Political conflict and the social structure of accumulation: The case of South African apartheid¶
James Heintz (2002). Political conflict and the social structure of accumulation: The case of South African apartheid. Review of Radical Political Economics 34(3). Union for Radical Political Economics / Elsevier (SAGE online).
| Type | journal article |
| Scope | Economics and economic history of apartheid |
| Method | econometric |
| Period studied | 1948–1993 |
| Regions | South Africa |
| Themes | macro fiscal finance debt, business and state, unions strikes, resistance social movements, labour markets wages, politics ideology elections, comparative theory, methods data sources |
| Citation key | heintz2002 |
Argument¶
Heintz asks why capital accumulation collapsed in South Africa from the mid-1970s. He argues from a social structure of accumulation (SSA) perspective that institutional instability, not falling profitability alone, was the main cause. He builds an index of political unrest from prison population, detentions without trial and strikes. He then estimates an investment function for seven sectors on 1970-93 panel data. Political unrest has a standardized effect close to that of the profit rate and the largest effect on the fall in investment between the 1972-75 and 1985-92 cycles. He presents this as empirical support for an SSA reading, against Nattrass's profitability-based critique.
Evidence and method¶
Aggregate South African capital stock series (Fig. 1) and a political unrest index (Fig. 2) built by principal components from the prison population, detentions without trial and recorded strikes. Panel data for seven sectors, 1970-93, with after-tax profit rate, accelerator (growth of real value added) and user cost of capital as regressors, drawn from the author's 2001 dissertation. Secondary literature on the apartheid labour market, Sharpeville and the 1979 union legalization.
Place in the debates¶
- Whether an apartheid SSA existed and supported accumulation (SSA/regulation approach vs Nattrass's profitability critique) (see Did the apartheid economy fail? Growth, productivity, investment and the post-1970s crisis). Defends the SSA reading. Concedes Nattrass's point that manufacturing profit trends were weak, but argues the critique is too narrow and untested, and that political instability explains the investment crisis.
- Cheap labour / labour discipline thesis: did apartheid labour controls (job reservation, influx control) sustain profitability? (see Cheap labour thesis and the function of the reserves). Notes that labour-discipline models say influx control lowered the cost of disciplining workers, but that firm evasion, rising White wages and turnover costs undermine the profitability gains. Treats the question as unresolved and stresses stability over profit.
- Causes of the 1970s-80s investment and accumulation crisis (profit squeeze vs political instability) (see Did the apartheid economy fail? Growth, productivity, investment and the post-1970s crisis). Political unrest, independent of profitability, accounts for most of the fall in the rate of accumulation. Profit rates matter but are secondary.
Findings¶
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Headline result: political instability explains most of the fall in accumulation, independently of profitability. (p. 2)
Estimations show that political instability accounted for most of the fall in the rate of accumulation, independent of distributive outcomes, such as the level of profitability.
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Accumulation was high in the early apartheid decades and then declined from the mid-1970s. (p. 3)
The decades following the establishment of apartheid in 1948 were years of high rates of capital accumulation.
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Nattrass's critique rests on negative manufacturing profit trends during the boom years. (p. 3)
Nattrass demonstrates that the rate of change of profitability of the manufacturing sector was generally negative in the 1950s, 1960s, and early 1970s: the period of rapid capital accumulation.
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Heintz rebuts the critique by widening the sectoral coverage to include mining. (p. 4)
When both mining and manufacturing are considered, growth rates of profit share were negative on average for only one business cycle from 1948 to 1989.
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Labour-discipline logic: influx control raised the cost of job loss to African workers, lowering employers' costs of discipline. (p. 4)
apartheid policies increased the costs of job loss, and allowed employers to discipline workers at lower cost than would otherwise have been possible.
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Sharpeville in 1961 was the one early shock to stability, and it dented investment. (p. 5)
the Sharpeville shooting in 1961, in which 69 people were killed during a protest over influx controls.
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Union legalization in 1979 did not bring industrial calm. (p. 5)
In 1979, Black trade unions were legalized in the hope that calmer industrial relations would prevail. However, industrial disputes skyrocketed after legalization.
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The political instability index is the first principal component of three unrest indicators. (p. 6)
The index of political instability is simply the first principal component of the standardized variables of the three indicators of unrest.
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In the standardized long-run coefficients, profit and political unrest have similar-sized effects, with accelerator and cost of capital smaller. (p. 7)
The largest standardized effect is associated with the after-tax profit rate, followed closely by the index of political unrest.
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Political unrest had the largest effect on the fall in investment between business cycles (-4.54 points in Table 1, against -1.50 for profit). (p. 8)
When actual changes in the explanatory variables are used to gauge the impact on the rate of accumulation, the largest effect can be attributed to political unrest, independent of the actual distributive outcomes (e.g. profitability).
