TOWARDS A CLASS COMPROMISE IN SOUTH AFRICA’S "DOUBLE TRANSITION": BARGAINED
LIBERALISATION AND THE CONSOLIDATION OF DEMOCRACY

Professor Eddie Webster (029edw@muse.wits.ac.za)
Dr. Glenn Adler (readler@erols.com)  


INTRODUCTION

 

It has become conventional wisdom on both the left and right that South Africa’s "political miracle" was purchased at the price of leaving the economic pillars of apartheid capitalism intact. On the right it has been argued that South Africa has accepted the inevitability of the market and that it has pragmatically adapted to the new international economic order: it has removed exchange controls, embraced an export-oriented development strategy, practiced strict fiscal discipline, and committed itself to privatisation. (Johnson, 1995) A number of left analysts fundamentally agree with this position, arguing that the global economy is hegemonic and that there is no alternative to its prescriptions of neoliberal economic and social policies outside of an unspecified intensification of conflict. (Lehulere, 1996; Barchiesi, 1997; Amaral, 1997) The Australian political commentator John Pilger, captures the sense of disillusionment on the left when he argued recently that a "historic compromise" between the ANC and the apartheid government left economic power in the hands of the corporate white elite; all that has changed is "the inclusion of a small group of blacks into this masonry." (Pilger, 1998:602)

 

Both sets of arguments curiously fit comfortably within a conventional political science elite analysis of transitions. In much of this literature it is argued that a transition from authoritarianism to democracy must involve an economic pact between elites on both sides that leaves the fundamental structures of capitalist society in place, thereby ensuring the loyalty of the propertied classes while producing a conservative outcome. Globalisation apparently renders such a conservative pact all the more essential not only because it constrains options for growth, but it also provides domestic capital with an exit option. However, there are persuasive reasons to believe that a conservative pact cannot deliver growth, and therefore cannot establish a fundamental condition for the consolidation of democracy. Yet we are sceptical of the contrary argument that economic crisis will in the long run be favourable for democratic forces.

 

In recognising the existence of a "double transition"- states that are simultaneously consolidating democracy and liberalising their economies - we accept that these two processes are potentially contradictory and may simultaneously undermine both democracy and economic growth. However we argue that they are potentially reconcilable, though on terms neither the advocates of a conservative pact nor their left critics would recognise. We argue that a class compromise oriented towards growth and redistribution can better provide the economic foundations for sustainable democracy. Such a compromise is not only desirable, but may be possible even in societies with limited economic resources.

 

Arguments in favour of the inevitability of a conservative pact exaggerate the power of globalisation, by presenting it as an omnipotent that deprives states of manoeuvring room in their choice of development policy. The arguments for a conservative pact further ignore constraints on capital and assume a frictionless mobility. In this such arguments make the mistake of equating all capital with financial capital, overlooking the fact that many firms are highly immobile and that employers may not only be profit-maximisers, but also risk-avoiders interested in steady, long-term, and sustainable profit. A number of analysts, most notably Albert (1992) identify these features, among others, as distinguishing Germany - the "other capitalism" - from the dominant American model. (See also Streeck, 1992; Roemer, 1996, 1995)

 

Above all, arguments for a conservative pact ignore the power of movements and organisations, the importance of institutions, and the strategic choices that collective actors can make. (Smith, 1998) Movements resisting economic liberalisation may be able to create new institutions through which they can process their demands. In turn these institutions may be able to create new rules of the game allowing what we describe as "bargained liberalisation" to occur, in which prominent groups renegotiate the terms on which a country engages with the global economy. These institutions may expand the universe of choices open to policy makers, while constraining the state and capital from options they would otherwise have chosen.

 

In essence, the impact of markets on domestic economies is not uniform, but is mediated through specific national configurations of organisations and institutions. (Cox, 1996) While markets constrain the choices that governments make and limit the options unions pursue, they do not predetermine outcomes. (Smith, 1998) In this paper we examine the institutions that have been constructed by workers, employers, and the state during the transition to democracy in South Africa, the choices they have made in developing economic policy, and the possibilities that may be open for a class compromise. The South African experience thus has implications that go beyond the case study and has relevance to other countries attempting to consolidate democracy under conditions of economic liberalisation.

 

 

PART 1. RENEGOTIATING CLASS COMPROMISE

 

A. The Historic Compromise in Advanced Industrial Societies

 

In advanced industrial societies, democracy was consolidated through a class compromise based on an exchange between capital and labour. In return for capital providing economic concessions to labour (high wages, full employment, social welfare) labour accepted the capitalist system and in particular capital’s prerogative to manage the enterprise. That a rising standard of living and full employment could be delivered through the institutions of a democratic capitalist state led workers to develop an interest in defending and maintaining the institutions that willy nilly bolstered capitalism. Capital was willing to make such concessions in return for favourable conditions for capital accumulation; it too, developed an interest in maintaining democratic institutions.

 

Underpinning the compromise, then, was a strong investor response to growing demand fuelled by rises in wages and full employment. Thus, as Glyn (1995) argues, wages and employment grew simultaneously in a virtuous circle linked by high investment levels, increasing productivity, and rising wages, resolving - temporarily - competition between the employed and the unemployed.

 

In historical perspective this class compromise was made possible by a series of contingent factors: the development of Keynesian macroeconomic demand management; the Pax Americana; and Fordist production systems supported by corporatist-style labour relations systems. (Marglin and Schor, 1990) It also depended upon a labour movement organisationally capable of attaining optimal militancy: too much militancy meant that accumulation would be too slow, and ultimately material benefits would be reduced; too little militancy meant that accumulation would take place without capital making any concessions. (Przeworski, 1985)

 

Since the 1970s the conditions underpinning the historic compromise have eroded, and with them many of labour’s gains have been rolled back. In particular, it has been argued, that the consequences of the new global economy undermine any possibility of a nationally based class compromise on the lines forged during the "Golden Age" of capitalism. (Teeple) International competition around unit labour costs makes a wage-led strategy more difficult to sustain. Furthermore, Keynesian demand management solutions are - according to these arguments - more difficult when firms are increasingly oriented towards global rather than nationally based markets, where, as Wright argues, "the realization of the economic value of those commodities depends less upon the purchasing power of workers in the countries within which those firms are located." (Wright, 1997:20) The globalisation of financial markets has made it more difficult for national governments to control monetary and fiscal policy.

 

Finally, globalisation has also contributed to a radical recomposition of the labour market. Whereas the class compromise had been founded upon permanent full-time employment, over the last twenty years this base has been transformed: the permanent full-time worker, according to Giddens "has been assaulted,

 

by a host of other competing modes of work organization - an expansion of part-time work, voluntary career breaks, self-employment and home-working....In all these areas the ethos of "industry" [what Giddens calls productivism] comes under strain. (1994:140)

 

Indeed, Standing argues that the insecurity created by the emphasis on flexibility has sharply fragmented the labour force, creating a growing stratum of "flexi-workers" - part-time, casual, and temporary workers - who, along with the unemployed and the "detached" are emerging as the labour force of the future. (Standing, 1997)

 

Globalisation has encouraged the view among many analysts that class compromise per se is no longer possible, and that discussion of the concept is futile. We do not reject the argument that globalisation constrains domestic policy choices, and renders unworkable any simple return to the postwar historic compromise. In a recent paper, Wright resuscitates discussion of compromises, which he defines as:

 

a non-zero-sum game between workers and capitalists in which both parties can improve their position through various forms of positive mutual cooperation rather than simply from refraining from hurting each other. (Wright, 1997:6) This definition implicitly takes issue with the notion that a class compromise was a western European post-war phenomenon, and its corollary, that the erosion of the conditions that made the compromise possible means the end of the possibility of class compromises in general. Wright’s definition implies that a compromise remains a logical possibility between capital and labour; it is not sui generis to Europe, nor to the specific conditions of the immediate post-war period.

