THE ECONOMICS OF THE COLOUR BAR The Quinten 8 Marian Ward and William W. Massey Libraries o£ the Ludwig von Mises Institute Gift of The Center f or I,iLertarian Studies Ludwig von Mises Institute 518 West ~agnoliaAvenue Auburn, Alabama 36832 [email protected] NOT TO BE REMOVED The Economics of the Colour Bar A study of the economic origins and consequences of racial segregation in South Africa W. H. HUTT Published for THE INSTITUTE OF ECONOMIC AFFAIRS br ANDRE DEUTSCH FIRST PUBLISHED IN GREAT BRITAIN = 964 ANDRE DEUTSCH LIMITED 105 GREAT RUSSELL STREET LONDON WCI 0 THE INSTITUTE OF ECONOMIC AFFAIRS LIMITED ALL RIGHTS RESERVED PRMTED BY Merritt & Hatcher Ltd., London, s.E.10 CONTENTS Page Prefatory Note 4 Foreword 5 The Author 6 Chapter I The Problem and its Setting 2 The South African Background 3 Colour Prejudice and Colour Resentment 4 The Poor Whites Injustices to Afrikaners Appendix-'Chinese Slavery' Africans in the Mines The First Colour Bar Act Appendix-'Collective Bargaining and the non-Whites' The 'Civilised Labour' Era Racial Integration and Industrial Growth Africans in the Towns Africans and Labour Unions The Group Areas Policy Job Reservation The Indians The Direction of African Labour The Border Areas The Bantustans The Market is Colour-Blind Statistical Appendix Bibliography Index PREFATORY NOTE Professor W. H. Hutt has written this book as an economist. His central discussion is of economic causes and conse- quences and he touches only marginally on other aspects, political, sociological, philosophical. Readers may differ from some of the judgments on non- economic aspects of the subject, but the Institute considers that Professor Hutt's effort to explain apartheid makes a new contribution to the debate that has been overlooked both by supporters and opponents. It does not necessarily accept his argument or conclusions, but believes he has written an informed, stimulating and controversial history and analysis of apartheid that can do nothing but good if it provokes dis- cussion ahd re-appraisal of uncritical attitudes on all sides. The central theme is that if the English in South Africa had continued the development of a liberal economy, it would have prevented or ameliorated the racial tensions that have been exacerbated by the restrictionist policies arising from the Nationalist Government's racialist doctrines and the efforts of the higher-paid white workers to protect privileged positions in the labour market. Although Professor Hutt writes dispassionately as an academic, there is ample evidence in his record of public protest of his moral revulsion against the injustices to the non-white peoples of South Africa. November, 1963. I.E.A. FOREWORD THEargument of this essay is illustrated mainly by reference to policies and conditions in the Republic (formerly the Union) of South Africa. Through the pressure of world opinion and the force of internal criticism, these policies and conditions are currently in process of significant modifica- tion - some changes being in a seemingly liberal direction and others in a seemingly totalitarian direction. The changes have been continuing whilst this book has been in the press; but its purpose is not to provide an up-to-date account of the racial situation in South Africa. It simply uses the exper- ience of that country in an attempt to expose the ultimate origins of colour injustices generally. Siniilar origins can, I suggest, be discerned for all colour, racial, caste, class or similar injustices wherever they rnay exist. March 1964 W. H. HUTT THE AUTHOR WILLIAM HAROLD HU~was born in 1899. He was educated in London and served in the R.F.C. and R.A.F. from 1917 to 1919.After the war he studied at the London School of Economics. He worked for several years with Benn Brothers, London, and joined the University of Cape Town in 1928. He was appointed Professor of Commerce and Dean of the Faculty of Commerce in I 93 I and has held this post ever since. He has written several works on theoretical and applied economics. His books include The Theory of Collective Bar- gaining, 1 930; Economists and the Public, I 936; The Theory of Idle Resources, 1939; Plan for Reconstruction, 1943; Ktynesianism -Retrospect and Prospect, 1963. He has also written numerous articles in economicjournals, including several dealing with economic aspects of South African colour problems. Professor Hutt has long been a critic of racial policies in South Africa. His fears were aroused before the election in I 948 of the Afrikaner Nationalist Government. Through the Statute of Westminster (I93 I) the British Government had relinquished effective control over the constitutional development of South Africa. The 1934 South African Status Act took a further step in this direction and in 1937 Professor Hutt tried to arouse South African public opinion to the danger that the entrenched clauses in the constitu- tion, which safeguarded inter alia the right of coloured men in the Cape to vote on the common roll, were being under- mind. He warned his adopted country through the columns of the Cape Times that it had carelessly torn up its constitu- tion. For this he was rebuked by the paper for irresponsi- bility. Since 1948 Professor Hutt has consistently opposed the South African Government's policy of apartheid. In 1955 his passport was withdrawn by the Department of the Interior but returned after the matter had been raised in Parliament. In I 96 I, as South Africa was seceding from the Commonwealth, he argued in The Times that all South African citizens, irrespective of race, colour or creed should be offered British citizenship. 