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Development Economics and Perspectives on the South African Economy

  • Neva Seidman Makgetla

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As a rule, in the Third World, social scientists and governments present their economic strategies in terms of national ends—typically, in the 1980's, as some variant of a supply-side, basic-needs or socialist approach. Similarly, in South Africa, the debate on policies to transform the economy away from apartheid often focused on the feasibility and desirability of different social systems. Yet each strategy originally arose out of a particular analysis of problems commonly afflicting Third World countries, including South Africa. Making that analysis explicit permits a more systematic evaluation of its applicability to South Africa and other countries. To facilitate such an assessment, this article reframes the three development strategies that rose to prominence in the 1980's in line with a problem-oriented, explanatory methodology, and suggests how each general analysis would apply in South Africa.

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1. See Leatt, J., Kneifel, T. and Nurnberger, K., Contending Ideologies in South Africa (1986) [hereinafter Leatt]; Davies, , Nationalisation, Socialisation and the Freedom Charter, 1987 S. Afr. Lab. Bull. 12 [hereinafter Davies]; Lipton, M., Capitalism and Apartheid (1985) [hereinafter Lipton]; Nattrass, J., The South African Economy: Its Growth and Change 300 (1985) [hereinafter Nattrass]; Thomas, , Post-Apartheid South Africa's Economic System, special issue, 17 S. Afr. Int'l 2 (1986) [hereinafter Thomas].

2. For a more detailed discussion of the limitations of an ends-means methodology, see Makgetla, and Seidman, , The Applicability of Law and Economics to the Third World (1987: copy of file at Boston University School of Law).

3. In economics, a significant debate between capitalist and socialist theories is whether the market represents an unalterable condition necessary for any economy to function no matter what its drawbacks, or a malleable cause of various social problems which is open to policy influence.

4. In other words, the methodology used here implies a conflict view of society.

5. See Friedman, , The Methodology of Positive Economics, Essays on Positive Economics (1953). As McCloskey points out, although modern economists remain reluctant to adopt them wholeheartedly, Friedman's views have remained influential. See McCloskey, R., The Rhetoric of Economics 8 (1985).

6. For instance, von Hayek refers to an “explanation in principle,” apparently meaning a description of a widespread situation in the form of an ideal type which might clarify thinking without being testable. Hayek, F. V., Studies in Philosophy, Politics and Economics 16 (1965). In their standard introductory textbook, Ruffin and Gregory argue that “(a) theory is simply a plausible and coherent explanation of how certain facts are related. A theory typically consists of at least one hypothesis of the form, ‘if A, then B.’ Two examples of hypotheses are: ‘If a good's price falls, people will want to buy more of it’ ….” The only examples they give of testing theories involve comparing a prediction with an actual outcome. 2 Ruffin and Gregory, Principles of Economics 67 (1986).

7. It is important in this economic methodology to distinguish between “problems” in the sense of something being wrong with peoples' lives related to living and working conditions and “problems” in the sense of systemic social or economic factors that injure people. For example, low profits or wages may be an individual problem; low investment, devaluation, or inflation may not be conceived of by the individual as a problem, although they may cause low profits or wages. If cause and effect are confused, solutions may be devised to “solve” the presumed cause of a problem without testing their pertinence as, for instance, when certain Third World countries labelled slow growth as the main economic problem and oriented their policies toward growth as the cure for poverty.

8. See Seidman, R., The State, Law and Development (1978).

9. On supply-side theory in general, see Swartz, T., Bonello, F. and Kozak, A., The Supply Side: Debating Current Economic Policies (1983). For applications to the Third World, see IMF, Impact of External Environment and Domestic Policies on Economic Performance in Developing CountriesWorld Econ. Outlook (04 1985); World Bank, Industrialisation and Foreign Trade, World Development Report (1987); Berg, E., Accelerated Development in Sub-Saharan Africa (1982).

10. As Leff notes about Richard Posner's work, this tendency makes the work of leading neo-classical analysts and IMF reports resemble a picaresque novel:

Think of the great ones, Tom Jones, for instance, or Huckleberry Finn, or Don Quixote. In each case the eponymous hero sets out into a world of complexity and brings to bear on successive segments of it the power of his own particular personal vision. The world presents itself as a series of problems; to each problem that vision acts as a form of solution; and the problem having been dispatched, our hero passes on to the next adventure. The particular interactions are essentially invariant because the central vision is single. No matter what comes up or comes by, Tom's sensual vigor, Huck's cynical innocence, or the Don's aggressive romaticism is brought into play, forever to transform the picture of the pictured world (without, by the way, except in extremis, transforming the hero).

