ObTHERN i\FRJrCl\ Public ~ture ani Ute poor

Cape Town

_, h .. "

SECOND CARNEGIE INQUiRY tNTOPOVERTY

)\No DEVELOPMENT t~ ~ObTHERN i\FRJrCl\

Public

~ture ani Ute

poor:

~litical ard

eroran1c

constraints on polley dDioes Up to the year 2000

,. ~ !. - '. I';

Carregie COnference Paper ~. 253

o

13 - 19 April 1984

ISBN 0 7992 0678 4

1- - I

I

,I!" "L

PUBLIC [XP[~DI'URE AND THE POOR: POLITICAL AND [CONO~!C CONSTRAINTS ON POLICY CHOICES

UP TO THE YEAR 2000

. '. , . f .,.

A number of th~brtsts of the modern state ta~e 8S their point of departure that it must do two things:

. <

(I' provfde circumstances

t"

^which .ccum~letion can take phce; iJnd

(b) legitimate

th~

i;;lem

o~ lut~ortt'

which underpini this tic(:umulation.

Ther~ mfty be tensi.n betwe~~ :~~dmu18tion and leg~itmaiton

: if'~ ^;L f ,,; ->

to the point bf p~oducin~ crises of greater or lesser mag-'

. . ' .• ' I, .. ,.~ .' \ .

nitude. David Yudelm8n's boo~ The [mergence of Modern South AttiCli iJnl'llyses the teht.i6~·shipbetwe~n the stah, ihii'dng

t8pft~1

i1nd white

minin~ ~brklr~

between '902 ahd

'~33

in these terms. This shldy, tab;.~ih. in ill preliminary fashion,

~ ~~.·f~~l·~:.:,·'·) ;s.''t''.~

consider elements of the relationship between legitimacy and

l ':", t~;~ii~·' . ~,

eccumulation here as they affect the welfare components of public expendfture ilnd ere

li\eiy

to Hfect them

~

^..

~ to

^the

year 2000.

The exposition will

st'rt ~iih

the political

'~p~cts ton~idering

in

~ur~ lh~ co~l~nt

io be

giv~n t~ th~

ofien

lo6s~'¥ u~~d

concept

'~~gi~i~~l~·.

the

relev~nce

to

S~uth

Africa of the concept

'fisc~~l ~~i'stst ~sed

^to

denot~

cett~in conditions fn B~v.nc~d ~8~it~lf~t economfei.

he

ruling fheel

~rfn'cipl~; att~chllY

in relation lnd to ~~

; ~. ;~,;.\ --K

w.,fare ex~enditur~ and its fiii~cing) in South Afrfta at

! ~ ,. • • . ,~

~res~rtt and 8S at'ett~d bj (hi ne~ constitutional legis-

2.

latlon. Th~ economic sections will comprise a look at South African welfare exp~nditure from 1949/50 to the present in international context. and. conSideration of projected growth rates to the year 2000 which define the room there will be for movement towards equal per capita expenditures al between the races. The conclusion will draw together the political and economic components and attempt to define the range of possibilities. indicating the implications for the role of public expenditure on welfare in reducing poverty.

In its most extended sense. 'legitimacY' means 'public ,upport for the form of government'. It must mean at least this to distinguish it from 'public suppor~ of the govern- ment'. the distinction being that a person who accepts the

legitimacy of the government may oppose a particular govern- ment while being obliged to obey its laws etc. because he accepts the authority relations involved in the form of government. Contexts in which this distinction is widely made are contexts in which certain political practices (e.g.

that of loyal opposition) are pO$sible which would not otherwise be possible; the presence of legitimate govern- ment underpins a more sophisticated, more civilised politics than would be possible in its absence.

In order to go beyond the minimal definition of legiti- macy just offered, one must consider the possible bases of

it. In a famous passage. ~eber wrote:

3.

'it i~ by no ~~An. t_U2 ~hAt tv~.y ~A4~ 0' Aubmi4&iu~n~&& to ~~_aon6 in po&ition& og

. . \: ~ . ~ . ^{. ~}

pow~. i4 p~imd~Lly 10_ e~~n At altl o_Lenltd

to

thiA br~lit' (.i~I~g1:t:ma~!lJ. ~i.;v;;t-t.Y;;'';iI---

-

b~ hypo~.iticatlY 4i~ui4t~d by individual4 o~

._ ,_~'f,;,~~ r·~·~.

by whot~ g~OUP& on pu~~ly oppo~tuni4ti~ g_outid4, , ',<I, l f>·~

o~ cdt~ltd ~ut

in

p_4dtL~~ 'o_~l~aAOn& 06

IiIdt~iAt 4tf'-inl~~iH. b.

^{peoph may aubmLt}

~.om

indivLdual

wed~"t&l

dnd helple4Ant68

~t-

j, :. ~ t f-" .. i~ i

edu8t tht.t LA rio A~~eptAblt alt~_native. But tftUt,

el"uiJ~Jidtlo~6 iiU ~ot de~i4ive

^«oPt

t~i

C1A88L«L~4iion o~ t~~~1 og Lmp2_ative co-o_di~

nation. What

Li

Lmpo~l~"t

L4

^{tbt «Act thAt Ln}

4 gLven clui

.Ht~ \pAllic.JiJk

chilli to HgUL-

IiIIlC!!

.u

to d lLgtiL&Lc.a~l ^dtgilu lind accolldiii~

to

LtA typt

iileAleJ ~l Sv~tid"