 

Arguments against the likelihood of a contemporary class compromise thus ignore that they were also struck outside of the specific conditions of western Europe, and continue to be constructed today. Indeed, many argue that globalisation in fact makes such compromises necessary, although their terms are different from the historic compromise of the post-war period. According to some analysts, such compromises have reemerged in the 1990s in western Europe, where globalisation and increased competition are making it difficult for companies to compete only on product quality and flexibility; containment of labour costs has regained prominence. Where labour movements are strong, this has been achieved through tripartite income policies and a variety of pacts where labour’s compromises on wages are matched by capital’s commitment to invest. (Regini, 1996)

 

A second example is the manner in which welfare states in Europe have responded to globalisation. According to Esping-Anderson (1996) rather than following the American model of deregulation and flexibility, these countries have retained generous egalitarian social protection with a relatively inflexible labour market. In all cases there is a seemingly universal trade-off between equality and employment: in the United States rising employment has been combined with greater job flexibility and increasing polarisation and poverty, while in many European countries high levels of social protection has been retained side-by-side with growing unemployment. (Esping-Anderson, 1996:1-4)

 

A final example of continued possibilities for class compromise is defined by Rogers and Streeck as "left productivism". Their argument builds from the increased influence workers may be able to acquire under conditions of "flexible specialisation". At the centre of their argument is a search for "a post-Keynesian equivalent of effective demand where the alchemy will have to come on the supply side, in production rather than consumption." (Rogers and Streeck, 1994: 129) This is to be found in

 

a left policy of effective supply [which] defends the welfare state as an indispensable instrument for imposing high and egalitarian labor standards on a capitalist economy, as well as for equalizing and enhancing the productive capacities of individuals and organizations, in both ways improving the economy’s performance potential. (Rogers and Streeck, 1994: 139)

 

Wright (1997) reiterates this position, but adds an important qualification: that a stable productivist class compromise requires high levels of working class associational power, without which workers are unlikely to have trust and confidence in employers’ behaviour that would ensure robust cooperation. Furthermore, such pacts

 

can have a more restricted scope in which the beneficial effects become contained within specific firms and sectors...increasing tendencies towards economic dualism in which economic inequality between insiders and outsiders is intensified. (Wright, 1997:24-25).

 

If this is a problem in advanced industrial societies, it is more so in developing countries where there are often more "outsiders" than "insiders". Are class compromises possible outside of the advanced industrial societies? And if so, are they desirable?

 

B. "Southern Compromise": The Historic Compromise in Developing Countries

 

At the same moment that the historic compromise in advanced industrial societies was being forged, a parallel compromise emerged in developing countries in the wake of decolonisation. However, the configuration of classes and the key actors that brought about the compromise were different. Whereas in advanced industrial society the compromise was essentially an exchange between organised capital and organised labour, in the third world the compromise was struck between the state, urban classes (including workers, the informal sector, the unemployed) and domestic and international capital. According to Seddon and Walton, this "developmental pact" was a "class coalition of industrial and export interests that paid the price of social peace with concessions to the urban masses." (Seddon and Walton, :47) These programs:

 

implied a bargain between the state and the urban poor. Public assistance was provided in exchange for political loyalty. The new urban groups were expected not only to refrain from embarrassing protest demonstrations, but to turn out in support of the state on ceremonial occasions and election day to channel their demand-making through the instrumentalities of government or the ruling party. (Seddon and Walton, 1994: 48)

 

Two important points arise from this pact. First, the social structure of the labour force differs from that of the northern advanced industrialised societies. Where the latter was composed largely of full-time permanently employed workers (represented in the main by national industrial unions) in the south a multiplicity of classes existed: urban workers, the informal sector, the unemployed, small entrepreneurs, peasants. In this configuration the industrial working class was a minority, while trade unions could not in truth represent the majority of workers - let alone other strata - and were not the principal agent of the developmentalist pact. Thus the second point is that the pact was driven by the developmentalist state, not the organised associations of capital and labour. The state’s involvement in the pact often led to the subordination of organised labour, a phenomenon captured in Schmitter’s well-known distinction between societal and state corporatism. (Schmitter, 1974)

 

The developmental pact, like the northern historic compromise, was underpinned by the same configuration of post-war political and economic conditions, and it was changes in these conditions that led to the unravelling of the developmental pact from the 1970s. However, the crisis in the third world took a much sharper form. The debt crisis into which many developmental states were plunged from the mid-1970s led to the now familiar IMF-inspired austerity programs. In turn these prompted large scale collective actions,

 

including political demonstrations, general strikes, and riots which were animated by grievances over state policies of economic liberalization implemented in response to the debt crisis and market reforms urged by international agencies. (Seddon and Walton: 39)

 

These "austerity protests" were not simply a response to a decline in material conditions, but must be understood as a moral reaction to a breach in the "southern compromise". As Seddon and Walton argue,

 

Governments were blamed for sacrificing their own citizens in the interests of foreign banks. Protestors demanded that the state meet its responsibilities to the people who, during the decades of patron-client politics, had upheld their end of the bargain. (Seddon and Walton, 50)

 

At the core of the austerity protests was a multiplicity of social groups drawn from the urban poor who most seriously affected by the economic crisis: shanty-dwellers, unemployed youths, street vendors and organised workers. (Seddon and Walton, 43) In many cases these groups were allied to other disaffected segments of the population: students, teachers, public employees, shopkeepers, professional groups, church groups. This moral struggle against the violation of the old pact discredited state corporatist regimes and fuelled many of the pro-democracy movements of the 1980s and 1990s. In some cases these struggles led to the toppling of national governments, such as the Philippines, Poland, and Zambia.

 

The crisis of the developmental pact led to two distinct but interlinked projects: democratisation to replace the authoritarian political regime and economic restructuring to replace the statist and protectionist economic regime. However there are conflicting views on the relationship between political and economic reform. An optimistic perspective sees these as necessary and complementary, (Diamond, 1988, 1993; Diamond and Plattner, 1993; Joseph, 1990) and raise political conditionality to an equal status with economic adjustment.

A more skeptical reading of these two processes emphasises the contradictions between them. The latter produces winners and losers while the former gives voice - and the capacity to block change - to well-organised interests threatened by liberalisation. If there must be a choice between economic and political liberalisation, some argue preference should be given to the former. (Callaghy, 1994:35) To overcome these special interests, Killick argues for the "insulation of policy-makers from pressures exerted by special interest groups."(Killick, 1995:28) In this sense insulation means protection from special interest groups - such as trade unions - who bear the brunt of adjustment, even if it means abandoning democracy.

 

Others acknowledge this contradiction, and argue instead that if a choice is to be made it should be on the side of democracy, both formal and substantive. They reject both the easy abandonment of democracy and the shrunken version embraced by many political scientists. This position, put forward by many critics of structural adjustment in Africa, seeks to embrace more participatory forms of democracy and alternative forms of economic development focussed on basic needs. (Ferguson, 1995; Harsch, 1993; Mkandawire, 1994; Schmitz, 1995)

 

Indeed, a recent study acknowledges the tension between political and economic reform as the key problem facing new democracies, but insists that only democratic institutions can resolve this tension. (Przeworski et al., 1995) Rampant economic liberalisation, they argue, leads to a decline in consumption, which not only undermines attempts to consolidate democracy, but may lead to social disintegration, descending into "decentralized collective violence." (Przeworski et al., 1995:110) New democracies, the authors argue, must find ways of creating "incentives for political forces to process their interests within the democratic institutions, when material conditions continue to deteriorate." (Przeworski et al., 1995:113)

 

But whereas the pessimists see democratic institutions as creating little more than an obstacle to economic reform, Przeworski et al. argue they are necessary for economic restructuring, but restructuring of a different type: a social democratic alternative to neo-liberalism that in our assessment amounts to a class compromise. This consists of three recommendations. First, liberalisation must be accompanied by social policies that minimise social costs. Second, policies must be designed with a view towards growth (and these include an expansion rather than a shrinking of the state). Finally, policies must be formulated and implemented through corporatist-style consultation and negotiation beyond the state and parliament to include unions, employers and other interest groups. (Przeworski et al., 1995:85) "Concertation" is central to their argument: it subjects the reform strategy to the competitive interplay of political forces, improves policy outcomes, builds support for the continuation of reforms, and helps consolidate democratic institutions. (Przeworski et al., 1995:82)

 

Surprisingly, the same authors are largely silent about the possibility of a social democratic alternative being realised in most countries undergoing double transitions.(1) Consolidation of democracy, they argue, depends on strong union organizations that can participate in pacting, reaching and enforcing agreements with capital and the state. Yet, the authors assert that concertation is impossible because unions "are too weak and too decentralized to serve as partners..."(2) (Przeworski, 1995:82) The implications of this conclusion for the consolidation of democracy are, to be sure, distinctly troubling.

