From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

With Rose Friedman. "Record of a Trip to Southern Africa, March 20-April 9, 1976." Unpublished typescript transcribed from a tape, dictated 7-9 April 1976. Excerpts published in Two Lucky People: Memoirs, by Milton and Rose Friedman, pp. 435-440. Chicago: University of Chicago, 1998.

This is nearly the end of our stay in Southern Africa and yet it is the first time I have

gotten around to dictating something about our trip here. This is partly because the program

has been very full and we have been very active all the time, but it is also partly because you

get immersed in the activities as they go on and it is hard to exercise the discipline required to

recall what has been going on. It probably would have been more sensible to have dictated

this at the end of each day rather than retrospectively as I am now doing.

Today is April 7 and we are in the Wankie National Game Reserve with about three-

quarters of an hour before our driver and car shows up to take us hopefully on an expedition

to view some of the big game.

We arrived in Johannesburg without particular incident on March 20. It was raining when

we got to Johannesburg, but in any event we saw essentially nothing of it since we were only

at the airport. We changed to the Cape Town plane and made our way to Cape Town where

we were met at the airport by Meyer Feldberg. He drove us out to the hotel where we stayed.

The hotel where we stayed was the President Hotel, which is one of a series of hotels run by

the Miekle-Southern Sun Hotel chain. We subsequently stayed in a Southern Sun Hotel in

Durban and also in Johannesburg, and the extremely fine hotel we are now staying in at the

Wankie Game Reserve is also a Southern Sun Hotel.

We had a fine suite there and the hotel is right off the beach in the Cape Town Seapoint

District. That really is not part of Cape Town proper but is rather like a suburb at the western

end of the town. I am not absolutely sure about my geography, but it is at one end of the town.

Much of Cape Town is on two sides of Table Mountain. This is on one side of Table From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

Mountain toward the bay; the University of Cape Town is on the other side of Table

Mountain. From our hotel we could see Lion’s Head Mountain in back of the hotel and, looking the other way, the ocean and the beach. The beach is a tremendously long one, all along the seashore side of Cape Town.

On Saturday we were somewhat tired, to put it mildly, after getting to Cape Town. So on that first night we slept right through until noon the next day. We then got up, had some breakfast, and just simply took a long walk along the beach before we went out to the

Feldbergs for dinner.

The Minister of Finance, O. P. Horwood, was supposed to have been a guest at the dinner but he did not show because he or his wife—I have forgotten which—was sick, but later on I had a session with him. Among the other people who were there was the American ambassador, Bowdler, a very pleasant person who said about three words during the whole dinner. If the essence of diplomacy is knowing how to keep your tongue, he is an excellent diplomat. We saw him also several days later when he had a cocktail party for us at the

Embassy, and that did not change the image which he presented. The other people who were there at the first dinner were Mr. Len Abrahamse, an Afrikaans who is chairman of a major bank in South Africa, and Mr. Len Shawzin, who is chairman of a chain store group. There were other guests who were friends of the Feldbergs.

The Feldbergs live in a suburb, Kenilworth, which is very near the University but is also a very nice residential section. The striking feature about each one of these South African towns, including Cape Town, is the complete segregation of the population of various groups.

The total population of Cape Town is a little over a million of whom about 400,000 are listed as Whites, 108,000 as Bantu, 600,000 as Coloreds, and 11,000 as Asians. Under the earlier regime many years ago there were no segregated living quarters. But when the Afrikaans party came into power in 1948 and instituted the explicit policy of apartheid, with the policy of separating the various racial groups and providing for their separate development, it in the first place disenfranchised the Coloreds who before that had been on the voting rolls and, in

2 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

the second place, specified specific areas in the city in which Whites could live, Coloreds could live, and Bantu or Blacks could live.

This has been the source, of course, of great unhappiness among the various groups. The driver from the Cape Town School of Business who drove us back and forth throughout the period we were there, a fellow whose first name was Jack (I never did get.his last name), was

Colored. He was very unhappy about the fact that he had formerly been able to live within a

10 or 15 minute walk of the University where he worked, but he now had to live in a section separated out for the Coloreds which involved something like a half-hour or more bus trip to the University.

At any rate, to return to the main theme, the Feldbergs live in the main part of Cape

Town. Almost the whole of the central part, as with everyone of the other major cities, is reserved to the Whites. The Coloreds and the Bantu live on the outskirts of the city in separately organized areas. This has a very curious effect. It produces a situation for a city like Cape Town or Johannesburg which is almost the opposite of that for New York City. In

New York City it is said that it is White by day and Black by night since the people who come in from the surrounding suburbs are the Whites who work in New York City while much of the resident population of New York City is Black. On the other hand, in Cape

Town, Johannesburg, and the like, it is the other way around. During the day the city is flooded with Blacks who come in from the surrounding areas in which they are required to live in order to work, and then at nighttime there is exactly the reverse movement and the city is all White.

The discussion after dinner ranged, of course, very widely over quite a number of subjects. But the thing that impressed us at this dinner, and at every other affair at which we were, was that the problem of the immediate situation of South Africa and Rhodesia was at the top of everybody’s head. Everyone was almost obsessed with the issue of whether there was any possible long-term future. In South Africa there was almost an acceptance of the fact that Rhodesia was gone, that it was just a matter of time, and that it might be only a very short

3 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

period of time until Rhodesia was overrun. In Rhodesia the atmosphere changed and there, there was a good deal more confidence that Rhodesia was in fairly stable condition and that the long-run problem of South Africa was really worse than the long-run problem of

Rhodesia.

There is an element of truth in this latter contention in view of the fact that the relations between the racial groups are quite different in the two areas. In South Africa, the explicit policy of apartheid has unquestionably alienated many groups of Blacks and instilled a great deal of bitterness in them vis-à-vis the Whites, though I must say this was not evident on the surface. All of the Blacks whom we saw in South Africa seemed very cheerful and in very good spirits, but I am sure that this was highly misleading. In Rhodesia, on the other hand, there has never been a policy of segregation; there has been a policy rather of open treatment.

I am exaggerating that, because there are also rules about areas where Europeans may live and areas where Africans may live. One striking feature of terminology, however, shows the difference. In South Africa, the reference is always to Whites and Blacks, with the Whites in turn divided between the English-speaking and the Afrikaans, and the Coloreds and Indians always listed separately from the Blacks. In Rhodesia, the breakdown that is made is

Europeans versus Africans, with the Whites, Coloreds, and Indians being lumped as

Europeans, and the rest, who would be called Bantu or Black in South Africa, being designated as Africans. The fundamental reason for this difference, of course, is that the

Afrikaner descendants of the Boers, who settled in Cape Town over 300 years ago, regard themselves as White Africans and not as Europeans.

One of the other things that struck us both at this and at subsequent meetings was the extent to which the Whites in South Africa were fundamentally split into hostile and antagonistic groups—on the one hand, the English-speaking; and, on the other, the Afrikaans or Boer group. Again and again we were told, and had the impression, that what was happening was that the Boer War was being fought over again, that the verdict of the Boer

War had in effect been reversed in 1948 and since when the Afrikaans took over political

4 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

power, and that the present situation was one in which it was the English-speaking who were the vanquished.

In general, the English-speaking groups are what in modern terms would be called the more liberal. That is to say, they have generally been opposed to apartheid from the beginning, have been in favor of an attempt at moving toward a unified multiracial state in which the peace would be kept by a kind of federal system with a government of limited powers, constitutional protection for minorities, and the rest. The Afrikaans in general have been what are termed the more conservative or the more reactionary, depending on who speaks, in that they have adopted and accepted the fundamental policy of rigid separation among the racial groups. It was worth noting that for South Africa as a whole there are roughly 4 million Whites, 4 million Coloreds and Indians, and about 16 million Bantu.

The philosophy underlying this policy of separate development was laid down by Hendrik

Verwoerd, who was first a member of the Cabinet in charge of the policy and then later became Prime Minister and was subsequently assassinated. I read several of his fundamental papers on the philosophy of it, and in abstract theoretical terms he makes a very strong case for his position. He presents it not as a racialist position but simply as a position of the desirability of preserving separate cultures—on the one hand, the culture of the Afrikaans, the culture of the English-speaking, the culture of the Coloreds, the Indians, and the Bantu. His argument was that the different groups cooperated and needed one another but that all would live together more peacefully if they lived separately, that it was the obligation of the Whites who were at the forefront of economic development to assist and aid the Bantu in the development of their potentialities. One aspect of this was the attempt to develop a separate

Bantu homeland which involved separating out parts of the country, which are predominantly filled with rural Black inhabitants, and ultimately converting them into separate countries.

This policy has been pursued consistently now for some twenty years and the first of the

Black homelands, the Transkei, is scheduled to attain its independence this year.

5 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

The theory is better than the practice. The theory is wholly paternalistic and highminded,

but the practice has unfortunately not been that. The practice has in fact been one of

preserving a monopolistic favored position for the Whites if not at the expense of the Blacks

at least at the expense of their development and their growth. There has been separate

development but there has certainly not been anything like equal development.

In respect of the group at dinner the first night, on Sunday, March 21, although Mr.