... •

(Economy

and

~~~i~t~ yol ~ ^section i~l.i.~) If

~ubmislibn

^tb

~~ttd~il~ "

.ought by

~ulers.

^then,

there liir@ i!I number of

resoJ~t~~ ~v~t1abh

to them:

, .. ~ ~. ': t { .. ., ~ 1,-" ~ ~

~ leg'tt~acy in the Weberian sense of belief in the

vaHdity of the authority syshm.

A~el1-lthOwn

^Weber

thought this belief could be g~01nded in different ways:

~n ·r~tlon8l1ty'. tr~dttion L~ l~~r'~ma.

br a comb1hat1hn of tilue

;" '7:(~,t,

_ sel'-int@r@st o~ the part o~ t~d('idu~ls or ~roups

~ I :. . • ~ . . .

_ un8v'ilabtltty tif accept~bll ~11;~n8tiv@s to indiv1dbal(

4.

or groups - coercion.

from this point of view, legitimacy has a number of sub- stitutes, but none as good as itself. Belief in the vali- dity of the authority system (at the ideal-type extreme) is independent both of the material output$ of the system (as self-interested submission is not) and of the ability of the system to support coercion. Intelligent rulers, there- fore, wi}l always be concerned with the consolidation and extension of legitimacy where this is possible. Because aspects of South African state policy can be discussed in these terms, it is worth, at this stage, briefly considering possible grounds for legitimacy in the context of the modern capitalist state.

Weber thought that in such a context the appropriate basis was 'a belie6 in the "legality" 06 patte4nb 06 n04- mative 4uleb and the 4ight 06 thobe elevated to auth04ity unde~ ~uch _uleb to i~6ue command6' (Economy and Society vol 1 section 111.1.2). So concerned was he with the second, administrative half of his characterisation that he had little to say about the grounding of a belief in the 'legality' of normative rules (i.e. law). As soon as one lur~s one's attention to this problem, two sets of issues have to be confronted:

(i) procedural issues. One major tradition·in political philosophy regards laws as valid in the Weberian sense if

,

'~.

5.

they are issued by an effective sovereign. This is Austin's command theory of law and it rests essentially on the justi- fication that an effective sovereign ,protects his subjects against the chaos _o_La ___ '_s_ta_te~-"~_tlJre'~ Another tradition regards laws as ~alid insofar as the people to whom they apply participate in making them. Clearly there is much scope for debate about what 'participation' might mean in this context; it is equally clear, however, that the second criterion for validity is more demanding than the first.

(ii) substantive issues. Might certain normative rules, despite their having been made in a procedurally valid fashion. be illegitimate on the grounds of their context?

While the judges at the Nuremburg trials did not repudiate the command theory of law as such, for instance, it was held that people had an obligation to disobey orders ~f validly made (in command theory terms) if the content of such orders was grotesquely immoral. Here legitimacy is linked to the dictates of the individual conscience.

Perhaps the most purely rational attempt to deal with these issues has been made by Habermas. He starts by observing:

'16 beiie6 in iegitimacw i6 conceived a6 an empi.icai phenomenon without an immanent .e- tation to t.uth, the g4ound6 upon which it i6 expticitiw ba6ed have ontW p6Wchoiogicat 6ig- ni6icance. Whethe4 6uch g4ound6 can 6u66icientty

6.

Atabilize a 9iv~" belie& deptnda on the inatitu- tionalized p~ejudicea and obae~vab!e behaviou~al

diapoAitiona 06 the·9~oup in queation. 1&, on the othe~ hand, eve~y e66ective belie6 in legitimacy ia da6umed to have an im~anent ~e­

lation to t~uth, the g~ounda on which it ia ex- plicitly baaed contain a ~ational validity claim that can be te6ted andc~iticized. ~nde-

pendently 06 the p6ychological e66ect 06 the6e

g~ound6' (Legitimation Crisis, Heinemann. 1976 p.97).

An element of an authority system, then. has a ~ation8l1y

based legitimacy if under conditions of a co-operative search for truth. a consensus in favour of acceptance of the norm arises argumentatively. Or to put the thing another way, a legitimate (in this sense) norm implies the possibi- lity of a S~cratic dialogue in which the outcome supports the norm. Rationalism can go no further than this; indeed what is being here restated is the rationalist ideal of a wholly transparent. wholly justifiabl~ society.

The principal theoretical objection to this programme takes as its point of departure Hume's critique of

rationalism in ~oral theory. That is to·say~ the outcome of a Socratic dialogue in relation to a norm may be neither acceptance nor rejection of it but an uncovering o~ a value divergence between th~ partie~ about which no futther

argument is possible. Those impre~sed by the force of Hume's

.rgumenti would therefore pre~~~

ii

i8~~ shout the re'atfon

i -f. }' 'f ,~j i:~_

~f ~eg't'macy to fairne§s and to acknowledge that v8r'ou~

conceptJoM of fa'rness, 'or liHhnilttve value constell1i'ons

- .• ~ ^; ~ . : : 11' ~ ^{- - . . : .}

are Iv."abl~. The d'stributiori of legitimating beliefs' i~ relat~d to the distr'~ut'o~ ~. ~onc~pts of fa'rn~ss w~~ch

, ,j'i ; i ,', ^f

in turn is related to the distribution of values whic~ is

~ec~ss~r'ly ⁱⁿ ~mp'r.c~t que~ii~~. One might po'nt, li~

, :~'

'nst.nc~. to the art1c~iiiioni ~i ~"erg~nt concept' ~f filir-

~~~s

tn Rawls' Theory ot

Ju,~'~e (wh'c~

underpins the legt- tflBilcy ~f the welfare sUt~, roughly spealdng) and hI

Roz'ck', Anarchy. state

and UtO~'8

(which supports i

~fn'mal

siate in 8 free enterprise environment). Clearly both these vorks tan be argued about ,t

'h

^{~espect of} the'r coh@reJce, .~ltd'ty ~f pirtttular ir~umeni~ 'it; but 1t 's .'si cfi~r that. dherg@nt

conc@pt'ol1~ OftJ",Kh

nHure and rehtihnsh'ps inform th@~f works.' ~I1C~ on~ ~14 ~lar'fted what'~s ,~

stah between them,

itr~i;ri,ent U~ ~iache~

tis HInHs.

In'li

legitimacy contest beiweerl

th~ ~;niir@

shte and the

minimal

stile,

wh~re

^the

'ssu~s ~fk w~11 unde~stood,

^the

out~o~~

~ill b~ dete~~'hed

^by

i~e d.str'~utibn ~r

^the

.1ter~~li;1

toncepU ~r human nat~;"e And ~ehHonships and the J'lues thit t'~ behind them.

"htle be C!vl!n

a

emp'r'cal

' \ ~ ~ :' 1 ; ' , , ~;H

rjt'onal l~g't'mat'on in "~berm.~'s iense ~ay not

, " , ' . ~ "

.

⁾

theoret'cal poss'b,1'ty.nd wh11~ the more~odist programme of

raUonil1t'~uh·J

^'nto

\egH'~;ttng

I> ' ,'" ~

b.l'@f is far from be'nguniv~rsal1y ~~6ctft61. it "on~the-

~

l@ts &~ems ^{(Ind for the}

grounds

tiled by Weber) that

8.

rational grounds for legitimation claims must play A con- 5iderabl, role 1n modern capitalist societies. In any Actual such society, how~ver, othe~ grounds for legitimacy exist, of which" tradition is:important.

