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«ANSA Alternatives to Neo-liberalism in Southern Africa The search for Sustainable human development in Southern Africa Editors: Godfrey Kanyenze, ...»

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The municipality of Gweru selected Saur as a private company to take over the water operation. Negotiations to develop a contract included the discussion of a number of issues including the level of investment, the regulatory framework and the level of the tariff, and were said to be going smoothly until two major problems arose: first, the 50% devaluation of the Zimbabwe dollar in the crisis of 1999–

2000. Secondly, the municipality's "commitment to gradually increase tariffs and their rejection of the 100% increase proposed by Saur (UK)". Negotiations remain suspended.

Source: 2005 World Bank Annual Report

3.2 State as assuror of services But this focus on the public sector as an arena for capitalist profit making does not mean that the responsibility of the capitalist state within the sphere of reproduction has been completely abrogated. The stakes for capital are simply too high. The very existence of capitalism requires that it have abundant and appropriate labour power to exploit, that it has infrastructure on which to transport good and services, etc. While the new globalised state tries to lever spaces in public services for capital accumulation, it still has to have public services as part of the sphere of reproduction for capitalism to have the wherewithal to exist in the first place. Under globalisation therefore, while the state opens spaces for capitalists to invest in public services, it also tries to act as an "assuror" of services. In other words, it wants individual capitalist enterprises to be "providers" and will make it possible for this to happen while at the same time setting The following graph gives an idea of the number of privatisations of public enterprises in SSA since the 1980s.

Graph 1. Privatisation in Sub-Saharan Africa, 1988-2003

–  –  –

Source. 2005 World Bank Annual Report up structures to ensure that there are some standards of delivery even though it is no longer involved in delivery. This is particularly so in the developed countries. It may be less so in many parts of Africa where imperial plunder has lead to the collapse of some states, but it is certainly true in cases such as South Africa and Namibia where the degree of development of local public structures is relatively advanced.

The impact of neo-liberalism has meant that the state envisages new methods of using market techniques to ensure public service delivery.

Sometimes this involves keeping the utilities state-owned instead of privatised, but restructuring public utilities so that they act like private businesses.

We refer to these initiatives as the corporatisation or commercialisation of public services.

In this model, departments within a public utility operate as "strategic business units" or "cost centres" where each must show a profit on the books and are barred from cross-subsidising other departments. Certain departments or activities are classified as "non-core" and are either closed down or outsourced to private companies. Financial managers are given decision-making powers over operational managers whose work is to "balance the budget" and not be concerned so much with service delivery.

Citizens are seen as "customers" or "clients" who must pay for the services received or else be cut off or denied those services. Citizens are forced to pay what accountants call the "real" cost of services based on strict commercial criteria and prices and the role of local public authorities is to ensure "cost recovery".

Cost recovery refers to the practice of charging consumers for the use of services such as water and electricity (Macdonald and Pape 2002). In direct contrast to the long-standing practice of subsidising these services, where the state would absorb some or all of the costs of provision, service users around the world are increasingly expected to pay for the full, or nearly full, cost of service delivery themselves. For public service providers, this may or may not include a surplus above and beyond the costs of production, while for private providers it necessarily includes a surplus (i.e. profit). In either case, the objective is to recoup the costs of production.

The single most important reason given for cost recovery is the need to "balance the books". Cost recovery, as the World Bank is wont to say, is "a matter of good fiscal practice" allowing governments to reduce tax burdens and thereby attract and retain human and financial capital. Cost recovery in lower-income areas, it is argued, reduces the need for crosssubsidisation from industry and higher-income households, making a country or a municipality a financially more attractive place to live.

These cost recovery pressures often emanate from national governments but are implemented at lower tiers of government as well, as regional and municipal authorities compete with each other for investment and deal with the downloading of responsibilities and cutbacks in intergovernmental transfers.

Much of the corporatisation of public utilities is accompanied by a new set of management methods which some have called New Public Sector Management (NPSM) (Barchiesi 2001).

Public service delivery and the NPSM are referred to in international literature as the rise of the "contracting state" or "market state". The "contracting state" concept refers to the separation between the local functions of the service authority and those of the service provision, with the latter being delegated to entities operating on private business principles to establish, operate and develop infrastructures.





The organisational units of public service delivery and their products are ring-fenced and reconstituted as autonomous profit centres, which increases the scope for managerial decisionmaking and decreases the possibility of cross-subsidisation from other levels or structures of government.

Notions of "networks of business units and cost centres", with subcontractors and performance contracts, have come to be accepted by municipal managers in Africa as international best practice and are applied despite the availability of critical studies into these matters in the late 1990s. It has been ignored that African countries are dramatically different from developed countries such as Britain and the USA, where many of the perspectives on managerial systems were developed and where concerns with adopting new management methods were about restructuring public utilities which had a long history of service delivery and the expansion of services to new constituencies was not an issue.

