Of Licks and Ladders: An Analysis of Industrial Policy of Developed and Developing Countries (Part 4 of 4)

 The 1993 IMF Loan to South Africa

By: Siyanda Pali

"Socialism", states Karl Polanyi, "is the tendency inherent in an industrial civilisation to transcend the self-regulating market by consciously subordinating it to a democratic society. The market has to be embedded in society and to be made subject to the non-economic demands of justice, compassion and freedom" (Polanyi 1944). This definition, one can argue, captures the position of the ANC from a policy perspective (Ready to Govern 1992) during South Africa's transition period. However, there were other actors, with pecuniary interests involved. 

(Source: Mining-outlook.com, Konkola Copper Mines, Zambia)

One of these interest groups was big business, or the Mineral Energy Complex. There were a range of issues that they perceived as hurdles to South Africa's transition. The first of these, was how to convince the ANC to forsake its socialist posture. Secondly, was how to prevent the ANC from becoming a government inclined towards significant redistribution. Thirdly, was how to ensure that capitalist corporations would remain in a dominant position with respect to the new political authority. The fourth item of concern was how to convince the National Party government about the inevitability of a negotiated settlement with the ANC. Lastly, they grappled with how to interact with a black, militant trade union movement. The Congress of South African Trade Unions (COSATU) is the largest trade union federation in South Africa, formed in 1985 (Terreblanche 2012).

In 1993, South Africa was governed by the Transitional Executive Committee, which consisted of 8 members of the outgoing National Party government, as well as 8 members of the ANC. It was decided during this time to approach the IMF for a loan, to assist South Africa in its transition. The IMF agreed to provide the financing if all 16 members of the TEC signed the document, which they did. Professor Terreblanche posits that the section of the IMF loan agreement, Statement on Economic Policy, was GEAR in embryo form (SACSIS 2013). Growth Employment And Redistribution (GEAR) was a market-orientated policy document adopted by the ANC in 1996, focused on fiscal deficit reduction, monetary stability, in order to curb surges in inflation, removal of exchange controls to promote domestic as well as foreign investment, providing tax incentives to stimulate investment, as well as trade liberalisation ie the gradual decrease of tariffs to facilitate 'industrial restructuring' (National Treasury 1996). 

As per Section 5.2 of the GEAR policy document by National Treasury, it states that," The mid-1996 real exchange rate is some 12 percent below the January value, which should permit a significant acceleration in terms of the tariff reductions to which South Africa is committed in terms of World Trade Organisation agreements." This signifies a dramatic shift from more socialist policies as espoused by the ANC in circa 1990, to outright neoliberalism in 1996, influenced by international financial institutions, inter alia. The adoption of this policy has had some significant outcomes for South Africa.

Neoliberalism, Stunted Prospects and Policy-Induced Premature Deindustrialisation

Deindustrialisation, as per the literature, is described as a decline in the manufacturing share of a country's total employment (Palma 2005, Tregenna 2015, Seager 1997, Rowthorne and Coutts 2004, Rowthorne and Ramaswamy 1997). It has been argued that deindustrialisation has the propensity to create negative, long-term effects for a country's economy as far as growth and employment are concerned (Palma 2005). Organisation for Economic Co-operation and Development (OECD) countries started to deindusrialise in the 1960s, while high-income East Asian developing countries experienced this phase in the late 1980s. At approximately the same time, some countries in Latin America and South Africa equally began to deindustrialise after radical economic reforms, despite having notably lower income per capita figures compared to other countries which began to deindustrialise earlier. This latter mentioned process is defined as Premature deindustrialisation (Palma 2014).

(Rodrik 2016)

With baseline results based on data from the Groningen Growth and Development Centre (GGDC, Timmer, de Vries, and de Vries, 2014) the above graph depicts the years for peak manufacturing employment share figures for various countries. From the above, it is evident that developed countries such as Britain and Sweden peaked in 1961, Denmark peaking in 1962 and Japan peaking in 1969. France peaked in 1974, while Spain peaked in 1975. Interestingly enough, one of the Asian Tigers, Korea, peaked in 1989, while Ghana, Peru, Mexico, South Africa, Nigeria and Zambia peaked in 1971, 1978, 1980, 1981, 1982 and 1985 respectively. 

Approximate GDP per Capita (1990 PPP US $ Figures) at Which Manufacturing Employment Peaks (logs)

(Data sourced from Rodrik 2016)

Using the income levels (natural log of GDP per capita, 1990 PPP USD) shown in the Peak Manufacturing Employment Share and Income Levels Graph and Table, the implied GDP per capita per country is calculated as:

$$\text{GDP per capita} = e^{(\text{Income Level})}$$

Thus, as per the data above, it is demonstrated that developing countries in Africa, Asia and Latin America have much lower GDP per capita income levels at their Peak Manufacturing Employment Share year, ranging from approximately $450 US for Ghana in 1978 using 1990 PPP USD figures, to approximately $5 400 US for South Africa at its peak in 1981. South Korea has an approximate income level of $8 000 US, peaking in 1989, a figure which is higher than most developing countries in Africa, Latin America and Asia. It is also evinced from the above data that developed countries peaked at much higher income levels as far as their Manufacturing Employment Share levels are concerned, ranging from approximately $13 360 US for Germany to approximately $19 931 US for Denmark, denoting incomes which are multiples greater than developing countries, depending upon which developing country is being referred to, relative to a specific developed country comparison, clearly exhibiting premature deindustrialisation as far as developing countries are concerned. 

 (Data Sourced from World Bank)

The above data from the World Bank clearly illustrates that South Korea, nicknamed one of the Asian Tigers, did not adopt neoliberal economic policies during the early years of its development and industrialisation period. It's Manufacturing Value Added as a percentage of GDP increased from 17% in 1970 to 27% in 2025. Conversely, South Africa adopted neoliberal economic policies, with the above data clearly indicating that South Africa's Manufacturing Value Added as a percentage of GDP has been in steady decline, falling from 24% in 1990, to 12% in 2025, a clear, striking tale of two countries. 

South Africa: Manufacturing Employment Share of Total Employment

(Source: Fortunato 2022, The Economic Transformation Database, The Conference Board Data)

South Africa's Manufacturing share of total employment peaked in 1981, with just over 1,4 million or 17% of workers in the sector. This figure has since dwindled to just over 1,1 million workers or 6.5% of the total workforce in 2025. The above datapoints all point to the fact that Africa's largest and most sophisticated economy is experiencing a sustained period of clear deindustrialisation. It is important to note that although the inverted U-shape is a cause for deindustrialisation generally, in the case of South Africa and other developing countries, this process was accelerated, occurring at much lower levels of income as demonstrated above, creating premature deindustrialisation due to liberalisation which took place in the early 90s in South Africa. With respect to rapid deindustrialisation, Rodrik (2015) notes that developing countries are peculiar in juxtaposition to developed countries, where there is sufficient evidence to suggest that domestic technological advancement was the cause. Rodrick further notes that developing countries may have "imported" deindustrialisation from abroad, given that they are price takers. A large number of Latin American countries undertook sweeping trade liberalisation and economic reforms in the 80s and early 90s, thus converting themselves to being open economies. Numerous countries in Sub-Saharan Africa underwent a similar process at or around the same time (Rodrik 2015).

In practice, the tectonic shift away from import substitution industrialisation in South Africa towards neoliberalism has resulted in profound changes being evident. 

Tariff Regime Change in South Africa 

(Percentage, unless stated otherwise)

(Source: Hviding 2006)

According to Bhorat, Lilenstein, Oosthuizen, and Thornton (2020), a major catalyst for South Africa's period of industrialisation was the spate of import substitution policies implemented by the government between 1925 and 1973, with the aim of encouraging domestic manufacturing and state investment (Sneider 2000). The latter, coupled with the development of a Mineral Energy Complex and state support, together with low-cost energy supply, propelled the development of the manufacturing industry (Black et al, 2016). This era was one in which there was bona fide direct and indirect support for industry by the state, with the Industrial Development Cooperation (IDC) playing a central role in heavy industry expansion (Black et al, 2016). This was also an era of enormous exploitation under the colonial-apartheid regime, especially in the mining industry. Whites earned incomes which exceeded those of Africans at a ratio of 10:1. 

