«ANSA Alternatives to Neo-liberalism in Southern Africa The search for Sustainable human development in Southern Africa Editors: Godfrey Kanyenze, ...»
This theory, first developed by Viner and Meade, postulates that under certain circumstances the advantages to be gained from the increased trade resulting from the removal of intra-regional customs barriers are greater than the losses incurred from trade reduction in the event of discrimination against external suppliers (Zehender 1983).
The theory was further developed by Balassa who identified the five stages of market-integration arguing that the integration process is supposed to be linear from a free trade area to a political union and the market forces unleashed at one level would have a spill-over effect to the next level, so that its implementation becomes an economic necessity. At the lower level there is a "free trade area" in which tariffs and quotas are eliminated among member states. A "customs union" goes a stage further. In addition, it sees the elimination of barriers against the free movement of labour and capital. One step further is an "economic union or community". Beyond the features of a common market, an economic union harmonises economic policies among its members and sometimes adopts a common currency. The highest level of integration is political union such as in, for example, the United States of America (Balassa 1961:3).
However, the applicability of this theoretical model to regional integration in the Third World has been extensively questioned especially in view of the fact that it assumes the existence of fairly developed economies. In the initial stages, emphasis is placed on protectionism or trade diversion in the hope that with time this would lead to freer trade with the rest of the world as production efficiency is realised through exploiting the comparative advantage of participating states. Lee points out that the traditional integration theory assumes that the benefits are "static" and "dynamic" – the former being welfare gains arising from a marginal relocation of production and consumption patterns as a result of freeing trade and the latter being effects of integration on the rate of economic growth (Lee 1984:7). Robson further explains: "In its simplest form, the theory makes the same basic assumptions as the static theory of
comparative advantage and deals with a situation in which:
• Inputs of factors of production, the state of technical knowledge, tastes and forms of economic organisation are all treated as constant or autonomous variables • Trade within each participating country is assumed to be perfectly competitive • Problems of adjustment in connection with the formation of a customs union are disregarded.
The assumptions are a far cry from reality. They do not apply in the advanced market economies, on the basis of which the theory was developed, and they apply even less in the underdeveloped economies of Africa (Robson 1968:7).
Perhaps what makes this integration model less relevant to Africa is that "the African economies are characterised to a greater extent than other developing economies by a small degree of division of labour, primary production predominates and their foreign trade is directed towards the industrial countries" (Lee 1984:8). In this situation, tariff reduction or elimination does not lead to increased regional trade, integration or even the efficient utilisation of the region's resources.
The other problem associated with the customs union theory is that the benefits of co-operation are unevenly distributed with the richer or more advanced members benefiting more than the poorer ones. These polarising effects of market integration, mostly manifested in trade imbalances, have led to the disintegration of many attempts at regional integration, and examples abound.
If political differences among the leaders of participating states were added to these limitations, the market integration theory is turned upside down because, as we have already seen, its ultimate goal is to achieve political union. Thus given the weak political and socio-economic structures of most developing countries, the efficacy of the market integration approach is severely curtailed.
2.2 Development integration theory Officially SADC documents indicate that SADC co-operation is based on the development integration theory. Ostergaard has observed that, "whether or not it is fair to claim that it represents a separate theory, the development integration model encompasses various ways in which economic integration may be implemented more in tune with the peculiarities obtaining in the Third World viz: "different economic size and political systems of member countries and different levels of industrialization" (Ostergaard 1993:33).
The main elements of the development integration theory are:
• High levels of political cooperation • Emphasis on basic infrastructure, investment and production systems • Capacity building • Conscious intervention to avoid the polarising effects of integration through the adoption of corrective measures • Involvement of the people/various interest groups in designing the co-operation protocols (Ostergaard 1993:35).
Ostergaard has further observed, "in essence the development integration model does not focus on efficiency maximization of existing capacity.
Instead, since most Third World countries have little productive capacity to start with, it focuses on how to stimulate the creation of that productive capacity in the first place thereby linking the theory of integration with the theory of development" (Ostergaard 1993:35).
The theory also combines elements of neo-functionalism and market integration in its treatment of sectoral co-operation and trade liberalisation respectively. The difference is that whereas neofunctionalism assumes the existence of functioning interest groups, development integration seeks to create them; and whereas market integration seeks to distribute the benefits of co-operation through trickledown effects, development integration emphasises the importance of adopting corrective measures to ensure equitable benefits to participating sectors. "The central element of the development integration approach is the coordinated development and integration of basic infrastructure, investment and production systems, to yield overall enhancement of the material production, service and exchange sectors of the regional economy” (Ostergaard 1993:36).
Perhaps the biggest innovation in the development integration approach is the way in which it places "the people", the region's citizens, in the forefront of the integration process. Development integration therefore calls for a gradual, people centred co-operation-cum-integration, whose achievement is based on the determination and articulation of felt needs.
It also calls for variable geometry whereby only those countries that are prepared to undertake more advanced forms of integration can go ahead while leaving the door open to other states to join in as and when they are ready to do so.