Abrahamse is of Afrikaans background, no group as a whole, he included, would be on the

liberal wing of the political spectrum. In political terms there are three parties that count: the

Afrikaans Nationalist Party which is overwhelmingly dominant in the Parliament; the United

Party which was originally formed back in the 1940’s, or something like that by, Jan Smuts in an attempt to get the Afrikaans and the English-speaking together, which is where it got the name United Party, to maintain a policy opposed to the fundamentalist nationalist policy of apartheid; and, finally, the Progressive Reform Party which arose out of the split from the

United Party because of dissatisfaction with the United Party’s failure to oppose apartheid severely enough. For something like fifteen years the Progressive Reform Party was represented in Parliament by one woman, Mrs. Helen Suzman, of whom more later. In the more recent election it managed to expand its hold a trifle, so that there are now something like six or seven or eight members of Parliament who are of the Progressive Reform Party. Of the group there that evening, most of them would have identified with the Progressive Reform and none of them certainly with the right wing of the Nationalist Party, though it may be that

Mr. Abrahamse votes Nationalist.

What is most impressive not about this group in particular, but about the general setup in

South Africa, is the extraordinary affluence of the White community. The interesting figure is that the average White income is ten times roughly the average Black income. But then to that has to be added the fact that the average Black income in South Africa is something like 50 percent higher than the average income of all the people in all of the rest of Africa, including

6 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

top and bottom. It needs also to be added that Blacks from the rest of Africa seek to migrate

into South Africa to obtain what they regard as preferable employment opportunities.

It is hard for me to recall at this late time the precise subjects discussed that particular

evening because that one dinner merges with all of the remaining dinners in a kind of haze,

and I can only list that the main topics over and over again at dinner after dinner were roughly

the same. They were the present problem of South Africa and Rhodesia; the concern about

what the Russians and the Cubans were going to do; the concern about what was going to be

the U.S. position; with respect to domestic economic policy, their current inflation, of which

more later; and also exchange rate policy.

On Monday, March 22, I had in the morning a lengthy interview with Stephen

Mulholland for the Sunday Times. We have a copy of his final report. The things he stressed in that report were twofold. First, he had a brief excerpt that he put into the editorial page, not in the financial section, dealing with my comments about the fundamental problem of producing change, in particular stressing the problem that revolutions occur not when people are oppressed but when their condition is improving and, as a result, that South Africa was really in something of a dilemma. The main part of his interview, which was much more extensive, dealt with the more economic comments; in particular, he gave great emphasis to my arguments for floating exchange rates and for eliminating exchange control, as well as to my emphasis that the government was responsible for inflation through monetary creation and that the so-called anti-inflation manifesto which had been issued some months back, which was almost entirely devoted to exhorting the public at large to do one thing or another, was largely irrelevant to the fundamental issue of inflation.

That same morning I also had an interview with a Mr. de Klerk who is writing for the largest Afrikaans newspaper in South Africa. I never did see that interview.

At noon on Monday, March 22, I gave a talk to the student body at Jamieson Hall on the

University of Cape Town campus on the topic of “The Fragility of Freedom.” I had a very good reception indeed. However, the question-and-answer session was not very effective

7 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

since one student obviously prepared his questions in advance without listening to what I had said, took over the platform with the usual diatribes against capitalism, inequality and depression. He could have come straight out of Berkeley or its equivalent.

We then went back to the hotel and took a nap. That evening we were driven out to the

Feldbergs’ house, and the Feldbergs and we drove out to Dr. Anton Rupert’s house in one of the suburbs of Cape Town. Dr. Anton Rupert is an Afrikaans who started out I believe as a chemist, but I am not absolutely sure but at any rate it was as some kind of academic person, taught for a while I believe at Stellenbosch University, and then went into business where he made an enormous success. He is largely in control of the tobacco industry in South Africa and is an important figure in the tobacco world internationally. The corporation he heads has branches all over the world and he is involved in a great many other activities. He is clearly one of the wealthiest and most important men in South Africa. He was the person whom John

Davenport had given me a letter of introduction to independently on the grounds that Rupert had been one of the most intelligent and thoughtful people that he (Davenport) had encountered during his earlier visit to South Africa.

The Ruperts have a lovely old Dutch-style house out in the country. It was one of many houses they had had, and one of the interesting things that came out during the evening is that they had owned that place for three years and had occupied it for only one week. One is impressed in South Africa, as in so many other countries around the world, by the extraordinary inequality of wealth. The impression is of a far greater inequality of wealth than we have in the United States.

As of this date it is very much of a blur about who were the guests. I do remember we talked about, of course, many of the same things we had before. But the most interesting person there was Anton Rupert himself. One of the ideas he talked about and which was most interesting was his emphasis on the complementarity between the Soviet Union and South

Africa in respect of various strategic materials. He subsequently sent a copy of a speech which had attached to it a couple of appendixes showing that in some key items South Africa

8 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

and the U.S.S.R. together made a very significant contribution to the total world production.

He had, for example, asbestos with South Africa contributing 7 percent and the U.S.S.R. 25

percent, or the two together 32 percent of total world production. In chromium the two of

them together contributed 54 percent (if you added Rhodesia, it would be still higher); in

industrial diamonds, 38 percent; in gem diamonds, 65 percent; in gold, 80 percent; in

manganese, 54 percent; in platinum, 93 percent; and in vanadium, 63 percent. He was

stressing this from the point of view of the strategic interest of the United States in keeping

Russia from overrunning Southern Africa. He was arguing this, as I recall it, both from the point of view of explaining Russia’s interest in South Africa and also the disastrous effects on

the West of permitting Russia to get control of South Africa. I do not believe he himself

suggested it, but it was suggested later and I suggested later the fact that you had here a

potential cartel between South Africa and Russia that could be effective on quite a range of

strategic mineral materials. Unfortunately, because of our carelessness in not dictating this

right away, much of the rest of the conversation and discussion as well as the names of the

people who were present fades into a blur.

On Tuesday, March 23, we had a free morning and slept late. In the afternoon I went with

Meyer Feldberg to meet the State President, Dr. N. Diederichs. When South Africa became a republic in 1961 or 1962, it established the kind of system other countries have of a ceremonial head of the state to replace the Queen, the State President, or as the active head of the government, the Prime Minister—Mr. Vorster now. Dr. Diederichs is an economist who was formerly the Minister of Finance and was for long very much of a gold bug. We went to a lovely old building in the Cape Dutch style. One of the curious things about South Africa is that it has three capitals: the legislative capital is in Cape Town, the administrative capital is in Pretoria, and the judicial capital is in Bloemfontein. The separation of the legislative from the administrative capital makes quite a problem for many of the people who end up spending six months in one city and six months in the other. At any rate, the State President’s quarters, or whatever the official building is, is a very fine example of old Cape Dutch architecture. We

9 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

were met by a captain, I think it was, in uniform who proceeded to warn us not to let Dr.

Diederichs go on too long because he had another appointment at exactly 4:30. At any rate, we met him at exactly 3:30 and had a very interesting and enjoyable discussion with him. I got the impression that on economic matters he rather agreed with my own position. … the fact that in his present ceremonial position he really no longer could enter into active politics or into active policy making. On the whole I did not get the impression that he was extremely happy with having been relegated simply to a ceremonial position, and he clearly enjoyed talking economics with another professional economist so that the captain finally had to come in and break it off at 4:30 and get rid of us.

We then later that afternoon, after picking up Rose the hotel, went to the U.S. Embassy

for cocktails. Here again the U.S. Embassy has to maintain two places, one in Pretoria and

one in Cape Town, and the U.S. ambassador whom we had met the night before at the

Feldbergs, Mr. Bowdler, has to spend about six months in Cape Town and six months in

Pretoria. There was a very large assorted group of people at the cocktail party which included

a great many of the people from the American community in South Africa as well as South

Africans. Like all cocktail parties, it consisted of being introduced to a great many people

whose names you don’t remember and standing around engaging in desultory conversation

and chatting. There was some more serious conversation but not very much.

We then went from there to dinner at the Feldbergs where the guests included: the

Minister of Economic Affairs, Mr. Heunis, who insisted on seeing us again later on in the

week; as well as Jan van der Horst, one of the more liberated South Africans—when I say

“South African” I really mean Afrikaans—whom they refer: to as a verligter (enlightened) as

opposed to a verkrampte (or old-fashioned conservative, stick-in-the-mud, or whatever you want to call it); another verligter Afrikaans, Justice Jan Steyn, a judge of their Supreme Court; and Mr. Bill Marshall Smith who is chairman of Caltex Oil, a rather stuffy English type. Mr.

Heunis was very much the politician, all things to all people, and this turned out to be the case when I saw him more extensively later. It would be impossible for anybody to know what his

10 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

position was on anything. Messrs. van der Horst and Steyn, on the other hand, were very

outspoken. They were extremely liberal by Afrikaans’ standards, very much opposed

fundamentally to the hard line apartheid policy of the main Nationalist Party. Judge Steyn

described the changes that had been taking place in the court arrangement. Apparently South

Africa has largely given up trial by jury and instead trials proceed with a judge and a number

of assessors who are appointed by the judge. It was his opinion that this was in fact a way in

which they could reduce the element of discrimination in their courts because they could

choose their assessors and include among them Colored or Bantu people as well as Whites.

He was obviously a very intelligent, thoughtful, and courageous man who had not been

hesitating to speak out. Steyn had met Norval Morris at some conference or other which had

been held in Chicago and asked me to convey his regards to him. Although this group

consisted mostly of Afrikaans rather than of English-speaking, it did not bring out the sharp

conflict between the two that we were impressed with later on, the reason being because these

were, as it were, assimilated Afrikaans rather than the hardcore type.