Some state-owned enterprises were set up with the sole objective of catalysing domestic manufacturing and securing cheap imports for the mining industry.  This was the case so much so that, as per Economist Dr. Arthur Joseph Norval in his seminal book, A Quarter of a Century of Industrial Progress in South Africa, by the 1960s, state-run steel producer ISCOR had prices which were significantly lower than some of the world's leading iron and steel producing countries (Norval 1962). This architecture for South Africa's industrialiation was dismantled through the adoption of neoliberal economic policy, removing, by and large, protections for South Africa's Manufacturing and Agricultural industries which, as argued by Prof Sampie Terreblanche, started to take shape after South Africa signed the 1993 IMF loan, later culminating in South Africa joining the WTO and the formulation of the GEAR policy (SACSIS 2013). South Africa's weighted average Manufacturing tariff declined from 30% in 1990 to approximately 7.7% in 2025, according to World Bank data. It is important to note that although South Africa did not undergo a formal IMF SAP, it does seem that the government was influenced by the IMF, as per Prof. Terreblanche, or undertook self-imposed market-oriented policies during its transition period.

The latter (neoliberlism) also led to the privatisation of steel giant ISCOR, the corporatisation of electricity provider ESKOM as well as austerity, which for all intents and purposes, has decreased state capacity in the long run. To paraphrase Terreblanche (2012), "The Americanisation of the SA politico-economic system during the transition of 1994/96 was therefore based on the wrong ideological premises, on the wrong power structures, and put SA on the wrong development path." 

IMF Structural Adjustment Programs (SAPs) in Africa and the Rest of the World

Cleary (1989) submits that the organising principles of Structural Adjustment Programs (SAPs) or Economic Recovery Programs (ERPs) as they were subsequently rebranded, are intertwined with an ideological belief in the superiority of the market over economic planning. Cleary (1989) further propounds that at the heart of these programs is an almost mystical faith in the private sector, which operating under greater degrees of freedom domestically and in external market conditions, will provide the galvanising impetus for a resurgence of economic growth and development. 

In order to execute SAPs, Cleary (1989) highlights that some or all of the following objectives were in place in Sub-Saharan Africa:

1. Reduction in Public Expenditure/ Austerity

2. Increases in domestic saving

3. Reduction in the role of the state economically to the barest minimum, with SOEs profit-driven, less protected and subsidised

4. Liberalisation of the economy, with more specific liberalisation including devaluation of currencies, removal of exchange controls and the abolition of price, import and distribution controls. 

5. The stimulation of exports in order to address shortages in foreign currency

6. Promotion of foreign private investment: Via extensive concessions to private investors

In Nigeria, Bangura (1986) posits that in response to the cumulative effect of SAPs, there was a significantly underutilised capacity in most industries and massive layoffs in both the private and public sectors. Bangura (1986) adds that, "Structural adjustment seeks to further weaken the limited strength of the working class and strengthen that of the bourgeoisie by its insistence on the market mechanism as the primary regulatory force for the allocation of resources. The current IMF-inspired monetarist package is an antidote to the earlier Keynesian structural adjustment strategy that followed the depression of the 1930s. The latter's major emphasis was on state intervention to regulate distortions and inequalities in the market. It was correctly assumed that the market mechanism, on its own, would not be able to create the proper equilibrium relationships to foster stability and growth." Extrapolating on the situation in Nigeria at the time, Bangura (1987) states that "In Niger state, for instance, the three-stage retrenchment resulted in 5 000 public servants losing their jobs". 

As far as the Manufacturing sector was concerned, Bangura states that:

A poll by the Manufacturers Association of Nigeria showed that by 31 July 1983, a total of 101 companies had closed within a period of 12 months for between 7 weeks to 3 months, affecting 20 000 workers. Rationalisation of costs has been more pronounced in industries with high import content such as pharmaceuticals, automobile plants, paper products, flour mills, milk, textiles and construction. Retrenchment in these industries is extremely high. Where work has been done as far as obtaining accurate data is concerned, sectors such as automobile plants, flour mills, pharmaceuticals, poultry and construction indicated cuts of more than 50% of the workforce. In addition to delays in salary payments and freezes to fringe benefits associated with rationalisation of workers, wage and salary cuts were also carried out by the Babangida administration in December 1985 (Bangura 1987). 

In Central African Republic, Professor Yarisse Zoctizoum provided evidence pertaining to the effects of SAPs, noting that: the retrenching of a large number of administrative staff condemns a great deal of people to hunger. This figure also included public sector staff, of which 2 000 were dismissed between 1982-1984. There were no public sector remuneration increases between 1982-1987, except for the army or the police. The minimum wage had not been updated between 1980-1987. Alas, fees for public services had risen astronomically, including massive increases in the cost of imported oil. A large number of SMMEs had vanished, resulting in massive unemployment, without any unemployment benefits or severance packages (Zoctizoum 1987). 

Due to Zambia being heavily dependent upon commodities, specifically copper mining revenue post-independence, the country faced a crisis when copper prices fell sharply in the 1970s. As a result, the government engaged the IMF and underwent a SAP from 1983-1987. As a result of the adoption of the SAP, the value of the Zambian Kwacha fell by a stratospheric 700% between mid-October 1985, when the foreign exchange auction started, to April 1987. Interest rates rose significantly, with borrowing costs rising to between 30% and 33% by mid 1986. In a bid to save costs in the prevailing environment created by the SAP, workforces were culled, with some 18 081 workers in 1981 alone being laid off. In addition, debt service commitments as a percentage of export revenues rose by 400% between 1980-1986, while loans from commercial banks decreased by just under 33% (Cleary 1989). This IMF-backed SAP also led to Zambia cutting subsidies on Maize meal, a staple in the country as a breakfast meal. The food subsidy cut led to a 120% price increase in maize meal, and subsequent food riots in December 1986, in which 15 people died. When President Kenneth Kaunda withdrew from the IMF's SAP, the country experienced suspension of disbursements by various international financial institutions. 

The second IMF SAP engagement with Zambia was post 1990, this time under former President Frederick Chiluba's Movement for Multi-Party Democracy (MMD). His government formed the Zambia Privatization Agency by an act of parliament in 1992. Following this, large-scale privatisation swept through Zambia, with over 200 parastatals being privatised, including manufacturing firms as well as significant copper mining divisions of Zambia Consolidated Copper Mines (Muneku 2002). In the words of Dr Alistair Fraser, '' the mines were the last great resource which the state held, the bank (World Bank) and fund (IMF) were very keen for the mines to be privatised, and so they made it a condition on a series of loans to Zambia, and a series of debt relief initiatives that the mines be privatised". Further explicating on the position of the state during the privatisation of Zambia's copper mines, Economist and former Zambian Finance Minister (1998-1999), Ms Edith Nawakwi, stated that, "We were basically under the instructions of the World Bank and the IMF" (Guldbransen 2012).  A former MMD government official highlighted of the era that, "We implemented structural adjustment probably to the book...the result was severe-somersaulting inflation, slashed public services and ballooning unemployment'' (Gubser 2023). 

The impact of Structural Adjustment Programs was equally evident from a healthcare perspective on the population as a whole. Muntemba (1987) recounts a Zambian National Commission for Development Planning survey, which produced results stating that Zambian households had experienced an average 70% surge in the price of high-protein foods. Muntemba (1987) also found that many households had reduced consumption of such foods, while others had stopped purchasing them altogether. Such alterations in nutrition patterns invariably contributed to a rise in malnutrition, cases of malnutrition-related admissions, and mortality rates in Zambian health centers. The nation's Central Statistical Office reported that admissions increased from 16 055 to 28 620 between 1981-1986. In addition, these admissions were coupled with a rise in the mortality rate, from 14.7% to 19% between 1981-1986. These outcomes should be placed within a context of a dwindling health budget (Cleary 1989). In essence, austerity, which is one of the tenets of SAPs and neoliberal economic policy had not only led to a reduced quality of life for Zambians, but an increase in mortality or death rates of the population itself. 