 

This need not be the case. Underlying this conclusion is a set of assumptions about the social actors who will produce this class compromise: that labour in a particular form (centralised, industrial, encompassing) delivered the historic compromise in Europe, and its absence makes class compromises per se impossible. On the one hand, these assumptions mis-read the dynamics of trade unions in countries undergoing the double transition. Labour movements are emerging in countries such as South Korea, Brazil and South Africa that have the power to stalemate liberalisation and are increasingly demanding the rights to bargain over its terms and pace. On the other hand Przeworski et al. overlook the fact that class compromises have been constructed by a variety of collective actors, including left parties, often in alliance with trade unions and other social movements, such as women’s organisations and cooperative societies.

 

The best example of the successful politics of class compromise is from the south Indian state of Kerala. In the late 1980s and early 1990s a class compromise was forged by an alliance of popular organisations led by the Communist Party (CPM). This compromise has linked "the state with a mobilized working class in a developmental pact that has prioritised redistributive and welfarist reforms." (Heller, 1995:647) The compromise has institutionalised working class power, including the right of workers to claim a share of the social surplus through the welfare state.

 

Rather than representing a privileged segment of the workforce, labour - in its broad alliance with the CPM and other organisations - represents the working class as a whole cutting across traditional urban-rural and skilled-unskilled divisions. The unions’ ties to the CPM create a cohesive and politically oriented labour movement. In the late 1980s the movement shifted from a tradition of militant class struggle which focussed on economistic wage demands and traditional welfarist redistribution, a process which exhausted itself and had become counter-productive. In its place the movement sought to locate its redistributive demands on a more viable productive base through a larger social pact "in which growth was tied to the expansion of the social wage." Side by side with this shift from "class struggle" to "class compromise" was a strategic engagement with capital and the state in a negotiated compromise that incorporated working class power within the state. Heller calls this compromise a form of democratic corporatism where working class power "finds expression through, and not outside of democratic institutions." (Heller, 1995:658)

 

The Kerala case illustrates an alternative view that popular movements such as labour have the potential to reconfigure democratisation through participation in negotiated compromises.(3) Class compromises have the potential to discipline capital and the state and ensure that the social costs of adjustment are not borne by workers alone. Pacting should not be seen simply as a way of disciplining workers, but as a conflictual process of class compromise, the results of which may produce workers’ loyalty to democratisation while ameliorating the social costs of adjustment.

 

The Kerala case suggests that a class compromise is possible where economic resources are limited and capital cannot extend economic concessions to the working class. But such a compromise takes a different form to that of the postwar historic compromise in Europe and the developmentalist pact in the third world. Such a compromise is not based on high wages and high labour standards for organised workers, but on two different kinds of compromises. Firstly, the introduction of a social wage to all citizens - what could be called a form of social citizenship consisting of the right to income security, other forms of welfare such as education, health, and shelter; a right to share to the full in the social heritage; and the right to live in a safe environment. This compromise allows for the productivist effect of social welfare identified by Rogers and Streeck. It also provides a redistributive mechanism for the poor and some compensation for those workers who have made wage and labour standards concessions. For the latter, it allows cuts in nominal wages without sacrificing workers’ real standard of living.

 

The second compromise provides workers and their representatives with significant influence over investment decisions and productivity gains, to ensure that surpluses generated by growth benefit the population as a whole. This could be done at the workplace through allowing for participation and co-determination, while at societal level it could be achieved through agreements over macroeconomic policy that encourage growth and redistribution. In this compromise the state ensures that labour gains increased control over the distribution of the surplus and that this is used - through social welfare - in the interests of working people as a whole. Capital gains a more productive workforce and flexibility conducive to job creation, while committing itself to longer-term productive investment. The state achieves economic growth and stability. These interlocking concessions and gains are a way to resolve the potential contradictions of the double transition.

 

Such a compromise must be negotiated through a range of multi-partite institutions at the micro, meso and macro levels. In Part 2 of the paper we identify the emergence of a range of institutional innovations that have laid the preconditions for a class compromise in South Africa. But the compromise also requires collective actors willing and able to make concessions. The constraints and opportunities facing these actors will be identified in Part 3.

 

 

PART 2. INSTITUTIONAL INNOVATIONS FOR CLASS COMPROMISE: THE SOUTH AFRICAN CASE

 

The South African transition has been marked by a range of major institutional innovations that we believe have laid the foundations for a class compromise. These institutions originated in the class stalemate that emerged during the transition to democracy in which civil society formations were in many instances able to block unilateral restructuring of the economy by the apartheid state and capital. The institutions created new rules of the game compelling the key social actors - government, organised labour, business, and (in some cases) community-based organisations - to negotiate and conclude agreements on major economic and social policies. The institutions were founded on the notion of bargaining, which implies reaching non-zero-sum agreement between independent actors based on mutually accepted rules, and that such agreements can be enforced.

 

The new institutions encourage new forms of dispute resolution and extended social regulation to previously marginalised social groups, providing workers with an opportunity to engage the state and capital over major economic questions, including the form and pace of adjustment. We call this "bargained liberalisation": liberalisation, because the changes involve opening up South Africa to the global economy; bargained, because agreements are subject to the institutionally structured interplay of societal interests.

 

A. Foundations of the New Labour Regime

 

For most of this century South Africa had a dualistic system of industrial relations: a legalistic set of bargaining rights for non-black workers (whites, coloureds, and Indians) while black workers were excluded from the system and subjected to varieties of formal and informal repression. This system received its most fundamental challenge in the 1970s with the emergence of independent shop-floor based industrial unions of black workers based largely in the import-substituting industries stimulated by South Africa’s 1960s economic expansion. These unions concentrated on winning recognition at plant level, which entailed both organisational rights (election of and time off for shop stewards, access for union officials) and substantive rights (bargaining on wages and working conditions, defence of workers in dismissals and retrenchments). Part of the unions’ demands stressed amendment of the then-existing Labour Relations Act which excluded African workers from the category of employee, thus preventing them from participating in industry-based collective bargaining.

 

The dualistic system began breaking down in the 1970s, under pressure from the growing union movement and its international trade union allies, and from many sections of South African capital who feared increasing and unregulated conflict on the shop floor. In 1977 - in the aftermath of the 1976 Soweto uprising and a system-wide challenge it posed to apartheid - the government set up the Wiehahn Commission of enquiry to investigate the industrial relations system. Two years later, in an attempt to control the emerging unions, the Wiehahn Commission recommended that the LRA be amended to incorporate black workers by encouraging their unions to register, but only if they would confine themselves to collective bargaining issues.

 

Rather than incorporating these unions into the existing industrial relations system, however, these reforms opened up a process through which the unions were able to transform the system from within. Initially by registering they were able to legitimise their presence and rapidly expand their membership. By demanding the right of recognition at shop floor level - backed up by the disciplined use of collective power - they were able to win extensive bargaining rights that encroached on existing managerial prerogatives: wage setting, punishment and dismissal, retrenchment, work reorganisation. This organisational power enabled unions to shift the "frontier of control" at plant level, thereby providing a base from which to demand industry-level bargaining, which was slowly won in key sectors.

