Market Regulation and Agricultural Development¶

Literature › Works

Stephan Schirmer (1999). Market Regulation and Agricultural Development. Department of Economics, University of the Witwatersrand.


Type	working paper
Scope	Economics and economic history of apartheid
Method	archival narrative
Period studied	1910–1970
Regions	South Africa (national), Transvaal (Lydenburg, Bethal, Rustenburg, Barberton), Cape wine districts
Themes	agriculture land, business and state, politics ideology elections, origins segregation, comparative theory, transition post apartheid, inequality poverty unemployment
Citation key	`schirmer1999`

Argument¶

Schirmer argues that the standard either/or debate over South African agricultural regulation hides a more important question: whether state interventions lived up to their developmental potential. Officials in the Department of Agriculture and the Land Bank wanted to modernise white farming from above. These aims were repeatedly undermined by populist commitments to keep poor whites on the land and by farmers' political clout. Many white farmers, especially small ones, pursued survival rather than accumulation and used state support to avoid risk and investment, while large farmers used it to improve their farms. The inefficiency and waste therefore stemmed from populism and a lack of state autonomy, not from regulation as such. He concludes that the state did too little as a developmental institution, and that conditional multi-year subsidies would work better than the once-off payments in ILRAD.

Evidence and method¶

Archival material from the Central Archives Depot (Land Bank and settlement files, Native Affairs files, the K14 evidence to the 1957-60 Commission on European Occupation of Rural Areas, and ministerial correspondence). Also Land Bank annual reports, Union and Republic commission reports (1934 Cooperation and Credit, wartime reconstruction reports, Social and Economic Planning Council Report No. 4, Soil Conservation Board), agricultural statistics for 1951 and 1956, and contemporary articles by De Swardt, Viljoen, Van Waasdijk and McLaughlin. Secondary works used include Bradford, Grosskopf (Carnegie), Wickens, Wilson, Lipton and Jeeves & Crush, plus the author's own PhD on Lydenburg.

Place in the debates¶

Did state regulation of agricultural markets help or harm South African agriculture (growth versus costs to consumers, taxpayers and marginal land)? (see Agricultural policy, productivity, farm size and land reform). Rejects the either/or framing. Regulation had mixed results and some positive effects, but it under-delivered because populism and short-term politics subverted developmental aims. Critiques the uncritical anti-regulation stance of Wilson, Nattrass and Jeeves & Crush while remaining critical of what the state actually did.
Developmental state literature (Evans, Amsden, Wade): are interventions effective, or subverted by pressure-group pandering? (see Agricultural policy, productivity, farm size and land reform). Applies this framework to South African agriculture and finds that developmental intent was repeatedly diluted by populism and by farmer representation on the control boards.
Relative efficiency of small versus large farms (see Agricultural policy, productivity, farm size and land reform). Finds that large white farmers were invariably more productive than small ones within regions. He reconciles this with the small-farm efficiency literature by arguing that small white farmers lacked the capacity to intensify or cooperate.
Whether the Second World War brought a desire for social and policy change (Marwick). Supports Marwick: wartime commissions justified reconstruction plans by the war's impact, though the plans were diluted afterwards.

Findings¶

State aid slowed the loss of white farms in the 1920s, although land mortgages left many farmers vulnerable. (p. 7)

the number of white owned farms rose by 23 percent between 1918 and 1928.
Farm indebtedness had escalated by 1930, and much of it was owed to private lenders who could call in loans at short notice. (p. 7)

By 1930, registered bonds on farms had escalated to a total of 91 million pounds, representing 36 percent of total farm values and an average indebtedness of nearly one thousand pounds per holding.
Settlers pursued survival rather than accumulation and consumed or used state resources for security instead of raising productivity, so extension and settlement support failed to produce progressive farmers. (p. 4)

Rather than utilising the state resources given to them to increase their productivity, they consumed them or used them to enhance their security.
The failure of voluntary cooperation in wine and tobacco led to compulsory single-channel marketing in the 1920s, which drew the state into market regulation. (p. 10)

In this way single channel marketing and price setting became a reality for wine and tobacco in the 1920s.
The racial-political rationale for subsidised farm incomes was spelled out by the Meat Control Board's General Secretary, showing the populist logic behind price setting. (p. 15)