Clark (1988) provides data indicating a clear decline in Zambia's healthcare budget allocation, falling from 7.8% or $49.4 million US in 1982 to 5.7% or $19.7 million US in 1985. It is no surprise that Zambia's health service was severely short-staffed, with 59% of medical doctor vacancies unfilled in January 1987. Almost three- quarters (73%) of all Zambian health centres had vacancies unfilled. Furthermore, more than half (51%) of all vehicles were not operational (Clark 1988). Rural areas were also severely impacted by an unavailability of drugs, some of the most crucial, which should have been available, but were not, for weeks and months on end. 

(Clarke 1988)

According to Clarke (1988), the above are the different drugs in which there existed critical shortages, the worst-hit areas as well as the average length of time such drugs were out of stock in Zambia in 1986. As can be seen from the above, Chloroquine was out of stock for an average of 4 weeks nationally, while Tetracycline was not available for an average of almost 70% (36 weeks) of a Calander year in the North West Province. To paraphrase a Mufulira unemployed copper miner," In our clinic, there are no drugs anymore. That's what the IMF means to us. But I don't know what these letters stand for (Clarke 1988)." 

In addition to the above, providing further insights about the labour and economic impact of IMF and World Bank mandated privatisation in Zambia, Muneku (2002) posits that by 1996, almost 79 000 jobs had been lost as a direct result of privatisation in Zambia. Furthermore, this also led to a surge in precarious forms of employment due to outsourcing and casualisation.  

In Ghana, Jonah (1987) states that the country's second ERP aimed to redeploy circa 45 000 state and state-affiliated employees over 3 years. The Manpower Utilisation Committee had supposedly come to this inference after conducting a survey in December 1983. Approximately 20% of the labour force were gauged to be underemployed. As a result, 31 700 employees in both the civil service and SOE such as the Cocoa Marketing Board could be redeployed in the first instance. The projected cost of this entire operation stood at Cedi 4.85 billion in 1985, with allocations made for approximately 10 000 workers being redeployed in 1987. As a sum-total, 17 200 employees had been retrenched by the end of 1987. In addition, the Cocoa Marketing Board would have released 46 097 workers by the end of December 1987. Alas, this was only the genesis of a prolonged, drawn-out process. The enormity and extent of such job losses had undoubtably put a tremendous amount of strain on those who were still economically active (Jonah 1987, Cleary 1989). 

The Ghanaian Cedi was also deliberately devalued, from Cedi 2.75 = $1 US in 1983 to about Cedi 246 = $1 US in September 1990 (Massaley 2010). According to Weider (2024), currency devaluation enabled exporters to earn more Cedis for exports such as Cocoa, which was presumed to be extended to producers. Unfortunately, currency devaluation proved to be unsuccessful in numerous respects due to a failure to promote exports to the desired levels. As per Konadu-Agymang (2001), "Due to many other countries implementing similar devaluation tactics, Ghanaian products were already entering an already flooded market full of cheap commodities".

In June 1981, Morocco experienced severe unrest when the Casablanca riots linked to the IMF-mandated repeal of food subsidies erupted. Facing a balance-of-payments crisis compounded by the costs of the Western Sahara war, the Moroccan government came under IMF pressure to lift subsidies on basic consumer goods, announcing sharp price increases on 28 May 1981 (Multinational Monitor, 1981). By August 1982, the cumulative effect of this and subsequent rounds of subsidy withdrawal had pushed the price of sugar up by 14 percent, cooking oil by 18 percent, bread up by 30 percent, butter by nearly 50 percent, and tea up by 77 percent, (OpenDemocracy, 2025). Rioting broke out in Casablanca on 20 June 1981 and was met with a severe security response. Fatality figures remain genuinely contested across sources, ranging from the Moroccan government's official count of 66 deaths, to 114 confirmed deaths established by the country's later Equity and Reconciliation Commission (Instance Équité et Réconciliation) investigation into the period, to the opposition Socialist Union of Popular Forces' estimate of 637 deaths and international press reports of up to 1,000 (IER 2006, MERIP 2004)

Zimbabwe's January 1998 food riots followed the government's decision to allow a cumulative 42 percent increase in the retail price of maize meal and, later that year, a 67 percent increase in fuel prices, both carried out under the IMF and World Bank-backed Economic Structural Adjustment Programme (ESAP) (United States Department of State, 1998; IRIN, n.d. AMANI Trust). The Zimbabwe National Army was deployed alongside police between 19 and 23 January, with armoured vehicles and helicopters authorised to use lethal force. Government and human rights sources place the death toll at between eight and nine persons, with arrests variously reported between roughly 800 and 2,000 (IRIN, n.d.; United States Department of State, 1998).

Egypt's January 1977 "Bread Intifada" remains the paradigmatic Arab-region case IMF mandated conditionality. Under IMF conditionality attached to a $9 billion debt burden equivalent to 42 percent of GDP, President Anwar Sadat's government announced price increases of between 25 and 50 percent on bread, sugar, rice, and cooking gas on 17 January 1977 (Ketchley, Eibl, & Gunning, 2024). Rioting erupted within hours and spread from Alexandria to Cairo and other major cities over two days, prompting a curfew and military deployment with live ammunition and tear gas. Contemporary Egyptian press accounts, cited in the most recent peer-reviewed treatment of the episode, documented 77 deaths, more than 500 injuries, and 1,270 arrests (Ketchley et al., 2024, citing Al-Ahram, 20–22 January 1977).

Jordan's April 1989 riots followed a similarly direct IMF policy trigger. Seeking to reschedule $6.5 billion in foreign debt, the Jordanian government agreed with the IMF to a $250 million credit package conditioned on fiscal consolidation, and on 16 April 1989 announced price increases of between 15 and 50 percent on fuel, alcoholic beverages, cigarettes, and licensing fees, with gasoline prices alone rising by roughly 30 percent overnight (MERIP, 2002). Rioting began the following day in the southern town of Ma'an before spreading to Mazar, Karak, Tafilah, Madaba, and as far north as Salt, with protesters demanding the resignation of Prime Minister Zeid Rifai alongside the rollback of the price increases (Washington Post, 21 & 22 April 1989). Contemporary reporting recorded at least ten deaths within the first three days of unrest, five in Mazar and five in Ma'an, while later retrospective accounts of the full three-week disturbance place the total death toll as high as 32 (Washington Post, 21 April 1989).

Venezuela's February 1989 'Caracazo' remains the most lethal episode in this comparative set of externalities of IMF conditionality in countries. As part of an IMF-backed austerity package negotiated immediately after his inauguration, President Carlos Andrés Pérez authorised a 100 percent increase in gasoline prices on the weekend of 25–26 February 1989, which in turn, triggered an officially mandated 30 percent increase in public transport fares, implemented a day early by bus operators on 27 February (PROVEA, Maya 1989). More broadly, prices for oil, electricity, telecommunications, and water had already risen by 100 percent in the preceding months, contributing to an annual inflation rate of roughly 80 percent for 1989 (Central Bank of Venezuela, Wire and Nino, 2018). Rioting and looting, beginning in Guarenas and spreading rapidly to Caracas, were met with the deployment of the army and police under Plan Ávila; a Venezuelan congressional commission and the Ministry of Defense. Both recorded 277 deaths, while independent and human rights sources place the toll considerably higher, with some estimates reaching several thousand, alongside more than 2,000 additional injuries reported (Guacamaya, 2025). The Inter-American Court of Human Rights subsequently found the military's conduct to constitute serious human rights violations.

According to Weider (2024), Structural Adjustment Programs were introduced in over 40 African countries in Sub-Saharan Africa between the 1980s and 1990s. 