6 'It is a striking historical fact that the development of capitalism has been accompanied by a major reduction in the extent to which particular religious, racial, or social groups have operated under special handicaps in respect of their economic activities; have, as the saying goes, been discriminated against. The substitution of contract arrangements for status arrangements was the first step toward the freeing of the serfs in the Middle Ages. The preservation of Jews through the Middle Ages was possible because of the existence of a market sector in which they could operate and maintain them- selves despite official persecution. Puritans and Quakers were able to migrate to the New World because they could accumulate the funds to do so in the market despite disabilities imposed on them in other aspects of their life. The Southern states after the Civil War took many measures to impose legal restrictions on Negroes. One measure which was never taken on any scale was the establishment of barriers to the ownership of either real or personal property. The failure to impose such barriers clearly did not reflect any special concern to avoid restrictions on Negroes. It reflected rather, a basic belief in private property which was so strong that it overrode the desire to discriminate against Negroes. The maintenance of the general rules of private property and of capitalism have been a major source of oppor- tunity for Negroes and have permitted them to make greater progress than they otherwise could have made. To take a more general example, the preserves of dis- crimination in any society are the areas that are most monopolistic in character, whereas discrimination against groups of particular colour or religion is least in those areas where there is the greatest freedom of competition.' MILTON FRIEDMAN, Capitali~mand Freedom CHAPTER I THE PROBLEM AND ITS SETTING WY DO the non-white peoples of the world today enjoy a much lower average standard of material well-being than the white peoples? The answer is compounded of history, climate, custom, powerful inertias, insecurity for investment, and legislative barriers to employment. How far can their inferior economic status be said to be caused by natural handicaps and how far by injustice at the hands of white people? Usually there is a mixture of causes. For instance, the failure to have stamped out disease, which still retards the development of many tropical regions, is due partly to inertia in the effective spread of medical knowledge, partly to tribal superstitions and customs, partly to climatic factors. Is there an element of injustice here? Similarly, investment insecurity is partly a question of history and partly a matter of the slowness with which an understanding of the vital role of property - and its pre- requisites - has spread to primitive communities. Some backward peoples and their advisers have ignored, or have failed to create, the conditions necessary for an inward flow of fructifying capital to provide productive equipment and foster the inborn powers of the people. Consequently, where capital flowed freely and rapidly from Western Europe to the under-developed regions of North America before I g 14, it now tends to avoid areas like India and Africa, despite their enormous development potential. Is that situation due to injustice? ECONOMIC 'INJUSTICE' As an economist, I shall attribute 'injustice' to any policy or action which is intended to perpetuate the inferiority of material standards or status of any racial group. The in- heritance of inferior circumstances or status cannot usefully 9 be regarded as 'unjust', except to the extent to which developed countries or colonising powers can be shown to be deliberately withholding opportunities from the under- developed areas or colonised peoples. Nevertheless we must ourselves be just in evaluating the past. Although we may deplore the era of slavery, we must remember that the enslavement of primitive peoples was not condemned by the religious and ethical codes which existed in the era in which it flourished. John Wesley was not unjust to the children of his day when he laid it down that they should be allowed neither to talk nor smile at Sunday school! The gradual evolution of ideas about what is appro- priate in the relations of one man to another, one caste or race to another has, significantly, been fostered by economic progress more than by any other cause.