South Africa: Triumph Over Capitalism

Racism and capitalism have long been viewed as the twin pillars of apartheid, reinforcing each other while supporting a system of social, political, and economic repression. As a result of this mistaken view, black South Africans and their white benefactors have something in common with apartheid's architects: a hatred of the free market. But unlike the white supremacists, critics of apartheid who oppose capitalism fail to recognize that market forces actually undermine racial privilege. Instead, they conclude that a more just society can be achieved only through socialism. This view is all the more alarming given the changes sweeping South Africa.

The indictment of capitalism and market forces is reflected in statements by Archbishop Desmond Tutu, who, after winning the Nobel Peace Prize in 1984, told London's Sunday Telegraph, "I myself hate capitalism." Similarly, Chris Dliami, vice president of COSATU, a black labor union, has said, "The unholy alliance of apartheid and capitalism has become obvious and concrete. One cannot expect to eradicate it simply by removing apartheid.…What we are talking about is the total change of the present system."

Some South African whites, wanting a better life for blacks, share this view of capitalism. Raymond Sutter, an antiapartheid activist, wrote in Business Day in 1985: "The struggle for the Charter is therefore an anti-capitalist programme, because any programme to end racial oppression in South Africa must be anticapitalist." Contributing to the connection between apartheid and capitalism in the minds of many South Africans are statements by government officials who refer to their economy as "our free-market system."

Contrary to these mutually reinforcing sets of beliefs, South Africa's apartheid is not a corollary of capitalism. On the contrary, apartheid is the result of socialistic efforts to subvert the operation of market 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.

South Africa's history is riddled with white contempt for market forces, from the highest levels of government on down. In A Century of Wrongs (1900), Prime Minister Jan Christiaan Smuts wrote: "It is ordained that we [Afrikaners], insignificant as we are, should be amongst the first people to begin the struggle against the new world tyranny of capitalism."

In 1941, Volkshandel, an Afrikaner business publication, declared: "Every sober-minded, thinking Afrikaner is fed up to the top of his throat with so-called laissez faire—let-it-be—capitalism, with its soul destroying materialism and the spirit of 'every man for himself and the devil for us all.' We are sick of it because of its legacy of Afrikaner poor whiteism and the condition which makes the Afrikaner a spectator in the business of his own country."

This fundamental hostility toward capitalism is not surprising when we consider that white hegemony in South Africa needs to be enforced by law. Indeed, the whole legal structure of apartheid is prima facie evidence that market forces, left unimpeded, would not achieve the results desired by the white supremacists. The history of economic regulation in South Africa reveals that racist goals have been served by heavy-handed government intervention, not by the operation of capitalism.

Such intervention occurred well before the establishment of the modern apartheid system, and it was often resisted by businesspeople because it raised their labor costs and hurt their profits. Various laws passed around the turn of the century restricted the number of blacks that could be employed in mines and the kinds of jobs they could fill.

When mine owners broke agreed-upon employment quotas in 1922, white workers, led by socialists and communists, responded with the most violent strike in South African history. They paraded around Johannesburg chanting, "Workers of the World Unite to Keep South Africa White." The government used troops, artillery, and aerial bombardment to restore order. The incident led to the downfall of Prime Minister Smuts and the rise of James Hertzog, who campaigned on a promise to protect white workers.

Under Hertzog, the Industrial Conciliation Act (ICA) restricted the employment of blacks, excluded them from collective bargaining, and outlawed black unions. Later measures gave the labor minister authority to reserve specific classes of jobs for whites only in order to "safeguard against interracial competition."

If we assume that capitalism and apartheid are in accord with each other, these and many other measures to confer privileges on whites are puzzling. South Africa's businesses were owned by whites, so why were racially discriminatory laws necessary?

Clearly, white businesspeople and government officials, while sharing the ideology of white supremacy, did hire blacks in jobs that whites wanted. They did so because blacks were willing to work for lower wages—as much as 75 to 80 percent lower—which meant higher profits. Moreover, in some jobs, blacks were more productive than whites. Government officials saw hiring blacks as a way to meet labor shortages.

White workers, many of whom were no more skilled than black workers, opposed market allocation of resources because it would not pay them higher, "civilized" wages. They were quick to recognize that markets do not respect race. White workers therefore sought privilege through the political arena, urging the government to write laws that would undermine the black competitive advantage.

South Africa's racist agenda and attack on market forces included laws similar to measures widely supported in the United States. White supremacists advocated a minimum wage for blacks and argued that blacks should be covered by the same industrial labor laws as whites. In 1925 the white Mine Workers Union argued: "It is now a question of cheap labor versus dear labor and we consider we will have to ask the commission to use the word color in the absence of the minimum wage, but when that [minimum wage] is introduced we believe that most of the difficulties in regard to the color question will automatically drop out."

Such supporters of minimum wages for blacks and equal-pay-for-equal-work laws have not been motivated by humanitarian concerns. Indeed, wage regulation is one of the most effective tools in the racist's arsenal, because it makes cooperation with racist goals cheaper. By preventing blacks from underbidding whites, wage floors reduce the profitability, and hence the attractiveness, of hiring blacks.

Wage regulation, often known as "rate for the job," therefore served a purpose similar to that of job reservation, which was not nearly as successful as white workers had hoped. Racist unions often complained of violation, evasion, and contravention of job reservation laws by businesses. The unions griped that "there has been a cold-blooded sellout of white workers" and declared that "job reservation is a dead duck, therefore the only protection is a policy of paying the rate for the job."

Even government officials charged with apartheid enforcement would cheat by changing the names of "white" jobs so blacks could be hired; for example, shunters became marshallers and ticket collectors became ticket takers. Officials of the government-owned railways have been known to hire teams of black workers and sneak them in, under the cover of night, to illegally perform "white" work in the railroad yards. In response to objections to such practices in the early 1970s, the minister of transport said, "You want white railway workers. Find me them!"

During the 1980s, long before job reservation and most of the racially restrictive employment laws were officially repealed, they were being repealed by stealth through market forces. Such has been the fate of the Group Areas Act, still on the books, which restricts where people may live and work by race. In the metropolitan areas of Cape Town, Durban, and Johannesburg, which are by law white areas, many neighborhoods are integrated, often with whites in the minority. This is a result of market forces—shortages of housing in nonwhite areas and surpluses in white areas.

As the apartheid regime crumbles, there is a real danger that South Africa will exchange one oppressive system for another. The collapse of socialism in the Soviet Bloc gives hope that this danger can be avoided. Rather than fight capitalism, South Africa's people must strengthen their beleaguered market forces and declare war on centralized government power.

Contributing Editor Walter E. Williams is John M. Olin Distinguished Professor of Economics at George Mason University. This article is adapted from South Africa's War on Capitalism (Praeger Publishers).