The consensus of opinion in this country is that the white race and its civilisation cannot be preserved unless the white man owns and farms the land.
Wartime planners put the annual cost of price support and assistance to white farmers at about £7.5 million, borne by taxpayers and consumers. (p. 18)

direct government assistance measures accounted for a further income transfer of £2.5 million in 1939/40, which made a total of £7.5 million.
Protection and price support raised the cost of the main foods for consumers. (p. 19)

it was estimated that, due to agricultural protection and price support, in 1939/40 the cost of the main foods to consumers was increased by at least £6 million.
After 1948 the National Party built a risk margin into the prices set for wheat and maize, which had been very small or negative before the war. (p. 21)

amounting in 1951-52 to 19.9 per cent of the wheat price and 33.4 per cent of the maize price.
Productivity gains in 1950s apartheid-era farming were modest. (p. 21)

The average yield of maize did rise from 1059 kg per hectare in 1939 to 1472 kg per hectare in 1962-63
Rural support in the 1950s was highly unequal within districts: even in tobacco-growing Rustenburg, small farmers were failing at high rates while a few prospered. (p. 25)

Eleven percent of the farmers were able to earn incomes of over £1500 per year while as much as 20 percent of the farmers earned less than £100 per year.
From the 1960s the state shifted against small white farmers, abandoning the policy of keeping whites on the land at all costs (per Lipton on the Du Plessis Commission). (p. 28)

in practice, the government abandoned the policy of propping up marginal farmers. It was thus no longer committed to backing the most reactionary forces in this sector
The state's main failing was too little developmental discipline, not too much support. (p. 29)

Most analysts have accused the South African state of doing too much for the white farming sector. But, at least until the policy shifts that began to emerge in the 1960s, the state clearly did too little as a developmental institution.

Evidence ledger¶

Sources used¶

Source	Kind	Period	How used
Central Archives Depot (CAD) files LDE No. 22108 Vol. 1158 and LDB No. R2542 Vol. 1572: extension officers' inspection reports on land settlement schemes, 1916-1928	state archives	1916-1928	Shows extension officers' reports that settlers were conservative and refused to develop their holdings despite state support.
Annual Reports of the Land and Agricultural Bank, 1913, 1916, 1918, 1919	commission or official report	1913-1919	Documents the Bank's departures from sound lending, loans to cooperatives, second mortgages and relief to distressed farmers.
Report of the Commission of Enquiry into Cooperation and Credit (1934)	commission or official report	1933-1934	Shows cooperatives' weakness and the commission's warning that guaranteed prices would cause over-production.
Carnegie Commission, The Poor White Problem in South Africa (Grosskopf report), Vol. 1, 1932	commission or official report	1932	Quoted as contemporary evidence that farmers preferred consumption or security to investment and that small farmers lacked capital.
Report of the Economic and Wage Commission (1925) and Report of the Committee of Enquiry re Taxation of Incomes Derived from Farming Operations (1919), via Bradford	commission or official report	1919, 1925	Cited, through Bradford, as showing the main motive of most farmers was to survive on the land.
Bradford, A Taste of Freedom: The ICU in Rural South Africa (data on farm numbers, bonds, poor whites)	secondary literature compilation	1918-1930	Supplies the figures on farm numbers, registered bonds (£91 million), indebtedness and growth in 'poor' whites.
Minnaar, 'Effects of the Great Depression on South African White Agriculture' (data on farm failures and state spending)	secondary literature compilation	1929-1934	Gives bankruptcy increases and £25 million state assistance during the Depression.
S.J.J. de Swardt, 'Agricultural Marketing Problems in the Nineteen Thirties' (memoir/participant account) and Viljoen, 'Planned Agriculture in South Africa' (1938)	newspapers periodicals	1930s (published 1938, 1983)	Used as official testimony on how and why the marketing board system was designed and accepted.
Farmers Weekly (1936, 1939) and TAU Annual Congress records in CAD NTS 3/371 Vol. 9257	newspapers periodicals	1936-1939	Shows farmers' complaints that prices were too low and that only rich farmers benefited from the Marketing Act.
J.R. McLaughlin, 'A Defence of Control in the Marketing of Agricultural Products' (1938)	newspapers periodicals	1938	Quoted as an official statement that the social aim of keeping whites on the land shaped board pricing.
Social and Economic Planning Council, Report No. 4: The Future of Farming in South Africa (1945)	commission or official report	1937-1940 data, published 1945	Supplies the international yield and productivity comparisons and estimates of the cost of price support and transfers.
Reconstruction of Agriculture: Report of the Reconstruction Committee of the Department of Agriculture and Forestry (1944); Third Interim Report of the Industrial and Agricultural Requirements Commission (1941)	commission or official report	1941-1944	Shows wartime reconstruction planning and Department officials' retreat to populist aims.
CAD K14: evidence to the Commission of Enquiry into European Occupation of Rural Areas (district evidence and submissions, 1957-1958)	state archives	1957-1958	Provides the district-level evidence that small farmers avoided risk, abandoned farming or survived on migrant labour.
Report of the Commission of Enquiry into European Occupation of Rural Areas (1960) and Du Plessis Commission (1963)	commission or official report	1957-1963	Shows the state's commitment to keeping whites on the land and its later shift against small farms.
CAD MLD No. 14/20 Vol. 19: letters from farmers to the Minister of Agriculture, 1954-1959	state archives	1954-1959	Shows poor farmers demanding more state intervention, price controls and land redistribution.
Soil Conservation Board Annual Reports, 1965-66 and 1968-69	commission or official report	1965-1969	Shows officials' growing frustration that small farmers took subsidies without committing to conservation.
Union of South Africa, Assembly Debates, 12 May 1960	parliamentary debates	1960	Cited for the growing state bias against land sub-divisions.
Lazar PhD thesis and Van Waasdijk, 'Agricultural Prices and Price Policy' (price indices and board price margins)	secondary literature compilation	1947-1957	Supplies the producer price index increases and the price margins after 1948.
Wickens, 'Agriculture' in Coleman, Economic History of South Africa (yield, area and inequality figures)	secondary literature compilation	1939-1963	Supplies maize yield increases and the 20 percent / 70 percent output concentration and western Transvaal returns.
Murray, 'Factories in the Fields' (Bethal) and Schirmer PhD thesis on Lydenburg	secondary literature compilation	1945-1957	Supports the 20 percent abandonment of farming in Bethal and Lydenburg's backwardness.