Similarly, in the work of authors in the neo-classical tradition, we watch Economic Analysis ride out to combat, ultimately,

the multi-headed ogre who imprisons fair efficiency in the castle keep for stupid and selfish reasons. In each case Economic (I suppose we can be so familiar) brings to bear his single-minded self, and the Evil Ones (who like most in the literature are in reality mere chimerae of some mad or wrongheaded magician) dissolve, one after the other.

Leff, A., Economic Analysis of Law: Some Realism About Nominalism, 60 Va. L. Rev. 451–52 (1974).

11. In fact, the model arose from the attempt formally to define the conditions under which a free market would necessarily achieve efficiency. In that sense, perfect competition represents the laissez faire Utopia. Similarly, one could construct a model to suggest the requirements for entirely efficient state planning. The conditions would be no more improbable—indeed, one requires only the assumption of perfect knowledge and factor mobility found in the model of perfect competition. See Kennedy, and Michelman, , Are Property and Contract Efficient?, 8 Hofstra L. Rev. 711 (1980).

12. See Kantor, B. and Rees, D., South African Economic Issues 5 (1982) [hereinafter Kantor and Rees]. O'Dowd argues that since South Africa's growth rate equalled or exceeded that of most other countries through the early 1970's, apartheid could not be labelled inefficient. See O'Dowd, , South Africa in the Light of the Stages of Economic Growth, quoted in Leftwich, South Africa: Economic Growth and Political Change (1974) [hereinafter Leftwich].

13. Truu, , Economics and Politics in South Africa Today, 54 S. Afr. J. of Econ. 1, 346 (1986).

14. Calculated from Economist Intelligence Unit, Country Profile: South Africa 1986/1987 at 29 [hereinafter Country Profile 1986/87].

15. Stadler, J., Heerer, J. Van Den and Kritzinger, L., The Debt Standstill and Beyond 1 (1986) [hereinafter Stadler].

16. Black, and Stanwix, , Crisis and Restructuring in the South African Manufacturing Sector, (paper presented at Workshop on Macroeconomic Policy and Poverty in South Africa, Cape Town, 08 29-30, 1986) [hereinafter Black and Stanwix].

17. 3 Houghton, D.H., The South African Economy 44 (1980).

18. See van Zyl, The Industrialisation Challenge [hereinafter van Zyl], and Dickman, Foreign Capital and the Environment for Sustainable Growth [hereinafter Dickman], in Thomas, supra note 1; see also Lipton, supra note 1, at 246.

19. Kantor and Rees, supra note 12, at 47.

20. Id. at 48-49.

21. See Country Profile 1986/87, supra note 14, at 16. See also Economist Intelligence Unit, Country Profile: South Africa First Quarter, 1987, at 20 [hereinafter Country Profile 1987].

22. Stadler, supra note 15, Fig. 13.

23. Id.

24. See Kantor and Rees supra note 12, at 104-05.

25. Stadler, supra note 15.

26. Dickman, supra note 18, at 59.

27. Lipton, supra note 1, at 247; see also Leatt, supra note 1, at 37; Business International, A Fresh Look at South Africa 99 (1982) [hereinafter Business International].

28. Country Profile 1986/87, supra note 14, at 21.

29. See Kantor and Rees, supra note 12, at 49; see also Business International, supra note 27, at 99.

30. Horwitz, R., The Political Economy of South Africa 183 (1967) [hereinafter Horwitz]; see also Bromberger, Economic Growth and Political Change in South Africa, quoted in Leftwich, supra note 12, at 62 [hereinafter Bromberger]; Rupert, , Strength Through Diversity 39 (1981) [hereinafter Rupert].

31. Calculated from Lipton, supra note 1, table 6 at 382; see also id. at 235-38.

32. Rupert, supra note 30, at 30.

33. Business International, supra note 27, at 44.

34. Id. at 96-97.

35. Dickman, supra note 18, at 61; see also Kantor, The Balance of Payments and the Exchange Rate Question, quoted in Kantor and Rees, supra note 12, at 118.

36. Lipton, supra note 1, at 253.

37. Business International, supra note 27, at 82.

38. Id. at 88.

39. Holden, , Exchange Rate Policy for a Small Open Economy in a World of Floating Exchange Rates: The Case of South Africa, Economics Research Unit, Univeristy of Natal, Occasional Paper 17 at 9 (1985).