On Wednesday we were free most of the morning, though at eleven o’clock somebody

from the radio came over and had a radio interview with me. Rose had left earlier with Mrs.

Graham, the wife of Pat Graham. Then Meyer Feldberg and I went down to have lunch at

Parliament with Senator O. P. F. Horwood who is the Minister of Finance. Senator Horwood

is another politician, but an exceptional one. Although he is a Minister in the Nationalist

Cabinet, he is himself of the English-speaking group who saw fit to threw in his lot with the

Nationalists rather than with the parties that primarily represent the English-speaking, namely the United Party and the Progressive Reform Party. Senator Horwood has the same characteristic as Heunis and all other politicians, and it is very hard to know what his position and his stand is. He was working on a budget shortly to be released and he emphasized at lunch the difficulties which he had in trying to hold down government spending and that he had had a terrible time in recent months having to say no much more than he ever had in his life. When the budget was finally announced, it was widely regarded as a fairly rigorous

11 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

budget primarily because it involved a very large increase in defense expenditures and a roughly matching decrease in real terms, though not in nominal terms, of expenditures in other departments. I never was able to get a very good estimate of total governmental expenditures in South Africa as a fraction of the national income. I got estimates that ranged all the way from 20 to 40 percent. These differences arose out of a failure to include investment spending in some cases, subsidies to nationalized industries in others, and local expenditures in still others. My final judgment was that it was probably not far from 40 percent.

There were present at the lunch with the Minister of Finance the Deputy Governor, de

Koch, of the Reserve Bank whom I was to see later on in Pretoria at the Reserve Bank itself, and also a senior civil servant in the Department of Finance whose name for the moment I do not remember. Both of them had the typical British relationship to the Minister of essentially regarding themselves as technical civil servants not supposedly concerned with policy, though undoubtedly in the background they were the ones who were really determining the policy. In general, the extent to which the forms of South Africa carry over the forms of Britain is striking.

After a very excellent lunch in the luncheon room of the Parliament House, replete with wine and the like, Minister Horwood said he had to go to the parliamentary chamber and arranged for us—that is, Feldberg and myself—to visit the chamber. We sat in the balcony, the Nationalist balcony on this occasion as on a later occasion when we came in. The

Parliament reminded me very much of the Australian Parliament. Like Australia’s, it is a model of Westminster but on a rather smaller scale. Again, the whole tone and atmosphere within the Parliament was that of complete conflict with none of that easygoing gregariousness that is so characteristic of the American Congress. Mr. Vorster was giving a very long speech on a very controversial bill having to do with the setting up of a kind of internal security commission that was being opposed by the opposition parties. It was in

Afrikaans needless to say, so we couldn’t understand a word of it.

12 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

After this we drove out to the School of Business where I really held a discussion rather than giving a talk to the M.B.A. students. They have one large classroom which is very nicely organized with seats sort of rising up, with a desk in the middle on which is a designation of where each person sits by name, and each person in addition has his own nameplate in front of him so that there is a possibility of identifying who is talking each time. It’s not a bad arrangement. I started off the discussion by comments on something or other, I don’t quite remember exactly what. I think it may have been on the problem of inflation or on exchange rates. At any rate, most of the time was taken with a back and forth discussion. To my surprise, one of the students followed a line of questioning which seemed to indicate a belief that Russia was a relatively efficient economy. I do not recall most of the other questions.

That night at 7:30 we had the first of a series of the black-tie dinners which Feldberg had organized as a way of getting the business community involved, primarily as a public relations matter for his School of Business, which apparently has been very successful. I gave a talk on “Inflation, An Incurable Disease” using the slides which I had gotten up. There was considerable discussion afterwards. The most interesting thing about this, however, was the furor that arose the next day when a reporter for the Cape Times put in a front-page story on the dinner headlined, “Friedman Predicts Imminent Devaluation.” This was very much of a misrepresentation of what I had said. What I had actually said was not “imminent” but rather

“eventual” or “ultimate,” in the sense of saying that if South Africa maintained a higher rate of inflation than the U.S., as she had been doing and was likely to do for some time, then sooner or later there would have to be a change in the exchange rate. But needless to say, I did not make any immediate predictions or any predictions about imminent devaluation.

At any rate when the next noon I arrived at the Graduate School of Business, Feldberg was in great concern about it. He said he had been phoned by van der Horst and Len

Abrahamse urgently that morning to say that we ought to do something about it because otherwise it was likely to cause a run on the rand and make the prediction come true.

Apparently there had been a flood of phone calls to the office of the Minister of Finance

13 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

asking whether devaluation was imminent, and apparently the report had gone out over the

Reuters ticker. At any rate, I wrote a statement to the effect that I had not made any such

predictions and that what I had been doing was talking about the principle of the thing rather

than the immediate situation. This statement itself subsequently went over Reuters’ ticker,

was carried by the evening paper in Cape Town, and the next morning, in essentially the same

position on the front page, my statement, or the equivalent of it, was published. All in all, it

was only something of a tempest in a teapot.

Prior to this tempest on that morning, I was taken to Parliament by one of the other people

at the Business School; it was not Feldberg but I really have forgotten at this point who it was.

At any rate, I met first at Parliament with the leaders of the United Party, the older of the two

opposition parties. The party dates way back and was called “United” because in its original formation it was formed by the Afrikaans, Jan Smuts, in cooperation with the English- speaking group as a combined English-speaking-Afrikaans group to oppose the Nationalist

Party which was seeking a strict apartheid policy. It was the United Party that, after winning during the war and so on, lost immediately after the war to the Nationalist Party and produced from that day to this the unbroken string of Nationalist governments that have developed, held to, and stuck with the apartheid policy and that seem firmly in the political saddle.

At any rate, the leader of the United Party is a man by the name of Sir de Villiers Graaff.

He was not, however, a particularly impressive person. The most impressive person there was

another member of the United Party by the name of de Villiers—no Graaff after it but just de

Villiers and no “Sir.” A man by the name of David Baxter, whom I had met at the American

Embassy cocktail party earlier in the week, was their shadow Minister of Finance and their

representative on economic matters. Our discussion ranged over quite a wide area during this

period. I tried to find out what they thought they were accomplishing as members of the

opposition. De Villiers gave a very interesting and thoughtful analysis emphasizing that they

had essentially no hope of gaining power but were, nonetheless, as an opposition free to speak

in Parliament. He had asked the same question of one of the more enlightened Nationalist

14 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

friends of his, who had stressed that such changes and such easing as there had been in the

apartheid legislation had come almost entirely from the proposals of the opposition parties.

I found much more interesting the other opposition group, the Progressive Reform Party,

which was originally formed during the 1960’s I believe by a group of people who broke

away from the United Party. In a legislative debacle they were reduced to a single member,

namely Helen Suzman, who served as the single spokesman for the Progressive Reform Party

over a fifteen-year period. Recently, a couple of years back, in an election they had a great

resurgence, mostly at the expense of the United Party rather than the Nationalist Party, and

now have the astounding total of something like six or seven members of Parliament. The

leader of the party is Mr. Colin Eglin who is a lawyer from Cape Town representing the

district where our hotel, the President Hotel, is located—the Seapoint District. This group, as

its title suggests, is much the most liberal group in our sense of the term, but by our standards

it would still be regarded as relatively conservative because its liberal emphasis is on the

apartheid and race relations aspect rather than particularly on the social, welfare or economic

control aspects.

I was very favorably impressed by this group; they are obviously a high-quality

intellectual group operating under very difficult circumstances. Mrs. Suzman, whom I had

heard a great deal about before of course, impressed me much more than I had expected to be

impressed. She was clearly a thoughtful sophisticated woman. We saw a good deal more of

her later on, which I shall come to in the diary, when we had lunch at her house in

Johannesburg.

We discussed at some length the fact that a laissez-faire policy was the only kind of policy that would make it possible for a society like the South African to have a peaceful multiracial society. It was in the course of these discussions that I first became most impressed with the enormous difference between the English-speaking and the Afrikaans- speaking group—how deep was the conflict and how strong it was. Essentially what has happened is that the verdict of the Boer War, when the British defeated the Afrikaans in the

15 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

early years of the century, was reversed by the elections right after the war in 1948–50.

Essentially what you now have are the Boers—that is, the Afrikaans—completely dominant politically and the English-speaking reduced to an embattled minority, though an economically extraordinarily affluent minority living under very desirable economic conditions.

After the hubbub back at the School of Business about the Cape Times report, we went— arriving rather late because of it—to have lunch with the Principal and Vice Chancellor of the

University of Cape Town, Sir Richard Luyt, a former governor of British Guyana. He and his wife were very pleasant people and we had a nice lunch, but there was nothing of particular moment except for Sir Richard’s talk about his experience as Governor of British Guyana. He was there during the period when there was an attempt to overthrow the government, and he himself was in serious difficulties at various times. He talked about cooperating with the

C.I.A. and the U.S.A., etc.

In the afternoon, from 2:30 to 4:30, I met with faculty from both the School of Business and the Department of Economics of the University of Cape Town. It was mostly a question- and-answer session and there was nothing notable about it. The rest of that day was free and we simply had dinner at the hotel.