Ordel has observed that while "political union is the final stage in the linear evolution of market integration... in development integration political cooperation at a high level is a prerequisite for implementation" (Ordel 1993:34). In the case of SADC, such political co-operation was based on a common struggle against colonialism, apartheid control and destabilisation – as personified by the Frontline states. With the demise of apartheid, new political values of democracy, good governance, regional peace and security were to be the political unifying factors.
As already pointed out, one of the main characteristics of the development integration model is "the conscious intervention by the regional partners to promote cooperation and interdependence" (Odel 1993:34). Such actions are mostly aimed at avoiding polarised development. Ostergaard observes, "as this involves redistributive measures of a compensatory or corrective nature, the development integration model is structurally more complex than the market integration model … and therefore requires a much higher level of commitment within and among member states" (Ostergaard 1993:34).
2.3 People-driven integration: beyond development integration While development integration is people-centred, it is not necessarily people-driven, as it still very much relies on political co-operation at a high level. In this regard, a change of political leadership either due to election or natural causes might affect not only the vision but also the values for regional integration.
In the case of Southern Africa, the departure from the political scheme of the original leaders of the Frontline States (i.e. founding presidents) has in some countries seen the emergence of leaders whose concept of democracy and good governance has led to heightened tension as opposed to co-operation among the leadership. This is largely because the region has not yet developed a common standard for concepts such as democracy and good governance and as a result some new political entrants, using trade unions as political launching pads, have uncritically embraced Western views of these concepts and challenged (and in some cases are alleged to have reversed) the gains of the independence struggle.
This has grossly undermined mutual respect among the leaders and severely blurred the mutuality of vision, interest and direction. With the institutionalisation of multi-party democracy within the member states, the liberation parties in Southern Africa have responded to the challenge posed by labour-based opposition parties labelling them pro-imperialist.
The Western countries have never hidden their discomfort with the liberation movements and their attempts to weaken the nationalist thrust of these movements are well documented. The relationship between these Western governments and the opposition parties at a time when development assistance is being redirected from governments to nonstate actors has also deepened the suspicions. Not only has the state's role of mobilising and allocating resources been weakened, but the state has also been accused of poor delivery due to alleged corruption and governance deficits.
As already pointed out, in terms of natural resource endowments, Southern Africa is very rich, yet at the same time its population is poor and disease-infested. Compared to other regions in Africa, Southern Africa boasts of good infrastructure, rising literacy rates and fairly developed agricultural, mining, energy, services and manufacturing sectors.
However, Southern African economies are dualistic and characterised by, on the one hand, a foreign dominated formal sector and, on the other, a marginalised, underdeveloped informal and mostly peasant indigenous sector. As Mhone has observed, "the formal sector emerged as a exogenous implant whose modus operandi was generally linked to external factors, thereby obviating the need for an internal accumulation and transformation process to emerge that would have captured the majority of the labour force into the capitalist process of accumulation" (Mahone 1997).
This had the effect of impoverishing and marginalising the indigenous population, thereby leading to the creation of weak class formations. It also led to the creation of weak internal markets with low effective demand, which constrained the growth of vibrant intra-country trade. The same scenario is true at the regional and continental levels and, as a result, inter-regional as well as (intra) continental trade is low. At the same time the dominance of an exogenously planted formal sector has meant that African countries trade more with Europe than among themselves. For instance, SADC's main trade partners for exports are EU 42%, USA 16%, Japan 7%, China 5%, Other 30%. SADC's main trade partners for imports are EU 39%, USA9%, RSA 8%, Other 44% (source IMF Data in COMEXT).
A people-driven and people-centred trade policy should therefore seek to influence and change the entire value chain from production to trade, with a view to ensuring the popular participation and empowerment of the country's/region's citizens. This is a big challenge given that the independent governments of Southern Africa adopted neo-liberal economic and trade policies that continued the view/assumption that the inherited formal sector was the engine of growth and development.
Coupled with the IMF prescribed and WTO inscribed pro-export led growth economic policies and over-reliance on aid and foreign direct investments, these governments are fast losing policy space to pursue people-centred policies. Most of them are also prisoners to foreign debt.
By the mid 1980s, most SADC countries had embarked on the IMF/World
Bank inspired SAPs. The main elements of these SAPs inter-alia included:
• Privatisation of state enterprises
• Trade liberalisation
• Economic deregulation
• Exchange rate management (devaluation)
• Reduction in social and fiscal spending e.g. on health, education and subsidies
• Flexibility in wage and price setting
• Liberal investment laws and regulations
• Strict property laws, etc.
In the light of stiff competition from more efficient suppliers as well as subsidised exports from developed countries, the SAPs led to rapid deindustrialisation. FDI flows, which were to crown these reforms, did not materialise and access to the promised funding was subject to a battery of conditionalities.
This led to growing unemployment and the weakening of organised labour. In turn, it led to social conflict as labour turned against government in response to the impact of SAPs. Riding on the wave of social discontent largely by the urban masses, labour movements transformed into political parties. Ironically, the same international forces that presided over the weakening of the labour unions were quick to sponsor the new labour parties and groom them to take over political power so that they would administer the same prescription and a harsher dosage of the same medicine i.e. trade liberalisation, financial deregulation, strict property laws etc. Sadly, while SAPs could be reversed, commitments at the WTO are legally binding.