Class, Race, and Inequality in South Africaby Jeremy Seekings
The distribution of incomes in South Africa in 2004, ten years after the transition to democracy, was probably more unequal than it had been under apartheid. In this book, Jeremy Seekings and Nicoli Nattrass explain why this is so, offering a detailed and comprehensive analysis of inequality in South Africa from the midtwentieth century to the early twenty-first century. They show that the basis of inequality shifted in the last decades of the twentieth century from race to class. Formal deracialization of public policy did not reduce the actual disadvantages experienced by the poor nor the advantages of the rich. The fundamental continuity in patterns of advantage and disadvantage resulted from underlying continuities in public policy, or what Seekings and Nattrass call the “distributional regime.” The post-apartheid distributional regime continues to divide South Africans into insiders and outsiders. The insiders, now increasingly multiracial, enjoy good access to well-paid, skilled jobs; the outsiders lack skills and employment.
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Class, Race, and Inequality in South Africa
By Jeremy Seekings Nicoli Nattrass
Yale University PressCopyright © 2005 Yale University
All right reserved.
Chapter OneIntroduction: States, Markets, and Inequality
The relation between public policy and economic inequality has been the focus of considerable research in recent years. The foundation for much of this work is Esping-Andersen's Three Worlds of Welfare Capitalism (1990). Esping-Andersen identified three distinct patterns of state intervention in advanced capitalist countries. In each case, the state intervened with social and (to a lesser extent) labour-market policies to reduce inequality, but the form of that intervention differed in terms of the scale of public expenditure and the extent to which the state displaced the market and the family in determining the incomes and welfare of its citizens.
Esping-Andersen's work (and related work) focuses primarily on the varieties of welfare capitalism existing in the "North" (including Australia and New Zealand). Most emphasis is placed on the way the state redistributes income using welfare and labour-market policies, with relatively little attention being paid to the way it shapes the growth path-and thus the overall level and pattern of income-with broader economic policies. Some recent work within this tradition draws on the"varieties of capitalism" literature (Hall and Soskice 2001) to emphasise that different welfare state regimes are "embedded" in different production regimes, that is, "different patterns of relationships between enterprises, banks, labour and government" (Huber and Stephens 2001, 5). But this particular research agenda focuses more on describing the different types of capitalism than on explaining their distributional impact.
"Northern" research into the way the state affects distribution is in sharp contrast to the "development" literature, which explores the distributional implications of particular economic growth strategies in low- and middle-income developing ("southern") countries. This emphasis is partly because there is generally little direct redistribution from rich to poor via the government budget in developing countries. But it is also a product of substantive research by development economists dating back to the mid-1970s showing that growth strategies have profound effects on who gets what in these societies (for example, Adelman and Morris 1973; Chenery et al. 1974; Lewis 1976). Whereas Esping-Andersen and others take the market-generated distribution of income largely as given and concentrate instead on how welfare states redistribute that income, development economists emphasise the relation between growth and distribution. As we demonstrate in this book, understanding the nature and trajectory of inequality in a particular country requires a sound grasp of how the state affects both the distribution of income via its labour-market and economic growth policies and the redistribution of income via the budget (most notably via welfare and educational spending). Put another way, analysis must encompass the direct and indirect ways in which the state shapes distribution.
South Africa is a particularly valuable case study for testing such a combined approach because it is a middle-income developing country and it has a set of labour-market and welfare institutions that, in important respects, mimic those in advanced capitalist countries. But South Africa's usefulness as a case study for understanding inequality extends beyond this. First, no other capitalist state (in either the North or the South) has sought to structure income inequalities as systematically and brutally as did South Africa under apartheid. Explicit racial discrimination affected earnings and income directly and blatantly. Black people and white people with the same qualifications were paid different wages for performing the same job, especially in the public sector. As late as 1979, for example, the starting salary for an African nurse in the public sector was two-thirds that of a white nurse with the same qualifications. Prospects for promotion also depended on race, with the result that the average African nurse's salary was about half the average white nurse's salary during the 1960s (Marks 1994, 173-74). The maximum salary for African secondary school teachers and police constables was only half that of those classified as white (Knight and McGrath 1977, 258). Similarly, black old-age pensioners received less from the state than did their white counterparts. In the late 1960s, the maximum pension paid to an African person was a mere one-seventh of the maximum payable to a white pensioner.
More important, state policies affected inequality by limiting the opportunities open to the black majority of the population. People were dispossessed of or denied access to property simply because of their racial classification. Business opportunities were curtailed. Discriminatory expenditure on education meant that black people entered the labour market with big disadvantages. The "colour bar" prevented them from getting the better-paid jobs, even if they had appropriate skills and experience. And discriminatory public expenditure on health services meant that black people suffered from inferior health. In many ways, therefore, an individual's income and welfare under apartheid were dependent on his or her official racial classification and hence location in a racial hierarchy.