On Friday, March 26, we were picked up the first thing in the morning by Gerid van Zyl,

who is of Afrikaans background and on the staff of the University of Cape Town School of

Business. He had come to drive us out to Stellenbosch University where we were to meet with

the Bureau of Economic Research and to have lunch with Professor Sadi. Van Zyl is a very

articulate and able young man who on the way out gave us an excellent talk on the history of

South Africa, going way back and bringing it all the way down to the present.

Unfortunately, on the way out, we had some automobile trouble. His practically brand

new, one month-old, car had engine trouble. Trouble is a mild way of putting it. All of a

sudden there was a great clash and a clatter, and oil dripped out. What had happened was that

somehow something had sheered off and broken the housing of the starter. We later

16 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

discovered that the whole motor had been wrecked and that he was going to have to have a

new motor put in. Fortunately, across the road there was an army encampment to which van

Zyl was able to go to make a phone call. Fortunately, also, one of his brothers has a helicopter

supply service business which has its headquarters only a few miles away from where we

were. So he was able to call up his brother and get him to send a car with a driver to pick us

up on the road, and we were able to continue on to Stellenbosch.

We met in Stellenbosch with a group called the Bureau of Economic Research, as I

mentioned before, and Professor Sadi. It seemed like a very able group but it was very hard to judge because, by comparison with the people I had seen at Cape Town, they were much more reserved and not as ready to speak up. I suspected, and van Zyl confirmed it, that this had to do with the difference between the Afrikaans’ more rigid attitudes than the English-

speaking ones.

After the discussion with these people, we went off to lunch at the home of Professor

Sadi. He has a lovely house six or seven miles or so out of town in the open country with a

magnificent view overlooking a rather extensive area. It was a pleasant house and they served

us an excellent lunch. It was an interesting contrast to the lunches and dinners we had been to

in Cape Town because, interestingly enough, Professor and Mrs. Sadi served the lunch to us

themselves; they had no servants. The thing that impressed us everywhere else we had been

was the profusion of servants that were available.

That afternoon at 2:30 I met again with the M.B.A. students for the second session. This

time they had prepared a series of questions and I tried to answer the questions they raised.

That evening we had dinner at the house of Frank Robb, Chairman of the Council of the

University of Cape Town and Chairman of one of the nation’s leading finance houses. This

was a very interesting session because it brought out very sharply the extent to which you had

an unreconstructed old English element in the area. This was as English as English could be.

There were a couple of Afrikaans there but they were the enlightened Afrikaans, and indeed

one of them, van Zyl Slabbert, was a leading figure in the Progressive Reform Party. Frank

17 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

Robb himself showed all of the narrow-mindedness and clannishness of the most extreme caricature of a Victorian upper-class Englishman. His opinions of the Afrikaans were very low; he was very resentful about the fact that the verdict of the Boer War had been reversed, as he put it; and I am sure that I would have found him full of all sorts of other prejudices.

Needless to say, all of this was done in elegant style and, on the surface, very gentlemanly.

One of the things that annoyed Rose most was that they persisted in the old English custom of after dinner separating out, with the men going to one room and the women to another room—the men going for brandy and cigars, and the women going for God knows what.

On Saturday, March 27, we went at noon to have lunch with Mr. and Mrs. Bill Beck.

Beck is Chairman of the Mobil Oil South Africa Company. The reason for this lunch was really as a sharp contrast with the dinner with Robb. The group here were all Afrikaans, and mostly verkrampte rather than verligter Afrikaans. It was quite an extraordinary lunch. For the first time we were really exposed to really hardboiled attitudes. Most of the people present had come from some distance out, from smaller towns around rather than being directly from the Cape Town community. They were businessmen in various businesses and their wives.

The wives, of course, were particularly firm in their opinions—I was about to say bigoted, but that I guess reflects my own attitude. In any event, the interesting thing about this group was that they felt themselves very strongly in control of the situation, expressed a very strong degree of confidence in the stability of the situation in South Africa and in the permanence of it, talked in terms of themselves and their ancestors having been there for hundreds of years and were going to be there for hundreds of years more. The whole atmosphere was very different indeed from the atmosphere at the Robbs’. In both cases there were very strong, very definite prejudices but they were different sets of prejudices in the two cases. The Robbs undoubtedly regarded themselves as enlightened and yet they were just as bigoted in their own way as were the Becks and their guests.

After the lunch, I think that afternoon we played tennis, as I had played once before. All in all, I played tennis exactly twice in South Africa.

18 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

On Sunday, March 28, we had very little all day except that in the afternoon at 5:30 there was a cocktail party at the Feldbergs. It was a large cocktail party with many people whom we had seen before but also many new ones who came including Marius Barnhard, the brother of

Chris Barnhard, who is also a heart surgeon as his brother is. Chris Barnhard was supposed to have come to the cocktail party but he had the flu and so did not come. I do not know that there is anything particularly notable about the cocktail party.

After the cocktail party we all drove over to our hotel, The President, because we had the best TV set, in order to see a broadcast in South Africa of an interview which Solzhenitsyn had had on the BBC with an inane English interviewer.

On Monday, March 29, we all left and flew to Durban uneventfully, and that evening had another one of those black-tie dinner addresses to the business community, this time on “The

Future of Capitalism.”

On Tuesday, March 30, we had what in some ways was the most interesting day of all.

We drove from Durban up to the town of Ashowe, arriving there about 10:30 or 11:00 to meet with Chief Gatsha Buthelezi. Buthelezi is the hereditary chief of the Zulus and he is the head—I’m not sure exactly what his title is—of one of the independent homelands that the

Nationalists have been developing. This one is called Kwa Zulu, meaning “the Zulu nation.”

It is the second most advanced of the homelands. The most advanced is Transkei, which is a homeland for the Khoisan people. Kwa Zulu is scheduled to become independent very shortly.

This was interesting because it showed two very different sides of the situation. When we first arrived, we went to a hotel and were greeted by a man, a White South African, who turned out to be one of the advisers to the Chief. We met with him, with a Black economist,

Mr. Ngcobo, who was a fairly fluent, literate economist, and with two other White South

Africans who were involved in advising the independent homeland. The discussion proceeded on a rather surrealistic level since the whole discussion at this stage, with Buthelezi cooperating and talking as if he agreed with everything, was proceeding as if the independent

19 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

homeland was in fact going to be pursued, was going to be organized into a single nation, and would ultimately become an independent state along the lines of the Transkei. The basic problem is that Kwa Zulu itself, instead of being a single homogeneous piece of territory, consists of 28 bits and pieces, some large, some small. The reason for all the bits and pieces was, of course, the political problems that arose for the Nationalists in acquiring land that had already been occupied by the Whites so that in fact the whole thing was gerrymandered. The objective is alleged to be the consolidation—to reduce it from 28 or 29 separate pieces to something like five or six. Needless to say, the ideal would be a single one.

But over and beyond this, there is the other element of unrealism about it which is proceeding as if the fundamental apartheid notion was in fact going to be carried out when it is hard to see how it is at all feasible. We had quite a discussion about the technical problems of planning in connection with their proposals for industrial and commercial development.

The original idea was that only Black-owned capital and Black-owned businesses would be permitted in the homeland. The Verwoerd philosophy was of complete separate development—the White areas to be restricted to White businesses, the Black areas to be restricted to Black businesses; the idea being that by minimizing the extent of contact between the races, you would minimize the sources of discord and division.

However, there is a great scarcity of Black entrepreneurship, Black capital, and the like, and so a new plan has been developed which deviates from the original principle. Under this new plan there is a Bantu Development Corporation which ultimately will be converted into a

Kwa Zulu Development Corporation, and there is to be a tripartite development, the three parties being this development corporation which is essentially a governmental body, the

White entrepreneurs and capital from outside, and hopefully Black entrepreneurs and capital from within the Kwa Zulu area. The idea is that these opportunities are being offered to the

Whites on the understanding that they are for a definite time period and that at the end of a certain period of time they will sell out or dispose of their share of the enterprise so as to turn it over to Black hands. In the process, without realizing it, what these people are doing is

20 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

providing abnormally favorable opportunities for the chosen White entrepreneurs who get the contracts to develop this. Instead of offering these opportunities up for auction, the planning department, like any planning department, thinks it can decide better who are the right persons to exploit the various opportunities. On the whole, we had a rather extensive discussion about the virtues of free enterprise versus their planning set up and the like.

I should say that there is a King for this Kwa Zulu area and then there is Chief Buthelezi, who has a position equivalent to the Prime Minister in the South African set up. Buthelezi is a highly sophisticated, intelligent, thoughtful man who impressed me very much and who obviously is a very important personality in the whole South African situation since he has been one of the Black leaders who has been reasonably moderate in trying to cooperate, at least to some extent, with the Nationalist government. He has, for example, in a series of speeches argued against the people who urge all foreign enterprises to boycott investment in

South Africa because, as Buthelezi properly says, the only effect of that is to hurt the Blacks, not to help them.

We then had lunch at this hotel with the White advisers, Buthelezi, his Black economist, and the rest of us—the two Feldbergs, Rose, and myself. After lunch the White advisers left and we then retired to a much more private conversation with Buthelezi, Feldberg, his Black adviser, and myself. The women went off on a sightseeing expedition in town. Now the discussion changed character altogether; it got really down to business. Buthelezi stressed that he was going along with what the South African government was doing because he thought it would help his people.

