form of capitalist growth - which had charac-terised the postwar period of relatively sustained economic expansion.The years since have seen the decay of this 'old order' and the emergencethus far of only some elements of a possible successor. The turning point hasnot yet been fully traversed - the crisis continues.The growth model which emerged in South Africa in the postwar periodfocussed on extending industrialisation via the production of (previouslyimported) sophisticated consumer goods for use primarily within SouthAfrica. A possible alternative orientation would have been to expandproduction of basic consumer items for both (larger) domestic and foreignmarkets. This was the path followed by south-east Asian industrialisers likeSouth Korea. Two primary factors pushed South Africa, perhaps inevitably,towards the former path:- racial domination, creating political pressure to substantially raise whiteliving standards, while similar black demands were repressed;- mineral wealth, making it possible to pay for the necessary machineryimports.The resulting 'growth model' has been called 'racial Fordism' to indicatethat racial domination was the pre-eminent factor shaping economic institu-tions. It combined import substitution industrialisation (ISI) with the apart-heid structuring of the labour and consumer goods markets. Whites were ina similar position to the working classes of the advanced industrial countries,with steadily rising living standards, while blacks (especially Africans)remained relatively impoverished, though their incomes did rise slowly. Thusinequality increased.The essential foundation of 'racial Fordism' was the expansion of exportsof gold and other precious metals, and their stable prices on world markets.Overall export earnings were relatively stable (as distinct to constant), so thatthere was only limited variation in the investment coefficient (the ratiobetween investment and GNP) over the course of the business cycle.This model fitted well with growth patterns in the major industrialisedeconomies, and like these countries, South Africa grew rapidly, with anaverage GDP growth rate of 4.9% per annum between 1945 and 1974. While26TRANSFORMATION GELBcyclical fluctuations occurred, there was a relative stability in the long-run inthe relation between the changes in labour productivity and in capitalintensity, so that the wage share was relatively constant. The interactionbetween these variables followed a similar pattern as found in the advancedeconomies, though productivity growth and wage share in South Africa wereboth at lower levels absolutely.The model's 'success' in achieving growth brought its own problems,however. The emphasis on capital-intensive production methods meant,first, that employment rose, but slower than the overall labour force, so thatunemployment also rose. Also, machinery and intermediate productioninputs came to dominate imports, so that the ability to expand productionwas increasingly tied to balance of payments considerations.By the start of the 1970s, there were already clear indications that thesefactors were becoming serious obstacles. Indeed, these rigidities helped toshape the manifestations and impact of the economic crisis as it hasdeveloped - their legacy constitutes two of the key problems we confronttoday.But more immediate problems arose, linked to the wider crisis developingin the international economy as a whole. There were three immediate causesof the crisis. Firstly, rising costs of imports of both machinery and com-modities (especially oil after 1973), which raised the cost of investment andproductivity improvement in South Africa. Secondly, the collapse of theBretton Woods system of fixed exchange rates led to fluctuating prices onworld