Wednesday, January 6, 2010

'South Africa’s War Against Capitalism'

This article originally appeared in Volume 3, Number 3, of International Freedom Review (Spring 1990).

South Africa’s War Against Capitalism by Walter E. Williams
[New York: Praeger (A Cato Institute Book), 1989, 159 pp., $19.95, cloth]
Reviewed by Richard E. Sincere, Jr.

The mythology of African liberation movements asserts that the struggle against apartheid is inherently a struggle against capitalism. The apartheid system, according to the African National Congress and its allied groups, was designed to benefit rich white capitalists at the expense of poor black workers. American economist Walter Williams demonstrates conclusively in his book, South Africa’s War Against Capitalism, that the opposite is the case: apartheid is an inherently socialist system designed to benefit (formerly) poor white workers at the expense of the entrepreneurial classes and of poor blacks. Simply, apartheid is South Africa’s war against capitalism. As Williams puts it, if capitalism can be described as the unfettered operation of the market in the allocation of society’s scarce resources, then apartheid is the antithesis of capitalism.”

South Africa’s War Against Capitalism covers much the same ground as did an earlier study by Merle Lipton, Capitalism and Apartheid, but Williams, well-known In American conservative and libertarian circles for his unabashed willingness to speak the truth as he sees it, regardless of whom might be offended, puts his own special gloss on the subject. It is this combativeness that makes his new book a lively read that will get people to think more deeply and more precisely about the complex social and economic system we call “apartheid.”

Although the term apartheid did not appear until the 1940s, it had its genesis in laws passed by the South African parliament in the 1910s and ‘20s. These were the first laws limiting the economic freedom of black South Africans by barring them from certain occupations, forcing them to carry identity documents, and forbidding them from owning farmland or business establishments. These laws were demanded by white-controlled labor unions and the South African Communist Party, as well as by white farmers, and were passed despite the protests of white manufacturers, mine owners, and other employers.

The reason for this legislation—which, in some cases, such as minimum wage laws, had the appearance of being non-racist, colorblind, and equitable—was to exclude blacks from competition for jobs in industry and agriculture. White farmers feared black farmers because the blacks were more productive and more willing to take risks than the whites. White workers in the mines disliked the fact that blacks were willing to work for lower wages than the whites, thus being more attractive to employers, especially when filling unskilled or semi-skilled positions. And because white workers disliked the blacks, the Communist Party campaigned on the slogan “Workers of the World Unite and Fight for a White South Africa.”

The capitalists—i.e., white entrepreneurs and business owners—opposed this legislation vehemently. Contrary to what anti-apartheid activists in South Africa and abroad have said, white businessmen and financiers are not the bulwarks of the apartheid system, because it puts them at a disadvantage. Apartheid laws interfere with their freedom to operate their businesses as they see fit. The existence of apartheid laws that restrict the rights of white employers to hire black workers is itself evidence that business interests opposed (and oppose) racial discrimination. After all, if white employers did not want to hire blacks in the first place, why should the state legislate against such activity?

In fact, in the early part of this century, white employers preferred to hire blacks not only because they worked for less money than their white counterparts, but because they worked harder and better. Williams cites a government commission report from 1908:

We have been impressed with the frequency with which it has been stated in evidence that unskilled labour was “kaffir’s work” and as such is not the kind of work which a white man should perform. [The poor white’s] inefficiency as an unskilled labourer and the higher wage he requires, have had the natural result that coloured labour, inefficient though it is, is cheaper to the employer for unskilled work than white labour... It is essential to realize the importance of the practical monopoly of the unskilled labour market possessed by the native.
Williams reports that in 1916, the South African prime minister travelled around the country “urging white farmers to fire their black workers and replace them with poor whites. This admonishment fell on deaf ears because farmers had little incentive to do so. First of all, black workers were cheaper and more reliable; and second, many poor whites were unwilling to do kaffirwerk (the American translation would be ‘nigger work’).”

Labor unions in South Africa and the United States at this time were both calling for racially-based discriminatory legislation against non-white workers. Samuel Gompers, one of the founders of the American Federation of Labor (AFL), called for immigration restrictions against Asians because he thought “the maintenance of the nation depended upon the maintenance of racial purity and strength.” Labor leaders demanded equal pay for equal work, which although it sounds altruistic and virtuous, was essentially a means to price black labor—often illiterate and mostly unskilled —out of the market. When that didn’t work, they called instead for outright discrimination by law. This was opposed by employers.

