The Post-Apartheid Development Debacle in South Africa: How Mainstream Economics and the Vested Interests Preserved Apartheid Economic Structures

Abstract:

Nelson Mandela and the African National Congress (ANC) were persuaded by mainstream economists and South African businesses to pursue neoliberal policies. The ANC implemented policies that made South Africa more open to international trade and financial flows along with privatization and austerity, other than a modest increase in social expenditures. After twenty-three years of such policies, we can judge their effectiveness. Unfortunately, neoliberalism worsened the inequality created under apartheid and failed to stimulate significant growth and development. This article documents the extent to which the maintenance of key apartheid-era institutions, under the guise of “market friendly policies,” undermined the prospects for long-term economic and human development in South Africa. This post-apartheid development debacle should go down in history as one of the great failures of mainstream economics and its neoliberal policy recommendations. Breaking the cycle of uneven development in South Africa will require fundamental changes in institutions, including changes in democracy, ownership structures, and the very nature of the economic system. This article offers some ideas for how an adjusted institutional structure might reconfigure the social provisioning process in South Africa to address racial divisions and lingering inequality.

Keywords::

• apartheid
• inequality
• mainstream economics
• neoliberalism
• uneven development

JEL Classification Codes::

• B52
• O23
• O24
• O25

Notes

¹ As early as 1984 Mbeki was openly rejecting the ANC’s ties to the South African Communist Party and any type of socialist economic system, arguing that “[t]he ANC is not a socialist party. It never pretended to be one. It has never said it was, and it is not trying to be. It will not become one by decree or for the purpose of pleasing its ‘left’ critics” (Saul and Bond 2014, 95).

² One of the products of the ANC’s neoliberal policies has been capital flight. The result of financial deregulation has been a rapid outflow of capital – a number of South African companies, including Anglo American, moved their headquarters to London, and net dividend outflows increased dramatically (Hart and Padayachee 2013, 78).

³ See, for example, The Economist (2017).

⁴ As Karl Polanyi (2001) points out in The Great Transformation, it was when community interests were aligned across class divisions that communities were best able to preserve a decent existence for their members.

⁵ Personal communication with community activists in South Africa, May-June 2017. Interestingly, the business community is also dismayed with the ANC’s governance of late due to increasing corruption. They blame the ANC’s continuing political success on the fact that the ANC has bought off poor blacks via social grants. This argument, however, is too facile. It is true that the social grants have made black lives better, especially when accompanied by expanded political rights and the provision of some basic services. But black lives in South Africa have changed very little in terms of economic opportunity. Also, we cannot discount the importance of the cultural bonds that were forged during the anti-apartheid resistance, and the extent to which the ANC embodied the anti-apartheid struggle. To cast aside the ANC is to question the legitimacy of the whole anti-apartheid struggle. Thus, political change will likely need to come from former anti-apartheid activists who offer a compelling alternative to the ANC.

Additional information

Notes on contributors

Geoffrey E. Schneider

Geoffrey E. Schneider is a professor of economics at Bucknell University. He thanks Berhanu Nega and Christopher Brown for their helpful comments on earlier drafts of this article. Parts of this article were presented in an earlier form at the meetings of the Association for Institutional Thought in Portland, Oregon, in April 2015.