It was a very interesting thing to see his own attitude as a hereditary leader and the attitude of his subjects as well. His chauffeur, when he came in to see Buthelezi about something, immediately dropped to one knee and bowed his head, and similarly all of the people around the hotel and elsewhere were incredibly deferential to Buthelezi.

In this subsequent discussion, as I noted, Buthelezi said he went along and played the game because he thought the most important thing for his people was to get them more jobs

21 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

and more opportunities, and this was a way of doing it. At the same time, he had no illusions whatsoever about the long run. He thought that the idea of a separate Kwa Zulu state broken up into bits was utterly impractical. In addition, and this is the key flaw in the whole separate development problem, roughly half of the Zulus, as of the Khoisas and of the other tribes, have now been absorbed into the urban economy and there is very little or no chance that they can be brought back to live back in the homelands. As a result, even if the whole homeland program went along exactly as initially planned, there would remain the basic problem completely unsolved of roughly half of the Black population that would be in the urban communities and that would violate fundamentally the initial philosophy of Verwoerd of separating completely, or so far as possible, the two races. Buthelezi stressed his own belief that the right approach was in the direction of a multiracial federal state. He was, however, very much concerned about his own position as being between the devil and the deep blue sea. On the one hand, when he makes speeches as he has been doing stressing the importance of a federal solution as opposed to a separate development solution, he is attacked by the

South African Nationalists as a radical and as destroying the peace of the society; while, by cooperating with the South Africans in promoting the interests of his people as he sees it, he is attacked by the exiles on the outside and the more radical young as being an Uncle Tom.

He discussed quite calmly the danger that he was going to be assassinated by either the one side or the other. He stressed the changing attitudes within the younger Blacks in South

Africa who, encouraged by what has been going on in Angola, Mozambique and throughout the rest of Black Africa, are now looking forward to violence. He noted that at one of his speeches or discussions with some of the Zulus, some of the younger people asked him that why when he went abroad, instead of coming back with speeches, he did not come back bringing guns.

Buthelezi himself is an Anglican Christian, a believer in nonviolence, and has always opposed trying to solve things by violent means. But he feels himself being pushed to. be

22 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

more and more radical in order not to lose control over his own people under the pressures which come from outside and from the more radical young.

Buthelezi has been in Chicago, and indeed stayed at the International House. His trip to

Chicago, I think, had been in connection with some kind of religious convention of the

Anglican Church, or something like that.

He left in the middle of the afternoon, and we then drove around a little bit to see the country. Incidentally, the Zululand country is extremely beautiful. It has rich rolling hills and very extensive vistas, and is extraordinarily picturesque country. We stayed overnight in the hotel, the worst hotel we stayed at anywhere in South Africa.

On Wednesday morning we started the drive back to Durban stopping en-route to see the ocean shore front, some absolutely gorgeous and beautiful beaches. At one where we stopped and walked on it, the car got stuck in the sand. But we were fortunate to have a road tractor come along, and the men came and pushed it out. We drove from there back to Durban where we flew to Johannesburg, arriving there early in the afternoon.

We had dinner with Meyer Feldberg and his mother and father. Barbara, who had been with us for the first few days in Durban, went back to Cape Town when we came to

Johannesburg. She returned to Johannesburg later in the week. Meyer’s mother I think had been, born in South Africa; his father came to South Africa from Lithuania in the late 1930’s,

I think it was, or sometime in the 1930’s—maybe 1930 itself I think somehow. After many trials and tribulations he became editor of a Jewish newspaper or weekly, I’m not sure which.

I guess he established and started it, became editor of it later, or sole proprietor of it, and developed it into a very successful and effective paper in South Africa.

One of the interesting things about South Africa is this whole emphasis on the separate groups—the emphasis on the Afrikaans on the one hand, on the English-speaking, on the

Zulus, on the Khoisas. The whole emphasis on ethnic purity, to use a phrase that Carter has just been being berated for, tends to lead to the closeness of every separate group. Thus the

23 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

Jews in South Africa, who are not very numerous, numbering about I think 110,000 or

120,000, are a very close group, driven to associate together fundamentally by the extent to which each of the other groups draws into its own shell. Their situation in South Africa is altogether different from that of Jews in the U.S. In the U.S. we feel Americans first and Jews second, whereas it is perfectly clear that in South Africa they feel Jews first and South

Africans second. On the whole, the Jews in South Africa have done extraordinarily well economically and I gather that one of the consequences of this is that they are per capita the largest contributors to funds for Israel. Meyer Feldberg’s father is a very able, sophisticated man and we enjoyed the dinner very much.

On Thursday, April 1, we started out at 7:30 a.m. to drive out to the Western Deep Gold

Mine. This is one of the gold mines of the Anglo-American Corporation; it is distinguished by being the largest and deepest gold mine in the world. That was an incredible experience.

When we got there we had to put on a miner’s costume consisting of white coveralls, miner’s boots which are heavy as the devil, and a cap on which could be attached a safety light. Then we were taken to the pit of the mine where we went down something like 2 miles underground. We got down in a succession of three elevators, each one taking us to a lower level. I have forgotten the numbers now, but the first one took us down, let’s say, 4,000 feet and the next one, say, to 8,000 and the next one down to 10,000. In each case these were offset horizontally one from the other, so we had to down in an elevator, go across, and so on.

I speak of them as elevators but they are not exactly residential elevators. They were cages on two levels, so that they could have people on top and on bottom, and underneath they would suspend pipes and things that they were delivering down below. The extraordinary thing is that when you got down to 10,000 feet and started walking through the passages, it was like a science fiction movie, with enormous rooms filled with machinery and equipment. In order to make it possible to work underground, it is necessary to have air-conditioning because apparently for every 100 feet or so you go down the temperature tends to go up 1º F., That means that for 10,000 feet it goes up 100º F., which would make the temperature too hot to

24 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

permit working at the surface of the mine. The result is that they have a tremendous air-

conditioning apparatus down below which air conditions all of these passages.

The extraordinary thing is that all of this is to bring out gold which tends to run in a very

narrow strip, perhaps only a pencil width or a half-inch width or a quarter-inch width. On the

average, they have to bring up to the surface and process 2 tons of rock in order to get 1 ounce

of gold.

It was a very interesting tour of the underground mine. We went back up to the surface,

and then we were taken for a briefing on some of their labor problems and the problems of

how they handled the completely unskilled, illiterate people whom they tend to bring in for

work in the mines both from South Africa and from neighboring countries. In the past they

have gotten a great many from Malawi and Mozambique but on the whole, these states having

become independent, they have now more or less tried to cut down or forbid their people to

go. The fact is, however, that many of them are very anxious to go. Although wages might

seem low by comparison with urban wages, they are very high by comparison with the

alternative income that the miners can get. We had a fascinating briefing on how they

managed to handle the people with many different dialects unable to read or write. One of the

most interesting things is that there is a completely artificial language that has been developed

for use in the mines which is a very simple language, can be taught readily, and is a kind of

lingua franca to enable people from all the different dialects to communicate with one

another.

We then had lunch with some of the people running the mine and, after that, returned to

Johannesburg. We got back in the mid-afternoon. Later in the afternoon, I went out to do an

interview for TV. It was in the form of a four-person affair in which George Palmer, who is the editor of the Financial Mail which is a weekly financial magazine published in South

Africa, served as essentially master of ceremonies and guided it. The other two participants were Aubrey Dickman, who is an economist with Anglo-American Corporation, and I now forget the name of the other person, but he was the one who provided most of the opposition

25 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

since apparently he had been one of the authors of the anti-inflation memorandum that I had been roundly criticizing throughout South Africa. At any rate, that was only a 15 or 20 minute

TV discussion, but we were able to see it later that evening.

Color TV had been introduced in South Africa only some four, five or six months ago, so

it is still a great novelty. The reason for the delay in introduction was because the government

did not want to introduce it until they could provide equal amounts of Afrikaans programming

and English programming. The schedule is very precisely specified: TV is shown each

evening for something like about six hours; three hours of it are Afrikaans, three hours

English; the order alternates day after day, and on the weekends essentially the same thing

happens, so that you have an absolutely perfectly precise balance between English and

Afrikaans. There is, of course, a great library and backlog of English language TV programs

but apparently, we were told, the government got together a group and spent four or five years

accumulating Afrikaans programs so that it would be an even-steven match.

The place where the program was filmed was the new TV and radio studios that have

been built on the outskirts, I guess—I’m not sure, but somewhere in Johannesburg. The main

building is a tremendous high-rise for radio and TV, and then there is an attached building

which is filled with studios and which really had not been completed. It was to be dedicated

the next day, and there was a great bustle and rush in trying to get all the last minute

arrangements finished.

We then returned to Johannesburg and after watching the broadcast of the program, which

was done about half an hour after we got back, we had dinner at the hotel. The hotel is The

Landdrost. It is one of the series of Miekle’s Southern Sun Hotels of which The President in

Cape Town, The Elegani in Durban, and later on the lodge which we stayed at at the Wankie

Game Reserve are all members—all excellent, reasonably luxurious hotels.

On Friday, April 2, I had a series of interviews in the morning with a number of people

from different newspapers and magazines. At noon, I attended a lunch that was organized by

the Sunday Times, the newspaper for which Stephen Mulholland is the editor of the business

26 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

section. Mulholland interviewed me at length in Cape Town and I shall come back to him

later. The guest list included in addition to the people from the Times quite a number of

people from various parts of the Johannesburg community including, which was rather

interesting because it was the first one of these occasions on which it had occurred, one Black

man who represented the Soweto Urban Bantu Council.