Traditional legitimacy ~ests~ according to Weber, 'on an eatabliahed belie, in the aanctit~ 06 immemo~ial t~a­

ditiona and the legitimacy 06 the atatua 06 thoae exe~ciaing autho~ity unde~ them' (Economy and Society, vol I section 111.1.2). 'Immemorial' goes ~oo far, it tends to imply that traditional legitimacy is appropriate in static situa- tions only. Burke had a more nuanced grasp of the situation:

'But ia it in deat~oying and pulling down that akill ia diaplayed1 You~ mob can do thia aa well at luat u you~ auembliu. Theahallo!Alut

unde~atanding, the 4udeat hand, ia mo~e tha~

eQual to that tuk. Rage and 6~enzy witl pull down mo~e in hal6 an hou4, than p~udence, deli-

be~ation, and 60~eaight can build up in ~

At once to p~eae~ve and

4e6o~m ia Quite anothe~ thing. When the uae6ul pa4ta 06 an old eatabliahment a~e kept, and what ia aupe~added ia to be 6itted to what ia 4etained, a vigo~oua mind, ateady pe~aeve4ing attention, va4ioua powe~a 06 compa~iaon and combination, and the 4eaou4cea 06 an unde~atanding 6~uit6ul

in expedienta a~e to be exe4eiaed ... But

9.

you ~4q ob/tet ~ "d p_OetA&

0'

^{t~iA lind La al~~.}

,~ L& not

«it

60~ ~ri d8Atmb!q. whieh glo~it4 in pt~'o_~ing in A it~ ~~nl~~ t~t wo_~

0'

^ftgtA.

,~----:-~-;-t·-.

.

^--.~.-

-.

^{# ~ -}

Sueh ft ~odt

0«

~tgo~~ing. p08a~bly ~~ght tft~t

up ~i'tn!l !lu~j." i .~ . , ."

Without q~t3tlo" it might, dnd

.;:4 '-

oi tht t~etlltneita 0« « Ll_J~ongAt fht ft88LAtdnt8i

.

^'

edutLon d~t ~ ~d.t o~ WLAdo~, whtn wt wo.~ onii

~ . J #? ^<

upon L"dnLMdt~ mdttt., au.tly thty bteomt d p«~t

0«

^{duty too,}

~~iJ l~i

^iuLjtet

0& ou~ dt~olLlio:

4nd eOnAhue.t.ion

iJ itbl ~Aieft

^i1nd

.timh~, ~ut

AtntLtnt b~Li~4

Li

t~l ~tJdt~ 4ttt.allon

oi

~~bat At4tt, eondiiihn, ~"J ^'dbltA, ~ultitudt8 ~dq ^bt Undtud

lIIiatJl«b.H.

i

. ' . ' t ""e ~: f; ,

tReflection~ ~~ the riivolut1on in France, Penguin,

_ (i. /~

'969, pp 279-28')

tov- buv-ice. time 1e

g

idmHU

.l~ ~nHHutton

which 6perates

~uct~~$'ul1y.

It does so.

Le~lUI:

it becomes

~~rt 0; ^i~

.ccepted way

~, do'n~

ILings.

iQJ

the legtttmat'on

'S ^~n­

hanced by

~

conttnu.'

~a'ei i~I~Lduct'on

of

necess~ry

relorms

" • f ,+ "'-~ "i t. "' ....

which ~vo'd upheav.'. L~g't'~.t'on depends oh perfo~m~nce.

. . .: -".~ 'I", ... ·f . .I(;. ... i:\

but tt T@quires only

an

adequate p@rform8nce end d'scourages

. ~" -':".(~. ~ I . ' .-

• restless rat'onalist seek'ng for the best ~ossible outcome.

if } ~ . . \ ··t.··~ tAl ~'4~. . f :.~ ~.~.

lraditional ·clai~$ t~ leg'tima~f a~~ at the'r most ~ubtle

, _ ~ ~ ·li " . ,.j;. ~ ~ J

and ipp@sling when they ~resent 8 sUcc@ssfut institution as

10.

conforming to nature and an embodime~t of the wisdom of generations. on the one hand. and when they point to the li.itations of the individual human Intellect ('the '4ltibte And ,uble contll..iu4ncU, 0' OUIl lluAon .... .,.:Reflections p.1Z1) on the other.

Traditional legitimation. then. may be a route. even in a modern capitalist democracy. by which conditional acceptance of an element in an ~uthoriiy systpm becomes less conditional over time. The essential thing about it is that it is slow.

Some haVe thought otherwise, such as President Nixon's aide Or Charles Colson who delivered his opinion in a pithy and obsc~ ~ne-liner of some notoriety. Insofar as this was representative of the ~ixon adminis~ration's approach to legitimacy. it ,as ~hown 'quite quickly to be unsound.

II

The ~rgument now becomes more specific insofar as the legitimacy of the norms governing public expenditure (parti- cularly on 'welfare' items) is considered. A framework.

developed in the context of adva~ced capitalist economies, exists for the discuision. namely the debate about the notion of a 'fiscal crisis'.

What is a fiscal crisis1 The contemporary conception was given currency by the Marxist scholar

J.

O'Connor in the early seventies;l liberal and conservative scholars have also interested themselves in the issue.

-

It is possible to

~.--- ... .

~Ktract the main themes from ~ useful survey art'cle by Fred

&10ck⁹ a~d thts~ can b~ .umma~tsed ~s foilows:

- {Block's worktng definition): lr-.[Acal--Clli6i6 ia 4-con-

• • ~ 'i 4., .. ,.' .

clition og ntJ.tiontJ.l 'OColttH6 wlt~Jl~, tho UptndoltuH 0« aU.

ttv~l. 0& ~ovtll".t"t t~~t~ ~~it1t~~ ~rpII"d6

^{116 tJ.}

p~llc~"lagt

0" GNP «aat t.IIOllgJi ttl

pllodlie.~ ~Ii~t;

Aymptolll6 IU i",tatifHIIIIlIj

" t , , ;

pllt66uht. ttJ.r 1l~6i6ttJ.nc~. AtJl~~~ pllt88ullt6 «Oil timit6 on

. ' : .~ .J; ~ ~ A:I iii t

~O~~llnlll~nt 6p~"di"g. a~d A ~lItt~ll~ ~, ,L6cat pll~66UIl~ o~

Uci..b and toctJ.l gOlltll""'dl.H.' Ii

Sochttes lire

parttcbHri~

vilfnerab1e to fhcal

CT'~t$

• !

during ~ustained pertods

0'

1~~ tconomic grdwth. Pre~sures

to

susta'n the growth of spending

it

historical l@vel~ can- ntit

~e ~~tch@d

^by

rev~~o~~

^iriJ

~~vern~~nts

are forctd

i~

increas~ taKes·Or tnsttiute b~ iric}eas@ deftctt rtnan~'nj.

Spending pressures

brtgthan

^from

the

necessHy

io

I

~atnta'n 'ctu~u1atton ~hroti~ • • . ~. provision of physical and

, " "

human capital. They

~ts~ b~i'i~'il! 'ro~'th@

^demands

L)

^the

; ~. $ , ; ' : I:

working C18S~ for

an

'~proved ~t.ndard of 'tying. Cutback

<.j I ..