(Data sourced from World Bank and IMF)

It is important to note that some countries had more than one round of SAP from the IMF. In addition, some countries had a combination of World Bank and IMF engagement. The countries listed above, and coloured in red specifically, have undergone formal SAPs or ERPs from the IMF/World Bank. All in all, 41 countries have undergone the abovementioned process. Alas, neoliberalism in general, has been far more ubiquitous in nature, due to, amongst other things, nations such as South Africa which wanted to join the World Trade Organisation as a founder member country in 1996, thus undergoing market-orientated reforms without adopting a formal Structural Adjustment Program.  

IMF Conditionality and the Quest for a Weberian Approach

In his 2018 paper co-authoured with Kentikelenis, Stubbs and Reinsberg, Professor Lawrence King’s paper, “How Structural Adjustment Programs Impact Bureaucratic Quality in Developing Countries,” examines a central contradiction in IMF-led structural adjustment: programmes presented as improving governance may instead weaken the state institutions required for effective governance. Drawing on Max Weber’s theory of bureaucracy and a world-systems perspective associated with Immanuel Wallerstein, the paper argues that capable government depends on trained, adequately paid and secure public officials, as well as institutions able to coordinate policy, regulate markets and implement public services. Yet structural adjustment conditions have often required governments to privatise assets, liberalise markets, cut public expenditure, reduce public employment and decentralise administration. King’s argument is that these measures can erode bureaucratic capacity rather than strengthen it (Reinsberg, Kentikelenis, Stubbs, King, 2018)

The paper also challenges the tendency to attribute weak development outcomes simply to corruption within developing countries. King argues that externally imposed reforms can themselves increase the conditions under which corruption flourishes. Public sector wage and employment cuts can reduce bureaucratic professionalism and capacity, while privatisation can create high-stakes opportunities for politically connected actors to influence the sale, regulation or allocation of former state assets. In this view, the problem is not a simple choice between state and market. Thus, effective markets require a functioning state that can uphold rules, regulate firms, administer contracts and provide public goods. The paper therefore disputes a zero-sum view in which shrinking government necessarily produces better 'governance' (Reinsberg, Kentikelenis, Stubbs, King, 2018).

The Ebola crisis in West Africa illustrates the potentially severe consequences of this logic. King (2018) explains that IMF structural conditions in affected countries included limits on the share of public budgets that could be devoted to state employees, alongside pressure to reduce public-sector expenditure and to decentralise decision-making. These restrictions could reduce health-system staffing and weaken the capacity of ministries of health to coordinate an emergency response. Côte d’Ivoire is a particularly salient case: caps on healthcare and public-sector spending constrained the country’s ability to build and sustain the personnel and institutional capacity needed for epidemic preparedness and response. Such constraints are a glaring illustration of IMF interference in governance, because externally shaped fiscal rules can narrow a government’s practical ability to determine how to protect public health and respond to regional threats such as Ebola (King 2018).

The broader implication is that fiscal discipline cannot be treated as an isolated technical objective. When expenditure ceilings, wage-bill restrictions or decentralisation requirements are applied without protecting essential state capacity, they may save funds in the short-term while producing higher social, economic and institutional costs later. King’s Weberian argument is absolutely critical: strong public institutions and functioning markets are complements, not opposites. A development strategy that prioritises debt repayment, austerity and market expansion while hollowing out health systems, regulatory capacity and public administration risks undermining both democratic governance and the market economy it claims to promote (Reinsberg, Kentikelenis, Stubbs, and King, 2018).

IMF Conditionality, Policy Space Encroachment and Pervasive Faultlines

In their 2016 paper entitled ''IMF Conditionality and Development Policy Space, 1985-2014'', Kentikelenis, Stubbs and King examine whether the IMF’s post-2008 claims of more flexible, socially aware and less intrusive lending practices are reflected in the actual conditions attached to its loans. Educing an original database of 55,465 individual conditions drawn from 4,590 IMF loan documents across 131 countries between 1985 and 2014, the authors conclude that there is little evidence of a fundamental break from structural adjustment. Although the number and scope of conditions declined briefly following the global financial crisis, conditionality increased again by 2014, and IMF programmes reintroduced many reforms the institution had publicly suggested it had moved beyond (Kentikelenis, Stubbs and King 2016).

The authors define 'development policy space' as a government’s capacity to choose the instruments it uses to address economic problems, rather than being compelled by creditors to use specified measures such as privatisation, VAT increases, public-sector wage restrictions or deregulation. The authors find that IMF conditions moved far beyond narrow balance-of-payments and macroeconomic targets into labour markets, state-owned enterprises, institutional reform, social policy and poverty reduction. They interpret this expansion as 'mission creep': the IMF increasingly influenced policy areas that are politically sensitive and normally within domestic democratic decision-making. Even after IMF reforms intended to 'streamline' conditionality, structural conditions—including privatisation, state-enterprise restructuring and institutional reforms—remained substantial and rose again in the post-crisis period (Kentikelenis, Stubbs and King 2016).

King et al (2016) pay special attention to social protection and labour. They find that, while the IMF increasingly included “social spending floors” in programmes, particularly in Sub-Saharan Africa, these were generally non-binding and were frequently not met. Of 362 social-spending-floor conditions with available implementation data in Sub-Saharan Africa, only 184 were implemented; in West Africa, only 97 of 210 observable targets were met. At the same time, governments often complied with or exceeded binding fiscal-balance targets. Côte d’Ivoire illustrates this imbalance. Its 2010 programme met its budget-balance condition but implemented none of the social-spending-floor conditions with available data. Kentikelenis, Stubbs and King (2016) also document continued wage-bill ceilings, public-employment reductions, pension cuts and labour-market reforms in countries including Côte d’Ivoire, Moldova, Romania, Greece and Portugal.

(Kentikelenis, Stubbs and King 2016)

The broader argument by Kentikelenis, Stubbs and King (2016) is that the gap between the IMF’s public language and its operational practice amounts to an “escalating commitment to hypocrisy.” The authors argue that the Fund responded to criticism through rebranding, procedural reforms and symbolic pro-poor measures without adequately changing the underlying structure of its programmes. According to Kentikelenis, Stubbs and King (2016), rhetoric about country ownership, flexibility and protection of vulnerable groups functioned partly as ceremonial reform, while fiscal discipline and structural adjustment continued to receive priority. The paper does not claim that every IMF condition is externally imposed or fully implemented, and it does not measure all indirect effects of IMF macroeconomic advice. Nonetheless, it concludes that the IMF’s claim to have created substantially more policy space for borrowing countries is not supported by its evidence (Kentikelenis, Stubbs and King 2016).

Discussion and Conclusion

In the early years following its civil war, the then President of the United States of America, Ulysses Grant (1868-1876), a war hero, was alive to the 'ladder-kicking' tendencies of England during its industrialisation period. Perhaps it is prudent to quote him at length to illustrate the point. “For centuries England has relied on protection, has carried it to extremes and has obtained satisfactory results from it. There is no doubt that it is to this system that it owes its present strength. After two centuries, England has found it convenient to adopt free trade because it thinks that protection can no longer offer it anything. Very well then, gentlemen, my knowledge of our country leads me to believe that within two hundred years, when America has gotten out of protection all that it can offer, it too will adopt free trade'' (Frank 1967). President Grant was absolutely spot on, given the knowledge of his country. Not only did the US begin doing its own kicking away of the ladder through the international financial institutions which it disproportionately controls, following more than a century of high tariffs (Bairoch 1993, p.40) it also, as did Britain before it, engaged in free trade imperialism (Hudson 1972).  

Nobel Laurette in Economics Paul Samuelson once stated that," I don’t care who writes a nation’s laws—or crafts its advanced treaties—if I can write its economic textbooks.” The first lick is the privileged one, impinging on the beginner’s tabula rasa at its most impressionable state.'' This statement by Samuelson illustrates not only the enormous power of education, but also of those who become students, thinkers, readers, researchers, and writers of Economics. It goes without saying that theory needs to be interrogated, for its own investment. Thus, a pluralistic education or approach to Economics holds the greatest promise of analytic territory capable of benefiting society at large. 

