Abstract
M.Com. (Economics)
This study looked into the possible presence of structural inflation
in South Africa. The South African rate of inflation has, by the time
this study was undertaken, showed resistance to reduce in the face of
several years of demand management policies. It was this resistance
that led to the idea that the South African inflation rate might be
the result of several structural factors in the economy.
The study was done in three separate stages. In the first, a study
of the conventional theories of inflation, the demand-pull and cost
push theories, was done. The main objective was to establish whether
inflation could be controlled by the medicine these theories prescribed.
In section two, the different schools of thought as regards the structural
approach to inflation were analyzed. The structuralist school,
developed during the late 1950s, described inflation as the result of
productivity discrepancies mainly between the agricultural and industrial
sectors. The structural school, which developed during the early
1970s has two variations. The first, the Scandinavian variant,
ascribes inflation to the existing productivity gap between the international
competing sectors and the domestic sectors, whilst no corresponding
gap in salaries between the relevant sectors exists. The
second variant designates inflation to the gap existing between the
labour productivity in the public and private sectors. Here again, no
such salary gap exists between the sectors.
The last structural inflation school of thought discussed was the one
prevailing in the USA. This school saw inflation as the result of the
unproductive use of capital and labour when measured against the incomes
generated by the same factors of production.
In section three of the study, the abovementioned theories of
structural inflation were empirically applied in the South African context.
In all cases very definite pointers, indicating the applicability
·of these theories in the South African situation were found. In
all cases two main sector groups were constructed; each consisted as
the sum of the weighted productivity of wages of the sectors belonging
to that sector group i.e. internationally or domestically competitive
and public or private competing groups. The constructed series for
labour productivity and wages and salaries for the different sector groups
were then compared.