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The economics of apartheid

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Why did apartheid end? Who benefited from apartheid? What was the National Party ideology when it instituted apartheid? Why did the ANC government have so little room for redistribution when they were elected in 1994? These and many other vexing questions are answered in the December issue of Economic History of Developing Regions, a journal published by the Economic History Society of Southern Africa, in a special issue on the economics of apartheid. All 11 papers have now been published online. The introduction, written by Martine Mariotti and myself, spells out the reasons we decided for a special issue on the economics of apartheid twenty years after it was abolished:

It should surprise no one that the weight of our history hampers our attempts to create a prosperous society. This has been a constant theme in presidential State of the Nation addresses. Of the 25 such addresses since 1994 (two in election years), 20 have mentioned the word ‘apartheid’ at least once. In 2004 Thabo Mbeki, celebrating 10 years of democracy, said that ‘we have always known that our country’s blemishes produced by more than three centuries of colonialism and apartheid could not be removed in one decade’. In 2011 Jacob Zuma said that ‘the legacy of decades of apartheid underdevelopment and colonial oppression cannot be undone in only 17 years’. In more recent addresses, President Zuma has observed that ‘apartheid spatial patterns still persist in our towns and cities’ (2013), and that ‘the culture of violence originated from the apartheid past’ (2014).

The Economics of ApartheidResearchers confirm these views. Poverty levels remain high for black South Africans (Van der Berg 2011; Leibbrandt et al. 2012; Bhorat & Van der Westhuizen 2013; Gradín 2013), their educational attainment and health outcomes continue to lag behind those of white South Africans (Van der Berg 2007; Harris et al. 2011; Spaull 2013; Barbarin & Richter 2013), and unemployment, which was already increasing during the 1970s and 1980s, shows no signs of declining (Banerjee et al. 2008). The distrust and non-cooperation induced by apartheid persist to this day (Burns 2012).

While economists and policy-makers are rightly interested in addressing these consequences of apartheid that affect South Africa today, the task seems to have fallen to economic historians to discover precisely how policy decisions taken during the apartheid era determine the country’s economic growth in the twenty-first century. The stagnation in employment opportunities is a case in point. The shortage of semi-skilled workers caused by the apartheid regime’s statutory job reservation policy obliged manufacturers to overinvest in capital technology, with the result that South African manufacturing became capital intensive rather than labour intensive. The consequence for employment has been low levels of job creation at the unskilled level, precisely the level of skills that the Bantu Education Act of 1953 and subsequent policies had envisaged as being required.

Economic historians are interested in the economics of apartheid not just because apartheid continues to affect South Africans, but because we see analogous situations elsewhere today. Ethnic divisions remain a feature of our times worldwide, perhaps nowhere more overtly than in the continuing conflict between the Palestinian Independent Authority and Israel. Former American president Jimmy Carter (2006) famously called for ‘peace not apartheid’ in this region. In the US, discussions of poverty and inequality often reference apartheid (Massey & Denton 1993).

In South Africa, we continue to extract lessons that hold the promise of not repeating past mistakes. We look for clues to understanding ideologues and their ideologies (Giliomee 2013; Koorts 2014): can we find similarities between Afrikaner nationalism in the early twentieth century and black nationalism in the twenty-first? We investigate apartheid policy counterfactuals (Bhorat & Ravi Kanbur 2006) because they provide a sobering perspective on current trade-offs: should government focus on high quality education for a select few, or education for all, but of lower quality? And at the macroeconomic level we consider the global response to apartheid policies (Kaempfer and Lowenberg 1988; Moll 1991): do economic sanctions force a regime change, or do they instead strengthen the oppressor’s hand?

The good news is that we are getting better at understanding how the past affects us and recognizing analogies between past and present. With the tools of econometrics, South African economic history studies are adding a valuable quantitative analysis to the rich qualitative analysis that is growing larger each year (Fourie & Schirmer 2012). The digitization of data previously buried in archives and libraries is beginning to make the apartheid era more accessible. Studies of apartheid can contribute to important themes in the economic history literature, such as the longevity of institutions and path dependence (North 1990; David 1994; Acemoglu et al. 2005). The era provides natural experiments with which we can analyse human behaviour in response to distorted incentives. The benefit of such experiments is that the inferences drawn are causal (Diamond & Robinson 2010). And because South Africa’s twentieth-century experience is a microcosm of global development, with the incomes of rich and poor diverging, the apartheid and post-apartheid periods serve as an analogy for the process of globalization and the potential effects of greater integration (Dalby 1998).

This special issue brings together the work of economists and historians to showcase recent developments in the study of the economic history of apartheid. We hope that the papers will inspire scholars to continue to work on this topic, to explore underused data sets and to maintain the conversation about this definitive era in South Africa’s history.

It is especially exciting to see younger researchers tackling this tough research area. As we report in our contribution, newly digitised, micro-level South African data, often with spatial features, allow for much deeper insights into not only the South African past but in things that are important to social scientists in general, like the political economy of policy-making. We discuss, for example, the fascinating work of LSE PhD-student Ed Kerby, University of Illinois PhD-student Nicolas Bottan, Harvard PhD-student Martin Abel, UCLA PhD-student Katherine Eriksson, MIT PhD-student Daniel de Kadt and Columbia PhD-student Laurence Wilse-Samson. Their affiliations include some of the leading economics departments in the world. That alone should be an indication of the treasure-trove of research possibilities the apartheid period offers.

But challenges remain. Although some are South African, these PhD-students are all based at universities outside South Africa. They are also all white. Let’s hope that the excellent research being done by a younger generation of (foreign-based) economists can act as a catalyst to encourage South African students to delve into an economic past that will remain with us for some time to come.

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Written by Johan Fourie

October 22, 2014 at 11:37

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  1. […] The Counterreformation had some famous economic effects. After Antwerp fell to the American-bullion-fattened armies of the Holy Roman Emperor, Protestants in Flanders were given the choice of exile or recantation. Flemish Protestants thus fled to Dutch cities (where they also found Sephardic refugees from Spain). They also boosted the English wool industry in Norwich. Many of the merchants in 18th century London were Huguenots. Less well known is the impact of Huguenot refugees in Prussia. South African economic historian Johan Fourie blogs about a paper he co-authored which found that Huguenot settlers in the Cape Colony who had come from wine-producing regions of France were more productive than those from wheat-producing regions, and this disparity endured for almost a century. He also concludes, the foundation of slavery in South Africa was laid by the great expansion of viticulture and the shortage of labour in the Cape Colony. That paper appeared in the Economic History Review which had a special issue devoted to the “Renaissance of African Economic History“. Bonus: The Economics of Apartheid […]


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