Soweto is an area outside Johannesburg which has been segregated for Blacks working in

the urban community. It is said to be the largest Black city in the world. The official

population is reported at 600,000 but we are told that the actual population is probably double

that, because of the large number of people who are in Soweto illegally. The situation is that

in order to be there legally, one has to have what is called a passbook which every Black man

must carry and show when asked by authorities. It is said to be a tremendous community. I

was very anxious to go to Soweto and originally Professor Feldberg had supposedly arranged

for me to do so, but ultimately it fell between the cracks and much to my annoyance we never

did get to see it.

The person listed on the guest list, Mr. Maponya, was not able to come to the Sunday

Times luncheon, but another man came who was described to me by our fellow guests as one

of the successful Black businessmen who is very well-to-do. In addition, there was also one representative of the Indian community, a Mr. J. N. Reddy, Managing Director of the New

Republic Bank of South Africa, a bank that he apparently started which was the first Indian bank in South Africa. The Black man, whose name I do not have here, impressed me very much more favorably than did Mr. Reddy. Mr. Reddy was smooth and sophisticated but, unfortunately like most Indians, he spoke too much. On the occasion when he gave a rather lengthy statement, if he had stopped after the first five minutes or so, everybody would have been very strongly impressed. But he then went on and misted up his whole analysis by going on for too long. His initial point had been to protest against the great discrimination against

the Indian community and the failure to have equal opportunities in the business and

economic world, but then he ended up being more or less of an apologist for the Afrikaans

27 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

government. The other people there included lawyers, businessmen, and one college professor.

The most interesting element of the discussion was that it revealed once again how wide is the gulf among the various groups. An issue I raised had to do with ways in which you could equalize conditions between the Black and White communities in a way that would also contribute to their financial and political situation. I suggested that the way to equalize it, to take an example from education, was that whereas the Black parents had to pay fees to send their children to schools supposedly run by the state (these are fees which do not cover the whole of the cost but they are fees nonetheless) and the White parents got free schooling— and I suggested that the way to equalize this was not to eliminate the fees on the Blacks but to impose the fees on the Whites as a way of both equalizing conditions, on the one hand, and of improving their budgetary position, on the other. The Black gentleman agreed with me immediately that this would be very effective from the point of view of the Black attitudes.

But then the interesting thing was that quite a number of the Whites protested that this difference did not exist. They insisted that the fees had to be paid either equally by both or by neither. Fortunately the Black man was there and some other knowledgeable people were there who did assert that this was the condition.

The other interesting thing was that there was a fellow by the name of Charles Friedman, a partner in the leading law firm in Johannesburg, who was very set on giving me a lecture about the virtues of exchange control and we had a rather spirited interchange on that subject.

Beyond that, of course, the discussion ranged over a wide range of items.

That afternoon I was picked up by Professor D. J. Botha of the Department of Economics at the University of Witwatersrand and was taken out to Witwatersrand. This is the university at which Lem Samuels had set up a business school and, unless I am mistaken, it is also the university at which Herbert Frankel taught. Professor Botha, as it turned out, had studied with

Harry Johnson at the University of Manchester and he gave us a piece of wood to give to

Harry. That was a very interesting session. Of all of the various sessions I had had at the

28 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

various universities or elsewhere, it was the most academic in character. The people around

the table, who were mostly the faculty from the Department of Economics and also some

from the School of Business, were interested in discussing economic questions on a more

theoretical and academic level than had most of the other groups which were oriented more

toward the immediate practical situation.

That night we had the final of our black-tie dinners at which I talked about gold. Needless to say, that was a subject that aroused strong emotions. Surprisingly, most of the questions after my initial talk did not deal with gold but dealt with quite a wide variety of other questions. The most difficult of all was one which was raised by Stephen Mulholland on the general question of what was the appropriate policy for South Africa in light of its apartheid situation and the pressure from outside. Needless to say, as a visiting guest, I was circumspect in answering the question. It will presumably show up on the transcript when we get it.

After the dinner we went back to the Landdrost Hotel and Steve Mulholland met us in the lobby where he had come to say goodbye to me before I left. We persuaded him to come up to the suite, and we sat around and talked for a while. He is an extremely interesting fellow who it turns out at one time was more or less committed to immigrating to the U.S. He went to school in Texas and he spent two summers working as a lifeguard in Flossmoor, Illinois, presumably because he was at the time going around with a girl from Flossmoor. He went so far as to allow himself to be drafted into the U.S. Army and apparently served his draft term in the Army. He is an excellent storyteller and a very able and intelligent fellow.

On Saturday after breakfast, late in the morning, we went out with the Feldbergs to the

Carlton Shopping Centre, a very extensive shopping center some blocks from the hotel. It was raining a little bit so we were driven to it in a minibus, or the equivalent of it, that the hotel operates for its patrons. The shopping center is an enormously extensive place and reminded us very much of the big shopping center in Honolulu. It is on several floors and on each floor there are a large number of shops, and there are all sorts of patios, fountains, displays, and so on in between. Mostly we just wandered around, but we bought a few uncut semi-precious

29 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

stones for David’s lapidary work, a couple of elephants for Rose, and in the main just very

minor items of this kind.

I should have mentioned earlier that when we were in Ashowe, in Kwa Zulu, we went to a shop run by a couple of Swedes who were collecting native handworks from the Zulu tribes around and building up a business of trying to sell them abroad as well as to visitors, but mostly abroad because of the limited number of visitors who came there. The experience of these Swedes, who had come originally as missionaries, was kind of interesting. They had learned and adopted the language and were working very extensively with the native groups to get them to develop their native culture. Most of this is basket work, though there is also some carving of wood and items like that. I should have also mentioned in that connection that before we left, Chief Buthelezi gave me as a parting gift a lovely olive cane which symbolized the Zulu chief’s cane.

To go back to Saturday, April 3, we spent several hours wandering around the shopping

center and getting a feel for the situation. Then we came back to the hotel and had lunch.

That evening we went out to have dinner with Harry Oppenheimer. He is the son of Sir

Ernest Oppenheimer who founded the Anglo-American Corporation and really organized and ran the DeBeers diamond monopoly. This is wealth and affluence with a capital W and a capital A—a magnificent estate landscaped to the tee, Japanese gardens, rose gardens, swimming pools, tennis courts, you name it, and a house which is itself an art museum filled with priceless original paintings by all of the great artists of the world; uper-class English traditions although Oppenheimer was, of course, born in South Africa but educated in Great

Britain. It was a black-tie dinner. The people who were present included Mr. de Koch, whom

I had met with Horwood before and is the Deputy Governor of the Reserve Bank of South

Africa; Aubrey Dickman, with whom I had been on the TV program but who is a consultant to the Anglo-American Corporation; and also Peter Gush (?)—in each case with their wives.

Gush—I believe that’s the right name—was the fellow who had taken us on our visit to the

Western Deep Gold Mine. He is a mining engineer who is, however, now in the head office of

30 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

Anglo-American dealing with financial and investment problems. He had been extremely knowledgeable about the technical aspects of the gold mining industry which we had discussed extensively as we had gone back and forth to the gold mine on Thursday. There were several other guests, Sir Clark and Lady Clark. He seemed to be a director of the Anglo-

American Corporation and had just recently been married although he is rather elderly; it must have been his second wife. There was one other couple that I cannot recall. It was a very elegant and elegantly served dinner.

Harry Oppenheimer himself turned out to be an extremely interesting person. He had studied at Oxford with Roy Harrod as a tutor and had a great fondness and respect for Harrod.

Oppenheimer was clearly highly knowledgeable not only about all of the details of his own firm but also about the general economic situation and condition. He had been extensively involved in politics at an earlier stage, having served for some ten or fifteen years as a member of the South African Parliament as had his father before him. Clearly he has one of the great fortunes in the world and the Anglo-American Corporation is one of the great enterprises in the world among his various interests, including being primarily the dominant figure in the DeBeers diamond monopoly around the world. Oppenheimer is now in his late sixties or early seventies—something like that. Now that I recall it, I guess he mentioned that he was born in 1908, which would make him 67. He is clearly partially retiring but is still very active in the business.

Mrs. Oppenheimer, whom I sat next to naturally at dinner, is a rather large robust woman who has a great interest in horses and horse racing as well as in athletics in general. She, like so many of the other people we met throughout South Africa, was very much interested in

American political developments, particularly the presidential campaign, and, like almost all of the other South Africans we met, had very little knowledge about most of the personalities involved, in particular about Reagan. The South Africans had clearly picked up their views from the newsweekly kind of things that they read, and it was clear also that their orientation was mostly to the East coast liberal establishment in the U.S.

31 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

Earlier on Saturday I had had a phone call from Helen Suzman who said she was up in

Johannesburg for the weekend and wondered if by any chance we were free to have lunch with her the next day. This was arranged, so that on Sunday we went late in the morning, first, driving out around the Johannesburg suburbs which are really an extraordinary collection of extremely affluent areas—very much Flossmoor writ large and even more extravagant and even more elaborate. After having driven around quite a bit to see that, we finally went to her place which is one of these large establishments in the Houghton area, which she represents.

This is an area which is heavily populated by the rather well-to-do Jewish community, and which is the explanation no doubt why she kept being returned to the Parliament as the sole representative of the Progressive Reform Party for so many years.