'n

^the for~er e.pense~ prejudtc@s tuture growth prosp~cts • Cutbick in the 1atter ~hvol~e~ ~lt~r'ng the terms of the

•

~ttuggl~ betw~en

worker; and

~h~ r~5t

^to

t~~

detriment of

th~ 'or~~r

^andlts

prosp~cl* ~il,

^{depehd @rt}

th~ str'n~th

^:nd

or~ants8tto~

0'

^{th~ working} cl~$s.r8ther Ih~n ~erely ils size

~s w~ll a~ the organis~~ion rif the po11ttc~1 system.'

~truggl~ ~t this level fi n~Jer.iood dtffer~ntly by ah~il:ts of dHhdng pol Hicel va~~'

..

12.

Raised taxes may produce ~ tax revolt, especially if the taxes are highly visible e.g. property and income taxes.

Deficit financing has the effe~t of raising inf1~tion

in many circumstances. It also raises th~ interest rates, a mechanism whereby private invest~ent is 'crowded out'.

Depending on the use foregone fynds are put to, this maY lower growth rates.

The openness of an econQmy to trade produces pressures for government spending as a way of protecting the population from the economic f1uctuation~ that r~sult fro~ a high level of dependence on the internati~nal market~1

The low growth which has sparked off fiscal crisis in advanced capitalist economies has been attributed to various factors: profit squeeze induced by wages and taxes, a period of downswing in the (alleged) long~period Kondratieff cycle arising from unevenness in the pace of technological innovation, the oil crisis etc.

A major sociological component of a fiscal crisis is a legitimacy crisis for the state. A slow or no increase in real wages undermines the claim for support based on

continuous material improvement and leads to a breakdown in the mechanisms of social control, among which are the legiti- macy of the political party system as a bulwark against the untramme11ed operation of a multitude of interest groups.

formulation of policies in the general tnterest then become much more difficult.'

, Vhe sochlht trit'que of ~h@ rettonal legfttmet'Dn e181ms of the l'b~ral

~·-·T·.7f=l--r , - -. ---t·

Cipflil'st stete 's that wh"e ctttrens ar@ formally equal before th~ lew. rel.tfons bt product'on ar@ §uch that t~'r'

< " I. t ;

.S .

^~tt.t cla5s bta! 'n the a~thorfty relations of tht system. The r'poste to this ,~ the observation thet .,ter-

~ ~ ~.; 4." .f. . . i" t

nat've systems would also have the.r 'nequalit'es (so the debeie is about degree. not exist~n~e) and that the'r growth pbtentta1 ~ight b~ less. ft re.~oh'bl@ be~is for assessIng systems mtght be thetr c8pabftfty for tmproving the lot of

\'I . . " t i"~

thefr leest advantaged members. (This has been made.

~ _ '. t 1:;. _ ~ j

cornerstone or Rawls's approach.) Systems cen be legitf- mated according to their po\enltil performance in th's respect. However. potential perf'~~'ln8nc@ elin only be e~~8b­

l'~hed

by ⁱ series of

co~ni~~I'ct~l~

.rgumenls difffcult 10

~s*e~b1~

.hd subject

t~ tbh~ta~{ Jli'~te.

so that tn

p~.tt'ce

actua1 per'orma~ce ~a_ b' i~ki~ ~t ~. proxy fot .btentttt rertof~~nc~. In' thf* ~ay th~ I~~~iir~ §tele' came to Jri' ltg'ti~acy fr~m rap'd 'mpro~e~enl

ih

~orking c~a*~ condi-

, .. , , ·1<' ~ .. '

ttons ffom 1945 unttl the end of the '9605. made possible 'n

~reat ~e&~ut@ by htgh r.tes o~ ~conom'c. growth dur'n~ 'hat per,od.

t " i.;,i

the 'tnl'restfng ~uisi'~ri then

'5

^{~h8t happens ~i '}

legfitmacy

~hen

^the

r't~

of tirowtt

~rop~ t~

^{• low}

V81d~ o~

iero

or

^h@n becomes negat've

~~ A~as'~n?

There seems to

4 - . ~ : '. "(, "r' • .. ~ t be no nec@sstty for i eris's of legtttmacy. for it may be

"

'4.

accepted that the gro~th rete could rot be raised by any other syst~m. There will ~e (and has been, since the early 19105) a political struggle about whose expectations of

futur~ improvements ~ill be disappointed and about who will bear the burden of ~ cut in standards, but this political struggle may be waged with very little damage done to belief in legitimacy of the system. As Bloch observes: 'Th~o~L6~6

on th~ l~'t t~nd to ~~~ th~ combLnatLon

06

,L6cal c~L~L6

and t~9itimatLon c~L~L6 a~ op~nLn9 th~ way60~ a b~oadly ba~~d PQPuLa~ a~bault on capLtalLbt LnbtLtutLonb. Thu4 ~a4, how~ve4. ~h~4~ hab b~~n LLttl~ dibCU44Lon 06 why ~hL4

a44autt hab not y~~ manL6~bt~d Li4eL, d~bpLt~ CLOb~ ~o ~~n yea4~

06

6L4cal c~L4L4. ^,7 The brutal answer is that, while fiscal crisis is.a symptom of an u~resolved political

struggle, there has not been a legitimation crisis. In this the depression of the mid and 'ete 70s and the milder one

9'

the early 80s differ from the depression of,the 30s ~'. and even then, it is unwise to assume that decline in material conditions directly weakened the claims to, legitimacy of the liberal capitalist state to a.marked degree. More im- portant was the rise of an alternative authority system ~

fascism ~ which attracted people on the right and caused enrolments in Communist Parties among th9se who believed that liberal capitalism led on to fascism or at least was unable to contain it.

A particular kind of political struggle, then, leads

-

to a particular kind of fiscal crisis as described above,

15.

