Regionalism Essay

“Theoretically speaking, various forms of regional cooperation are touted as suitable responses for developing countries to foster sustainable economic growth within the context of a globalized economic system. Nevertheless, the primacy of domestic politics and constituent interests must always be considered when analyzing the prospects for such regional cooperation. Given South Africa's current socio-political and economic structure, how do you envisage the prospects for regionalism in the contemporary global economic climate?” This essay will argue for the prospects of regionalism in the Southern African region, taking into account the contingencies of the global economic climate in which the region finds itself. Additionally, attention will be drawn to the domestic socio-political and economic structure of South Africa, highlighting the effects that these conditions have in the region and the more broad consequences they might have for the regionalism project. Modern world history from at least 1648 to the present day is in essence the history of an increasingly globalized world. This history is not teleological in the sense that it “assumes the existence of an inexorable historical process leading to a universal human community” (McGrew, 1993 : 73). Rather it can be seen as the interaction of discontinuous dialectical processes that consist in “mutually opposed tendencies”(Giddens, 1990 : 64). Before an analysis of the Southern African region can be made, this contextual history - in which the region exists - must be elucidated. Seventeenth century Europe was a mess with war and strife as the “lands of what had been called the Holly Roman Empire, religious and dynastic forces battled for control” (Lieber, 2001 : 23). The 1648 treaty of Westphalia brought the thirty year wars to an end, and laid the foundation for the rise of the era of the nation state. As modern states started to form through a process marked by both integration and disintegration of earlier political authority, the current world system (such as we find it) began to develop. “With the sovereign state at its core, the newly evolving system was anarchical” (Rourke, 1999 : 49). Mercantilism is the view that “emphasizes the states role in managing international trade and delivering prosperity to its polity” (Haywood, 2007 : 156). For the next three centuries, Europe enjoyed increasing global dominance with the leading countries extending imperial control over much of the world, while developing strong military forces. This period is understood as a mercantilist period in world history as “European states sought to

generate trade surpluses as a source of wealth … through discouraging imports if these imports meant that people were less likely to buy locally manufactured goods” (Balaam et al). By the end of the Nineteenth century, much of the non-European world had seen the culmination of the European rivalry for world power, and there was little territory left in the non-European world to satisfy the demands for later emerging European powers. By 1871, through the unification of Germany, Otto von Bismark had created Western and Central Europe's most economically vigorous and militarily powerful state. (Lieber, 2001 : 27) A multi-polar moment was experienced in Europe during this time, with treaties and alliances holding war at bay in an anarchical system of states, whose leaders were operating under mercantilist ideologies. By 1914 a sequence of events followed in quick succession, requiring national leaders and strategists to “make good” on their military treaties and alliances, which saw Europe fall into all-out war. “The European balance of power had failed disastrously” (Lieber, 2001 : 27). By 1918 America had entered the war and turned the tide against Germany. However, with the European allies unable to constrain the threat of fascism, World War Two broke out in 1939. By the end of the war in 1945, the European nation-state system and infrastructure lay in ruins. This sees the first shoots of the global economic context in which the Southern African region finds itself today. Two world powers emerged from the war, namely the United Soviet Socialist Republic (USSR) and the United States of America (USA). Both powers pursued fundamentally different economic and socio-political strategies and the world political system became increasingly bi-polar, with the USSR as one pole touting a socialist paradigm and the USA forwarding an increasingly liberal capitalist system. With the great depression of the 1930's barely passed and American commitment to the war hitting home, the Allied states realised firstly that the system needed to be altered so that a world war such as that which had just been won should never happen again, and secondly that Europe had to be rebuilt. “In 1944, 44 states met in Bretton Woods, New Hampshire to devise new rules and institutions to govern the postwar international trading and monetary system” (Haywood, 2007 : 156). Two major structures emerged from the Bretton Woods conference, namely a production structure and a financial structure.