That was a fascinating, interesting, and entertaining lunch. Helen Suzman herself is quite an extraordinary woman. She is married to a man who is a heart physician, apparently an eminent one. She kept calling him Mosey as nearly as I could tell. But we learned afterwards she has a much more complicated personal life. The main dish was provided by a Max

Borkum who is a stockbroker in Johannesburg and who has a farm somewhere out in the country where he has a trout stream. His great passion is both catching and cooking trout, and he brought the cooked trout; it was absolutely delicious. According to Feldberg, he is supposed to have had a long time relationship with Helen Suzman. The other guests included

Colin Eglin and his wife. Eglin is the leader of the small Progressive Reform Party as I mentioned before. He was in Johannesburg to give a talk there on Monday. I think that completes the guest list.

A large part of the discussion before and after was devoted naturally to the problems of

South Africa, and particularly to the various themes about how the only way in which you could get a multiracial community going was through a laissez-faire economic policy which would make it possible for people to cooperate economically without having to make it a matter of legislative action. Mrs. Suzman was very graphic in describing the situation in

Soweto and obviously knew a great deal about the problems and difficulties of the Black

32 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

community. She has of course been the most passionate and effective defender of a move

toward a greater multiracialism.

One of the interesting things that impressed us out of this and all similar contacts we had here was the fundamental difference in attitudes between the English-speaking, and in particular among them the Jews, and the Afrikaans. There is no sign among the Afrikaans of any attempt to get out or any real contemplation of the possibility of emigrating and the like.

But we hardly met any English-speaking person who did not have somewhere under the surface the possibility of providing a second line of defense for himself or his children. Thus in Helen Suzman’s case, although she is obviously deeply involved in the politics of South

Africa and has no intention of leaving or getting out, the Suzmans have two or three children—I do not recall exactly how many—and all of them are now abroad, at least one daughter in London and one daughter in Cambridge, Massachusetts. And this was the pattern.

For example, one chap, who was sitting next to me at one of the black-tie dinners and was a very prosperous businessman, had said that he was not considering leaving and would not consider leaving because he was too deeply and heavily involved in South African affairs and business. But then I asked him about his children, and he said he had two children, 10 and 13, and he had made arrangements for them in case of problems. So that although there is a great deal of superficial confidence, there is no doubt that, especially in the English-speaking community, there is a fundamental underlying uneasiness about how stable and tenable their situation is.

After lunch at the Suzmans, in accordance with some comments we had made the preceding night at the Oppenheimers about how much we would like to see their garden, which was impossible to see in the dark, we drove over to the Oppenheimers. I should explain that there are two entrances to their estate; they are both guarded by what look like soldiers in uniform, although I am sure what they are privately hired guards. There were either one or two at each of the two gates. At any rate, we got into the Oppenheimers’ and as it happened neither one was around. Mrs. Oppenheimer was sleeping and Harry Oppenheimer was

33 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

somewhere on the grounds, so we proceeded to wander around the grounds by ourselves.

There is an absolutely magnificent Japanese garden, and then we finally wandered into a rose garden and then saw a swimming pool in which Harry Oppenheimer was swimming. We spoke to him and subsequently after ourselves touring through the whole garden—including a greenhouse (there were some magnificent orchids not so much in the greenhouse as in the house itself)—we went back up onto the porch and had a drink with Harry Oppenheimer and his wife, who by that time was up.

We then later went back home and had dinner that evening with Mr. and Steve Cohen who are friends of the Feldbergs and dealers in the diamond business. Present also were Colin

Benjamin and his wife. Colin Benjamin is a partner of Steve Cohen. I am not sure of their exact relationships but they are somehow related one way or another; either their wives are sisters or something like that. At any rate, they had a very pleasant house and we had a very easy, purely social evening.

On Monday morning, the first thing, we had breakfast in our suite together with the

Feldbergs who were returning that day to Cape Town while we were going on in the other direction. Later in the morning we were picked up by a car from the Reserve Bank in Pretoria and driven out to have a meeting at the Reserve Bank. Rose was taken in tow by Mrs. de

Koch, the wife of the Deputy Governor of the bank, who proceeded to take her with some other women out and show her various aspects of Pretoria.

Rose was impressed in the course of her day with the women—there were three of them, all of whom were Afrikaans—[in respect of?] the language problem. Whenever they talked to one another they talked in Afrikaans, although they apparently spoke reasonably fluent

English—very fluent. This led to a considerable discussion about the language problem, with

Rose stressing the advantages of a single language and drawing upon the experience of India as an illustration. But the women were very adamant in their opposition to this, stressing presumably the extent to which it would destroy the separate indigenous cultures if they were, all homogenized and accusing Rose of talking like an Englishman.

34 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

So far as I was concerned, I first had about a half-hour discussion with the Governor of the South African Reserve Bank, Dr. T. W. de Jongh, at which Mr. de Koch was also present.

This discussion stressed heavily the foreign exchange policy and the remarks which I had been making, of which they were more than aware, about the desirability of eliminating exchange controls and introducing a floating exchange rate. We also discussed their recent policy of setting top limits to the amount of credit that could be issued by the banks. The discussion was friendly and pleasant, but it really didn’t get very deep and I was unable to form a very thorough impression of Mr. de Jongh. In the course of seeing him three times, I had come to have a very high opinion of the sophistication of Mr. de Koch. Mr. de Koch had studied at Harvard immediately after the war and one of the people who undoubtedly left a great impression on him was Schumpeter, but I never did gather from him what he learned about monetary matters there.

After the discussion we spent about half or three-quarters of an hour with a group of people from the research staff of the Reserve Bank, and they were very much interested in technical economic matters, particularly those associated with the appropriate definition of the money supply—the usual M1, M2, etc. question—and the question of the demand studies of

the quantity of money, the appropriate rate of growth for price stability, and the like. Then I

had lunch with more or less the same people and a broader group of officials of the bank.

There was not a great deal of really serious discussion at the lunch; it was mostly desultory

conversation although there were some questions raised about the economic situation in the

United States, about my own views on that, about the exchange rate system around the world,

and the like. After lunch, we were driven by car from the Reserve Bank to the airport where

we took a plane for Rhodesia.

We were met at the Salisbury airport by Mr. C. G. Tracey, who is the Chairman of the

Rhodesian Promotion Council, and David Brewer, who is the Director of the Council.

Mr. Tracey is an extremely ebullient, outgoing, exuberant man who travels all over the world—I get the impression primarily in the interest of finding ways to get around the

35 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

sanctions which have been imposed on Rhodesia through the United Nations action instituted

by the United Kingdom after the unilateral declaration of independence in 1965. Mr. Tracey

apparently is also a farmer, a breeder of horses, and a very active participant in horse racing.

He was very much taken aback when I inadvertently accused him of being a senior civil

servant on the assumption that the Rhodesian Promotion Council was a governmental

organization. It turned out that the Rhodesian Promotion Council is an entirely private

organization financed by contributions from the business community in general and that Mr.

Tracey has about the same opinion of civil servants as I do. He said that that was as bad an

insult in his opinion as calling a Democrat a Republican.

We drove to the Jameson Hotel and it was about 6:00 or 6:30 p.m. when we were booked in. The suite was nice looking but had the worst beds of any place we had stayed in South

Africa. After washing up and so on, we went to a different room in that same hotel for a dinner arranged by the Rhodesian Promotion Council.

In addition to Mr. Tracey who was the host, my recollection is that the other people who were there were: Mr. and Mrs. F. E. Buch, and he had formerly been the president or chairman or head of the American copper mine in what is now Zambia, I guess, but gave that up some years ago and is now Chairman of the Air Rhodesia Corporation; Mr. and Mrs. H. J.

Quinton, tobacco farmers in Rhodesia; and Mr. and Mrs. C. Wright—he is the Managing

Director of the Central Africa Building Society. There may have been another couple, but if so I do not remember.

Perhaps the most interesting part of that evening’s dinner was talking with Mrs. Buch.

She was born in Swaziland where her father had been a friend and confidant many, many years ago of the native leader of the province, who had given him very, very large tracts of land. Obviously they had been extremely wealthy and prosperous as a result of all the land and the farming of it. She described various aspects of her childhood growing up in

Swaziland and what had happened as a result of the more recent developments in which, instead of being a British protectorate as it was initially, Swaziland had become an

36 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

independent country. She told an especially interesting story of what happened when their

former “calf-boy” as she called him, a boy who had tended their cattle when he was small and

who later also had served as an aide to her brother in the war, became the Prime Minister of

Swaziland and the extraordinary episode when he came to have lunch with his former

mistress and his former superior in the army. It was very clear that they did not relish the turn

of events from being the masters to being second-class citizens. It was also clear that they were very reluctant nonetheless to pull out of the country but that in effect that was what they were in the process of doing—that is, her family; she herself was now in Rhodesia.

Beyond this, at dinner the discussion ranged widely. The one thing that was clear from this dinner and every other chat we had was that all of these people were supremely confident about the internal situation in Rhodesia, were concerned primarily about the external situation, and were very proud of the way they had coped with the ten-year period of sanctions.

