Academic journal article Economic Inquiry

An Economic Theory of Apartheid

Academic journal article Economic Inquiry

An Economic Theory of Apartheid

Article excerpt


Apartheid is a regulatory system designed to effect redistributions in favor of white workers and farmers at the expense of black workers and white capitalists. This paper uses a competitive interest group theory of the apartheid state to formalize a collective choice analysis of apartheid as endogenous policy. The "level" of apartheid is conceived as a continuous variable that is determined by the relative influence of competing interest groups within the white polity and by the costs of maintaining and defending apartheid institutions. Some empirical implications of this approach are explored.


Since South African apartheid embodies essentially a complex web of politically determined restrictions affecting the level of employment and mobility of the black labor force, it is not surprising that most economic analyses of apartheid institutions have focused on their evident allocative inefficiency and distributional inequity (see Nattrass [1981, 31-32]). Some economists have hinted at the possibility of formally modeling the economic, social and political institutions of apartheid as endogenous products of a process of collective choice. In other words, the question has been raised of the existence of an economic "rationale" for apartheid. Thus, Richard Porter [1978] and subsequently Mats Lundahl [1982] have initiated rigorous analysis of what Porter terms a "South African-type" economy--a competitive market system, the operation of which is constrained by state-imposed apartheid regulation.

While the Porter-Lundahl characterization of the South African-type economy is an invaluable starting point for an economic analysis of apartheid, it falls short of providing a satisfactory explanation for the existence and extent of South African discriminatory policies. The inevitable contradiction between economic efficiency and the political requirements of apartheid leads both Porter and Lundahl to treat the goals of apartheid as exogenously determined by political considerations.(1) The purpose of this paper is to show how it is possible to provide an explicitly economic explanation of apartheid institutions. Apartheid is viewed here as a vector of policies which can be varied in intensity along a continuum. Thus the level of apartheid regulation is treated as a continuous endogenous variable, responsive to the relative influences of interest groups which receive benefits or incur costs associated with apartheid.

The intention is not to claim originality in recognizing the economic motives for apartheid policy (which have been well documented in the literature, as indicated in section II), but rather to formalize this approach (in section III) and to suggest some methods of testing its implications (in section IV). The effort to formalize an analysis of apartheid in terms of a competitive interest group model of social choice should be of interest not only to students of South African, but also to economists more generally concerned with endogenous public policy. The South African case provides a laboratory for this type of analysis because the boundaries which delineate interest groups are very clearly drawn.


It has long been recognized by economists and scholars of South Africa that the apartheid system, representing a comprehensive set of regulations affecting all aspects of economic, social and political life, arose essentially as a response on the part of the white working class to the threat of black labor market competition.(2) Although apartheid itself is phenomenon of the post-1948 era of National Party rule, it is really only the most recent phase of a long history of white labor elitism and black exclusion, brought about through the medium of an interventionist, statist polity characterized by a racially limited franchise. The harnessing of the instruments of state power to further the interests of the white labor force, at the expense not only of blacks but also of white capitalists, dates from the earliest period of industrialization in South Africa, which followed the discovery of precious minerals in the 1860s and 1870s. …

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