 

After the mass political resistance of the mid-1980s had been suppressed in successive states of emergency, both capital and the state sought to reverse labour’s gains by amending the LRA. However their efforts provoked widespread union resistance at workplace and national levels. The unions organised three national stayaways in 1988 and 1989 and refused to service their members in disputes under the new LRA’s provisions. Faced by growing disorder on the shopfloor many companies began searching for common interests with organised labour, yielding a series of bilateral negotiations between labour and business that culminated in a tripartite agreement - the Laboria Minute - on the basic contours of a new labour relations system. The three parties agreed that: all labour laws would in future be considered by employers’ bodies and the trade union movement prior to being put before parliament; that the unions would participate in a reconstructed National Manpower Commission (a statutory consultative body on labour relations and labour market issues set up by the Wiehahn Commission and boycotted by the new labour movement); and that labour rights would be extended to those previously excluded from the industrial relations system, including farm workers, domestic workers and public servants.

 

The Laboria Minute was a crucial moment in the transition to democracy as a whole. In part the agreement was itself made possible by the transition: by the late 1980s labour repression was not an option for the National Party government, which was already talking secretly to the African National Congress (ANC). The ANC, South Africa’s strongest and oldest liberation movement, had been banned in 1960 and was operating in exile. In 1989 the National Party government had taken the first tentative steps towards regularising politics by unbanning key opposition leaders, and the following year had legalised the ANC, which in 1994 became the leading party in South Africa’s first democratically elected government.

 

More importantly, in terms of the transition as a whole, the Laboria Minute was the first example of a major policy issue being addressed through a negotiated compromise, where a societal stalemate was processed through institutions. Furthermore, the Laboria Minute was struck prior to the pacting between the political actors on the political, military and constitutional aspects of the transition. It set up a practice of tripartism giving labour an institutionalised voice enabling it to shape the broader transition agenda. As important, it prevented labour’s fate from being solely determined in a constitution-making process between political parties. In practice, political parties could not easily overturn or trade away tripartite agreements. Most of the institutional innovations outlined below grew out of the Laboria Minute.

 

B. Institutional Arrangements

 

Labour Relations Act

 

In 1994 one of the first moves by the new democratically elected government was to establish a legal task team to draft a new Labour Relations Act. After a prolonged consultation process the Act was formally passed by parliament at the end of 1996.

 

The LRA has four key features. For the first time in South African labour history all workers were brought under the ambit of one industrial relations system. In addition to public service workers this includes the most marginalised, including farm labourers and domestic workers. The new Act promoted collective bargaining by providing for organisational rights for unions in the workplace (thereby entrenching in law what many unions struggled to achieve through private agreement: access to employer premises; meeting rights; union subscription facilities). It entrenched the right to strike with a clear right to picket. The Act encouraged parties to resolve disputes through conciliation and arbitration through a new institution, the Commission for Conciliation, Mediation and Arbitration (CCMA). Finally, and its most significant innovation, was provision for joint decision making and consultation at shop floor level between management and workers through the creation of Workplace Forums, developed in part from South African and western European precedents.

 

Institutional Engagement at the Societal Level: NEDLAC

 

As mentioned above in the Laboria Minute the unions agreed to participate in the then-discredited National Manpower Commission, while government agreed to seek consultation on important economic policies. However, little progress was made on either count. Labour’s recommendations for restructuring the NMC made little headway with government, while government did not take seriously the commitment to consultation. These problems came to a head in late 1991 when government announced a new and regressive Value Added Tax (VAT). Labour responded by organising a wide array of formations that participated in a two-day stayaway against the new tax. The protests were led by the Congress of South African Trade Unions (COSATU), the largest and most politically sophisticated labour federation in the country. Since its formation in 1985 it has been aligned with the African National Congress and the South African Communist Party (SACP), the "triple alliance" which was formally inaugurated after the unbanning of political organisations in 1990.

 

Through their struggles over VAT it became clear to labour leaders that merely delaying the new tax would not achieve their goal of participation in economic decision-making: restructuring of the economy was happening unilaterally. Furthermore, their lack of success with the NMC motivated labour strategists to seek a new general forum where economic and social policy could be debated and negotiated in a more global manner. Thus a macroeconomic forum emerged as a central demand in the aftermath of the anti-VAT campaign, leading to a proposal to establish a National Economic Forum (NEF). (Adler and Webster, 1995:94)

 

The NEF operated as a tripartite forum between 1992 and 1994, parallel to the main constitutional negotiations, and struck agreements on a number of contentious economic and social policy issues. However, the NEF was essentially a transitional arrangement that emerged in the context of an illegitimate government where negotiated agreements nonetheless had to be reached between the state, capital and labour.

 

With the election of a democratic government the NEF’s status was uncertain. Would a new government attempt to reclaim sovereignty over economic policy or would some form of bargaining over these issues become a more permanent feature of the new regime? Significantly, the key architects of COSATU’s NEF strategy were now either in ministerial positions or were serving as advisors to government. Taking advantage of their positions - and in the absence of any serious opposition to a bargained approach - they quickly proposed the merging of the NMC’s labour law and labour market agenda with the macroeconomic concerns of the NEF.

 

The new body - the National Economic Development and Labour Council (NEDLAC) was located in the Department of Labour and charged with the task of reaching consensus on economic and social policy between organised labour, organised employers and other community-based interest groups. This latter category was an important innovation that gave voice to marginalised groups, such as the unemployed, disabled, youth, and women, thus avoiding a narrow corporatism based on the "golden triangle" of state, labour and capital. (Bird and Schreiner). One of the first pieces of legislation passed by the new government was the NEDLAC Act of 1994. NEDLAC is thus a statutory body, consisting of four chambers: labour market; public finance and monetary policy; trade and industry; and development.

 

Institutional Engagement at the Meso-Level: Industry Level Bargaining

 

The hardest bargaining on liberalisation emerged in those sectors of the economy most exposed to the impact of globalisation: mining, clothing and textiles, motor and components, and the state-owned corporations in the public sector. From 1991 unions took the lead in creating institutional forums where bargaining over the terms of liberalisation could take place.

The first of these was the calling of a "mining summit" by the National Union of Mineworkers (NUM) in 1991. Faced by mounting job losses the union called for a social plan to manage the gradual downscaling of the industry. The NUM’s proposed plan included minimising job losses by prolonging the life of marginal mines; generating alternative forms of employment by encouraging beneficiation; and cushioning the effects of retrenchment through counselling and retraining. (Pillay, 1998) Little progress was made on these ideas until 1998 when the steeply declining gold price put job loss and the need for a follow-up summit back on the agenda. A new Gold Crisis Committee was launched to manage downscaling.

 

Similar summits took place in the motor and in the clothing and textile industries. In the latter, the South African Clothing and Textile Workers’ Union (SACTWU) understood that in the face of liberalisation it would be unable to sustain its members’ jobs and wages unless these were linked to an industrial policy oriented towards growth and adjustment. In a context where the government was illegitimate and clothing and textile employers fundamentally divided, the union became the bearer of the public interest in industrial regeneration. Their package included defensive measures to protect those threatened by job loss, such as retraining and wage subsidies to those retrenched; active policies, including incentives to industry to develop and deploy new technology, modernising management, and small business development; and policies oriented to the extension of union power, such as a commitment by employers to centralised bargaining. In this context - and only in this broader context - SACTWU was willing to negotiate on phased reductions in tariff barriers and "stability" in the workplace. (Patel, 1996; Hirschsohn et al., 1998)

 

The third example of meso-level bargained liberalisation is labour’s response to the ANC government’s announcement in December 1995 that it intended privatising important state assets. The unions organising workers in parastatals demanded the right to negotiate the terms of restructuring. After intensive discussions between labour and senior government ministers both parties accepted a National Framework Agreement (NFA) on the restructuring of state assets. In terms of the NFA all specific instances of restructuring must be negotiated between government and the relevant parties according to broad principles. Furthermore, the government agreed that restructuring would not be done at the expense of employment, and where there were job losses, a social plan would be negotiated. (NFA, 1996; Rix and Jardine, 1996; Rix and Lloyd, 1998)

 

The final example of industry-level restructuring comes from the public service where centralised bargaining was established for the first time in 1993. Importantly, the functions of the Public Service Co-ordinating Bargaining Council go well beyond traditional collective bargaining to include qualitative non-distributive issues such as work organisation as well as the restructuring of the public service itself. To the extent that the public service is a central actor in liberalisation - either to be "downsized" or restructured - workers therefore have important influence over the character of change in the institution. (Patel, 1998)

 

Each of the institutions discussed above provides labour with the access to shaping fundamental development policies at the micro, meso and macro levels. In terms of their content and their breadth these institutional innovations are remarkable in comparison with other countries undergoing the "double transition". As such they provide part of the basis for a broad class compromise in which development policies are not defined on the terms of local and global capital alone, but instead are the outcome of genuine bargaining. Indeed, the Labour Market Commission, appointed by President Mandela, proposed a social pact in 1996. In Part 3 we identify - through an analysis of the key actors who would be party to such a class compromise - the opportunities and constraints of achieving such an agreement.

