Volume 10, Issues 2 & 3
An Economic History of South Africa: Conquest, Discrimination and Development. Charles Feinstein. London: Cambridge University Press, 2005. 326 pp.
This book seeks to "...provide a broad overview of the character, transformation, initial growth, and final decline of South Africa's economy, and an interpretation of the major factors that explain these developments" (p. xviii). It does not contain original research, but rather aspires to be a synthesis of information already in existence. If I remember correctly, it was Harrison White who thanked his professional colleagues in the “Acknowledgments” section of his Identity and Control by stating that all ideas are already present in networks from which we borrow, thus legitimizing once again the important role of “synthesizers” in social science. Feinstein´s synthesis is astonishing and of high quality, and the book´s main arguments are skillfully argued.
The author first makes observations about South Africa's economy in an international context. Most notably, growth in South Africa appears to have been slow up to 1870; from 1870 to 1913, there was "...the early development of globalization," with expansion and prosperity throughout the world economy; from 1913 to 1950, the world economy fared poorly, though South Africa did well through the 1930s gold boom and during World War II; 1950 to 1973 was a "...'golden age' of dynamic growth"; from 1973 to 1994, there was a general decline in economic performance, and South Africa shared in the "stagflation" (pp. 4, 7). It should be noted that there was quite extreme income inequality between whites and blacks during these periods.
"A strategy of conquest and disposition was pursued energetically by both Dutch and British settlers..." (p. 34). White farmers, the British government, and from the 1870s on, mine-owners, though divided over many issues, were united in their suppression of independent African polities as a means to achieve their objectives. To illustrate this, the author next provides a detailed look at the case of the Pedi, a Sotho-speaking tribe in northeastern Transvaal that clashed with the Boers and later the British, in the second half of the nineteenth century.
The author next considers the use of African labor by whites in more detail. African labor on white-owned farms took four forms: (1) rent tenancy, whereby whites with too much land rented the land to Africans; (2) sharecropping, in which Africans were allowed use of land and a place to live in return for half or more of their crop; (3) labor tenancy, in which Africans agreed to provide a given amount of labor in return for housing accommodations and a small plot to cultivate for themselves; and (4) wage labor, which was extremely popular by the 1930s and predominant after World War II. Employment in mines started to pose serious competition with agriculture for labor by 1890. The mining industry wielded much power over workers, through a system of fixed-term contracts, penal sanctions imposed on workers that broke such contracts, and controlled compounds where workers would live for the duration of their employment. Although initially high, wages became rather low with little recourse by workers, as the industry sought profit.
Discrimination by color had been present since the beginning of the colony, but the explicit use of discrimination did not take place until the mining boom. The national government first did so in 1911 through the Mines and Works Act. The Act was intended to regulate mines for safety purposes, but the government took advantage of it to impose color bars, the "...fundamental reason for [which was]...the desire of white miners to protect their jobs and their very large income differentials" (p. 75). Specific lists were created of skilled trades and occupations reserved for Europeans, including mining specific occupations as well as generic trades required for the repair and maintenance of equipment and buildings. However, conflict arose: due to the gold standard, mines received a fixed price for gold, and thus could only profit by managing expenses. Because Africans were paid low wages, the mining industry had an incentive to allow Africans to participate in white semi-skilled and skilled work. Needless to say, white workers sought to maintain their privileged position, and there were a series of white union organized strikes. Major strikes occurred in 1913, 1914, and 1922.
The role of the country's natural resources in its economic development (from the 1860s on) must be considered. Unlike other areas that depend upon the export of minerals for growth, South Africa was successful in exploiting, most importantly, its gold, and its diamond resources to promote general growth. The author describes the character and expansion of the mining industry in detail, but it suffices to note here that both the gold and diamond industries grew rapidly upon the discovery of the minerals, and that production was concentrated in the hands of a few large companies. It was not long until agriculture was dwarfed by these industries in terms of exports.
Later on, manufacturing would become more important for the economy. Ever since the colony's founding, there was almost no domestic manufacturing industry. Despite a brief pickup in activity during WWI, the industry did not experience sustained growth until 1924. In this pivotal year, the government decided it was in the country's interest to diversify beyond the "wasting asset" of minerals and into manufacturing. Protective tariffs were imposed, and the government set up and owned an electric and a steel company, thus ensuring the requisites for a mature industrialization. The state also owned the railways. The results were generally successful, as specifically detailed by the author (p. 126).