Can we discern the llnea~ents

of

this process In South ~frfc81 Desptte the presence.Gt ~ n~mb~r

ot

§ymptoms - an

I nfht fOil -o-atiiurrent

,':'y

-Hgll-by intefn-a'nonar s hndarck;

-i---

, ,

wel1-org8n's@d and articulate lobby In favour of low

taxes

&nd limft~d government. 8 ~oi ~ery .mpresstve growth rec~~d

;.[ , '0:. ~

In recent y@ars - the answer must be no. Participation by

. , ~ l ~ .. ', l - ...

the publfc s@ctor in production has increased only mildly

~fnc@ ^{the war.9} the exchequer Jeil~t~ ^{is i} percentage of

,. , ... t

exchequer fssu@~ wa~ lower In 1981 than It was in '910' ~nd

the

~e81

^aggregate

growt~

^o}

p~Lllc

services over the

p'rl~d

'976-'902 ~&s been described as near stagnation.^IO Most importantly. there has been no ov~rt political ~truggl@

about the broad lines of budget&tY policy.

if th~r@ ,~ no fisc31 ttis~i ~l ~r@s@nt. what ~re the prosp~cts t6r 6n@7

A

crutl~i m~*sl~~ element at ~resen~ Is the orgsnfsatton of the working class. H'stortcally dlv'ded ajong @thnit 'fne~. South Afrit'~ ~ork@r5. Insofar as ihey are unlonfs@d ~t all. a~~ af'i1~it'~ to one of several trade unio~ f~deration~ or to none. 'nd.of course, t~ere never has been A broadly based

~oc1allst

or SOCial-democratic party. Hot only that, the greater part of the working class Is dhfraflchtsed. Sr,omberger has alluded to this point:

' •••• _t ed" ~t~h4P& d9~tt ~hdt 4 gov~~nm~nt in tht ktyn~Aidn t~«

_4&

Mo~t tl~~iv to ktAo~t to th~ d~dAtie UAt 0« ~4e~0-

teonomle ~tAt~aint l« th~ A~gmtnt b« tht wo~~ing eld6a that would AU«&t~ untmploymtnt W46 without politie«l Atp~~6~nt4tlon.

16.

Thi4 view wa4 widtly exp~t44ed about the ext~tmely 4ha~p and 4uece44lul govt~nment ~t4pOn4e to the balanct 06 payment4 C~i4i4 in 1915, whick ltd ·to a p~olonged ~eceuion. ,11

This is a situation which can and will change. Industrial relations reform was undertatin in recognition of growing working class power at the place of work and provides a_

context in which furthe~ unionisation will take place. If the new constitution is implemented (and the ~est of this study assumes that it wll1 be) then more of the working class will be enfranchised. if only on' a 'junior partner' basis. Trade union federations will be obliged to co-operate in some minimal sense as more an~ more serious business comes on to their agenaas. At1 this pOints to a somewhat more coherent and powerful degree of working class organisatiQn which will progressively weaken the possibilit, of re~olving fiscal difficulties at the expense of that class. There is every reason for supposing ,that this will be a rather slow progress - historical rivalries, a substantial degree of coercion in the political system, persistent unemployment and 14rge sectoral differences in conditions will all pose problems.

All this is at the level of political and economic struggle. There is one dimension of the problem where con- siderations of legitimacy are important and that is th~

allocation of public expenditure under the new constitution.

The next section considers what is involved.

I

'I

\

I.

H.

Iti

Our conc@rn ~er@

wt,i

~. wit~ ,l't~ exp~nd't~r~5 'Jlr~cily Allocebh byrac-e--group' - to~'s~ HcCr&th,s'-phase11.These --- ixp~~d'tur~s Ar~ on c~sh ir~nster~, ~ood~ lind ~erv'ces

- 1\ 1 j

consumed by indIviduals so that estImates or total ~xpen-

dlture

~n

each r'ce

~rou~ c~J t~ '~de

^on

.ssumpt'~ris

^In

principle unproblematic.

The

heads of expendHure can ti!

ite~lsed as tol10w~:

- agrIcultural servIces

~nd

subsidies - education

- health

- transfer pilyments : SocIal penslb~s of varfous types, Unemployment insurance 6nd Woriman's tompensatlon

- other

~oci~l

si!rvttes :

subSf~i~j ~~

sheltered

employ~eni.

subsldle~ on the transport

oi

biat~ passengers, welf're and commu~tty services and Interest 10ss~s on houSlng.^1; Thes@ make up state welf.re expenditures In the br08de~

serise of the term 'wel'.re'. Most ~f the Items on thi!"~st also appear In the Schedule to Sectton 14 of the newcori- stftutfon ,~ 'own .ff.'rs'.

the

~6de of their listing 1s

. t

of sigril'It&nc@ and the relevant tliluses of the schedule are reproduced below:

't. Soc •• ,

~e'f.re;

hut subject toeny

gen@ral'la~ tn·~t~

htton to -

. . !~(

uh" .

(a) l'ior~~ and standards fur the provision or.financlng of welf.re ~ervtcesl

18.

(b) the control of the collection of money and other contri- butions from members of the public for welfare services or charity; 'and

(c) the registration of social workers, and control over their profession.

Z. Education at all levels, including -

(1) instruction by w~y of correspondence, and institutions providing such instruction;

(Z) the training of adults iri the trades at centres established by the State President acting as provi~ed in section 19(1)(~);

and

(3) training of· cadets at schools in terms of section 3(1)(a) of, and subject to, the Defence Act, 1957, and official school sport,

but subject to any general law in relation to -

(a) norms,and standards ,for the financing of running and capital costs of education;

/

(b) salaries and conditions of employment of staff and pro- fessional registrati~n of teachers; and

(c) norms and standards for syllabuses and examination and for certification of qualifications __ •

4. Health matters, compriSing the following, namely _ (1) hospitals, clinics and similar or related institutions;

(2) medical services at schools and for indigent per~ons;

(3) health and nutritional guidance; and

(4) 'the re9istr~tion of and control over private hospitals,

I'

I

I

f'

"

(n houstng

(~) dev~lopm~nt of the tommu~it; in ant area declared bj or

, 0

·under any general law 8S an Brea for the use of the popula- tton grou~ t~ qu~stlon, 'ncluding the establishment, d@velop-f.

~@nt and t~noyation of towris. ~~; t~@ cont~ol over and d'~­

posal of land (wh@th@r by 8lfen~t'on or otherwise) acquIred or made .va~1abl~ f~r thai pur~~s~; and

(~t t@~t control and control &v~r &nd clearance ~f squ~tling.

tli ~~ch Qn ~rta' i~ terms

hi

.~~ i~n@ral 18W, but subjl!d to •

,t·., ., ,I f' )

(ii' ;Iriy ~@n@tal 18w hi r@lHion to norm!, shndards, &nd incom@ groups for th@ ffriilncfngbf ~bu!ltng; and

(b) the ptovt!ton of the

~erier~f law

referred to in par:·

graph (2).. ,

in order to interpret the$~ provtston~ for our pur~o;es.

':. '

.

^"~~'

., it is n@ce'Uilry to develop iI~ account of the budgetary

pro-

~,.

c'ss under the new conslit~\ion. i~; firsi thing to nbi~

t~ thit ~~n f.n~nc'al 8ft'if~ ~~~ very 't~'ted in ~cop~o

i~ttlon

" ot

th~ Schedul~ ip~~i~t~s~

ittninci! ~h rehUon to own iiff~t~i of the population g'roup , in questton. ~ncludtng -

.'... "," ", .,~ " )f "" ~ .i..