Second, and unsurprisingly, inequality in the distribution of income was extreme in South Africa throughout the apartheid period. At the end of that era, when cross-national data were becoming more readily available, South Africa recorded one of the highest levels of income inequality in the world. Available data are nowhere near good enough to distinguish among the countries competing for the unenviable title of having the most unequal distribution of income, but South Africa is clearly right there alongside the more unequal Latin American countries (Brazil, Paraguay, Guatemala) and some other African countries including Zimbabwe and Lesotho (see, for example, World Bank 2001). In these societies, the top decile of households received almost one-half of national income, and the top two deciles together almost two-thirds. South Africa's poor, however, are unusually poor (relative to the rich, that is): average household incomes in the bottom income decile were just one-hundredth of the average household incomes in the top decile. This is a larger ratio than that of Brazil, where the ratio stood at "only" 1:50 (Psacharopoulos et al. 1997, 144). In most southern societies the ratio for expenditures varies between 1:10 and 1:20, with a few societies (including Bangladesh and Egypt) having ratios as low as 1:7 (World Bank 2001, 282-83).
The third reason for the value of the South African case is that democratisation brought to power (in 1994) a government with a clear public commitment to, and a political interest in, mitigating inequality. One might thus have expected a subsequent significant reduction in overall inequality. Yet income inequality in South Africa is proving resistant to change and may in fact have worsened since the end of apartheid (see Chapter 9). We argue that this is because no significant policy shifts have occurred to stem the rise in unemployment. This highlights the importance of labour-market and economic policies in understanding how the state affects income distribution.
The fourth aspect is surely the most surprising. Compared to other developing countries, South Africa has long had-and continues to have-a very high level of redistribution by means of the government budget. This entails a progressive and efficient tax system, an exceptionally generous system of public welfare provision (based on noncontributory old-age pensions), and pro-poor spending on public health services and public education. If inequality is measured after taxation, cash transfers, and the benefits in kind of public services, then South Africa ceases to be at the top end of the international inequality league. This redistributive aspect of government spending under apartheid has not been adequately explored in the South African literature, which, understandably, has focused mainly on the racially discriminatory and exploitative aspects of apartheid. As we show in this book, however, the way in which the state affected income inequality during and after apartheid cannot be understood with reference to racial policies alone.
The South African case illustrates how labour-market, welfare, education, and economic policies combined to structure the pattern of income in society, sometimes exacerbating inequality, at other times reducing it. We show that, under apartheid, the basis of disadvantage shifted from race to class. The deracialisation of public policy in the late apartheid and post-apartheid periods thus had a very limited impact on inequality. By the 1990s, South African society was thoroughly divided by class. Intraracial class differences persisted or deepened even as some black South Africans seized the opportunities provided, belatedly, by deracialisation. Put another way, under apartheid, discrimination within classes (by race) exaggerated the effect of inequalities between classes. With the decline of discrimination within classes, interclass inequality has become the driving force of overall inequality. State policies played and continue to play a major role in the reproduction of inequality, in interaction with exogenous changes in South Africa and the world economy. We develop the concept of a "distributional regime" to describe the ways in which the apartheid and post-apartheid states intervened in the economy to shape patterns and levels of inequality. By "distributional regime" we mean not only the direct and readily visible ways in which states affect income inequality, such as taxation and cash transfers in the form of old-age pensions and other grants, but also the indirect or more opaque ways, including policies affecting education and the labour market and, more generally, the rate and path of economic growth (or what is termed, in the context of "developing" economies, "development"). Figure 1.1 summarises the key components of our analytical framework. Following Esping-Andersen, we analyse labour-market and welfare policies as being closely linked, both being designed according to a common organising principle. This "labour-welfare nexus" affects distributional outcomes directly by affecting incomes and opportunities and indirectly by influencing the growth path, which ultimately also affects the level and distribution of income. The growth path is also shaped by the broader economic growth strategy and the general economic environment.