Next the author considers the country's economic performance from after World War II to 1994. The performance from 1950 to 1973 was decent, with a 2.2 percent per annum growth in real GDP and about 3 percent in labor productivity. Mining continued its strength during this period due to the discovery of new gold mines, an increase in the price of gold, and a new demand for uranium. Manufacturing, too, was strong with the help of foreign investors and the demand from the mining industry, though dependence on government protection and assistance remained. A financial sector developed alongside these industries. Finally, commercial agriculture was able to improve its efficiency from the mid 1960s through increased mechanization. However, subsistence farming in the reserves showed no improvement, and South African farming was still sub-par by international standards. The author discusses each of these topics individually in more detail.
The period of stagflation in the early 1970s affected South Africa severely; in fact, real GDP per capita growth was -0.6 percent from the period 1973 to 1994. Other problems included soaring inflation, high unemployment, and a balance of payments problem caused by foreign aversion to the country's apartheid policy. There are three main economic explanations for the country's decline during this period. First, there was the impact of gold. The richest gold mines by this time were becoming exhausted. Additionally, gold had lost its special place in the international monetary system with the demise of the gold standard, and prices started to plunge in the 1980s. The second cause is "...a succession of adverse external economic and political changes" (p. 202). This included a worldwide slow-down in growth from the prior "golden age," a surge in oil prices that created inflation, and a weakening exchange rate that made it harder for manufacturers to export. Finally, the low efficiency and high costs of production in the industrial sector became more significant as the country increasingly relied on this part of the economy to drive growth.
International hostility to apartheid was also starting to cause problems for South Africa. Apartheid as a policy, involving the subjugation of blacks, was implemented in 1948 when the National Party won elections. The party pursued a policy of reversing African urbanization, which, despite the efforts of earlier governments to control it, had proceeded. Of course, such a policy would empower white domination, but it ran afoul of the needs of industrialization. "The government relied primarily on enforcement of an elaborate set of laws and procedures..." to this end, which in part involved non-whites carrying passes which restricted their movement (p. 154). "At the core of the apartheid system was a colossal bureaucratic apparatus of influx controls and labour bureaux, backed up by the oppressive powers of the police" (Feinstein, 2005; 154). The government spoke of a plan to encourage socioeconomic development in the "homelands" (reserves), though nothing much came of this. Africans were further suppressed through these measures: blacks were prevented by law from striking, and were excluded from collective bargaining with their employers; further legislation was enacted to displace blacks from more categories of jobs, so that these could be reserved for whites; and African education was taken over by the national government in 1953, offering a sub-par education designed to prevent competition with whites. The government at the time maintained that apartheid was a system that would encourage economic growth and one that was in the Africans' best interests. However, there was considerable debate and dissent from this view among whites.
Criticism of South Africa's apartheid policy started to gain traction in the mid-1980s. In 1985 and 1986 the European Community, the Commonwealth, the United States, the United Kingdom, and other governments voted to ban trade with South Africa in many products. "Restrictions or bans were also placed on government and bank loans to South Africa and on private investment" (p. 224). A general level of political hostility also made it difficult for South African exporters looking to expand into new markets. The author states that although the trade sanctions had only minor effects, the financial sanctions were much more damaging. Changes in the labor market also put pressure on the economy. Black labor unrest spilled into strikes in 1972, 1973, and 1974. Blacks eventually achieved large real raises in their income, greater than the rate of productivity growth per worker. The policy of job reservation was also being eroded, and the black labor participation rate increased. All of these factors, in addition to a dismal GDP growth rate and the obviation of labor by capital, led to high rates of unemployment.
The author finally describes the demise of apartheid. The government started a gradual retreat from the policy in the 1970s when its economic cost became more apparent. A commission was established in 1977 to look into labor reforms. It recommended that Africans be allowed to unionize, that job reservation be abolished, "pass laws" be eliminated, and an increased focus on African education and training. These policies were in fact phased in over time, though education, while improving, remained inferior to that received by whites. "By 1986 many of apartheid's major economic institutions and policies had been dismantled," thought blacks still were "...denied access to decision making over all aspects of economic" and political life (p. 244). The country finally transitioned to a non-racial democracy in 1994.
Gerardo del Cerro Santamaría Assessment and Innovation Cooper Union for the Advancement of Science, MIT and the Urban Research Center at the London School of Economics and Political Science and the International Development Group at MIT