(t, estimates of revenu~ ilhd ~kpendtt~re. but exclud'ng the , ' , ; "C ffit U t" '

torm 1ft wh1ch such esttmate~ shall be prepared;

, ,., ~ , ~ t

(2)

the

ipprop~lition of moneys for

the

purposes of such

20.

estimates. but ~~cluding such appropriation of moneys for any purpo~e other than that for which they are ~y or under general law made available for appropriation.

(3) leries authori~ed by or under general law. or services rendered over and above payments for such s~rvices.

(4) the receipt of donations.

(5) the making of donations not amounting to a supplementa- tion of appropriations contemplated 1n paragraph (2). and

(6) the control over the collection and utilization of revenue, subject to the provision of the Exchequer and Audit Act, 1975.

but excluding the levying of taxes an4 raising of loans.' These provisions have their counterpart in sections 60-82 of the constitution~

'80. All revenues of the Republic, from whatever source arising. shall vest in the State President,

ffi. (I) There shall be a State Revenue F~nd, into which shall be paid all revenues as defined in section 1 of the Exchequer and Audit Act, 1975.

(2) No moneys shall be withdrawn from the State Revenue Fund, except in accordance with an Act of Parliament.

~. (I) In respect of the State Revenue Fund there shall be - (a) a State Revenue Account, which shall, subject" to the provision of paragraph (b) and subsection (2), be credited with all revenues and from which shall be defrayed all expenditure and be paid any amounts with which it is charged

I

1 I

"

Zl.

in terms of this Act or any other law;

(b) the accounts in connection with the administration of own affair~ of the differ~nt population groups, which may be

prescriE~~y any _ g~~l-=-,".a.~ law and which shall be credited with all revenues accruing to them in terms of this Act or

an~other law and from which shall be defrayed all expendi- ture and be paid any amounts with which they are charged in terms of this Act or any other law.

(Z) Where any law dealing with own affairs of a population group provides that revenue so mentio~ed shall be defrayed from that fund, such revenue shall be paid into, and such expenditure shall be defrayed from, the appropriate account contemplated in subsection (1)(b).'

All this establishes that the budgetary process will be a complex mixture of own and general legislation. The best indication of how the process will in fact work is contained in Chapter 4 of the Second Report ~f the Co~stitutional Committee of the President's Council on the Adaptation of

-~- of Constitutional Structures in SoiJth Africa. The outline can be summarised as follows:

- There will be a Permanent Parliamentary Budget Committee consisting of representatives from all three houses. This Committee will be furnished with expert staff.

- This Permanent Committee will be involved in ~iscussions with the Department of Finance at the initial stages of

'estimates of revenue and the ·~urvey· of the economy that

2-2.

must precede all detailed discussion of budgetary proposals.' (p:45). These discussions will be confident'al.

- The Minister of r'nanct wfil ihen prepare the budget and, once it is approved by the Cabinet. it will be introduced for information at a jo'~t stttihg of the three houses.

- After that it will be considered by the Permanent Committee who will try and reach consensus about 't. but can dec,de on issues by resolution. Its dectsio~wil1be conveyed to the three houses as information end recommendat'ons.

- Then there will be a second. reading debate in each house separately. After that the Pr~stdent's vote will bedeali with and then the other votes will be dealt with by

specialist Permanent Parliamehtary Committees 'n public.

The fndfvidual votes may then be approved either by consensus or majority resolution.

- 'Thereafter. all votes, (includfng those of a segm@nta1 nature, which wfll be disposed of in separate Chambers) will be sent sill1Ultenaous1y as ii tota 1 pachge. together. wi th a report.

to all three Chambers for debate and approval or rejection' (p.46).

- This process is expected by the stgnatorAes to the Report to 'afford opportunities tor negotialfon whfch'wi11 lim.t to the minimum the possibfllty of veto by any Chamber' (,.46).

Should there be a deadlock. the ~rov's'ons of sectto~ 32 relating to d1sag~eement amon~ the Uouse~ tould b~ a~pl'ed

by sendirig the relevant legt~l~tion. ~o the Prestdent~~

·Council to receive its final form.

-I

23.

The really interesting thJng about ~hese constitutional provisions and outlines of procedure is that they indicate a decisi~e rejection of ~ne set of possible fiscal principles

"_ in favour of another.

The rejected set is outlined in an article by Terreblanche."

Terreblancretook the fundamental question in relation to new fiscal principles to be: 'in what wa!l can .buHic.i.e.nt

political ba~gaining pow~~ b~ inhtitutionaliz~d ~OA th~

ColouA~dh and lndianh to ~nabl~ th~m to imp~ov~ theiA 6ihcal and w~l6aAe pObitionh without giving that amount 06 political pOlA/eA that can be mihuhed to OV~AhtAain th~ capacity 0& th~

South A6Aican economy and CAeat~ economic chaoh?'l~

"is proposed answer was to observe that 'in th~ d~mo­

cAaticbyht~m 06 the WuteAn Wo~ld the n~c~uaAy 6ihcal

A~htAaint and 6inanciai dibcipline ih bAought about by th~

tax capacity 06 the economy and th~ tax wi.l.U.ngn~u 0 6 ^th~

vot~~h. '16The application of this to a new South African constitution was to relate expenditure on each population group's own affairs to the contribution of that population group to state revenue. The relation could be direct. or there could be a development subsidy made available to a poorer population group especially if such a group showed

·willing by making a special tax effort among its members.

Attractive though this proposal might seem in introducing.

budget constraints to produce rational economic behaviour and in combining the standard commercial principle of 'you

get .what you "iy for' w'th the possibil'ty of generos~tY9 on

cl05e~ examination it can b~ s@ento have ~ number of flaws - given that both black efV,'rs and general &ff.'rs have to be f'nanc@d, the budget for own ~ffa'rs for Wh't@~~ Colour@ds a'nd Indians might w@ll bur it rather tenuous rehUon to their respective contr'butions to state revenue. The more tenuous the rehtton.~Ue'1ess rthe"'ab" ny;'of.:these. tontrlbutfon~:>h

function as budget constraints;

- it assumes that the quest'on 'what do the various pop~la­

t'on groups contribut@ to stat@revenue7' i~ a purely

factusl one. The work of McGrath and Wllson¹⁷ both indtcate that it is not. Wilson raises explicttly the normative issues raised by the rac'al allocation of both 'ncome and consumption taxes Bswel1 as company tax and royalttes. He also ob~erves that 'you get.~hat you pa~ fo~' as • ffscil principle has for some time a'ld .. for m!!iny p@oplebeensupplan.ted w'th an expectation that the State will carry out a measure of redistribution towards the poor. And when McGreth asks the question 'how ~ft~ hftA tht~t b~~n ft ti&ent ~~diAt~ibutio"

o~ .income between thi. MCur' he B only&b1e to provide til w'th

a

rather wide range of !nSwers. Some of this range

ts a~count@d f6~ by uncertainty about fects; but under1yth.

many of h's altern~t've·assumpt'on* .are alternat've values.