 

 

PART 3. TOWARDS A CLASS COMPROMISE: OPPORTUNITIES AND CONSTRAINTS

 

A. From Left-Keynesianism to Fiscal Austerity

 

Although the South African government’s current macroeconomic policy is guided by a neoliberal framework, the Growth Employment and Redistribution strategy (GEAR) its apparent hegemony conceals the persistence of a powerful left-Keynesian orientation to economic and social policy debates in the democratic movement dating back to the late 1980s. This approach can be identified with two separate, but linked projects. The first was an intellectual project based among groups of progressive academic economists who established the Macroeconomic Research Group (MERG) to develop a framework for macroeconomic policy in South Africa. (MERG, 1993) According to one of its key participants, MERG envisioned a two-phased "crowding-in" approach to a growth strategy for South Africa. According to Padayachee, this entailed "A state-led social and physical investment programme as the growth driver in the first phase, followed by a more sustainable growth phase which would see private sector investment kick in more forcefully as growth picked up." (Padayachee, 1997:9) However, in spite of the fact that MERG was initiated by the ANC’s Department of Economic Policy and that it developed the furthest articulation of a left-Keynesian programme, its policy recommendations were never adopted by the democratic movement.

 

The second project - the Reconstruction and Development Programme (RDP) - overlapped with MERG in terms of personnel and policy prescriptions, but came out of COSATU. The RDP originated in an attempt by labour to produce an accord that would tie a newly elected ANC government to a labour-driven development programme. In 1993 and 1994 a number of intellectuals based in the unions and NGOs developed successive drafts of a policy framework. In its final formulation, the RDP envisioned as a first priority "beginning to meet the basic needs of people: jobs, land, housing, water, electricity, telecommunications, transport, a clean and healthy environment, nutrition, health care, and social welfare." (RDP, 1994:7)

 

Running parallel to this left-Keynesian project was a set of local and international pressures that were profoundly changing the ANC’s expressed economic policy. From the 1950s the ANC was publicly committed to a state-interventionist redistributive strategy, as articulated in its central policy document, the Freedom Charter’s commitment to nationalisation. This policy was publicly reconfirmed by Nelson Mandela on his release from prison in February 1990. The ANC’s standard developmentalist position - which was consistent with the "southern compromise" referred to above - had by the late 1980s and early 1990s come under substantial pressure. If Mandela had entered prison at a time when nationalisation was an article of faith, he was released into a world where monetarism and its obsession with inflation and the reduction in state expenditure had become the new orthodoxy. (Hood, 1994)

 

From 1990 there were a series of economic policy reversals through which the ANC leadership came to adopt positions increasingly consistent with the neoliberal orthodoxy. By late 1993 the ANC had made a number of concessions in macro-economic policy. They accepted a clause in the constitution that guaranteed the independence of the Reserve Bank and agreed to retain its highly conservative governor. They also agreed to retain the NP-appointed Minister of Finance. Finally, in November 1993 - at precisely the moment when MERG was releasing its left-Keynesian policy framework - the ANC concluded a secret $850 million loan agreement with the IMF. In return for the loan the ANC agreed: not to ease monetary policy; to prioritise inflation reduction; to contain government expenditure (indeed to cap the debt/GDP ratio and to reduce it progressively in subsequent years); and not to raise taxes. (Gelb, 1998)

 

These agreements were not in keeping with the thinking of both the MERG and the groups drafting the RDP, which was proceeding through its final drafts.  Upon its release the MERG essentially disappeared: it was no longer consistent with the ANC’s macroeconomic policy reversal. The RDP however, was central to the ANC’s electoral strategy and could not simply be abandoned, above all because it was being promoted by COSATU. Instead it was amended to make its macroeconomic thinking more consistent with the new position. In particular, its macroeconomic orientation was redefined away from the unions’ commitment to "growth through redistribution" (an important emphasis in MERG) to a direction more attractive to domestic and international capital, with commitments to fiscal discipline and macroeconomic balance.

 

The redrafted RDP was sharply criticised on both procedural and substantive grounds at a special COSATU congress held in August 1993. The redraft was presented for adoption without being debated within COSATU structures, and its content had been changed to include a statement that "coherent, strict, and effective monetary and fiscal policies will be a cornerstone of our RDP." (Etkind and Harvey, 1993) The re-formulation provoked considerable debate at the Congress over what was seen as the thin end of the neoliberal wedge, that would constrain - if not undermine - the possibilities for a left-Keynesian project as envisioned by both MERG and the RDP authors. However, COSATU adopted the program without suggesting an alternative to this call for fiscal discipline at the heart of the RDP. The RDP soon became the paradigm within which all development policies were to be discussed, an extended wish list in which the homeless, the landless, workers, and international bankers could take equal comfort. In other words, it became all things to all people. (African National Congress, 1994)

 

From 1994 to 1996 the RDP became ostensibly the guiding document of the Government of National Unity, located in an RDP Office within the President’s Office, under the immediate authority of Minister Without Portfolio Jay Naidoo - ex-General Secretary of COSATU. Within months the Alliance’s election document was redrafted into an official government White Paper. (Parliament of the Republic of South Africa, 1994) However, the principles and programmatic objectives of the original RDP were reconceptualised as a long-term strategic vision to realign all government effort around clearly stated economic targets, leaving little room for labour-, or indeed civil society-driven change. (Götz, forthcoming)

 

Furthermore, the macroeconomic shift noted above became even more pronounced in the White Paper which significantly strengthened the emphasis on fiscal discipline that first appeared in the draft presented to the 1993 COSATU special congress. It developed a more robust commitment to an export-led growth strategy while loosening the RDP’s original emphasis on a basic needs strategy stressing instead the need to reduce state expenditure, privatisation, and promoting private sector expansion.

 

In the first year and a half of the new government, the two parallel thrusts - left Keynesianism and macroeconomic conservatism ran parallel to each other, leading to a muddle in government policy. This confusion was heightened by a measure of ineptitude in the RDP office, and rivalry between it, the Department of Finance, and the Department of Labour which had begun implementing a labour-friendly legislative agenda, focussed on the new LRA and NEDLAC.

 

B. Contestation over Economic Policy

 

The first major public contestation over the neoliberal drift occurred in December 1995, when the government announced its intentions to privatise important state assets. Labour responded by threatening a general strike and demanded the right to negotiate the terms of restructuring. After intensive discussions between the NEDLAC labour caucus(4) and senior government ministers, the National Framework Agreement was accepted in February 1996. But while labour challenged an important element in government policy, and had won important concessions, it had not yet developed an alternative macroeconomic framework.

 

Instead, in January 1996 business opened the public debate on economic policy with a document advocating a standard neoliberal solution: economic deregulation; dramatic reductions in the deficit; trade liberalisation in the form of lower tariffs; rapid privatisation; lower corporate taxes; and increased labour market flexibility to be achieved through dual labour market policies. (South Africa Foundation, 1996)

 

Soon after business’ document was published, COSATU released an alternative plan, "Social Equity and Job Creation," inspired by left-Keynesian thinking that became the common position in the NEDLAC labour caucus. (Labour Caucus, 1996) The plan attacked neoliberalism and proposed instead a public and private investment policy geared towards job creation and growth. Central to the strategy was an active industrial policy to develop the manufacturing sector along with social adjustment measures to provide for the social costs of restructuring the economy. Importantly, the document proposed a redistributive fiscal policy based on a strongly progressive tax system to redirect spending towards social services for the poor. The program articulated a vision of regional reconstruction and development tied to support for a third world debt write-off and closer trade union solidarity. Finally, it incorporated demands for worker participation, both at the shop floor in the form of union-based Workplace Forums and at the sectoral and national levels.