For instance, the South African Chamber of Mines argued that the color bar “should be abolished because it is irrational and immoral.” It was irrational because it stifled the most effective utilization of labor by management, making allocation of resources difficult and uneconomical. That it was immoral is self-evident.

A turning point in South African history was the “Rand Rebellion” of 1922, also known as the “Red Revolt.” Twenty thousand white miners went on strike in the area around Johannesburg, in an action described by Williams as “a Marxist revolution organized by white workers to prevent the Chamber of Mines from hiring black semiskilled workers.” In the strike, more than 200 people were killed—mostly whites—and several hundred more were wounded. It precipitated a political crisis that led to the collapse of the South African Party government led by Jan Smuts and the formation of a new government by National Party leader J. B. M. Hertzog.

Another result was the passage of the Industrial Conciliation Act of 1924, which because it was opposed by the Smuts government and favored by the white workers and Hertzog’s National Party, led to Hertzog’s accession to power. Smuts’ South African Party opposed this legislation, which statutorily limited the economic rights of blacks, for several reasons that still ring true today. Williams writes:
The South African party opposed statutory discrimination for several reasons: (1) It would embarrass South Africa in the eyes of the world; (2) it would earn whites the hatred of all the other communities; and (3) it was redundant since racial domination—the party felt—had already been achieved de facto. Some members of Parliament also advanced practical arguments against statutory provisions for discrimination. They said that: (1) the bill would create hate and agitation among the black population, and (2) this artificial protection to poor whites would lead to failure since the only real job protection was in efficiency and hard work.
More than twenty years passed between the introduction of this legislation and the election in 1948 of the National Party government that campaigned on a platform of apartheid. In that twenty years, South Africa suffered the effects of the worldwide Great Depression. Rural Afrikaners, like Africans throughout the continent, migrated to the cities in search of work. The Second World War precipitated political organizing for both Afrikaners and black Africans. Within both groups were supporters and opponents of the war effort, but whatever the case, political organizing skills were strengthened and the groundwork for later social and political events was laid. Because the market acted non-racially, those who wanted to uphold white privilege increasingly turned to the political arena to achieve their goals. Not only did they pass discriminatory laws, they moved to acquire more property for the state, to the extent that by the mid- 1980s, 55 per cent of South African industry was state-owned or -controlled. By this means, the government could grant patronage positions and sinecures to white workers who preferred not to compete in a market that granted the same status to black Africans as it did to white Africans.

Under Daniel F. Malan and his successors J. M. Strijdom and Hendrik Verwoerd, apartheid—or separate development—was developed to its zenith. Under their plans, blacks and whites would do everything separately: live, work, go to school, vote, travel. Separate black republics would be established to satisfy the longing of blacks for political rights. Of course, In the long run, none of these grand schemes succeeded. The events of 1989 and 1990 show that quite clearly. As Williams explains thoroughly in this book, however, the collapse of apartheid under its own weight was inevitable.

In a chapter that has lessons for all countries where the state is tempted to intervene in the economy, Williams explains how market manipulation supported apartheid and can be used to enforce malevolent ideas almost anywhere. He discusses minimum- and equal-wage legislation at length, noting that such legislation:
is an effective tool in a racist’s arsenal. Wage regulation is effective because it enjoys the benefit of at least four powerful forces: (1) It evokes voluntary cooperation with the racist goals; (2) it gives the appearance of being racially neutral; (3) it is relatively cheap to enforce; and (4) it sometimes enjoys the political support of the people whom it is intended to victimize, as well as their benefactors.
Why is such legislation so bad? Simply because it works to price out of the market the least advantaged (or most disadvantaged, depending on one’s perspective) laborers. Williams writes: "Virtually all scholarly studies conclude that minimum wage laws discriminate against employment of the less preferred worker.” Thus, if black workers face discrimination because of their race, but employers are willing to overlook their irrational dislike of blacks if blacks also work for lower wages, the discrimination is mitigated. However, if the law forces employers to pay the same wage to workers regardless of irrational prejudices, the employer is more likely to yield to his prejudice and discriminate against the black worker. “No doubt there were white supremacists in private industry,” Williams comments, “but their sense of loyalty to white workers was not sufficient enough to withstand the voluntary forces of the marketplace.”