Inference¶

Quantification: Illustrative figures.

Qualitative historical case-study argument that reads official and archival documents (commission evidence, extension reports, Land Bank reports) and sets them against the developmental-state literature. Selected district cases from the 1950s Transvaal illustrate small-farmer risk aversion, supported by a few secondary statistics. There is no systematic dataset or statistical test.

Key claims¶

Claim	Basis	Strength
South African agriculture was highly inefficient by international comparison in the late 1930s and cost consumers and taxpayers heavily. (p. 17)	Social and Economic Planning Council Report No. 4 yield and productivity tables and transfer estimates.	Systematic data
In the 1950s large farmers were consistently more productive than small farmers, and only a minority gained from state support. (p. 20)	Wickens's figures, Agricultural Statistics 1951 and 1956, and Transvaal district evidence.	Partial data
Small Transvaal farmers in Lydenburg, Bethal, Rustenburg and Barberton avoided risk, abandoned farming or survived on migrant labour, while wealthier or outside capital drove development. (p. 24)	CAD K14 evidence to the 1957 commission of enquiry, as summarised in the paper.	Illustrative or anecdotal
The National Party after 1948 reversed wartime developmental ideas by raising prices and protecting poor farmers, until the 1960s shift against small farms. (p. 27)	Lazar's price indices, Van Waasdijk's price margins, CAD MLD letters, the 1960 report, the Du Plessis Commission and Lipton.	Partial data
The Soil Conservation Board found small farmers used subsidies without improving their farms, supporting the claim that unconditional support was wasteful. (p. 28)	Soil Conservation Board annual reports 1965-66 and 1968-69.	Illustrative or anecdotal

The author's caveats¶

The author notes that the international yield comparisons covered both white and black farmers. The author also acknowledges that the Soil Conservation Board's view of small farmers may have been influenced by ideological bias, and that officials could not ascertain the value of railway subsidies.

Gaps in the evidence¶

The argument that small farmers were systematically conservative rests on selected district evidence, officials' perceptions and quotations that officials themselves may have biased. It needs farm-level panel data on investment, productivity and subsidy receipts by farm size, such as the agricultural census returns, Land Bank loan ledgers, and marketing board price and pooling records. These sources existed at the time and are now held in archives, but they are not used. It also lacks a counterfactual comparison with deregulated markets or other countries' regulation, and offers little evidence of the efficiency effects of regulation itself.

Replicability: Data poorly documented.