Ending ethnic socialism: privatizing apartheid.

APARTHEID, though regarded by most of the world as an expression of capitalism, is in fact ethnic socialism. It is the protection of organized white privileges against the operation of free-market forces. Implementing that vision required the use of force against whites as well as blacks.

For example, the government had to force white mine-owners to acknowledge white supremacy through the Mines & Works Acts of 1911 and 1926, which limited certain jobs to whites only-thus removing the right to hire blacks for those jobs. The Natives Land Act of 1913 was a culmination of previous laws that sought to drive blacks off the land to prevent competition with white farmers (it also provided cheaper labor for industry).

In 1922, South Africa suffered its most violent strike. The dispute grew out of mine-owners violating various laws and regulations restricting the number of blacks who could be hired for certain jobs. It was supported by the South African Communist Party, then entirely white, and its slogan was Workers of the World, Fight and Unite, for a White South Africa." The strike had to be put down with artillery and planes; nearly three hundred whites died, and a year later Prime Minister Jan Smuts and his party were run out of office. General Hertzog's National Party and Creswell's Labor Party formed a coalition, campaigned on the promise to enforce white privilege, and won the 1924 elections.

The new government passed tough laws to promote "civilized labor policy": reserving certain jobs for whites only; outlawing black unions; restricting movement of blacks; punishing businessmen who violated civilized labor policy" through fines and denial of customs privileges and the right to do business with government.

The struggle for white privilege was a struggle against market forces and what they imply: voluntary exchange. The free market was an enemy of race-based privilege. If white mine-owners and other businessmen (who shared the ideology of racial supremacy advocated by their workers) had not hired blacks as foremen or underground steam-engine drivers, there would have been no need for a law prohibiting them from doing so. Yet white employers repeatedly evaded, contravened, and otherwise violated both the letter and the spirit of apartheid laws-often seeing the resulting fines as a routine business cost.

Black employees willing to work for cheaper wages (who in many cases outperformed whites) meant greater profits for owners. The prospect of greater profits tested and broke white racial solidarity. White South Africans continuously complained that capitalism could not be trusted to protect white privilege-and they were right. Apartheid required extensive economic controls to suppress peaceable, mutually advantageous, voluntary exchange.

The past, unfortunately, is one of the immutable facts of life. Only through rapid economic growth can South Africa overcome the injustices of apartheid. A 6 or 8 per cent annual growth rate, quite achievable, would see current incomes doubling every eight or 12 years.

Hopes depend on just how willing South Africans are to restrict government power. The South African government owns outright (or through quasi-government enterprises) railways, harbors, airlines, housing, hospitals, the electric and telephone industries, coal-to-gas conversion plants, television stations, huge land tracts, and universities. What the government does not own it controls. Entry conditions and prices are regulated; and the government even mandates the composition of business-asset portfolios.

In order for South Africa to achieve a high rate of economic growth, it must commit itself to a number of major policy changes. Protectionist tariffs must be lifted, particularly those restricting the import of Western technology. There must be major change in the central bank policy which restricts foreign investment and produces a 20 per cent rate of inflation. South Africa must eliminate its agricultural marketing boards which lead to an inefficient allocation of agricultural resources and raise the prices of all agricultural and dairy products.

In particular, it must eliminate collusive regulations and controls on business entry. After the government deregulated taxis several years ago, blacks acquired minivans and virtually took over the taxi business in the major cities. Deregulation not only provided business ownership opportunities but vastly improved transportation for black workers and consumers.

By deregulating business activities in central business districts, South Africa has already begun to tap the robust entrepreneurial spirit of thousands of street peddlers, some of whom have opened up stores. Those who belittle such "cooperation with the system" ignore the fact that it not only means income for petty capitalists, it also provides training and experience in buying, selling, and risk taking. Some of South Africa's petty capitalists may end up following in the footsteps of American ex-peddlers such as James Cash Penny, John Wanamaker, and the Bloomingdales.

But freeing blacks to compete will not fully solve the problem of economic injustice. South Africa presents one of the more compelling arguments for some form of redistribution or compensation. Current generations of blacks have suffered injustices at the hands of the current generation of whites.