40. See Stadler, supra note 15.

41. A view shared by Business International, supra note 27, at 93-94.

42. Between 1924 and 1933, the percentage of white laborers employed by the South African Railways and Harbours rose from 9.5% to 39%, while the proportion of Africans declined from 75% to 49%. Horwitz, supra note 30, at 196, 251.

43. See Business International, supra note 27, at 83, 87; Horwitz, supra note 30, at 196, 251.

44. See discussions of Iscor in Horwitz, supra note 30, at 252-53.

45. Business International, supra note 27, at 87.

46. Id.

47. Country Profile 1986/87, supra note 14, at 22.

48. See Horwitz, supra note 30; Simkins, , How Much Socialism Will Be Needed to End Poverty in South Africa?, paper presented to Conference on the South African Economy After Apartheid, York University (09/October 1986) at 5 [hereinafter Simkins]; Rees, Agricultural Policy in South Africa - An Evaluation, in Kantor and Rees, supra note 12.

49. See Kantor and Kenney, Sources of Economic Growth, quoted in Kantor and Rees, supra note 12, at 15 [hereinafter Kantor and Kenney]; Bromberger, supra note 30, at 95.

50. Bromberger, supra note 30, at 63.

51. Supply-side adherents usually only imply that members of interest groups pressing for unfair advantages are lazy and dishonorable. Horwitz expresses the position more openly in his discussion of poor whites. See Horwitz, supra note 30.

52. Horwitz, supra note 30, at 4-5.

53. Id. at 8; see also Lipton, supra note 1, at 113-16; Nattrass, supra note 1, at 73-74.

54. Lipton, supra note 1, at 294.

55. Dickman, supra note 18, at 58.

56. Id. at 62.

57. Kantor and Kenney, supra note 49, at 34.

58. Simkins, supra note 48, at 19-20.

59. Id. at 17.

60. Id. at 6.

61. Bromberger, supra note 30, at 97.

62. Kantor and Rees, supra note 12, at 47; see also Moore, and Smit, , Wages, Money and Inflation, 54 S. Afr. J. of Econ. 1, 93 (1986).

63. Brand, The Development Task, in Thomas, supra note 1, at 53 [hereinafter Brand].

64. van Zyl, supra note 18, at 67.

65. Simkins, supra note 48, at 19-20; see also Lombard, , On Economic Liberalism in South Africa, Bureau for Economic Policy and Analysis, University of Pretoria 11 (1979) [hereinafter Lombard].

66. Simkins, supra note 48, at 15.

67. Id. at 17.

68. Lipton, supra note 1, at 12.

69. Kantor and Rees, supra note 48, at 36.

70. Brand, supra note 63, at 53.

71. Kantor and Rees, supra note 48, at 38; see also Lomard, supra note 65, at 13.

72. Id.

73. See Country Profile 1986/87, supra note 14, at 21-22; Country Profile 1987, supra note 21, at 19.

74. Dickman, supra note 18, at 60.

75. See ILO, Report on the World Employment Conference (1976); Meier, G., Emerging From Poverty: The Economics That Really Matters (1984); Leipziger, D., Basic Needs and Development (1981).

76. Tollman, , Thoughts on Planning for Basic Needs in South Africa [hereinafter Tollman], in Second Carnegie Inquiry into Poverty in South Africa, No. 9 at 11 (1984) [hereinafter Second Carnegie Inquiry].

77. Keenan, and Sarak, , Black Poverty in South Africa, in 12 S. Afr. Lab. Bull. No. 4 at 108–09 (1987) [hereinafter Keenan and Sarak].

78. Calculated from World Bank World Development Report at 203, table 1 and 258, table 29 (1987).

79. Kantor, Macroeconomic Issues, in Kantor and Rees, supra note 12, at 69.

80. Bromberger, How Much Work Do the African Unemployed Do?, in Second Carnegie Inquiry, supra note 76, No. 271, at 3-4.

81. See Country Profile 1986/87, supra note 14, at 10.

82. Keenan and Sarak, supra note 77, at 114-17; see also Ndaba, Malnutrition in Children in South Africa [hereinafter Ndaba], in Second Carnegie Inquiry, supra note 76, No. 278.