"~w the observation that there are no~mBt1ve. tssues·heT~- '$ not in 'tself fatal, prov'd~d there 'S ton~ensus .boul them but when it t$ borne in ~1nd that some dtscussion of the racial allocation of beneftts from general affa'rs

~-~--- .... --- ^...

25.

expenditure would also be necessary one sees that issues such as the following would be r~ised:

- to what extent is the pre-tax distribution of income

~'~. ~~-~justifie d-l-

- who benefits from expenditure on police, prisons and the Defence rorcel

-these 'are question~'about:which'one wouldJelpectnot ^{r "}

consensus but a rather sharp divergence of opinion.

- 1t makes the 'development subsidy' which would function as the index of redistribution (although unreasonably) highly visible.

The alternative which seem~ to have been developed starts in a different place, with the development of norms and standards in relation to the various heads of.expendiiure mentioned at the ^~eginning of this section. The excerpts from the schedule show clearly that this will be a general affair. There will be powerful fOrces working in favour of making the norms and standards the same for each population

~, Coloureds and Indians wili have to pass legislation to establish these norms and standards and any attempt to have one standard for Whites, Coloureds and Indians and a lower one for Blacks could have costly repercussions. Of course, things will start with a large number of unequal nor.s·and standards and changes will have to be negotiated.

It is recognised that concessioris will ,have to be made. ~s

the President's Council reporf put it:

26.

'Aa t~~ p~o~~aa oj ~t«D~M 'o~§~a d~~dd, t~~ g~oup l~ad~~a' ~~~dibllltv witt comt to d~p~"d ld~gtl,

bn t~~i~ ~~al a~~itvtm~"tj i" imp~Dvi"§ t~t

quality o~ li~e 0' t~ti~ g~oupa In economle ~t­

ap~cta. Pu~l"g t~t p~~pa~ato~g at4g~ 0« t~~

8udg~t, t~la wIll cdll «o~ t~~ g~~at~at poaalblt dlaplay 0« op~n~~d~ttdntaa and optn~a"d~d"~aj. Oil

This alternative avoids the.difficulty of the Terreblanthe approach. Racial allocation of state revenue and e~pendtture

b~com~s unnecessary. normaitv@ debates threatening to wr@c~

the achtevemeni of consensus ar@ finessed

~nd misleadtn~

m~asures of redistribution are avoided. Above all the way is opened for progress towards 8 much more defensible fiscel configuration. ·The rate at which this progress ten b@ made depends on economic variables an~ it is to an examination of these that we now turn.

IV

Two of McGrath's tables summarise the history of welfare expenditures (in the broad sense of the term) from 1949/50 to 1975/76. These are reproduced below in slightly revfsed

for~:

27.

The Com osition of GroSS Current Government Ex enditure in South Afd ca 1949/50

-

^1975/1611 (Percentages)

-,,~- --Year~---- ^.--.. ...--~--

1949/50 1959/60 _~ 1975/16 1. Agricultural services

and subsidies ⁶ 7 7 6

2. Education 18 19 19 19

3. Health and hospitals 13 13 8 7

4. Transfer-payments 8 10 7 7

5. Others ⁹ 10 7 ⁶

54 59 48 45

Gross current expenditures as

--

a percentage of personal income 24 21 23 25 'Welfare' expenditures as a

percentage of personal income 13,0 12,4 11,0 11,2 Items 3, 4, 5 as a

percentage of personal income 7,2 6,9 5,1 4,5 The picture which emerges is a sustained but gradual decline in state ~elfare expenditures as a percentage of per- sonal income between 1950 and 1970. The sector in which the decline was most mar'ked was health, with smaller declines in transfer payments and other payments and more or less static situations in subsidies and education.

There has been a small shift in the share of this ex- penditure going to the various racial groups - a dr,op for Whites and rises for everyone else.'

---

^- --~---

l8 •

• hares of ex~endftures dtrectll allocated bl rIctal grouE 1949/50 - '97S/76 (percentages)>>t

Race 9rou~ 1949/50 1959160 t969170 U75l7&

Whites 61 ^{59 58 56}

Coloured

"

^{12 13 12}

Ashn 3 3 4 4

Bhd 25

n

²⁵ 28

100 100 '00 100

Whf!re di Herent per CIIpfta exp@liditures ire fnve>hed reht Ively smallshHts tn shar@s of exp@ndttur@ may ^wel~ be

,.

compatibll! wtth quite large difterf!lice~ tn growth of·

coyer.

when corisidered against the ba~tground of 'nternationa1 experi e~ce.

Wtlensky!! has dati on social securtty sp@ndtng for

6.

tountrfes ranked by GNP per capiti tn '9~6. lh'~'ntludes

'compulsory social tnsUranc@. c@rtain voluntary soc'al tn- surance schemes, family al10wanc~ schemes, special 5ch@Mes for public employees, public health services, public assistance and benefits granted to war ~icttms.· If ~@

focus attention on s~mt-dev@loped countrtes by txcludiht from consideration the 16 richest arid the 1& poOt@st couritries and estimate the coefftcients of 8 simplified Chenery and Syrquin type cross-secttonal equltton

19.

where X is proportion of GNP spent on soci~l security and Y

A

is income per capita, a is found to be 1,3973

e(

-0,4858 and ez 0,0435 which has a positive and increasing slope from the point -crf--Y--"-$2~B-in 1966 prices i.e .t-he---proportion tends to rise with economic development in the range of interest to us. The predicted value of X is 3,6% at a per capita Income ~f $300, 6,3% at $600 and 11,0% at $1000.

Note what this regression establishes. It establishes that in semi-developed countries generally the percentage of GNP going to public welfare expenditures (in Wilensky's sense of the term) tends to rise as income per capita rises.

If we are prepared to posit a development path to which capitalist countries partly adhere and partly deviate each in their own fashion, cross-sectional results can be inter- preted as indicating an- average path~

Now the definition of social. security used corresponds approximately to McGrath's headin~, health and hospitals, transfer payments and other social ~ervice5 50 we can read off from his table (reproduced above) and from national income statistics what was happening in South Africa and compare it with the international cross-section data.

3f1.