Evidence ledger¶
Sources used¶
| Source | Kind | Period | How used |
|---|---|---|---|
| South African fixed capital stock / rate of fixed capital accumulation series, 1950-2000 | official statistical series | 1950-2000 | Establishes the pattern of high accumulation in the 1950s-60s and decline from the mid-1970s that frames the crisis of accumulation. |
| Average annual prison population of South Africa (political instability indicator) | official statistical series | 1969/1970-1992 | One of three component indicators combined by principal components into the index of political instability. |
| Estimated number of persons held in detention without trial under apartheid security laws | official statistical series | 1969/1970-1992 | Second component indicator of the political instability index, capturing township unrest and repression. |
| Number of recorded strikes in South Africa | official statistical series | 1969/1970-1992 | Third component indicator of the political instability index, capturing workplace conflict. |
| Sectoral panel data on non-residential fixed capital stock, after-tax profit rate, real value added, and user cost of capital for seven core sectors, 1970-93 (as used in Heintz 2001 dissertation) | national accounts macro | 1970-93 | Panel data underpin the investment-function estimates in Table 1 of the effects of profit, political unrest, accelerator and user cost on accumulation. |
| Real GDP annual rate of change, used to date business cycles (1972-75, 1985-92) | national accounts macro | 1972-1992 | Used to identify trough-to-trough business cycles over which explanatory variable changes are averaged to compute contributions to the fall in accumulation. |
| Nattrass (1992) profitability findings for South African manufacturing (profit rate trends) | secondary literature compilation | 1950s-early 1970s | The profitability trend evidence the author engages with and contests as the main empirical critique of an apartheid SSA. |
| Fedderke, de Kadt and Luiz (1999) index of political instability, ERSA Working Paper 4 | secondary literature compilation | 1935-97 | Alternative instability index mentioned and rejected for lacking strike activity and using subjective weights. |
| Apartheid security legislation: Suppression of Communism Act (1950), Riotous Assemblies Act (1956), Internal Security Act (1976), state of emergency provisions | legislation gazette | 1950-1980s | Defines the laws under which detentions without trial counted in the instability index were held. |
New data¶
The author constructed an index of political instability (first principal component of standardized prison population, detentions without trial, and strikes, 1969/70-92) and a seven-sector panel (1970-93) for investment estimation, documented in his 2001 dissertation; data are not reproduced in the paper.
Inference¶
Quantification: Econometric (causal design).
Panel investment-function regression (fixed effects, lagged dependent variable) on seven sectors, 1970-93, with a principal-components political unrest index. Standardized long-run coefficients and a business-cycle comparison (1972-75 vs 1985-92) decompose the fall in accumulation. Historical narrative provides context, and the results are used to answer the Nattrass critique of the SSA approach.
Key claims¶
| Claim | Basis | Strength |
|---|---|---|
| Political instability was the primary cause of the fall in the rate of accumulation, independent of profitability. (p. 8) | Panel regression estimates (Table 1) with the unrest index, plus decomposition across two business cycles. | Partial data |
| Political unrest explains more of the change in investment between cycles (-4.54 points) than profits (-1.50), accelerator (-1.30), or cost of capital (-0.24). (p. 8) | Table 1 column 2, computed from changes in business-cycle averages of explanatory variables multiplied by estimated coefficients. | Partial data |
| After-tax profit rate has the largest standardized effect on investment, followed closely by political unrest; the accelerator is smaller and user cost of capital negligible. (p. 7) | Standardized long-run coefficients from the panel estimates (Heintz 2001). | Partial data |
| Nattrass's profitability critique is too narrow: when mining and manufacturing are both considered, profit share growth was negative on average in only one business cycle from 1948 to 1989. (p. 4) | Asserted, with no data or source presented in this paper. | Asserted |
| Accumulation was high after 1948, fell in the mid-1970s, and reached historically low levels for the remainder of apartheid, apart from a gold-bubble upturn in the early 1980s. (p. 3) | Fig. 1, rate of fixed capital accumulation 1950-2000 (source not named). | Partial data |
| The 1960s stability and the later instability of the 1970s-80s are linked to repression, Black union legalization and industrial disputes, and mass mobilization, which fits an SSA interpretation. (p. 5) | Narrative historical account (Sharpeville, state of emergency 1985, union legalization 1979) with no cited data; Fig. 1 for the post-Sharpeville investment dip. | Illustrative or anecdotal |
The author's caveats¶
The author notes that discontinuities in the data prevented extending the period before 1970, and that the three indicators are imperfect observations on a single latent variable (political uncertainty), hence the principal-components approach. Full details of variable definitions and estimates are not reproduced and are available only on request.
Gaps in the evidence¶
The paper does not name the sources of its capital stock, profit, prison, detention or strike series, nor report full regressions, diagnostics or robustness checks, so the central result cannot be assessed here. The unrest index relies on repression-related proxies (prison and detention numbers) that may reflect state policy rather than business uncertainty, with no direct measure of investor expectations such as surveys or capital flight. Pre-1970 data, which would test the claimed stability of the early apartheid era and the Sharpeville episode, are not used, and the sample covers only non-mining, non-agricultural sectors; archival and official series from the period (Reserve Bank, SA Statistics, Department of Labour strike statistics) could extend and cross-check this.
Replicability: Data poorly documented.