The financial structure consisted of the International Monetary Fund (IMF) and the International Bank of Reconstruction and Development (IBRD), which is now know as the World Bank. The World Bank or IBRD was initially setup as a fund to rebuild the demolished European infrastructure. The IMF was designed to act as a “lender of last resort” to bail out countries experiencing balance of payment problems. “At the heart of the Bretton Woods [financial structure] was the proposal to establish a fixed system of exchange rates” which were backed by the only strong currency remaining after the war, namely the United States Dollar (Heywood, 2007 : 156). The production structure was constituted by the General Agreement on Trade and Tariffs (GATT). It was founded on the fundamental principles of non-discrimination and reciprocity among trading nations. Ultimately it was designed to impede the emergence of unilateral trade barriers, and issue thought to be an efficient cause of war. GATT rested firmly on the “most favoured nation” clause requiring nations to trade with nations that could offer the best price. GATT was later subsumed as a single article under the more broad World Trade Organisation (WTO) articles. (Heywood, 2007 : 157). Although these new institutions were focused on “opening up” the international trading system, they also accepted the important roles played by states in managing economic affairs, as represented in the theories of John Maynard Keynes, the leader of the British delegates to the conference (Heywood, 2007 : 157). In this way, the system promoted a liberal international trading system, which contained an implicit “Keynesian compromise” that accounted for the “mercantilist impulse” that fueled state intervention in the market when necessary. (Stephan, 2006) The Bretton Woods system worked well as long as the US economy was strong and “countries held Dollars on the basis of their being 'as good as gold' because the system operated on the basis of fixed convertability into gold”. With a declining US balance of payments position and a resulting over-supply of Dollars held by foreign banks and businesses, the Bretton Woods system weakened and the collapsed entirely with the US allowing the Dollar exchange rate to “float”. (Rourke , 1999 : 475) The collapse of the Bretton Woods system “instituted a major policy and ideological shift” (Heywood, 2007 : 157) on all levels – individual, state and system. The collapse coincided

with the collapse of the Soviet Union – and hence the end of the Cold War. This marked the end of the Socialist economic project and created a space where international and supranational organisations such as the IMF and WTO became increasingly neoliberal – espousing principles of free-trade and free-markets. Individual political actors such as Thatcher and Regan began touting the virtues of market driven economic systems, and slamming the state intervention mercantile policies of the previous era. In policy terms, this dialectical synthesis gave rise to the writings of John Williamson who outlined the principles of the Washington Consensus - “The name given to a list of ten neoliberal policy recommendations for countries willing to reform their economies”(Nafm, 2000). It is in the wake of this policy that Southern Africa (and infact the global economy) finds itself today. Over time, through the legacy Bretton Woods institutions – now revamped to conform to the policy dictates of the Washington Consensus – countries wishing to interact on the global stage have been expected to adjust their economic policy in line with free-trade and free-market principles – leaving no space for the state to regulate or intervene in the market. Pressure on countries in regions such as Southern Africa to conform to the policy is not managed by traditional realist “power models”, but rather through more coercive measures such as loans from the IMF and World Bank being contingent on Structural Adjustments as laid out by these institutions (Rourke , 1999 477). Having laid out an historical description of the system in which the Southern African state finds itself, attention is now turned to regionalism and how state and non-state actor's projects manifest regionally within this historically contingent framework. Regionalism as a theoretical framework can be understood as being divided into two teleological divisions, namely old regionalism and new regionalism. As Stephan et al point out, “Early theories of regionalism were almost entirely Eurocentric, and many of the ideas which first emerged in response to the European experience are still influential today” (Stephan, 2008). Further, old regionalism can be seen as having two intellectual frameworks – functionalism and neofunctionalism. Functionalism was designed as a normative device for the establishment of mechanisms in Europe to ensure peace. Mitrany, a key advocate of functionalism, says “the task facing us is how to build up the reality of a common interest in peace … not a peace that would keep nations quietly apart, but a peace which would bring them actively together” (Stephan, 2008). Functionalism claimed that governments