Williams culls examples from both American and South African history to support his argument. He recalls:
In 1909, the Brotherhood of Locomotive Firemen called a strike against the Georgia Railroad. One of their demands called for the complete elimination of blacks from the employment rolls. Instead of eliminating blacks, however, the arbitration board decided that black firemen, hostlers, and hostlers’ helpers should be paid wages equal to the wages of white men doing the same job. The white unionists were delighted with the decision; they said, “If this course of action is followed by the company and the incentive for employing the Negro thus removed, the strike will not have been in vain.”
Similar demands were made by South African unions. Williams explains that both American and South African labor leaders
recognized the power of wage regulation as a means to accomplishing racist goals. They both saw that setting a floor on wages could be more effective and politically cheaper than the Imposition of quotas and color bars, in part because a legislated minimum wage is seldom seen as racially discriminatory and is hence more politically acceptable among decent people (even those victimized by it) and less subject to constitutional challenge.

Williams believes that all South Africans have suffered because of the apartheid system, not only blacks who are its most visible victims. This is because apartheid distorts the market, its enforcement absorbs a disproportionate amount of national income, and all South African citizens have to pay. Because race rather than the market determines the allocation of scarce resources, apartheid—which Williams terms “inefficient resource allocation”— “clearly reduces South Africa’s overall material wealth from what it otherwise might be.”

The curious problem that we face today is that organized anti-apartheid groups argue—incorrectly—that apartheid and capitalism are allies and must both be opposed with equal vehemence. Bishop Desmond Tutu, for instance, wrote in the black South African magazine Frontline in 1980:

At the outset I must say that I am opposed to capitalism it is due to abhorrence at what I believe to be an essentially exploitative economic order.... What I have seen of capitalism in my 48 years, and all over the world, has convinced me that no amount of plastic surgery can alter its basically ugly face.
Archbishop Tutu has not changed his opinion in ten years. Neither, for that matter, have Nelson Mandela or the African National Congress, who continue their insistence that in the new South Africa, banks, mines, and other basic industries must be expropriated by the state. (They use the term “nationalized,” which implies giving the nation or the people some role to play, but in fact they intend to take these industries away from the people and put them in the hands of an impersonal leviathan, the State.)

Perhaps after seeing the concrete rejection of socialism by the people of Central Europe and the at least nominal rejection of it by African rulers, the ANC, Mandela, and Tutu may change their views. But so far their minds seem closed to the logical conclusion drawn by Walter Williams:
South Africa’s apartheid is not the corollary of free-market or capitalistic forces. Apartheid is the result of anticapitalistic or socialistic efforts to subvert the operation of market (capitalistic) forces. Indeed, it is the free play of market forces—with no intervention by political forces—that has always been seen as the enemy of white privilege and that apartheid ideology has always sought to defeat.

Indeed, the South African Conservative Party and other right-wing groups that seek to return to unreconstructed apartheid and racial discrimination speak bluntly of their disdain for capitalism and the entrepreneurial classes because the free-market system subverts the ethnic solidarity and Afrikaner nationalism they hold so dear.

Walter E. Williams
The bottom line is this: While the new South Africa is undergoing its long-awaited reshaping through negotiations and civic conversation, those who support the free-market must make a frontal assault on the incorrect beliefs that apartheid and capitalism are allies. The case for the free market must be made clear and accessible to all South Africans. It must be explained, as Williams explains, that “the mere existence of South Africa’s racial regulatory laws is evidence enough that racial privilege is difficult [to sustain] through free market forces.” It must be emphasized that “the business pursuit of profits—which caused employers to be less ardent supporters of the white supremacist doctrine—has always been the enemy of white privilege.”

So it shall be in a post-apartheid South Africa. If black South Africans really want to see a fairer distribution of wealth, they must insist not that property be taken over by the state, but that state-owned enterprises be turned over to the people. The current South African government has already begun an extensive program of privatization, and it is only a matter of time before the big state-owned industries—steel, electricity, communications— become the property of the people. Anti-apartheid activists should not allow their anti-capitalist ideology to scuttle that process. A complete elimination of racist laws and practices in South Africa can only be achieved under a market system that permits maximum freedom for the individual to engage in whatever economic enterprise he or she wishes.

Richard Sincere is a Washington-based issues analyst and author of Sowing the Seeds of Free Enterprise: The Politics of U.S. Economic Aid in Africa, published in 1990 by the International Freedom Foundation.

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