83. Keenan and Sarak, supra note 77, at 110; see also Ndaba, supra note 82, at 8.

84. Nattrass, supra note 1, at 182.

85. Id. at 288.

86. Tollman, supra note 76, at 6.

87. Nattrass, supra note 1, at 95.

88. Id. at 29.

89. Id. at 99.

90. Black and Stanwix, supra note 16, at 5.

91. Nattrass, supra note 1, at 112-13.

92. Id. at 162-63.

93. Rupert, supra note 30, at 97.

94. Bell and Padayachee, Unemployment in South Africa: Trends, Causes and Cures, Second Carnegie Inquiry, supra note 76, No. 119, at 12, table 2; Nattrass, supra note 1, at 167.

95. Country Profile 1986/87, supra note 14, at 16; Country Profile 1987, supra note 21, at 20.

96. See Country Profile 1986/87, supra note 14, at 39.

97. Black and Stanwix, supra note 16, at 22.

98. Nattrass, supra note 1, at 31.

99. Id. at 86.

100. Black and Stanwix, supra note 16, at 22-24.

101. Levy, , Industrialisation and Inequality in South Africa, Saldru Working Paper No. 36 at 1415 (1981) [hereinafter Levy].

102. Id. at 5.

103. Black and Stanwix, supra note 16, at 23-24.

104. Nattrass, supra note 1, at 109.

105. Levy, supra note 101, at 16.

106. Nattrass, supra note 1, at 125.

107. Nassim, Education and Poverty: Some Perspectives, Second Carnegie Inquiry, supra note 76, No. 94, at 30.

108. Nattrass, supra note 1, at 291-92.

109. Id. at 31.

110. Id. at 122.

111. Leatt, supra note 1, at 27.

112. Nattrass, supra note 1, at 66.

113. Id. at 116.

114. Id. at 117.

115. Id. at 96.

116. Nattrass, , Politics and Liberal Economics in the South African Context, 12 S. Afr. Int'l 4, 187 (1987) [hereinafter Nattrass].

117. Leatt, supra note 1, at 28.

118. Black and Stanwix, supra note 16, at 20-21.

119. Id. at 56-57.

120. Simkins, Public Expenditure and the Poor: Political and Economic Constraints on Policy Choices Up to the Year 2000, Second Carnegie Inquiry No. 253, supra note 76, at 30.

121. Keenan and Sarak, supra note 77, at 114.

122. Nattrass, supra note 1, at 303; see also Black and Stanwix, supra note 16, at 44-45.

123. McGrath, M.D., Distribution of Personal Wealth in South Africa 59 (1982) [hereinafter McGrath].

124. Black and Stanwix, supra note 16, at 57.

125. Thomas, Towards a “Socialist Market Economy”, in Thomas, supra note 1, at 104.

126. Nattrass, supra note 1, at 307-08.

127. Id. at 308.

128. Nattrass, supra note 116, at 186.

129. Nattrass, supra note 1, at 79.

130. Ndaba, supra note 82, at 17-20.

131. Levy, supra note 101, at 17.

132. Nattrass, supra note 116, at 189-90.

133. McGrath, supra note 123, at 48-49.

134. Nbada, supra note 82, at 17-20.

135. McGrath, supra note 123, at 48-49.

136. See Motsuenyane, NAFCOC in Search of Solutions in Southern Africa, in Thomas, supra note 1, at 1.

137. Nattrass, supra note 116, at 189-90.

138. Id.; see also Thomas, Toward a “Social Market Economy”, in Thomas, supra note 1, at 104.

139. Rupert, supra note 30, at 99.

140. Id. at 100.

141. Black and Stanwix, supra note 16, at 45.

142. See Marx, , Economic and Philosophic Manuscripts of 1844 and Critique of the Gotha Program, in 2 Tucker, R., The Marx-Engels Reader (1978); Marx, K., Capital (1967); Engles, F., Socialism: Scientific and Utopian (1975). On Marxist development theory, see, inter alia, Baran, P., The Political Economy of Growth (1975); Frank, A., Latin America: Underdevelopment or Revolution (1969); see also Wilber, C., The Political Economy of Development and Underdevelopment (1988).

143. Marx's understanding of alienation emerges perhaps most clearly from the contrast with his socialist Utopia. His recurring paradigms for a nonalienated society include the family as an example of resource distribution where conflict remains personalized, so that some empathy with one's opponents lingers, and the pre-capitalist craftsperson as an example of inherently creative work.

