The Rationale of Apartheid

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Mats Lundahl (1982). The Rationale of Apartheid. The American Economic Review, Vol. 72, No. 5. American Economic Association.

Type	journal article
Scope	Economics and economic history of apartheid
Method	theoretical or conceptual
Period studied	1652–1970s
Regions	South Africa, Zimbabwe (Rhodesia)
Themes	origins segregation, agriculture land, bantustans removals influx, labour markets wages, politics ideology elections, comparative theory
Citation key	lundahl1982a

Argument

Lundahl extends Richard Porter's heuristic model of a 'South African-type economy' by adding land alienation and skilled/unskilled job reservation, treating wages as endogenous, and splitting history into three stages: settler agriculture to 1867/1886, mining and industry to the end of WWII, and the postwar Bantustan and pass-law era. In each stage he uses comparative statics to show how white policy instruments (immigration, land alienation, job reservation, influx control) affect white and African incomes. The instruments benefit some white groups at the expense of others, so the white community is divided by sector and skill. Under influx control, admitting more African labour benefits all white groups, so segregation cannot be explained by economic rationality alone. Lundahl locates the root of segregation in the security concerns of a white minority, with the Bantustan and pass system serving both as political control and as a way to hold down the supply price of unskilled labour.

Evidence and method

No empirical data are analysed. The paper is a formal comparative-static model (production functions, factor-market equilibrium conditions, and tables of signed effects). It is illustrated with secondary literature: Houghton, Wilson, Horwitz, Knight and Lenta, Knight and McGrath, Rogers, Kane-Berman, Horrell, and the author's own work with Ndlela. The full mathematical derivation is in a separate Lund working paper (Meddelande 1982:80).

Place in the debates

• Economic versus political/security rationale for segregation and the Bantustan policy (see Origins, coherence and ideology of apartheid and Afrikaner nationalism). Argues the root cause of segregation is white minority security rather than economic rationality, though the pass system also serves an economic role in lowering the supply price of labour.
• Land alienation, the labour reserves and the 'unlimited supply of labour' (Lewis) in southern Africa (see Cheap labour thesis and the function of the reserves). Holds that land alienation and the creation of reserves produced the 'unlimited' labour supply. Rejects the assumption of constant returns to labour in the reserves, since population pressure produced diminishing returns and falling per capita incomes.
• Determination of black and white wages (Porter's exogenous wages versus endogenous wages; Knight's reserve-income-based wage determination) (see Racial wage gaps, wage convergence and wage determination). Treats wages as endogenous, with unskilled wages tied to reserve productivity or to influx limits, and white wages determined within restrictions on the supply of black labour. This is closer to Knight than to Porter.
• Conflicts of interest within the white community (farmers, industrialists, skilled and unskilled white workers) (see The job colour bar, white labour and its erosion). Finds that job reservation and the colour bar divide whites by sector and skill, with agriculture and unskilled whites gaining from some measures and industry and skilled whites losing.

Findings

• Land alienation underpinned both Boer expansion in South Africa and white intrusion in Zimbabwe, and created the labour supply for the white economy. (p. 3)

  I have shown elsewhere how the Boer expansion in South Africa and the subsequent white intrusion in Zimbabwe were both founded upon land alienation from the Africans by the whites.

• Porter's constant-returns assumption for the reserves contradicts the historical record of land shortage and falling per capita incomes there. (p. 4)

  As the African population grew, increasing numbers of people were concentrated on a shrinking land area.

• African wages in the white economy are bounded by the alternative of staying in the reserves. (p. 4)

  A policy that dictates a wage rate which falls short of what the Africans can obtain by staying in the reserves would never have been successful

• White-worker labour market dominance was secured by legislation after the 1924 change of government. (p. 5)

  After 1924, a number of laws ensured white-worker domination in the labor market.

• In Stage II, poor whites competing with low-wage Africans made job reservation the central concern of white workers. (p. 7)

  Thus, one of the prime concerns of white workers during the period was the reservation of (both skilled and unskilled) jobs for whites.

• In Stage II, land alienation is the one instrument that benefits landowners without harming other white groups. (p. 8)

  It allows them to reach their goals without creation of adverse side effects on other white groups.

• In Stage III, excluding Africans from skilled jobs pits farmers against industrialists. (p. 10)

  Thus, the farming community will be in favor of excluding Africans from skilled jobs, while industrialists will oppose it as they have done in practice.

• Increasing African influx into the white economy benefits all white groups in the model, which sits uneasily with the rhetoric of separate development. (p. 10)

  As Table 3 demonstrates, an increase in the influx is beneficial for all white groups.

• Segregation is better explained by white minority security concerns than by economic rationality. (p. 11)

  should not be sought in economic rationality, but in the fact that whites constitute a minority in South Africa, and that this minority feels that it must somehow control the African majority

• The pass system lowers the cost of unskilled labour by admitting single migrants and excluding dependents, shifting social costs to the Bantustans. (p. 11)

  Thus, by employing a pass system which allows only single migrants to enter, the white economy reduces the wage and other costs that have to be paid.