creating technical agencies could unite people across borders as a way to “side step … national loyalties” (Stephan, 2008). Haas – generally regarded as the father of functionalism – built on this to eliminate the disjunction of politics and economics by introducing the concept of “functional spillovers” (Stephan, 2008). Essentially this insight suggests that cross border interaction would not just unite people around one particular technical project, but rather that these interactions would increase international interdependence, creating functional spillovers which would allow integration to deepen under its own momentum. New regionalism “moves away from conventional state-centric and formalistic notions of regionalism... and is characterised [by the new roles] played by civil society, market forces, transnational actors and professional and business associations.” (Stephan, 2006 : 271). Within new regionalism there are two perspectives found. The first perspective – referred to as “open regionalism” - conforms broadly to the dictates of the Washington Consensus and calls for the liberalization of trade and implementation of free-market principles in the region. This perspective, mapping so closely to the contingent world-order as described in the historical context above, “enjoys a dominant status within policy making circles today” (Stephan, 2006 : 272). However, a second new regionalism also emerges, led by writers such as Bjoern Hettne, which “attempts to bring the political back” into regionalism. This approach is referred to as the “developmental integration approach” and arose with the growing realization that economists analyzing regionalism tend to look primarily at market factors of production, and “assume away the relevance of institutional and political force” (Stephan, 2006 : 272). Where “open regionalism” can be seen as causing globalisation – through the liberalization policies of the Washington Consensus schematics – the more critical second approach often sees “regionalism as a response to globalisation … sometimes going as far as saying its the only response to global market forces” (Stephan, 2006 : 272). Old regionalism played out – in line with the historical context above – during the cold war era. It was thus characterised as inward looking, protectionist (as the Keynesian compromise would support) and concerned with security. For developing countries such as the ones in the Southern African region, “regionalism seemed to offer a route where they could protect themselves from the [effects] of world market conditions, while allowing infant industries to take advantage of expanded regional markets behind walls of protectionist barriers” (Stephan, 2006 : 266).

With the subsiding of the Cold War, the collapse of the Bretton Woods system and consequent surge in globalisation through neoliberal policy perpetuation, and the rising of the world context as described above, the new wave of regionalism was far less concerned with the security dilemma of the past and much more concerned with dealing with the “sense of vulnerability of marginalization from world markets through the fashioning of new and more effective regional organisations” (Stephan, 2006 : 270). According to the Global Economic Perspectives and Developing Countries World Bank report, Sub-saharan Africa represents the least economically dynamic region in the world (Arnold, 2005 : 952). South Africa is the largest, most dynamic country in the region, but this does not alter the fact that it belongs to a region that in world terms is marginal (Arnold, 2005 : 952). In 1994 the South African government changed, as the apartheid regime was voted out of power, and a new era for South African politics dawned with the election of the ANC government headed by a president Nelson Mandela. The new regime was elected on the back of a policy called the Reconstruction and Development Programme (RDP). (Arnold : 2005, 786) However, after setting up a ministry to oversee and implement RDP, the new South African government switched away from RDP towards a new policy called the Growth, Employment and Redistribution strategy (GEAR). Whereas RDP was developed in a coalition framework with wide consultation of the political and social structures inherent in South Africa, GEAR was developed by a focused group of economists and politicians. GEAR was seen as the neoliberal policy alternative guided by principles of privatization of state assets and free-trade (Arnold, 2005 : 952). The adoption of GEAR was not an instance of the state acting as a unitary actor – and when Finance Minister Trevor Manual announced its adoptions, it was criticized by both COSATU and the Communist Party, setting the stage for a national tension between the neoliberal dictates of GEAR and the labour organizations that are a significant portion of the ANC electoral vote (Arnold, 2005 : 786). In 1994 South Africa joined the Southern African Development Community (SADC). As a result of the dictates of GEAR and its focus on trade liberalization and the relaxation of the controls of foreign investment, South Africa has seen significant growth in its exports and trade into the region. This ties up with the theory above espoused as “open regionalism”.