Our central argument in this book is that the distributional regime in South Africa has long served to privilege one section of the population while excluding others, but the composition of the privileged group and the basis of privilege has changed over time. Initially, under apartheid, insiders and outsiders were defined primarily in racial terms. The apartheid distributional regime provided full employment for white people (by means of a combination of racially discriminatory labour-market, industrial, and educational policies) while channelling cheap African labour to unskilled jobs in the mines and on farms. But the very success of this regime in advantaging white people allowed the basis of exclusion to shift from race to class: white South Africans acquired the advantages of class that allowed them to sustain privilege in the market and ceased to be dependent on continued racial discrimination. The consequence of this was that some classes of black South Africans could become insiders while others remained largely excluded from the benefits of prosperity. The distributional regime was never as neatly exclusive as apartheid discourse suggested; even under apartheid it extended some benefits to the poor, and since 1994 it has had more universalist ambitions. But the underlying bases of distribution remain fundamentally inegalitarian. The reason why extreme inequality has persisted after 1994 is, above all, that the distributional regime of the late apartheid period has been reformed (primarily through deracialisation) rather than transformed or rejected in favour of a more egalitarian one.
This book is about South Africa. But the country is analysed as a case study of distributional regimes in societies that industrialised-and democratised-later than did the European and other advanced industrialised democracies of the North. The analysis of inequality under and after apartheid might shed light on the factors shaping inequality in other societies that have been spared the terrible ordeal of apartheid. We are not suggesting that South Africa at any given time is an ideal type of any category of distributional regime, but we do suggest that, across time, it has shared key features with a number of other societies. Further research is required to establish whether these cases constitute a discrete model of distributional regime.
STATES, MARKETS, AND INEQUALITY IN THE NORTH
In analysing apartheid and post-apartheid South Africa in terms of distributional regimes, we build on Esping-Andersen's canonical work on more advanced industrialised societies. Esping-Andersen identifies different forms (or "worlds") of welfare capitalism in the advanced capitalist countries according to the ways in which the state affects distribution using a combination of social policies (including especially the public provision of welfare by social insurance or social assistance) and labour-market policies. His 1990 study was organised around the concept of "welfare-state regimes." Use of the term "regime" was intended to emphasise the relations among social policies, employment, and the social structure in general (Esping-Andersen 1990, 2). In later work he prefers the simpler term "welfare regime," which reduces the emphasis on the state: "A welfare regime can be defined as the combined, interdependent way in which welfare is produced and allocated between state, market and family" (Esping-Andersen 1999, 34-35). He also considers labour-market policies, primarily with respect to the maintenance of full employment. Full employment (during the golden age of postwar capitalism) meant that the public provision of welfare could be largely confined to the young (in schooling), the elderly (with old-age pensions) and the sick (via the public health system). Unemployment was contained by means of Keynesian macroeconomic policies and public-sector employment policies (which increased the demand for labour) and social and tax policies that affected labour supply. Such policies constituted different kinds of "labour market regimes," each corresponding to a different kind of "welfare-state regime" (Esping-Andersen 1990, 141-90; 1994, 169-71).
The three worlds of welfare capitalism are characterised by their welfare-state and labour market regimes. "Liberal" welfare regimes entail modest financial provision to targeted (generally means-tested) individuals in a limited array of situations. Public provision is residual in that the state only fills gaps left by the market, but its targeting means that it is nonetheless redistributive. The modal liberal welfare regime is the United States. By contrast, the social democratic welfare regime is much more generous and universal and aspires to cover (that is, socialise) all risks, with the result that it is much more redistributive and egalitarian. The state actively assumes roles-such as child care-played hitherto by the family and seeks to minimise the role played by the market. Full employment in such regimes entails very high participation rates, not merely low unemployment rates. The social democratic regimes are found mostly in Scandinavia, with Sweden treated as the modal regime (although Goodin et al.  places the Netherlands in this role).
The conservative welfare regimes of continental Europe (Austria, France, Germany, and Italy) share some features with each of the other two kinds. Like the social democratic regimes, they are generous. But they are unequally generous, with differentiated benefits; support is "mutualist" rather than redistributive. The basis is insurance, not assistance. These regimes emphasise the roles played by families: public policies buttress rather than undermine familial roles. Women are discouraged from working, so that full employment entails a low participation rate. Each of these regimes has its origins in different political and ideological contexts: liberal regimes where liberal traditions were strong and liberty was the fundamental value, social democratic regimes where politics revolved around class and social equality was the fundamental value, and conservative regimes where corporatist or Catholic traditions were strong (and liberal and socialist traditions weak) and the fundamental value was social cohesion (Goodin et al. 1999). Table 1.1 shows the key characteristics of each of Esping-Andersen's regimes (based on Esping-Andersen 1999, 85). "Degree of decommodification" refers to the extent to which the state provides income to citizens as a right independent of the market value of their labour as a commodity. Esping-Andersen also refers to "defamilialisation," that is, the extent to which the state assumes roles played by close kin (such as care for children and the elderly).
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Meet the Author
Jeremy Seekings is a professor in the sociology and politics departments, University of Cape Town. Nicoli Nattrass is professor in the school of economics, University of Cape Town.
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