Soch 1 SecurHl as a I!rol!ortion of GNP. South Africa iind I nternatlonal

Per capita S.A. Actual sochl Predicted values Date Income In 1966 security e~pendlture from fnternatlonal

U.S. dollars as a percentage of cross-section personal income

1949 362 7.2 3.9

1959 441 6.9 4.6

1969 602 5,1

6.4

1975 658 4,5 7.b

Whatever the inexactitudes of thh ,sort of international study or of comparing personal income fractfons with those of GNP the table's main feature

-

a perverse movement shce _{. I}

1949 I n the proportion of the GNP devoted to social securtty

e~pend 1ture by comparison with II norm tahn from II cross-

sectional study - must impr@s~ us. In part ft:~ay be explained by changing coverage of welfare @xpendlture tn a context of greatly different entitlements, but it must also b@ a testimony to a period of rigid political repression. One can see that straight away when considering, fo! inslance, the damage done to black education in the s@cond half of the t9505 and most of the 19605 by the Verwoerdian financing prlncipl ••

Are there any indications from the post, t975/6 period to indicate that this percentage decline has been halted or reversed? One is the rapid @xpanston.~f educatto~; .not'e~

I

Is the rise In old age penstons. No clear indfcatton tn!

31.

respect of agricultural subsidies and health" are apparent.

Housing policy, on the other hand, is steadily deteriorating under the 'influence of mi'sgulded principles, a circumstance westlall com"e To-r"egretis-surely as -w"e--now regret" ea-rl i-er black education policy. There has been some progress on"

" ~

eliminating discrepancies in norms and standards between races. The picture is probably one of slow general but not uniform improvement.

For the reasons mentioned in section III minds are going to have to be concentrated on the question of speeding up and making more reliable progress towards a generally support- able fiscal dispensation. In considering the options ahead one issue is important above all others - how fast is the economy likely to" grow"and what implications does that have1

v

We are concerned here with the growth in real income per capita, so expectations must be established about real economic growth rates and "population growth rates. We shall pick up from the last year for which McGrath carried out calculations - 1976 - and work forward to the year 2000.

32.

Real income growth rates (percents,e per annum) 1976. - 1980: 3,'3 (S.A. Statistics i982 p.2V.7)

1981: 5,'

•

1982: -1.2

1983: -3,7

1984: 4,9 (W.H. ~e Vries and A.P. Faure. Pro~pects

for 1984. Bur@au 'or Econo~ic Rese~rch

Stel1enbo$ch p.10) • 1985 - 1990: 3,58 (average rite '970-1980) 1990 - 2000: low 2,50

me,dfum ,4,25 high _6,00 Summarl

1976 ^~ 1980: 3,'13.

1981

-

^{1985: 1,67}

1985 - 1990: 3,58

1976 - 2000: low 2,67 medium 3,37 high 4,06 Population growth r.tes Total popuhtion

1970: 22 038 000 (J~l. Sadie, Projections of the South AfFie."

population. lot. 1973)

1980: 28 692 000 (J.A. Grobbelur., Project'ons' arid arialysH 1990: 36 161 000 of the South African population for tbe 2000: 44 863 000 period 1980-2015. Unit for Futures

Research, St~ile"bosch)'

Growth rates (percentage per annumt 1970

-

^{1980: 2,64}

1980

-

^{1990 : 2,38}

~1990

-

2000: ---2Ti8-- - -... - - - . 1976

-

^{2000: 2,35}

The rate of decline in- the population growth rate may be a bit more rapid than this if black fertility drops faster than Grobbelaar has projectedfor the eighties- and nineties.

Reasonable ~lternatiye rates would be 2.28l p.a. 1980-1990 and 1 ,gal p.a. 1990-2000 in which case the 1976-2000 ayerage would b, ?23l p.a.

A table of outcomes can then be compiled for the total growth in -real per capita income oyer the quarter century 1976-2000:

Total percentage growth in real p~r capita incomes 1976-2000 Low economic' Medium economic High economic

growth growth growth

High population growth

a

28 51

Low population growth 11 32 56

This table should impress on us that if we are thinking in terms of redist~ibution with growth, the growth margin is not _'ikely to be gr·eat (of the order of 30S oyer 25 year..s or just oyer 1S p.a.) and if things turn out badly the margin could be come very slender indeed. We-could, on the other hand, get lucky as the high projection~ show,. but it would be unwise to count on it.

34.

Now McGrath phces ru:hUy aHocab1e up@n~Uur@ per capita 1n '975/76 at R18~ for Whites. R74 for Coloureds.

R82 for Ashns 'nod R22 for' Blu:h. (McGrath: Table '2) im- plying an averag@ expenditure (~s'ng S.ft. Statisttcs populi- tion weights for 1975) of R56. these t'~ur~s ire tn ~97~

prices.

Assume the following:

" a low growth in real per captta. incomes ot ,.91 between 1976 and 2000. a medium growth of 301 ind a htgh growth of 531 (derived from the tabl@ above) ^I

2) a low welfare expenditure situit'on where ~ubl'c @,pen- dUure h 2211 of personil hcome hd ractally allocable expenditure is 4211 of public expendtture • • ~~d'um situation where the respectiv~ perc@ntages.~re l7&' and 451 and a high one where· the figures are lZiS and

I'tl.

^{T~e i975/76}

ffgures were 251 and 451 repsecttv@1y.

Then a two-way table bf per C~p't8 welfare (in the broSO sense) expeoditure - all races - tan be calculated.

Per capft~ welfare expenditure 2000 - all rices ('910 prfces)

Small Med'um larg!

welfare budget welfare budget welfare budget·

Slow growth ^{52 67}

9'

Med'um growth ⁶² 80 109

High growth . 77 9 • 128

35.

In the case of the small welfare budget and slow growth real average per capita expenditure would actually be lower on iverag~ in 2000 than

it

was in 1975/76. Whatever the growth outcome. the average would be lower than the 1975/76, levels of per capita expe~diture enjoyed by Asians. In the case of the medium welfare budget and the ~edium

growth projection the per capita expenditure In the year 2000 would be the same as received by Coloureds and Asians i~ 1975/76. If the equalisation of per capita e~pendiiure

~ achieved by 2000. in other words. everyone could enjoy the same level of services as Coloureds and ASians had en- joyed a quarter of a century earlier. given the realisation of th~ ~o~t probable ~rojectio~~. Even In the high-high

case~ equalisation would mean standard~ dropping 281 ·for Whites. though rising for everyone else.

Of course. the application of equal standards and no~ms does ~ot necessarily mean equa11slng per capita.welf~r~

expenditure across racial groups but these calculations.

crude e~ they are. indicate the m~gnitude of the problems involved. They show that It is possible for the state to provide without specific cherge only a very basic level of social services. This has been appreciated clearly enough and the system Is designed in·princl~ie .. so that individuals who want to buy more of these services and who can pay for lhe~ will be able to do so. If it is required. for instance.

that public expenditure for whJte pupils drop. then those w~lie parents that want to cen make up'for the drop by