As Stephan et al point out, the neoliberal reforms in the region have largely failed to live up to their promises. They have certainly created a more stable macroeconomic condition and freer markets, but this has not been accompanied by investment or increased growth. This has resulted in the benefit of the regionalism practiced in SADC being largely to the benefit of private companies in South Africa. This is due to the significant lack of intra-regional trade, as well as the fact that trade in the region is skewed in South Africa's favour, in extremis. (Stephan, 2006 : 300) However, it is also true that “open regionalism” is increasingly not the only case of regionalism in SADC. Although given the world context that has been described above, “open regionalism” is almost guaranteed to be in existence wherever there is regionalism in the world today, “a number of sectoral initiatives have been embarked on which differ significantly from traditional neoliberal notions of how this should occur. These involve significant state intervention and explicit political co-operation” (Stephan, 2008). This ties up closely with the ideas of the “developmental integration approach”, described above as the critical second version of “new regionalism”. An example of this kind of interaction and integration can be seen in the analysis of the Southern African Power Pool (SAPP) by Stephan et al in the article “new regionalism in southern Africa: functional developmentalism and the Southern African Power Pool”. The SAPP came into being and moved towards implementation in December 1995 when the national utilities of nine SADC countries joined an Inter-Utility agreement. “It was the first formal international power pool established outside Europe or North America … and in terms of its constitution, only utilities, not individual power stations, are allowed to join” (Stephan, 2008 : 69). From this it can be seen how this represents a move away from open regionalism towards development integration regionalism, by constraining and controlling the process through mechanisms of the sovereign nation state. “The SAPP is based on cooperative principles wherein the utilities coordinate and cooperate in the planning and operation of their systems to minimize costs and maintain reliability and [ensure that cost recovery is effective and efficient]” (Stephan, 2008 : 69) Further, SAPP has allowed for the emergence of the Southern African Grid - “an ingenious and effective way of countering crippling shortages of electricity by moving power around the sub-continent. This has helped free electricity supply in the SAPP countries from the impact of drought and other natural disasters, particularly as the interconnections allow for

the routing of power under almost all circumstances” (Stephan, 2008 : 70). Thus it is seen that regionalism in the SADC region IS somewhat of a two-pronged approach. There is the necessary and contingent process of “open regionalism” driven by powerful global market forces and interests. But similarly there is the fork of the “developmental integration approach” to regionalism, driven by the state to guide markets and effect functional political spillovers. The spillovers for regionalism in the Southern African region is the ability for the developmental integration approach to redress some of the imbalances that exist in the region as it stands, and herein lies the hope. Domestic political concerns are of key importance when considering the effectiveness and posibilities of regionalism. South Africa faces significant domestic hurdles to open regionalism, because of the neoliberal slanting towards free-trade and free-markets. As mentioned earlier, a significant percentage of the ANC political support is located in the trade unions of COSATU and the Communist Party. In two level games terminology (Putnam, 1988), the South African leader finds himself sitting with his domestic requirements to be pro-labour and politically left on the one hand, as well as business calling for increased ability to export into the region, and hence politically right, on the other. The international game-board plays out in the world context constructed in the first part of this essay, in a neoliberal framework calling for free-trade and open markets. The leader (president Mbeki or president Zuma have both faced this same problem), faced with a seemingly unresolvable dilemma must give away significant side payments in order to progress. Giving in to the pressures of “open regionalism” and globalisation, business is satisfied but domestic labour interests are unhappy with an insecure and relaxed labour market. To overcome this, our fearless leader turns, as well, to the “developmental integration approach”, an approach wherein the process can be controlled to a greater degree. Creating regional initiatives, such as SAPP, enables the leader to give away side payments in the “currency of the negotiation” (Putnam, 1988) with labour, namely... jobs. The functional spillover is that the imbalances brought about by unconstrained open regionalism can be managed. To extend the SAPP example... “there will be an opportunity

to generate significant revenue through the export of power to other member states connected to the power pool, as well as countries outside the pool in northern Africa and Europe. South Africa should be a net importer of electricity … and if the country is able to source more electricity from beyond its borders, this will hopefully go some way towards alleviating the chronic trade imbalances between South African and the rest of SADC, and encourage other forms of regional trade in which non-SADC countries have significant comparative advantages” (Stephan, 2008). In conclusion, it has been shown how the Southern African region exists in an historically contingent world system. Further it can be seen how the interaction at the domestic level of South Africa, the regions largest economy, effect the interactions in the region. Through carefully planned “developmental integration” the prospects for regionalism of this kind bring new hope to the developing world, through the increase of regional trade, access to large regional and international markets. Further, creating large, politically coherent and stable regions will enable Southern Africa to negotiate from a stronger position on the world stage. But all of this is only possible through an iterative processes of continual integration, and not just by allowing the market to dictate direction and progress.

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