The African continent has not obtained sustained optimal growth rates or development due to premature deindustrialisation, attributable to the effects of the neoliberal or mark-orientated reform era, took place in the 1980s to 1990s.  

The continent has also experienced 'mission creep' ie a gradual and continuous expansion of IMF and World Bank policy scope, conditionality associated with lending and mandates which went far beyond its original, core objective. In line with the Weberian philosophy, a strong bureaucracy actually comprises of well-paid, well-trained and secure bureaucrats who will be empowered to manage a well-fuctioning market economy, which is at variance with the philosophy which seeks to hollow out state capacity. 

In line with the latter, the world's most industrialised nations today have done so through a well-established and strong manufacturing sector. Since time imemorial, nations such as Britain, the USA, South Korea, Japan and Singapore have managed to achieve periods of sustained growth and prosperity underpinned by a strong manufacturing sector. Therefore, the belief that developing nations can industrialise without a strong manufacturing sector goes against international experience. 

It is also evinced that economies which are structurally dependent on raw material exports while importing finished or advanced manufactured goods become vulnerable over time due to, as per Prebisch and Singer, a decline in the terms of trade between primary commodities and manufactured goods, among other things (Chang H-J, uneca). Thus, mineral rich economies possess massive potential for capturing more of the value chain domestically en route towards industrialisation.

A strong manufacturing sector possesses numerous inherent advantages for states eg. a higher propensity for raising productivity, a greater ability to spread technological progress across an economy, as well as being a source of organisational innovation (Chang H-J, uneca). There also exist numerous reasons for 'artificial' industrialisation in counties, eg the infant industry argument by German Economist Frederick List and first US Treasury Secretary Alexander Hamilton, Asset Specificity as per Williamson, the linkages argument as per Rosentein-Rodan and Hirshman, learning-by-doing as per Arrow as well as the Externalities argument as per Stiglitz.

Given the experiences of the developing world, perhaps it is prudent for developing countries to explore the possibility of Post-World Bank and Post-IMF world. To invoke the critique of 18th century philosopher Jeremy directed towards France, with fraternity on their lips, the World Bank and IMF declare war against mankind. 

It has become evident that industrial policy has a significant role to play in the industrialisation of Africa. In spite of the policy encroachment by institutions such as the World Bank and IMF, developing countries in Africa can arguably still use industrial policy successfully within the WTO framework through various mechanisms, eg tariffs, subsidies, FDI regulations, as well as other non-trade related policies. In conclusion, successful industrial policy is a function of, amongst other things, the political economy ie sovereign states with the right political base which can enable the state to encourage development in certain directions. The big question for African states is whether this will be achieved with a unitary approach or not (Chang H-J, uneca, Nkrumah, 1965).

Of Licks and Ladders: An Analysis of Industrial Policy of Developed and Developing Countries (Part 3 of 4)

 The World Bank, International Monetary Fund, and the Rise of Neoliberalism

By: Siyanda Pali

It is often stated that "A rising tide lifts all ships." However, this has not always been the case, especially when referring to the rise of the neoliberal era globally, which took off in the 1970s-1980s. Neoliberalism is an economic policy which is essentially a political or economic idea which supports 'free markets' as the main means to run a society. It is anchored on the principles of free market capitalism, deregulation, privatisation, austerity and globalisation (Keen 2026). Through the International Monetary Fund, World Bank, and World Trade Organisation, its adoption has been ubiquitous, and it has had some rather potent consequences, especially for the developing world. 

Business Recorder

The World Bank and IMF were both established in 1944 at the Brettonwoods Conference. These institutions formally came to being on 27 December 1945, first with a mandate to finance the reconstruction of Europe, and later the developing world. A decision was reached that the headquarters would be in the USA, and that the president should come from the country with the largest shareholding, which invariably, was the USA. In tandem with the World Bank and IMF came the formation of the World Trade Organisation from the GATT, a key player in the drive towards globalisation and liberalisation in spheres such as trade and foreign investment regulation (Chang H-J 2007).

 The intellectual founding father of the IMF, British Economist John Maynard Keynes, had his own ideas about how the IMF should function eg an international clearing union overseen by a central bank, with an international currency called The Bancor. The US repudiated this, opting for a US Dollar-centered system linked to gold. It was also not fortuitous that Keynes did not support the idea of conditionalities attached to loans. Invariably, Keynes foresaw that corporations from the developed countries would be unable to resist the temptation of taking advantage of countries from the developing world (King LP 2018). Unfortunately, conditionalities became synonymous with IMF loans and their ''Structural Adjustment Programs".

According to Chang H-J (2007), with respect to developing countries, the neoliberal agenda has been advanced by a coalition of developed country governments, spearheaded by the USA and the troika of international economic organisations which they disproportionately control ie the IMF, WTO and the World Bank. These developed countries use access to their home markets and aid budgets to induce the adoption of neoliberal economic policies. Occasionally, this is to the benefit of a few firms in developed countries which lobby for certain outcomes to take place, but generally, to set the scene in the developing countries concerned: an environment which is friendly to foreign investment and foreign goods. The IMF and World Bank come to the fore by attaching conditionalities to loans made to developing countries, i.e.the adoption of neoliberal policies. The WTO, on the other hand, sets trading rules in favour of developed countries in spheres where they are strong, but not where they are weak.

Chang H-J (2007) also notes that these governments and organisations are supported by ''an army of ideologues". Some of these ideologues are highly trained academics who ought to know the limits of their free-market economics but tend to ignore them. The collaboration between these bodies and individuals forms a "powerful propaganda machine, a financial-intellectual complex backed by money and power" (Chang H-J 2007). This unitary, blinkered approach to Economics creates what Economic Historian, Lord Robert Skidelsky referred to as intellectual arrogance (Skidelsky 2015). This previously mentioned sentiment was similarly perfectly captured by Margaret Thatcher during the 1980s, stating that, TINA, "There is no alternative" i.e. that there is no other viable system, other than neoliberalism, to manage the economy, a statement we know to not only be inaccurate, but also ahistorical.   

Professor Ha-Joon Chang provides great insights with respect to South Korea, highlighting that "The neo-liberal establishment would have us believe that during its miracle years between the 1960s and 1980s, Korea pursued a neo-liberal economic development strategy. The reality, however, was very different. What Korea actually did during these decades was to nurture certain new industries, selected by the government, in consultation with the private sector, through tariff protection, subsidies, and other forms of government support" (Chang H-J 2007). This was the case until these industries were in a position to compete with international players. In addition to this, he states that "The government owned all the banks, so it could direct the lifeblood of business- credit. Some big projects were undertaken directly by state-owned enterprises- the steelmaker, POSCO, being the best example..if private enterprises worked well, that was fine. If they did not invest in important areas, the government had no qualms about setting up state-owned enterprises (SOEs), and if some private enterprises were mismanaged, the government often took them over, restructured them and usually (but not always), sold them off again" (Chang H-J 2007).

South Africa's Democratic Transition

The territory currently referred to as South Africa today is one in which Africans had ruled and reigned over for centuries. The Mapungubwe, in particular were a sophisticated African kingdom based in what is now the Limpopo province in South Africa, flourishing between the 11th and 13th centuries (Cartwright 2019). The society's wealth was based on sophisticated metallurgy, mining and vast trade networks, with locally mined gold, iron, copper and ivory being central to trade with countries such as Egypt, China and India.

