South Africa's international financial relations, 1970-1987 : history, crisis and transformation.

Abstract

This thesis examines South Africa's relations with the International Monetary Fund (IMF) and private international banks in the period 1970-1987. The thesis is written in the language, and uses the conceptual tools, of 'regulation theory', an approach whose emphasis on 'time-changing' empirically-grounded explanations of a country's global interactions, it is suggested, represents an advance over modernisation and dependency approaches. The thesis traces the altered circumstances of the international financial system since the early 1970s. It points to the struggle by the IMF to come to terms with these changes in harmonising a new international financial system. The IMF has, however, increased its supervisory power in relation to most countries in the developing world, especially after the oil-price hike of 1973. The basis for, and implications of, the explosion in private international bank lending in this period is also examined. This analysis is followed by an examination of the crisis in the South African political economy since the early 1970s and of the way this crisis was influenced by global events. It is argued that South Africa's international economic relations were transformed by both global and domestic forces and came to be dominated by issues of international finance. The second part of the thesis examines South Africa's relations with the IMF and private international banks. This relationship was supportive of the apartheid state's development strategy for most of the period 1970-1985. It is argued that until the 1980s, the relationship also benefited the western industrialised countries who profited both materially and strategically, from their economic relations with South Africa. However, in 1983, the US imposed restrictions on its support for IMF loans to South Africa. By mid-1985 a combination of political and economic changes within South Africa forced some foreign banks to withdraw their normal credit facilities to South Africa. These events precipitated a dramatic change for the worse in South Africa's international financial relations. It is argued that although there has been some improvement in these relations since 1987, the country's relations with the IMF and banks have not returned to their previous mostly supportive character. A combination of international, regional and domestic economic and political factors has ensured that the current crisis in South Africa's international financial relations is already deeper, more prolonged, and more damaging to growth prospects, than the crisis of the mid-1970s.