When we first arrived at the hotel, having been driven from the airport (I don’t remember whether this story is in these observations earlier), Mr. Tracey pointed out that there was one statue at one end of the airport devoted to Rhodes, the founder of Rhodesia, and said that there was another place at the other end reserved for a statue for a second benefactor, that they had decided who it was to be, and wanted me to guess. With very little pause, on the basis of the conversation we had been having coming in, I said Harold Wilson and he agreed—the idea being that, thanks to Wilson and the British government, sanctions were imposed on

Rhodesia in 1965 when, after inability to come to an agreement about new constitutional arrangements for independence, Rhodesia declared a unilateral declaration of independence, or UDI as they all referred to it. This led to the imposition of sanctions by the U.N. which were joined in not only by Great Britain but also by the U.S. and, on a formal level at least, by many other nations. According to Tracey, the result had been a tremendous increase in the rate of technological improvement, the rate of growth and development of Rhodesia. The real income as recorded had grown over the next ten years at a very rapid rate, I believe something

37 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

like 5 or 6 percent, a higher rate than in the prior ten years and a higher rate than in any other country in Africa except possibly South Africa. Mr. Tracey was inclined to attribute this to the imposition of sanctions.

Essentially what he was giving was the infant industry argument for protection. That argument has some theoretical merit. It hardly ever applies in a particular case because it is always the industries that are already established that try to pass as infants. However, because you had in effect the equivalent of a tariff imposed from outside independently of the industries in question, it may be that it had some merit in this case. A more likely possibility I believe is that the method of estimating real GNP tends to overstate the real growth in terms of consumer satisfaction because of the changed composition of production and output.

What is clear, however, is that international trade continues to play an extremely large role with estimates that exports amounted to roughly one-quarter of total national income.

One of the main items that had been involved was, of course, chrome of which Rhodesia is the major producer and which is essential for the United States. The initial effect of the sanctions was that Rhodesia got around the sanctions by selling the chrome to Russia, which was also technically supposed to comply with the sanctions, and Russia then turned around and sold it back to the United States for something like double the price. This finally led to the so-called Byrd Amendment. I guess the Byrd in question is Harry Byrd of Virginia, but I may have it wrong; it may be Robert Byrd of West Virginia. At any rate, it was passed by the

Senate which authorized the U.S. to buy chrome from Rhodesia despite the retention of the boycott elsewhere. It produces an utterly anomalous moral situation but shows that at least there is some recognition of the self-interest of the U.S.

Mr. Tracey was very proud of the part he had played in drumming up congressional support for a continuation of the Byrd Amendment when there was a strong attempt made to repeal it. He had been involved in getting a group of congressmen, headed I guess by

Congressman Ichord of Missouri, to spend a few days in Rhodesia and to serve as sponsors for the continuation of the Byrd Amendment.

38 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

The next day, which was Tuesday, April 6, Rose was taken care of by Mrs. H. J. Quinton and taken to see the African townships around the city, then to lunch at the house of the

President of Rhodesia (a Mrs. Wrathall is the wife of the President), and then in the afternoon to a tea at Mrs. Quinton’s house. She will describe her impressions separately.

I went to a briefing session at the Rhodesia Tobacco Association boardroom. The guest list is attached and it consisted of a considerable number of businessmen primarily of various kinds who were to brief me on the business conditions. There was an unexpected dividend in that it turned out that Peregrine Worsthone, who is either assistant editor or deputy editor or something of the London Telegraph, was spending a few days in Rhodesia, and it had been discovered the day before that he was free part of the time so he came and joined with us in part of this briefing. We also saw him later in the day for a drink before dinner and he came to dinner with us.

The essence of the briefing was first by W. Margolis, who I was informed had come to

Rhodesia at the age of six from Lithuania with his parents, but obviously now had developed into a very important man serving as Chairman of the Agricultural Marketing Authority of

Rhodesia, though that was in his public capacity. In his private capacity he was involved in some businesses of which I am not absolutely certain. He gave a very extensive briefing. He gave the estimate that the income of the average White relative to the Black in the commercial sector was roughly 10 to 1, and of the Black in the commercial sector relative to the Black in the traditional economy 8 to 1. He emphasized that a major effect of the sanctions had been to promote self-sufficiency in agriculture and indeed lead to great exports of agricultural products. Agriculture, he pointed out, amounted to 17 to 21 percent of gross domestic product. Roughly 60 to 80 percent of their maize, what they call our corn, is exported; 70 to

90 percent of their cotton; in wheat they are self-sufficient; in beef, they export about 60 percent of it; and in dairy they are self-sufficient.

Craig Gibson, who is President of the Chamber of Mines of Rhodesia, briefed us on the mineral aspect pointing out that gold was their principal mineral product until 1952; that from

39 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

1952 to 1965, there were added as important products copper, chrome, asbestos, and coal; and that they had found more recently nickel deposits; and that copper output was increasing and nickel was going to become an important aspect. He discussed the employment situation pointing out that all labor was classified into four groups ranging from (a) the artisans down to (d) the unskilled labor; that the great bulk of all the employees in the mining industry were

Black; that all of the categories (b), (c), and (d) were Black; and that of the artisans, they were principally but not exclusively White; that there had been an increasing tendency for Blacks to permeate up in the employment level; that technically speaking the distinction was solely on the basis of skill and not of color—of course, that has to be taken with a very large grain of salt.

Then there were briefer briefings by G. C. Maltas who spoke for the Associated

Chambers of Commerce of Rhodesia and by a Mr. J. A. C. Girdlestone who is a senior economist for the Association of Rhodesian Industries. Mr. Girdlestone emphasized that industrial production had doubled since 1965 and then he went on at some length about the

“necessity to impose import controls,” about foreign exchange controls, and the like. Of course this ended up in our usual discussion about the merits or demerits of exchange control.

The interesting thing of the discussion that developed at this point was the question of the extent to which the people involved were really believers in a free enterprise society and the extent to which in their search for protection, exchange controls, and going back more particularly to the Agricultural Marketing Authority which I investigated the fact that they had compulsory marketing through a government board. Mr. Margolis had been a student of

Professor Hutt at Cape Town, and he was very much taken aback to be put in the class of state planners or socialists as I did. All in all, this was a very enlightening session from the point of view of learning in short compass a good deal about the Rhodesian economy and having a chance to see what the attitudes and reactions of the leading business group were.

I then went from there to a private session with Dr. Krogh, who for the past year or two has been the head of the Reserve Bank. He is himself a South African who came up to

40 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

Rhodesia from South Africa. He had been at the dinner in Johannesburg at which I talked and

I had met him briefly there. We talked privately about the problem of their currency and of

exchange controls, and here for the first time I heard explicitly enunciated what I have always

supposed to be the most important single reason for exchange control and limitations on the

exodus of capital from Rhodesia, namely he acknowledged frankly that the main reason was

to keep people from moving out. He emphasized that the European population of Rhodesia

was extremely small, that they relied on it very heavily for defense and leadership, that the human capital was far more important to them than the physical capital, and they were very much concerned that if they eliminated exchange control and made no restrictions on capital movements they would have a large exodus of their population.

We discussed this back and forth because the arguments run both ways. I gave the

example, without mentioning the name, of Stan Fischer’s father, Philip Fischer, who is

retired, who is serving no useful purpose as human capital in Rhodesia, but who is kept from

leaving by the inability to convert his nonhuman capital into other currencies; also about the

effect which elimination of exchange control would have on the exchange rate which would

encourage the transfer of property from weak to strong hands. It might open up opportunities

that would induce people from outside to come in. So it was not entirely clear that the net

effect was really to retain the human capital which they wanted to retain.

We then went to lunch at the Reserve Bank and the guest list is attached. The most

important single person there was the Minister of Finance, Mr. Smith, not Ian Smith but D. C.

Smith, and then Professor Cole who is a professor of economics at the University of

Rhodesia. I talked some with Professor Cole while we were having drinks before lunch about

the University of Rhodesia.

The University of Rhodesia has been established within recent times—I am not sure

exactly when. It has a total of only about 1,200 students at the moment with a staff of about

200. According to Professor Cole, there is no discrimination in the student body. The students

are now more than 50 percent Black. The staff, however, is predominantly White; I think he

41 From The Collected Works of Milton Friedman, compiled and edited by Robert Leeson and Charles G. Palm.

said there were three Blacks out of the 200 but I am not absolutely sure of that number. Up until the last couple of years, he said, there had been a slight majority of White versus Black in the student body. He attributed the shift in the last couple of years to the call up for military service among the Whites. It seems the situation is that all Whites—all Europeans, that is— are conscripted for a definite period of military service. With respect to Blacks, they are not conscripted but they do volunteer. I had it pointed out to me several times that more than half of the total defense forces of Rhodesia are Black, that the number of Blacks volunteering is larger than the number that can be accepted. Cole emphasized the same points but pointed out that this did not affect as strongly those Blacks who were upward mobile and most anxious to go to universities. For the rest, the discussion at lunch ranged over the usual kind of topics.

In the afternoon after lunch we first met Rose and Mrs. Quinton, and David Brewer, I, and the two of them went over to an African crafts place, which they had been to earlier in the morning, where Rose had picked out a little stone statue to buy which we looked at and bought.

Then David Brewer took me essentially over the route which Rose had been over that morning, namely the African townships around the outskirts of Salisbury. This is the one place where there explicitly is enforced residential segregation. The situation is a little different than it is in South Africa in that Blacks can own houses in the neighborhood of the

White cities. I’m not sure exactly how it is divided, but in the area reserved for Blacks they can own them. But most of the houses are not owned; they are provided by the City

Council—or whatever it is—of Salisbury and rented to the inhabitants.

42