 In line with a history of trade with other nations, the Cape, based in what is now the Western Cape province of South Africa, served as a key trading "proto-port" where travelers would victual their ships with fresh fruit, vegetables, cattle, sheep and fresh water, trading with Africans stationed in the Cape, as they embarked upon voyages to and fro. On 4 November 1497, Portuguese Explorer Vasco da Gama docked at St Helena Bay (approx.. 150 km north of Cape Town), where he had a skirmish with the Khoi, because his men attempted to expropriate fresh water without permission. About a decade or so later, strangely enough, another of his countrymen, one Portuguese Viceroy of India named Francisco de Almeida landed in the Cape of Good Hope in the early 1500s to victual his ships, en route to his homeland of Portugal. Initially, he and his men had traded with the Khoi, to the satisfaction of both parties: trading iron for cattle. However, when de Almeida's men tried to steal numerous cattle at a Khoi village they had visited, the plunderers were chased away back to their ships. After being persuaded by his men to take revenge upon these Khoi, de Almeida led a party of 170 men with weapons to carry out this act of revenge on the village. It was then that he, together with 10 of his generals and 64 of his men, were routed by the Khoi warriors, never to return to Portugal alive (Van de Aa 1707).

Data from the Huygens Institute, which shows historical logbook data of Dutch ships, shows that approximately 1000 Dutch ships alone sailed the route between the Netherlands and Asia via the Cape between 1600-1652.. In addition, historians also posit that European nations such as the French, Portuguese, English, Dutch and Danish consistently used the Cape before 1652 on a systematic, regular basis for the purposes of victualing their ships and for trade between Africans and Europeans. Furthermore, Patric Tariq Mellet posits that a conservative figure of 120 000 travelers docked their ships at the Cape between 1602-1650, further underscoring the established system of trade in place (Mellet 2002). 

Emeritus Professor of Economics Sampie Terreblanche illuminates that South Africa experienced 4 main political-economic systems thereafter:

1. The VOC period/ Dutch colonisation (1652-1795)

2. British colonialism during the 1800s

3. The Mineral Energy Complex (MEC), Union of South Africa (1910) and various other SA governments during the first half of the 20th century

4. The MEC and National Party/ Apartheid government from 1948-1994 

Tembisile Martin 'Chris' Hani with MK in 1991 (Britannica)

This period of colonial-apartheid was fiercely resisted by Africans (Klaas JJ 2023, Stapleton 2016, Biko 1978). The US abandoned the Gold Standard in 1971. Prior to the official fall of Apartheid in 1990, Terreblanche (2012) states that there were 4 events which were of great significance during South Africa's transition period in 1986. First, the Chernobyl nuclear disaster of 26 April 1986 laid bare the dearth in the nuclear technological expertise of the Soviet Union. The second event was the declaration of a state of emergency in South Africa on 12 June 1986. The third event was the Comprehensive Anti-Apartheid Act passed by the US Congress and Senate, which imposed severe economic sanctions on the Apartheid government of the White minority in Pretoria. The fourth event was the summit in Reykjavik between former US President Ronald Reagan and former Soviet President Mikhael Gorbachev, which took place in October 1986. 

The confluence of the abovementioned events led to pressure being put on the White minority government by the US and the ANC was encouraged by Gorbachev, to find a political solution or negotiated settlement. In addition, South Africa's economic growth rate gradually stagnated, falling from an average of approximately 5.5% between 1946-1960 to an average of between 1.2%-1.5% between 1980-1990. It was also during this period that neoliberalism was on the rise globally and was sold with gusto to South Africa. Professor Terreblanche argues that the abovementioned circumstances were a harbinger for South Africa's transformation.

In light of the dynamics prevalent at the time, the Mineral Energy Complex played a massive role, together with key African National Congress leaders, in facilitating South Africa's transformation from a political economy perspective, taking place in the mid 1980s. However, in doing so, they had to grapple with numerous challenges which they saw as stumbling blocks to South Africa's transition.

Of Licks and Ladders: An Analysis of Industrial Policy of Developed and Developing Countries (Part 2 of 4)

Britain 

By: Siyanda Pali 

It is perhaps common knowledge that Britain was the first country to undergo an industrial revolution in the 18th century, commencing around 1760. However, it is also perhaps prudent to explore the background for some details on how this may have been achieved, amongst other things. 

To paraphrase (Chang H-J 2002, Defoe 1728), "Other elements were deliberately created by the state...It is difficult to establish the relative importance of the abovementioned factors in explaining the British success in wool manufacturing. However, it does seem clear that without what can only be described as the 16th century equivalent of modern infant industry promotion strategy put forth by Henry VII and his successors, it would have been very difficult, if not necessarily impossible for Britain to achieve this initial success in industrialisation. Without this key industry which accounted for about 50% of British revenue during the 18th century, its industrial revolution might have been very difficult, to say the least." 

Industrial Textile Machine (Dreamstime.com)

(McCusker 1996) also adds that cloth exports, mostly woolen, accounted for approximately 70% of British exports in 1700, and were still well above 50% of total exports by the 1770s. The above are brief explanations of not only its integral nature, (state-facilitated), but also how Britain went from being a fairly backward economy in the 13th to 14th century, relying on the export of raw wool to the then Low Countries, often referred to as the Benelux, which were more advanced at the time (Belgium, Netherlands, and Luxemburg), referred to as such because of their extremely flat terrain or geography, to eventually having an economy which comprised of the most remarkable wool manufacturing industry the world over (Davies 1999, Defoe 1728, Ramsay G.D. 1982). For the sake of clarity, such a dynamic transformation was not purely as a result of laissez faire economics as others may wish for us to believe, but rather, included state intervention such as sending royal emissaries to other nations in order to identify suitable regions for wool manufacturing, the poaching of talent from the Low Countries (Belgium, Netherlands, and Luxemburg), increasing duties on the export of raw wool, as well as a preliminary ban on the export of raw wool (Ramsay G.D. 1982).

The pivot point for Britain's industrial period was the 1721 law introduced by Britain's first Prime Minister, Robert Walpole during the reign of George I (1660-1727). While Britain's policies prior to this were dedicated to capturing trade and increasing government revenue, the policies after 1721 were aimed at promoting manufacturing industries (Chang H-J 2003). Presenting the new law to parliament through the King's address, Walpole stated that, "It is evident that nothing so much contributes to promote the public well-being as the exportation of manufactured goods, and the importation of foreign raw material" (List 1885). 

According to (Brisco 1907, Davis 1966, McCusker 1996) the legislation which came into effect in 1721, together with other policies was as follows:

1. A reduction on import duties of raw materials used in manufacturing, or eliminated completely

2. Duty drawbacks on imported raw materials for exported manufactures were hiked

3. Export duties on most manufactures were repealed

4. Foreign- manufactured goods fetched increased duties

5. Export subsidies were widened to also include other items such as silk products and gun powder, while subsidies which prevailed at the time for refined sugar and sailcloth, were increased.

6. Regulations to control the quality of manufactured products, especially textiles, was introduced, in order to protect the reputation of British manufactures in foreign markets, policies which were similar to those employed by South Korea, Taiwan and Japan during the post-war period (Chang H-J 2003)

In spite of Britain's widening technological gap with other countries, it continued its industrial promotion policies well into the early nineteenth century, (Bairoch 1993) equating to some 50 or more years or two generations after its industrial revolution. 

The revocation of the Corn Law in 1846 created a semblance of 'free trade', which would be considered a cause for celebration by subscribers of the classical liberal economic doctrine (Bhagwati 1985). However, numerous historians see it as an act of "free-trade imperialism" designed to "halt the move to industrialisation on the Continent by enlarging the market for agricultural produce and primary materials." (Chang H-J 2002, Kindleberger 1978) 

The latter is precisely the rationale by certain politicians at the time, e.g. John Bowring and Richard Cobden vis-a-vis the repeal of the Corn Law as their campaign. 

Britain's Early Example of Kicking Away the Ladder

England vigorously opposed the industrialisation of its then colonies, in numerous ways (Chang H-J 2003):

1. Export subsidies (bounties) were used to encourage primary production in the colonies, while import duties produced in the abovementioned were prohibited. 

2. High value-added manufacturing activities in the colonies were forbidden.

3. Exports from the colonies which competed with British products were barred eg cotton textile imports from India as well as woolen cloth imports from Ireland and the USA were both banned by Britain in 1700 and 1699 respectively.