 

In the meantime, the Government was converting the RDP White Paper into a formal policy, the National Growth and Development Strategy (NGDS). The NGDS continued the ambiguous straddling between neoliberalism and the redistributive and equity orientations of the original RDP. (Inter-governmental Forum, 1996) However, this document was withdrawn when critics within the ANC and the SACP and COSATU opposed both its content and the non-consultative process by which the document was written. As a result of this deadlock in the Alliance, the NGDS was never publicly released.

 

However, the new government’s first major currency crisis - starting in February 1996 - quickly overtook this debate, as the value of the Rand plummeted by more than 25%. (Lloyd and Rix, 1996) In this context the government moved quickly to calm domestic capital and foreign currency markets by embracing a conservative macroeconomic framework developed by a team of policy makers including senior civil servants, technocrats from the Development Bank of South Africa and the World Bank. In June, after considerable internal disagreement within the Triple Alliance, Finance Minister Trevor Manuel finally released the new strategy, "Growth, Employment and Redistribution" (GEAR). (Department of Finance, 1996).

 

GEAR put forward ambitious targets. It aimed to achieve a "fast-growing economy which creates sufficient jobs for all workseekers." It also envisioned redistribution of income, the provision of sound services to all, and the achievement of 6% growth and the creation of 400,000 jobs per annum by the year 2000. (Department of Finance, 1996: 1) The controversial aspect of the plan was the means identified to achieve these goals. Its integrated strategy highlighted fiscal deficit reduction, gradual relaxation of exchange controls, reduction in tariffs, tax reductions to encourage private sector (and especially foreign direct) investment, and restructuring of state assets (privatisation).

 

The ANC sought to win support for this shift in policy within the Alliance through a series of informal meetings with senior SACP and COSATU officials in the weeks before GEAR was released. ANC leaders stressed their precarious international position and the need to project confidence during the crisis, and argued that GEAR was the best means for doing this. The Alliance partners, while acknowledging the pressures on the government, queried the origins of GEAR and were critical of the lack of consultation. Indeed, the actual document was not tabled in the meetings - the COSATU and SACP leaders, according to one participant, were shown only the section headings.

 

However once GEAR was released, the Alliance partners were angered both by its content - which they now saw for the first time - and because the government asserted that it was "non-negotiable", a position that was reiterated by many ministers and government spokespersons. These two factors provoked anger from COSATU as well as among many figures in the SACP. COSATU General Secretary Sam Shilowa publicly criticised GEAR - tellingly at a seminar marking the 75th anniversary of the SACP - describing the strategy as an "unworkable and unwinnable" plan that "poses serious difficulties for the working class and the country as a whole." Most significantly, Shilowa identified the distance the ANC government has moved rightward from the original RDP by indicating that GEAR could never have emerged from the ANC before the 1994 elections. (Sunday Times, 1996; Sunday Independent, 1996)

Despite these criticisms, GEAR was ultimately formally endorsed by the ANC’s National Working Committee, on which COSATU and SACP representatives sit, though both COSATU and the SACP have rejected the policy. Yet no formal agreement could be reached in either COSATU or the SACP on how to deal with GEAR: some felt that the policy should be given a chance and the government should not be attacked during a crisis; others wanted openly to oppose the policy. The issue threatened to be divisive both within and between the parties to the Alliance; as someone close to the process put it, "the debate became so shrill that people walked away from it."

 

However, silence over GEAR did not mean acquiescence, and during 1997 the terrain became more fluid. Firstly, line ministers experienced the consequences of GEAR’s fiscal restraint and the implications this policy held for delivering on the government’s social programs. Secondly, GEAR has not come close to delivering on its ambitious promises of employment creation, redistribution, growth, and foreign investment. (Marais, 1998)

 

In this context, both COSATU and the SACP became increasingly critical of GEAR. COSATU’s 6th National Congress rejected GEAR but did not demand that the ANC drop the policy. It was argued that the policy was not cast in stone and could be successfully contested in many ways short of a direct confrontation with the ANC. The basis for this contestation came from the major document presented at COSATU’s congress, the report of the September Commission on the Future of Trade Unionism. (COSATU, 1997; Webster and Adler, 1997) A crucial recommendation in the report was that COSATU establish greater autonomy in its alliance with the ANC, "support the ANC when it adopts progressive policies, influence it wherever possible, and oppose the ANC when it adopts >anti-worker’ positions." (Webster and Adler, 1997:14)

 

Importantly, the economic chapter of the report, "Reclaiming Redistribution" contained a more systematic and considered statement of the left-Keynesian position first put forward in COSATU’s Social Equity document. This vision includes socialising the investment function and building a "social sector": although the private sector remains the largest sector, the report recommended its transformation into a "stakeholder sector" where "no longer only the rights of shareholders prevail, but also the needs of workers, communities and society." The report believed that this could best be done through strategic engagement with the state and capital at the enterprise, sectoral, and national levels. The report also recommended that union leaders commit themselves to taking a central role and responsibility in shaping economic and social development as well as the functioning of the public sector. This latter was seen as "the basic foundation for translating into reality the citizenship rights enshrined in the constitution" through the delivery of services, the stimulation of economic growth and by advancing significant forms of collective ownership. (Webster and Adler, 1997:13-14) These prescriptions were endorsed at COSATU’s Central Committee meeting in June 1998 and tied to a clear set of alternative macroeconomic policies that call for demand-led growth, stimulated by reduced interest rates and more flexible policies on debt, state spending, and taxation.

 

The ability of COSATU as well as the SACP to avoid a direct confrontation over GEAR has largely disappeared. Not only has GEAR failed to perform anywhere close to expectations, but a further decline in the value of the Rand in May and June 1998 alongside dramatic interest rate increases have raised the spectre of a recession. In this context both President Mandela and Deputy President Thabo Mbeki have used high profile speeches to COSATU’s Central Committee and the SACP’s Congress to rebuke both organisations for questioning the government’s economic policy. As Mandela told the SACP:

 

GEAR, as I have said before, is the fundamental policy of the ANC. We will not change it because of your pressure. If you feel you cannot get your way, then go out and shout like opposition parties. Prepare to face the full implications of that line. (Business Day, 1998b; Financial Mail, 1998)

 

For the moment this public "dressing down" will likely quell open dissent in both of the ANC’s alliance partners. However the causes that are motivating such criticism - straightened economic circumstances, increasing retrenchments and attendant social dislocation - cannot be made to disappear by presidential fiat. Thus the factors leading to this opposition are likely to deepen, and with them, the contradictory pressure economic liberalisation places on the consolidation of democracy.

 

C. Explaining the Shift in Economic Policy

 

If COSATU and the SACP are influential alliance partners with the ANC how did they come to this point of conflict over economic policy? On the face of it, South Africa is well-placed to resist orthodoxy. Not only was the ANC’s policy orientation opposed to such directions, but South Africa was not suffering from an immediate debt crisis, which should have given the international financial institutions less leverage over the course of economic policy.(5) How can the shift in economic policy be explained?