144. COSATU Executive Committee, A Message to All Members of COSATU, reprinted in 12 S. Afr. Lab. Bull. No. 2, at 52 (1987) [hereinafter COSATU Executive Committee].

145. Labour Research Service, Economic Notes for Trade Unions, 12 S. Afr. Lab. Bull. No. 4, at 124 (1987), quoting George, Lloyd, writing in The Beehive in 1874, to argue that workers should earn “Not a miserable allowance to starve on, but living wages.” See also Jack, , Towards a “Living Wage”: Workers' Demands Over Sixty Years, 12 S. Afr. Lab. Bull. No. 3 (1987).

146. COSATU Congress, Resolutions, 1987, reprinted in 35 Rev. of Afr. Pol. Econ. 8283 (1987) [hereinafter COSATU Congress].

147. Keenan and Sarak, supra note 77, at 110.

148. Cobbett, , Industrial Decentralisation and Exploitation: The Case of Botshabelo, 12 S. Afr. Lab. Bull. No. 3, at 95, 101–03 (1987) [hereinafter Cobbett].

149. COSATU Executive Committee, supra note 144, at 53.

150. Isizwe, , Errors of Workerism, 11 1986; reprinted in 12 S. Afr. Lab. Bull. No. 3, at 5556 (1987).

151. Cobbett, supra note 148, at 102.

152. Motlatsi, J., 1987 - the Year the Mineworkers Take Control, speech to the 1987 NUM Congress, reprinted in 12 S. Afr. Lab. Bull. No. 3, at 44 (1987) [hereinafter Motlatsi].

153. Id. at 53.

154. Id. at 41.

155. Labour Research Service, Economic Notes for Trade Unions, 12 S. Afr. Lab. Bull. No. 3, at 124 (1987).

156. COSATU Congress, supra note 146, at 82.

157. Naidoo, , Address on Health and Safety Day, 28 03 1987, reprinted in 12 S. Afr. Lab. Bull. No. 4, at 33 (1987).

158. Marks, and Rathbone, , Introduction in Industrialisation and Social Change in South Africa: African Class Formation, Culture and Consciousness 1870-1930, at 12 (1982) [hereinafter Marks and Rathbone].

159. Turrell, Kimberly Labour Compounds, in Marks and Rathbone, id. at 67-68.

160. Motlatsi, supra note 152, at 41-42.

161. Davies, supra note 1, at 89-90.

162. Motlatsi, supra note 152, at 42.

163. Adler, Social Welfare and the Democratisation of the Economy, quoted in Thomas, supra note 1, at 86.

164. Hofmeyr, and Nicol, , Deregulation: A Challenge for the Labour Movement, quoted in 12 S. Afr. Lab. Bull. No. 4, at 83 (1987) [hereinafter Hofmeyr and Nicol].

165. See H.J., and Simons, R.E., Class and Colour in South Africa 1850-1950 (1983).

166. Marks and Rathbone, supra note 158, at 6.

167. Muad, The Myth of White Meliorism in South Africa, in Leftwich, supra note 12, at 322 [hereinafter Muad].

168. Hofmeyr and Nicol, supra note 164, at 84.

169. See Muad, supra note 167, at 297-98; Welsh, Political Economy of Afrikaner Nationalism, in Leftwich, supra note 12, at 273.

170. During the 1987 mine strike, the notoriously liberal company, Anglo-American, met black miners' demands for higher wages by firing thousands and refusing to make concessions.

171. This becomes clear from examination of country risk reports by major American banks and from the articles by Brand, Simon, and Dickman cited above.

172. Motlatsi, supra note 152, at 39.

173. Id. at 42.

174. NUM Congress, Political Resolution, reprinted in 12 S. Afr. Lab. Bull. No. 3, at 4748 (1987).

175. COSATU Executive Committee, supra note 144, at 79.

176. Motlatsi, supra note 152, at 44.

177. COSATU Executive Committee, supra note 144, at 52.

178. Motlatsi, supra note 152, at 44.

179. COSATU Executive Committee, supra note 144, at 82.

180. Id. at 79.

181. Id. at 82.

182. In the mid-1980's, the Government of Zimbabwe organized and supplied engineers to several fairly successful worker-owned mines.

183. Davies, supra note 1, at 94.

184. Motlatsi, supra note 152, at 47.

* Dr. Makgetla is an Assistant Professor of Economics at the University of Redlands, Redlands, California.

Development Economics and Perspectives on the South African Economy

  • Neva Seidman Makgetla

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