4. Tariff use by colonial authorities was outlawed, unless deemed appropriate for revenue purposes. Even so, such tariffs would still be annulled in numerous ways. 

Through 'unequal treaties', any tariff autonomy of colonies was eroded, with levels ranging between 3% - 5%. Starting with Brazil in 1810, Latin America in its entirety, including Persia (now Iran), the Ottoman Empire, China, Thailand (formerly Siam) as well as Japan up until 1911, were included in this group of countries. 

To quote the distinguished economic historian Paul Bairoch, "In short, contrary to popular belief, Britain's technological lead that enabled this shift to a free trade regime (1846) had been achieved behind high and longstanding tariff barriers (Chang H-J 2003, Bairoch 1993). 

It is also for this reason that German economist Frederich List draws his comparison of Britain to one who ascends the summit, then, 'kicks away' the very ladder which they had used to ascend, depriving others of enjoying the same opportunity. Perhaps it is prudent to quote him in copious amounts, to further indent the point:

"It is a very common clever device that when anyone has attained the summit of greatness, he kicks away the ladder by which he has climbed up, depriving others of the means of climbing up after him. In this lies the secret of the cosmopolitan doctrine of Adam Smith, and of the cosmopolitan tendencies of his great contemporary William Pitt and all his successors in the British government administrations.       Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and raised her navigation to such a degree of development that no other nation can sustain free competition with her can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the path of error, and has now for the first time succeeded in discovering the truth" (List 1885).

Of Licks and Ladders: An Analysis of Industrial Policy of Developed and Developing Countries (Part 1 of 4)

By: Siyanda Pali

The continent of Asia is considered to have the world's highest total GDP figure, coming in at over $42 Trillion US. North America, on the other hand, leads the world when it comes to per capita GDP, which currently exceeds $71 140 US according to the International Monetary Fund. Nevertheless, the continent of Africa is the wealthiest continent on earth when it comes to its resource endowment, with the United Nations stating that it possesses 30% of the world's mineral reserves.

San Francisco (Popular Science)

The African continent is endowed with 8% of the world's natural gas, 12% of global oil, 65% of all uncultivated arable land, as well as more that 70% of the world's platinum and cobalt deposits. In addition, while other continents such as Asia face overwhelming population decline, Africa has the world's youngest population, with approximately 1 in 4 (25%) of all young people on earth aged 15-35 projected to be African by 2050. Nevertheless, despite these impressive fundamentals, the continent has not translated its potential from the end of the colonial era to significant present-day gains for the population at large, accounting for about 2%-3% of global GDP to date. This necessitates inquiry. 

To paraphrase South Korean-born Economist, Prof Ha-Joon Chang, the aim of this article is to 'discuss a contemporary problem with the help of history', mainly, how a large number of mature economies today followed a certain trajectory or path of development in order to achieve industrialisation, and later, when they had ascended the summit, prescribed a totally different recipe for success to newer entrants or developing economies following their independence from colonial rule, with Bretton Woods Institutions such as the World Bank and International Monetary Fund being central actors. The impact or outcomes of such industrial policy will also be examined and discussed. 

Industrial Policy in Action

One would be forgiven for thinking that bastions of 'free market' and neoliberal economic policies such as OECD nations eg the United States of America and Britain developed their economies along such lines from the outset. Alas, the record of history portrays a markedly different approach. In Professor Ha-Joon Chang's "Kicking Away the Ladder: The Real History of Free Trade", a reference is made to "Economics and World History: Myths and Paradoxes" by Paul Bairoch, which illuminates how the levers of industrial policy, ie targeted state intervention, were used to protect or boost certain domestic industries, ultimately shaping their economies.   

Bairoch (1993)

The table above with data provided by Bairoch (1993) provides approximate average percentage levels of custom duties (tariffs) on manufactured goods, as a weighted percentage of value for specific nations during the early years of their industrialisation period. From the above, it is clearly evident that in the early 19th century, the United States of America and the United Kingdom had some of the most well-protected industries and economies, with tariff regimes which ranged from 35% to well over 50%. In line with above, a nation such as Belgium, despite having an average tariff rate of 9%-10% in the late 19th century, in reality, had tariffs as high as 60% and 80% for industries such as iron and textiles respectively. In the early 20th century, Italy had customs duties averaging 46% and Russia had duties averaging 84% in the same period. Similarly, Spain had tariffs averaging 63% in the early 20th century. Furthermore, the 'R' in the abovementioned table denotes the word, 'Restricted', meaning that highly restrictive import barriers existed, or that outright import bans were in place. Thus, calculating an average tariff rate in those years was not possible. This was the case for Austria, Japan, France, Russia, Spain and Sweden in the early 19 century. Therefore, it is evinced that protectionism was not the exception, but the norm, as a means to industrialise what are now developed nations today.

(Bairoch 1993)

The abovementioned trade policy remained in the aforementioned countries, all the way up until the second world war. After this point, it is only then that tariff rates started to decline. It was only in the 1970's that developed nations had tariff regimes which are similar to today's tariffs. Therefore, it is important to note that by the time that the relaxation of high tariff rates occurred, these nations were already well-off, having obtained decades, if not over a century of protection from international competition. In addition to a copious use of high tariffs, the range of industrial policy instruments was widened from the 1950s to the 1980s in nations such as Norway, France, Finland, Japan, Austria and Italy, strictly regulating foreign direct investment, in order to protect domestic industry. Japan and Finland in particular had highly regulated and restricted foreign direct investment up until the 1980s. In fact, it was not permissible without special government approval. The former-mentioned countries, bar Japan, used State Owned Enterprises in specific sectors at the time.

In an attempt to thresh out their economic vision for the future, Japan and France had indicative 5-year plans, pointing out which industries would be promoted, what type of support they would receive from the government, as well as how these priority industries would link or relate with other industries. Regional governments in Germany and Japan also used industrial policy to promote and support small enterprises. eg the Germans used publicly owned banks to provide affordable, long-term financing for SMMEs (Chang H-J 2019). There was also a synergy with local industry associations to supply inputs which are normally too expensive for individual firms eg research and development, worker training, and export marketing, which normally require large, fixed costs upfront, a notable barrier for small firms.  

The Role of the State

The United States of America, contrary to popular belief, actually had one of the world's strongest industrial policies, albeit it being called R & D Policy. As per Mazzucato (2011), although the level of technological innovation is critical for economic growth, there is no clear correlation between the size of companies, R & D spend, the number of patents and the level of innovation in an economy. However, what is unequivocal is that a requisite precursor for innovation to occur is a highly networked economy with dynamic feedback loops between individuals and organisations, in order to facilitate information  exchange and for its barriers to be broken, and for its horizons to be broadened ie what in literature is referred to as a ''national system of innovation''.  

At the forefront of knowledge, simply possessing a system of innovation is not enough. With time, more substantial or remarkable results can be achieved when the state is a significant, active participant within the system (Mazzucato 2011). The state can, through its different laboratories and agencies, be agile, utilising its commissioning, procurement and regulatory functions to steer or direct markets, and to propel technological advancement. Thus, it can be a protagonist for change in a networked system which already has the potential to spread new ideas rapidly. 

The Defence Advance Project Research Agency (DARPA) is a classic example of the similarity of the United States of America with other developed countries, with military involvement playing an important role in economic growth and development. In Germany, automobile maker Volkswagen was formed in 1937 as a state-owned company meant to meet the transportation needs of the German population. The Manhattan Project was a major scientific collaborative effort between the governments of the USA, Canada, and the UK, leading to the creation of the atomic bomb. The US experience in latter decades has been to apply lessons learnt in broader industrial policy. 