 

The most important factor in this shift was the changing locus of international influence that arose out of the collapse of the Soviet Union and the east block. Not only did this discredit left economic policy, it also ensured that the most important international actors in South Africa’s transition were to be the United States and its allies, Britain, Germany, and Japan. The price these powers demanded for disciplining the apartheid government and extending promises of material aid to the ANC was a commitment by the ANC "to embrace western-style free-market principles." (Landsberg, 1994:291; Landsberg and Kabemba, 1998)

 

The full opening to the west meant not only that the ANC was now for the first time welcome in Downing Street and the White House, but as it was increasingly perceived as the government-in-waiting it gained access to international financial institutions, banks and corporations. These organisations vigorously and enthusiastically promoted neoliberal policies and a thick web of contacts began to develop between their representatives and ANC policy makers and intellectuals, particularly economists. These contacts included a welter of private conferences and workshops as well short-term secondments of key officials to the World Bank, the IMF, and western banks. Others were invited to participate in economics refresher courses and graduate programs in Washington and elsewhere. The result was a powerful ideological shift in the thinking of key policymakers in the ANC. Commenting on this shift, two left economists observed that:

 

It was not unusual in the early 90s to hear senior ANC spokespersons arguing that the world had totally changed, and that those arguing for more radical or alternative economic solutions in this new globalised context were simply living in a bygone age. (Michie and Padayachee, 1997:229)

 

This shift was eased by the absence of a coherent left and social democratic economic tradition in South African political and social scientific life, what Padayachee has described as the "relative intellectual weakness of the progressive economics community." (Padayachee, 1997:15) "The ANC," according to Michie and Padayachee,

 

did not at the beginning of negotiations possess a ready institutional capacity on the economic policy front to counter the power and resources available to its main opponents and other institutions. (1997:229)

 

Though MERG was set up to meet this gap, it came too late to offset the growing relationship between the ANC and its new-found economic allies.

 

These perspectives corresponded well with the interests of a growing professional middle class and business group emerging out of the movement that stood to gain materially from the rightward shift in economic policies. For these strata - black and white - market-oriented policies delivered direct benefits through the prospect of buying privatised state assets and gaining access to discounted shares in private companies. As important, however, these ideas helped justify their newly acquired wealth and to rationalise the persistence of South Africa’s highly unequal society. "Africans...should not feel ashamed about making money," the political commentator Jabulani Sikhakhane wrote recently:

 

Black empowerment has never been about enriching every black man and woman in South Africa. Those who believed so were naive. Black empowerment has been about creating opportunities...for blacks to enter business. (1998:50)

 

Clearly the new government faced international and domestic constraints on policy choices. However, this growing acceptance of market orientations led policy makers to interpret these "objective conditions" in particular ways and to suggest particular solutions.

 

The rapprochement between leading figures in the ANC and international capital had a domestic counterpart in which the movement grew closer to local capital. These links were forged in a fashion similar to the external connections. From the late 1980s, but particularly after the ANC was unbanned, far-sighted South African businessmen courted black businessmen, intellectuals, and politicians, offering them attractive directorships and shareholdings in established companies. Moreover they engaged ANC leaders in a series of workshops and scenario planning exercises where the two sides could meet and discreetly discuss "options" for South Africa’s future. In the process business could exert influence over the thinking of important leaders while simultaneously facilitating their entry into the ranks of the bourgeoisie. For Bond (1996) this "elite compromise" determined the direction of macroeconomic policy in the country, redirecting it from the stated redistributive goals of the RDP towards a policy in the interests of dominant domestic and international class interests.

 

There are two problems with the elite - or conservative - compromise. The first is that it is not delivering sustainable growth, and it is unclear whether it can ever do so. The second is that the compromise occurred over the heads of those who supported the ANC during the liberation struggle and elections and who stand to bear the brunt of the decline in consumption that accompanies neoliberal adjustment. It is these groupings who were chastised by Mandela for criticising the economic policy reversal. In other words, these policies have generated the familiar tension identified at the outset between economic liberalisation and the consolidation of democracy.

 

D. From Class Stalemate to Class Compromise?

 

The challenge to this elite compromise has come from the labour movement and (in an increasingly close relationship with COSATU) the SACP, as well as a broader constituency of NGOs, community organisations, and sections of the church. However, at this point these forces do not have the capacity to impose their alternative economic policies on either the state or domestic and international capital. Nor is the government and capital able to satisfy the economic demands of this constituency through GEAR. Neither can they crush opposition.

In other words, South Africa may be entering a class stalemate where neither capital nor labour are able to win their demands and adequately protect their interests. A class compromise is impossible unless all key actors perceive the stalemate and recognise the need to bargain and make concessions. In the mid-1980s, negotiations between the apartheid state and the democratic movement did not begin until both sides realised they could not achieve their objectives without making concessions. For an economic compromise in the 1990s what would such concessions look like, and under what conditions might they be forthcoming?

 

A class compromise must aim at a non-zero sum solution appropriate for a labour surplus economy in a semi-peripheral country. Such a compromise would prioritise high growth in which capital invests in a manner that generates sustainable jobs, without undermining the living standards of currently employed people. As with all compromises this involves trade offs for all parties.

 

In return for organised labour accepting wage stability and variation in employment conditions, they would gain two concessions. The first would take the form of a social wage. Currently South Africa could be described as a residual model of a social welfare state, the core of which is the provision of a basic pension for everyone in need. (Standing et al., 1996:407) For example, in 1994-95 R8 billion was paid out on social pensions to 1.7 million pensioners; a sum of R470 per month is paid to all women aged 60 and over, and to all men age 65 and over. According to one expert, "International poverty professionals are shocked at (and many disapprove of) the >high’ level of the state social pension compared to, say, the unskilled wage levels." (Lund, 1998)

 

This example illustrates that South Africa already possesses some attributes of a welfare system. The challenge is to deracialise this system by breaking away from what Nattrass and Seekings (1996) have called "the apartheid welfare state regime". This involves difficult trade offs and tough choices, such as providing benefits for all at the cost of reducing the relatively high level of benefits historically enjoyed by non-blacks.(6) COSATU has embraced the logic of this argument, and has called for an investigation into the ways in which "social insurance and the provision of social assistance can best be integrated to achieve the most effective - and widest possible - social security net." (COSATU, 1996)

 

The integration of labour market variation and welfare allows a degree of "regulated flexibility" in the labour market - greater job and wage inequality - in return for a minimum standard of benefits, thereby ameliorating the impact on workers of downward variation. The advantage of such tradeoffs is that variation gives incentives to individual capitals to invest and create jobs, while the social wage provides workers at the lower end of the labour market and the unemployed with a degree of income security. Moreover, labour will be more accommodating of flexibility where workers’ concessions can be offset by a system of public benefits. These benefits are extremely important in a labour-surplus economy where job creation will be slow, while the consequences of adjustment are felt immediately.

 

Part of the concessions can be accomplished through negotiations in the current industrial relations institutions: in particular industry-wide bargaining councils, as well as through workplace-level forms of codetermination. These enable workers and employers to bargain on concessions and to reach agreements acceptable to both. Furthermore, they also enable the parties to negotiate improvements as conditions improve, thereby helping to ensure that concessions do not become permanent.

 

But the concessions also require an active and strong developmental state to maintain a system of social welfare that is integrated with these labour market agreements. (For a similar emphasis, see Torres, 1996) Moreover, public benefits are not limited only to the forms of transfer payments. Recalling the "productivist welfare" arguments made above, they also currently include a range of public expenditure on education, training, health, transport and housing essential to a modern economy. Concretely, such benefits assist job creation directly by producing a higher skilled, more secure workforce, but also help contain employers’ costs (for example on medical aid), thereby creating multiple incentives for job creation. As above, these transfer payments need to be integrated with the system of labour market compromises.

 

The second major compromise involves capital relinquishing unilateral control over investment and production decisions. This entails embracing codetermination at the workplace and bargaining at the industry and societal level to reach agreements over macroeconomic policy that encourage growth and redistribution. In the absence of such joint decision-making it is unlikely that the surpluses generated through wage stability and labour market variation would benefit the population as a whole.

 

In return for labour gaining increased control over the distribution of the surplus capital gains a more productive workforce and flexibility conducive to job creation. These are necessary conditions for the stability of profit over the longer term, and provide capital with an incentive to participate in the compromise. But this incentive is not open-ended. Business not only gives up a measure of control over profit and investment to workers, but also concedes power to the state: it must accept being brought fully into the state’s tax regime. Taxation of the increased profits generated by flexibility provides a major portion of the income stream to fund the redistributive and productivist welfare policies. An important part of the compromise is an emphasis for all parties on policies that are oriented towards the stability of profit over the longer term as opposed to high rates of profit in the short-term.

