A Model of the Political Economy of International Investment Sanctions: The Case of South Africa

Abstract

SUMMARY Many advocates of sanctions against South Africa have proposed that such measures will reduce the wealth of white South Africans and thereby raise the costs of apartheid to those who benefit from it by such a large amount that whites will voluntarily choose to terminate the apartheid system. This paper examines the likely effects of disinvestment sanctions on the survivability of apartheid. An ‘interest‐group’ model of the South African state is developed, in which apartheid policies are treated as endogenous outcomes of a political decision‐making process. The effects of sanctions are introduced through the impact of international capital flows and asset prices on the major interest groups within the white electorate. It is shown that disinvestment policies may not diminish apartheid via market effects, but could have an impact upon the political costs of maintaining apartheid institutions.

Why do sanctions need time to work? Adjustment, learning and anticipation

“…4 In the models of, for example, Hughes Hallett and Brandsma [27], Kaempfer and Lowenberg [28,29] and Schultz [43] the sender countries utter a strategic threat consisting of the 1Brady ([9], p 299) claims that sanctions with time become extremely efficient, because agreement on the international unacceptability of the target's conduct causes more and more countries to join the embargo. Hanlon [107][108][109][110].…”

An Economic Model of the Apartheid State

“…Kaempfer & Lowenberg's (1988b) public choice analysis of sanctions indicates that even symbolic sanctions that do not inflict severe economic damage might nevertheless precipitate desirable policy changes in a target country if they encourage opponents of the target regime to organize successful collective action against the regime, or if they weaken the ability of pro-regime groups to mobilize support. In an empirical test of the public choice theory of sanctions, Kaempfer et al (1995) find that anti-34 See Becker 1987, Hazlett 1987, and Kaempfer & Lowenberg 1986, 1988a On the motives and effects of anti-apartheid sanctions, see Kaempfer et al 1987a, 1987b, and Kaempfer & Lowenberg 1989. 36 This latter effect is confirmed empirically by Kaempfer et al 1995. apartheid sanctions strengthened the political effectiveness of black opposition movements within South Africa, but that this was typically a short-term effect, ultimately swamped by the negative income effects of sanctions on both blacks and whites.…”

A Theory of International Conflict Management and Sanctioning

“…As an example supporting the latter argument it is often pointed out that the economic recession that apartheid and early post-apartheid SouthAfrica underwent due, at least partially, to the desinvestment that followed the imposition of international economic sanctions during the apartheid days, was especially harmful to more vulnerable economically, i.e., to the same people that were discriminated against by the apartheid regime. Also for a discussion of the South-African case see Kaempfer and Lowenberg (1986).…”