Evidence ledger

Sources used

Source	Kind	Period	How used
Mines and Works Regulation Act of 1911 (color bar in mining)	legislation gazette	1911	Cited as the legal instrument that reserved mining jobs for whites, illustrating how white wages and job reservation arose historically.
Porter's South African-type economy model (1976 discussion paper; 1978 AER article)	secondary literature compilation	1976-1978	The author extends Porter's model structure, assumptions and policy parameters and quotes his arguments about white policy goals; no data are drawn from it.
Muriel Horrell, The African Reserves of South Africa (1969) - maize yield evidence, as quoted by Porter	secondary literature compilation	c. 1930s-1960s	Evidence on constant maize yields per morgen is reinterpreted to argue against Porter's assumption of constant returns to labor in the reserves.
Knight and Lenta (1980) on reserve farm production per household	secondary literature compilation	c. 1920-early 1970s	Used as empirical support that farm production per household in the reserves fell steadily, supporting the diminishing-returns assumption.
Rogers (1972), South Africa: The 'Bantu Homelands' - urban African population composition 1960-70 and removal of dependents	secondary literature compilation	1960-1970	Cited for the claim that urban African population composition shifted toward working-age men and that dependents were massively removed.
Kane-Berman (1979), South Africa: The Method in the Madness	secondary literature compilation	1960s-1970s	Cited for the demographic composition of urban Africans and for loss of South African citizenship under homeland independence.
Lundahl and Ndlela (1980); Ndlela (1981) - historical studies of land alienation in South Africa and Rhodesia	secondary literature compilation	1652-WWI	Referred to for the historical account of land alienation that creates the model's Stage I-II setting; the evidence is not reproduced here.
Historical syntheses of poor whites, farming and the economy (Houghton 1971, 1976; Wilson 1971; Horwitz 1967; Bundy 1979)	secondary literature compilation	1865-1966	Supply the historical narrative on the poor white problem, job reservation, the Rand Rebellion and agricultural backwardness used to motivate the model's stage assumptions.
Knight (1964) and Knight and McGrath (1977) models of African wage determination and the color bar	secondary literature compilation	1960s-1970s	Support the assumptions that African wages are tied to reserve income and that whites monopolise skilled jobs, and the claim that the color bar moved up the occupational hierarchy.

Inference

Quantification: None.

Theoretical comparative-static modelling: a three-stage general-equilibrium-style model (African reserves, European agriculture, industry) is differentiated totally to derive the signs of policy effects (Tables 1-3), motivated by stylised historical narrative drawn from secondary literature. No estimation or testing is done.

Key claims

Claim	Basis	Strength
Land alienation and creation of reserves produced the 'unlimited' labour supply, and Porter's constant-returns assumption for the reserves contradicts the observed historical pattern of shrinking land and falling per capita incomes. (p. 1171)	Secondary literature (Lundahl-Ndlela, Houghton, Horrell, Knight and Lenta), reinterpreting Horrell's yield figure.	Partial data
In Stage I, European immigration and land alienation raise European incomes while lowering African wages and per capita incomes (given European agriculture is more land intensive). (p. 1173)	Comparative-static derivation from the model; the land-intensity premise is assumed as 'reasonable'.	Asserted
In Stage II, job reservation (civilized labor policy) creates conflicts within the white community, benefiting unskilled white workers and landowners while hurting industrialists and skilled whites. (p. 1175)	Model Table 2 results and general historical narrative from Houghton, Wilson, Horwitz.	Asserted
White wages should be treated as endogenous, determined via bargaining with restrictions on black labour supply; the 1911 colour bar and the Rand Rebellion illustrate this. (p. 1172)	Brief historical illustration based on Horwitz and the 1911 Act.	Illustrative or anecdotal
In Stage III, increased influx of African workers benefits all white groups, so apartheid's separation reflects political security considerations rather than economic rationality. (p. 1178)	Model Table 3 plus Porter's argument; no empirical test.	Asserted
Pass laws and Bantustan policy let the white economy admit only single working migrants and lower the supply price of unskilled labour while avoiding social costs of dependents. (p. 1178)	Urban demographic change 1960-70 reported by Rogers and Kane-Berman; Knight and Lenta on family-wage costs; argument by inference.	Illustrative or anecdotal

The author's caveats

The author notes that the stage dates are only suggestive and the stage concept should not be interpreted too literally, and that the model does not explain transitions between stages. He also acknowledges that whites did not fully control immigration or land distribution, and that the Porter model is heuristic.

Gaps in the evidence

The argument rests on no primary data; claims about factor intensities, wage determination, job reservation effects and migrant composition are assumed or taken from secondary literature. Tests would need census data on land holdings and African and white occupations and wages (e.g., population and agricultural censuses, Chamber of Mines wage series, Native Affairs and pass-law records), which existed at the time. Estimated production functions or sectoral factor-share data would be needed to verify the land-intensity and capital-skill complementarity conditions on which the signs in Tables 1-3 depend.

Replicability: Not applicable.