The developmental state is not merely about intervention by the state – all states intervene – but about the scope and quality of any particular intervention in the economy, Deputy Minister of Finance Dr David Masondo said on Sunday.

“A developmental state is not a welfare state. The task of a developmental state is to assist under-developed countries to catch up on industrialisation in terms of manufacturing and the composition of its gross domestic product (GDP),” he said as part of the Umrabulo Dialogue series of the OR Tambo School of Leadership.

“The aim is for a country to be relatively self sufficient in terms of consumer goods and GDP composition and not to be dominated by primary production like mining and agriculture.”

He said it is not about a debate on whether capitalism is bad or not, but about saying a government can decide to assist business with subsidies, for example, but then at the same time providing directions on where it would want the private sector to invest in order to make use of such protection mechanisms.

“The state is, therefore, not just intervening in general. You intervene and say ‘business, I want to have a say where and how you invest and how much you invest’. If the state and business agree, then the state will provide support in terms of protection and state support,” he said.

“On the other hand, if this process is not carefully monitored, it can lead to a process which is easily raided by rent seeking agencies. Then the state ends up protecting the inefficiencies of business.”

He pointed out that the state must ensure that it has coherent policies in this regard and ensure it has politicians who are not “captured”, while at the same time having the capacity to “discipline” business if need be in the process of achieving the goals set out in a policy.

“Under capitalism, business has an inherent power over the state. That makes investor confidence very important. Business must be confident that what the state is doing will enable them to have returns,” said Masondo.

“At the same time, the state can still act developmentally, but it cannot act with absolute autonomy and do as it pleases.”

It is also important, in his view, that in a developmental state people can ask questions and that the working class has the strength to make certain demands. 

“So, both business and labour must be interested enough in the developmental state,” he said before his Zoom presentation was hacked and had to be terminated. 

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