Contrary to the prominence given to Franklin D Roosevelt's New Deal as a turning point in US economic history by laissez-faire stalwarts, World War 2 became a period of great significance for development and innovation in the USA. It was after World War 2 that the Pentagon collaborated with other national security agencies such as the National Aeronautics and Space Agency (NASA) and the Atomic Energy Commission which then precipitated the development of technology such as jet planes, computers, biotechnology, civilian nuclear energy and lasers (Block 2008, Mazzucato 2011). This was championed by the Advanced Projects Research Agency (ARPA), a Pentagon-spawned office in 1958.

Established with the aim of giving the US supremacy in certain industries or sectors, DARPA has a budget of over $3 billion US per annum, 240 staff members and variable or limited overheads. It has successfully managed to recruit skilled programme managers who have the license and willingness to take risks. The formation of DARPA also led to a portion of US military R & D spend being allocated for 'blue sky thinking' ie, ideas which went beyond normal time horizons, and might not achieve results in 10 or 20 years. Consequently, DARPA's mandate allowed it to prioritise the propagation of innovative technological development with nuanced strategies. 

Such is the history of industrial policy in what are now developed countries. Targeted state intervention through protectionism was a mainstay during the early years of their industrialisation. Following this, there were specific measures which provided targeted support, further fostering the growth and development of certain sectors and industries. It is difficult to imagine what might have been of Silicon Valley and other conglomerates today, were it not for the decisive role of the state.

From Lab to Leaps: Boston Dynamics and its Ambitious Future

By: Siyanda Pali 

In a world increasingly captivated by the possibilities of robotics, few companies occupy the same imaginative terrain as Boston Dynamics. Their name conjures images of agile robots dancing, leaping, and navigating complex environments with an uncanny human-like grace. But the story of Boston Dynamics is not just one of technological marvels; it's a chronicle of ambition, perseverance, and a vision for a future where robots seamlessly integrate into our lives.

Robot Atlas assists a worker on scaffolding (youtube)

A Brief History: The Early Days and Marc Raibert's Vision

The tale begins in 1991, when Marc Raibert, a professor at the Massachusetts Institute of Technology (MIT), founded the company as a spin-off from his pioneering research in legged locomotion. Raibert, a visionary roboticist, believed that robots with legs offered greater adaptability and efficiency than their wheeled counterparts, especially in dynamic and unstructured environments. This philosophy became the cornerstone of Boston Dynamics' approach, laying the groundwork for their future innovations. 

The early years were marked by slow and steady progress. The company received support from DARPA, the U.S. Department of Defence's Advanced Research Projects Agency, allowing them to develop prototypes like the BigDog quadruped robot, designed for rugged terrain. While these early creations were far from polished, they showcased the potential of Raibert's vision.

Broader Horizons: Google Acquisition and Public Recognition

In 2003, Google acquired Boston Dynamics, providing the resources and platform the company needed to accelerate its development. The influx of funding allowed them to refine their designs, improve performance, and produce increasingly impressive robots. The world took notice in 2013, when a viral video of the humanoid Atlas robot performing parkour flips made headlines. This marked a turning point, catapulting Boston Dynamics into the public eye and solidifying their reputation as a leader in advanced robotics.

Growth and Innovation: Expanding Portfolio and Global Reach

Since then, Boston Dynamics' trajectory has been one of sustained expansion and innovation. Their product portfolio diversified with the introduction of Spot, a smaller and more commercially viable quadruped robot aimed at applications like inspection and security. Atlas continued to evolve, showcasing even more sophisticated movements and manipulation skills. In June 2017, Google sold the company, with SoftBank Group emerging as the new owner. The acquisition provided further financial backing and a renewed focus on commercialisation. As of June 2021, the company was acquired by Hyundai Motor Group, which owns an 80% stake, while SoftBank holds the balance.

Today, Boston Dynamics boasts a global presence, with offices in the United States of America, Switzerland, and Japan. Their revenue streams are diversifying, with Spot leading the charge. Partnerships with companies like Fluor for industrial inspection and Hyundai Motor Group for autonomous driving technology showcase their willingness to explore new and diverse applications.

As of 2022, Boston Dynamics boasts over 30 years of existence, over 300 employees, and hundreds of clients from over 35 countries around the world, with reported annual revenues in excess of R2.5 billion ($135.8 million US) in 2023.

Impact on Industries: Redefining Work and Pushing Boundaries 

The impact of Boston Dynamics' robots extends beyond technical marvels. They are poised to disrupt various industries, from logistics and warehousing to construction and emergency response. Spot, for example, has already proven its utility in inspecting offshore wind turbines and hazardous environments, minimising risk for human workers. The company's agility and manipulation capabilities offer the potential to automate tedious tasks and/or the proverbial dull, dangerous, and dirty jobs, increasing efficiency and productivity across diverse sectors.

However, the societal impact of these robots also sparks important conversations. In 2021, Spot, the company's quadrupled robot dog, was seen in military exercises conducted by the French army, allegedly for reconnaissance purposes. Vice President for Business Development at the time, Michael Perry, stated that the robot was sold by a European distributor, Shark Robotics, and that Boston Dynamics was not made aware of the latter.

 

This was a notable development, given the justifiable uneasiness surrounding the misuse or abuse of arms against innocent civilians in military confrontations between various forces. The world has seen and watched with shock and awe how, in certain cases, armies have committed not only war crimes but also wanton acts of genocide in certain parts of the world. If the technology developed by Boston Dynamics were to be weaponised against civilians by military establishments with the abovementioned proclivities, no one knows what kind of world mankind would live in. 

Despite Boston Dynamics conceding that their robots are used in military operations, this is only for non-weaponised applications. The company states that it has, in fact, forbidden the weaponisation of its robots in its ethical principles and its terms and conditions. It is expected that war criminals and those guilty of committing genocide will be dealt with decisively by the relevant institutions, such as the International Court of Justice.

 

The use of a Spot model in policing by the New York Police Department has also drawn sharp criticism from the public in recent times, as was the case in 2020. This resulted in its early retirement in 2021. Reasons for the above included threats to privacy and to civil liberties, among other things. However, the New York Police Department has since rolled out a new fleet of robots in 2023.

 Among the criticisms raised about the deployment of these robots in policing was the risk of further exacerbating the trust deficit between the police and certain communities, which have historically and currently largely been on the receiving end of unwarranted or disproportionate force by the police compared to other communities. Despite some arguing that the use of technologies such as robots in policing may be justified due to the dangerous nature of the work involved, it is likely that the debate about the use of robots in policing will continue, given the cost and dystopian element they invoke among some members of society.

One of the company's most fruitful initiatives is its recent collaboration with Central High School in Louisville, Kentucky, which allowed high school students to gain first-hand experience in working with an industrial robot. By opening up the world of robotics, computer programming and innovation in general, the gains to society are unquantifiable, given the benefits to society which are likely to be realised as a result of a young population with a passion for subjects such as engineering, robotics and computer programming, among others.

Concerns about job displacement, ethical considerations for autonomous robots, and the potential for misuse necessitate careful consideration and transparent dialogue. Boston Dynamics acknowledges these concerns and emphasises their commitment to responsible development and collaboration with stakeholders.

The Future: Beyond Leaps, Towards Collaboration and Integration

As we look ahead, Boston Dynamics' future appears to be brimming with opportunity. The company is actively pursuing advancements in AI, machine learning, and sensor technology, aiming to make their robots even more adaptable and autonomous. Collaborations with robotics researchers and ethicists will be crucial to ensuring responsible development and mitigating potential risks.

The ultimate goal, as envisioned by Raibert and furthered by successive leadership, is a future where robots seamlessly collaborate with humans, augmenting our capabilities and enhancing our lives. Integrating these robots into various industries without displacing workers will require careful planning and reskilling initiatives. Open and transparent communication with the public will be paramount to addressing ethical concerns and building trust.

Boston Dynamics' journey is more than a tale of engineering marvels; it's a testament to the power of human ingenuity and ambition. The company has pushed the boundaries of robotics, sparking both excitement and caution. As they look towards the future, navigating the challenges and seizing the opportunities, one thing remains clear: Boston Dynamics is poised to be a crucial player in shaping the world of intelligent machines and their place in our lives.