4. Public services and changes to the state under globalisation

The increased privatisation of public utilities and the corporatisation of public services have been accompanied by major changes in many of the institutional forms of the capitalist state itself. These changes to the capitalist state have sometimes, mistakenly, been characterised as "doing away with the state" or "increasing the role of the market in relation to the state". Neo-liberal apologists themselves speak of their being in favour of "free markets" and are against governments "interfering in the economy." This kind of error leads to a zero-sum approach, which looks at the different policies of countries and attaches an evaluation on the basis of whether there is more evidence of the state "withdrawing" (thus supposedly more neo-liberal) or whether the state is "stepping back in" (thus more developmental etc.). Such arguments miss the point about how the state is acting in new ways and being restructured as a result of a new set of social relations that define neo-liberalism and globalisation.

Some analysts use the term the "market state" to describe this new form of state.

4.1 Market state is a "hollowed out" state What we have witnessed over the last thirty years is a profound change in the different functions of the capitalist states, from the Keynesian welfare state of the post-second world war period in Europe and North America and their attempts at welfare states and/or developmental states in the Third World created by newly-independent countries in Africa and elsewhere after decolonisation (which were often defeated by the Cold War machinations of Empire), to the neo-liberal states of globalisation today.

Whereas the repressive function of the capitalist states still continues as the "rule of law" as far as ensuring that law and order is maintained and that the rights of property and exploitation are sacrosanct, the economic functions of the state have changed quite radically under neo-liberalism and, with these changes, there have also been profound ideological changes such as citizens becoming "customers", the me-first spirit, the need to be competitive, the building of entrepreneurship and the supremacy of the private sector.

4.1.1 Restructuring of the state In a very significant way the state has been "hollowed out" (Jessop

1998) in the sense that certain functions have been transferred "upwards" to international institutions (e.g. the UN, the World Bank, the IMF and the WTO) while others have been devolved "downwards" to the local state that must then compete with other local authorities to attract revenue and private investors. The role of the state changes from a provider of services to an assuror of services.

4.2 Local state to function independently from national government Like most neo-liberal prescriptions, this was intended to further the capitalist attack on the national welfare state. This state embodied the concessions, protections and reforms that, for instance, the European working class won through their revolutionary uprisings against capitalist society in the first half of the 20th century. Neo-liberalism claimed that too much of the national fiscus was spent on the welfare of the working class and poor people. For neo-liberals it became an article of faith to find ways of directing public resources away from welfare towards profits.

Therefore 'autonomy' and 'independence' in this context meant local governments had far less claim on the resources of national governments at a time when they were saddled with increased responsibilities.

Another important reason for the local state to be more independent is to do with the national budgets of countries. Under globalisation all countries are judged by potential speculators on the basis of how much money they can make by buying shares in a country's stock market. Two important sources of profit for these money makers to invest in are government bonds and currencies. Governments that have big budget deficits are regarded as a risk for getting safe returns on bonds or currencies. So all states under globalisation try to ensure that they have very low budget deficits. South Africa, for instance, is very proud that its budget deficit is under 3%.

How do many capitalist states achieve such low national budget deficits?

By shifting the responsibility for many payments onto local governments.

These accounts therefore do not appear on the books of the national state and so the budget deficit is low. By shifting the financial burden for delivery to local governments, national governments' budgets are kept in order thus satisfying the finance markets, which look for small budget deficits at the national level.

4.3 Local states compete to attract capitalist investment This devolution of responsibility forces local governments to compete against one another as independent bodies to make themselves "world class" to raise money and investment.

Local states must ensure that their municipalities are more investor friendly, that they provide more opportunities for business and that they remove restrictions on capitalists' ability to make profits. It has therefore been notable under globalisation how local authorities have privatised services and granted concessions for key public services, such as water, to Transnational Companies. Examples are the British Biwater and the French TNC Suez Lyonnaise that are making huge profits from getting multi-year concessions from local authorities to delivery water.

Should one local state be a bit too finicky about the conditions for public service that it wants to impose on a TNC then another local state, even in the same country, will be only too wiling to concede as its competitor.

4.4 Local state and service delivery Under globalisation, local states stop being providers of public services in the sense that they both own and deliver the services. Instead local governments hand over services to private companies and set themselves up as "service authorities" that only supervise delivery of services as opposed to providing the services themselves. This means that local states can sub-contract or outsource services such as water, waste collection and electricity.

This so-called "facilitation of service delivery" has meant a massive attack on wages and working conditions through privatisation and outsourcing. It also meant people have to pay for services that were previously free or at least pay more for services that were previously much cheaper. 'Attracting investment' meant driving down wages, making it easier for employers to dismiss workers, helping capitalist firms to make profits out of municipal services and spending money on infrastructure that supported businesses rather than on the welfare of the people. The result has been a painful loss of many services to poor people and an increase in the cost of living for all.

By withdrawing from the provision of services, the state fulfils a number of responsibilities under neo-liberalism. It opens spaces for privatisation, it reduces the budget deficit and promotes the private sector ideologically as the best practice for services. In important ways this also changes the relationship between the people and the government as the state now charges for all services, people do not relate to governments as citizens but as "clients".

4.5 Prescriptions imposed on Africa Since the mid-1970s African countries found themselves vulnerable as a result of their past insertion into the capitalist world economy since the days of colonialism and then, after independence and the period wherein they tried to lessen their dependence in the 1960s through programmes of import substitution, self-reliance, industrialisation and diversification, they fell into the debt crisis of the 1970s. Since then the imperialist world has used the debt crises to impose conditionalities on African countries thereby perpetuating the external determination of their path of development.



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