 

Thus far we have argued that a class compromise is desirable to resolve the tensions between political democratisation and economic liberalisation. We have also identified the concessions that would to be made to make a workable compromise in a labour surplus semi-peripheral economy. Finally, we have pointed to the development of a range of institutions through which such a compromise could be bargained.

 

These are necessary, but not sufficient conditions for a compromise. In order for such a compromise to take place it is necessary for all the parties to share a perception of stalemate and be willing to accept a sub-optimal solution to the impasse. As we have identified above, a stalemate in economic policy has emerged. Yet none of the parties are willing to make the concessions necessary for such a compromise. For the moment all of the parties perceive the possibility of achieving their aims without conceding to their adversaries.

 

The state continues to refuse to negotiate the terms and elements of an alternative to GEAR. In the face of the policy’s weaknesses, their best offer remains more of the same, and a growing intolerance of criticism. For capital, its "triumph" lies in the collapse of socialism and the apparent omnipotence of globalisation and its capacity to discipline labour on a variety of fronts. They remain committed to an even purer version of GEAR and to a dogmatic adherence to labour market flexibility that would require a reversal of many of the institutional and labour market advances noted in Section 2. Finally, labour is pursuing many of these compromises in practice, but its rhetoric and official policies block its capacity to make wage and labour market concessions in a strategic fashion that would yield positive outcomes to itself, the unemployed, and to capital and the state.(7) It is, in other words, conceding the flexibility business seeks without gaining much in return.

 

For the moment none of the actors are oriented towards a compromise. What would the conditions be for these orientations to change? To understand these conditions we return to the political "miracle" and the forces that shaped the concessions that enabled it to occur. Firstly, the parties have to enter a situation of stalemate where neither party is able to achieve its objectives. Secondly, the stalemate has to lead to a situation where the costs of not compromising begin to outweigh the perceived gains to be realised by standing fast (such as increasing levels of social disorder). Thirdly, the parties must have access to - or be in a position to create - institutional arrangements that allow for bargained agreements to be reached. Fourthly, it is necessary for there to be organisations that can mobilise and restrain followers according to the organisation’s strategic and tactical vision. Fifth, it is imperative that individuals are willing to risk making strategic choices that may break with their organisation’s prior commitments. Sixth, the international context must be conducive to the settlement - or at a minimum, does not serve to affirm the parties’ unwillingness to compromise.

 

On each of these points conditions in South Africa were favourable to a political settlement that began in the mid-1980s and culminated in the 1994 election. On a number of these points conditions are becoming favourable to a class compromise, but not on all. The first condition has been met: South Africa has reached a stalemate where government’s and business’ insistence on staying the course is being met with increasing levels of resistance. The third condition, as we argue in Part 2, has been met and is one of the most important legacies of South Africa’s transition to democracy. Surprisingly, the sixth condition is beginning to be realised. A growing number of influential neoliberal economists and policymakers are questioning the efficacy of their economic and social policies. Most notably, World Bank chief economist and vice-president Joseph Stiglitz has "called for an end to >misguided’ policies imposed from Washington." (Hanlon, 1998) As Galbraith remarked recently, when asked whether he thought there would be a Keynesian response in the United States,

 

Inevitable. It’s not because people are starting to read the General Theory again; it’s because there is no ready alternative. Low interest rates and government support of employment - there isn’t anything else. (Laurance and Keegan, 1998)

 

The return to certain Keynesian solutions is increasingly being advocated at both the national and international levels to develop some regulation over the perverse forms of financial instability generated by globalisation. The deepening crisis in East Asia could well fuel these developments, making a compromise in South Africa a more sustainable proposition.

 

But significantly, the other critical conditions do not yet exist. The parties have not yet been disciplined by the threat of disorder such that they perceive a sub-optimal solution as preferable to class stalemate. Furthermore, it is not yet clear whether organisations - including those of business and labour, as well as the state - would be able to bring their constituencies along on a compromise or that there are leaders willing to make bold departures and tough strategic choices, such as those that made the political settlement possible.

 

 

CONCLUSION

 

In this paper we have identified the reemergence of the possibility of a class compromise, but on terms different from those of the historic postwar compromises struck in both the north and the south after the second world war. This compromise is an attempt to resolve the tensions between economic liberalisation and the consolidation of democracy in developing countries such that the costs of liberalisation are more equitably distributed between the social classes.

 

We have taken South Africa as our case study and have shown how during the struggle for democracy institutions emerged that allowed for agreements to be reached between collective actors. These allow for bargaining over the terms of South Africa’s re-entry into the world economy, what we have called bargained liberalisation. As a consequence, these institutions provide the possibility for reconciling conflicting class interests: for reaching a class compromise. We have furthermore identified the terms of a compromise that could yield growth, equity and redistribution in a context of a labour surplus semi-peripheral country.

 

However, it is insufficient to identify the necessary conditions and terms of the compromise as well as the institutional means through which it could be struck. Drawing on the experience of the successful political compromise that enabled South Africa’s political miracle, we argue that a number of conditions sufficient for such a compromise have emerged. But this is not to say that a class compromise will ensue. South Africa’s political compromise was a rare achievement, and whether it can be repeated - in arguably the more difficult terrain of the economy - remains to be seen. The alternatives - continued stalemate, increased disorder, and a "descent into decentralised collective violence" - are also likely. But paradoxically, these also provide the strongest incentives for South Africa to achieve what most people believe - as they did in the 1980s - an impossible task.

NOTES

   1. Haggard (1990) seems to acknowledge that social democratic forms of representation may develop in the NICs and that these could bring about a more humane growth path.  Similarly, O’Donnell and Schmitter identify the logical possibility that democratic deepening may result in “socialization”: a combination of social democracy where citizens may help decide the actions institutions take, and economic democracy, providing “equal benefits to the population.”  (1986:71) However none of these authors has developed these possibilities further.
 2. In an earlier study, Przeworski gives three reasons why concertation is not feasible in less developed countries: unions represent only a small proportion of workers; they are not strong and centralised enough; and employers are hostile to them while government is ambivalent. (Przeworski, 1991:186).
 3. We have developed this view in two other papers, Adler and Webster (1995) and Adler and Webster (1997).
 4. The loose association of labour federations participating in NEDLAC, consisting of COSATU, the National Council of Trade Unions, and the Federation of Unions of South Africa.
 5. Although government debt as a ratio of GDP was increasing rapidly in the last years of the National Party government, there was never any suggestion that the government was unable to service the debt.  Furthermore, the prominence of the debt was to a large degree a product of  the policies of both the NP and ANC governments.  Most debt is owed to domestic creditors, such that servicing is exacerbated by the high interest rate regime pursued by the Reserve Bank and endorsed by government.  In addition, much of the debt is created by the government pension funds.  Since 1991 - in a concession to white civil servants fearful that their positions would be threatened by an ANC government - the NP agreed that these would operate on a fully-funded basis.  The concession forced the government to borrow to cover its obligations, and thereby increased the public debt burden. (Naidoo, 1998)  It is within the power of government to ease these conditions dramatically and rapidly by moderate changes in monetary and fiscal policy.
 6. The Lund Committee for Child and Family Support - set up by the Department of Welfare - recommended that the government restructure the existing child welfare grant.  Where 300,000 white, coloured and Indian mothers had received R700 per month, the committee advocated a universalistic system open to all mothers (including previously excluded African women), thereby expanding the number of beneficiaries to 3,000,000 but reducing the monthly grant to R100. (Lund, 1998:16) Baskin has proposed a monthly grant to all South Africans - a citizenship grant providing a minimum income - as one way of meeting the demands for extending social welfare. (Baskin, 1997)
 7. According to Baskin, a dual or fragmented labour market already exists in many sectors, such as the building and clothing industries, where “people doing similar jobs might earn as little as 20% against those covered by bargaining council agreements or those living in urban areas.” (Business Day, 1998a)
 
 

 

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