Academic journal article Contemporary Economic Policy

Why South Africa's Apartheid Economy Failed

Academic journal article Contemporary Economic Policy

Why South Africa's Apartheid Economy Failed

Article excerpt


Political and economic reform began to take place incrementally in South Africa in the 1970s and culminated in the 1990s with the dismantling of the apartheid system, legalization of the African National Congress (ANC), and the democratic election of a black majority government. Significant foreign pressures brought to bear on South Africa's white government from the mid-1980s onward preceded apartheid's demise. Therefore, the question arises as to whether primarily these foreign influences precipitated the collapse of apartheid, or whether other factors were more important.

Much of the literature on the political economy of apartheid suggests that the practical implementation of apartheid policies over time was sensitive to changes in the costs and benefits of those policies to white South Africans (Hazlett, 1988; Lowenberg, 1989; Williams, 1989; Lingle, 1990). In this respect, apartheid was not blind dogma so much as a rational response by white policymakers to existing constraints and incentives. Thus, the fundamental cause of the abandoning of apartheid must be sought in far-reaching changes in the costs and benefits of apartheid itself, as perceived by white South Africans. This paper traces these changes to a number of inherent weaknesses in the apartheid system. These weaknesses, although certainly exacerbated by foreign sanctions, would have existed even in the absence of sanctions and ultimately would have destroyed the viability of apartheid even if sanctions had never been applied.


The core of apartheid comprised restrictions on the rights of blacks to own or occupy property in designated "white" areas as well as regulations preventing direct labor market competition between blacks and whites (Lowenberg, 1989; Williams, 1989, p. 121). From the outset, white labor and farming interests, initially brought together in the Pact government of 1924, sought influx control and job reservation policies. This alliance of Afrikaner nationalists and white laborites formed the political basis of subsequent segregationist and apartheid governments (Lundahl, 1992, pp. 166-167). White farmers benefited from legislation restricting geographical and occupational mobility of black labor because these restrictions increased the supply of rural workers, lowering agricultural wages. White workers also benefited from the reduced flow of black workers to the industrial sector because most white workers at that time were unskilled or semi-skilled and directly competed with blacks for jobs. Although clearly advantageous to white labor and agriculture, influx control and job reservation laws were inefficient from the standpoint of society as a whole because they hindered the allocation of scarce resources to their highest valued uses (Jones and Muller, 1992, p. 183).

Economic realities undermined job reservation from its inception (Jones and Muller, 1992, p. 292). Employers, for example, routinely circumvented the job color bar by diluting jobs to allow blacks to move into positions nominally reserved for whites (Jones and Muller, 1992, p. 185; Lundahl, 1992, p. 169). Job dilution occurred by "renaming the jobs blacks moved into and according them lower status and pay. Thus on the railways whites were termed 'train marshallers' and blacks 'shunters;' whites were 'ticket collectors,' blacks were 'ticket examiners'" (Lipton, 1985, p. 63). Precisely because employers possessed a compelling interest in replacing expensive white workers with cheaper black workers, the only way that white workers could protect their privileged position was by capturing the power of the state to enforce racial discrimination (Williams, 1989, p. 128).

The costs of apartheid policies mounted as the structure of the South African economy changed, particularly after the 1960s when manufacturing surpassed the combined primary sectors as a share of GDP (Lipton, 1985, p. …

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