The problem is that most discussions of income redistribution call for government schemes whereby earnings of white households and businesses are taken and given to blacks in the forms of higher pension payments, housing and business subsidies, food, and medical care. Despite its broad appeal, the numbers do not add up. There are too few whites and too many blacks.

Ignoring other non-whites, South Africa has about thirty million blacks and five million whites, six blacks to each white. In order for government to give each black R1,000 (roughly $380) a year, or R83 ($32) per month, it would have to take R6,000 ($2,280) from each white or R24,000 ($9,120) from each white family of four. But the annual per-capita income of whites in South Africa is only R15,000 ($5,700). Even if such an income-redistribution scheme that at best would deliver blacks a paltry $32 per month were politically feasible, it would be a death sentence to the economy.

Suppose government also finances income redistribution with profit taxes on South Africa's businesses. In 1987, South Africa's top six mining houses and the Financial Mail's top 100 industrial firms earned R8.7 billion ($3.3 billion) in after-tax profits. If these profits were completely taken away for income redistribution, each black would receive R24 ($9.20) a month. And businesses having lost their profits would have little incentive to produce and invest the next year. Thus, wrecking the economy by imposing confiscatory taxes on white households and businesses would give each black a paltry $42.20 per month.

A better approach is the compensation scheme put forward by the Free Market Foundation of Southern Africa. This calls for the South African government to give up all its property. Shares of stock for the property would be divided equally-but only among the black population. According to 1987 estimates, government assets are valued in excess of $250 billion. If divided equally among its black population, each person would receive a one-time payment in excess of $9,000, or $36,000 for a family of four. A family might keep its shares or sell them to start a business, send kids to college, or build a home.

This proposal has several advantages. It is a gesture of goodwill; it reduces the power of the central government; and it presents a challenge to any new tyrannical government, which would face the task of dispossessing blacks. Such redistribution would have no harmful effects on the economy. Indeed, it should help it, since government ownership is less efficient than private ownership. The sole losers would be politicians whose political patronage would diminish.

The response to this proposal from most quarters is, alas, not that encouraging. After decades of abuse by a powerful government, blacks are perhaps more interested in changing the color of people who wield the power rather than eliminating the power itself. As such they confirm French philosopher Freddric Bastiat's prediction: "As soon as plundered classes gain political power, they establish a system of reprisals against other classes ... even though it is against their own interests."

The second argument, that giving poor blacks shares would set them up for exploitation, follows from the view that wisdom is the monopoly of an elite. Ironically, this view has a striking similarity to the rhetoric of apartheid. D. F. Malan, who led the Nationalist Party to its 1948 victory, said, "I regard the Bantu [blacks] not as strangers and not as a menace to white people, but as our children for whose welfare we are responsible."

If South Africa goes down the road of ethnic socialism under black management, the main sufferers will be ordinary blacks. White corporations and white professionals will simply cut a deal with the new political elite, which will gradually be corrupted. This has, after all, been the pattern throughout most of post-colonial Africa. Ordinary blacks will suffer from the economic failure that socialism of every kind creates, without sharing in the economic rents enjoyed by the coalition of the black elite and favored white corporations.

Yet blacks are especially well positioned to seize the opportunities offered by a growing capitalist society-and for an obvious reason. Because of apartheid, blacks could not expect handouts and protections received by whites; thereby they did not develop the welfare mentality of many white South Africans, particularly those in the petty bureaucracy of apartheid who now face unemployment with no useful skills. Blacks, by contrast, had to make do, and some have done quite well. What they mostly need now is economic freedom and a non-racial society in which they can exercise their talents freely.

IN A perfect summer's day a couple of weeks ago, with the surf up and the clouds tumbling like lemmings over the edge of Table Mountain, President F. W. de Klerk tolled the bell for South Africa's old order. At the opening of parliament in Cape Town he announced the impending repeal of the legislative remnants of apartheid: the Group Areas Act, which segregates residential land; the Land Acts, which reserve 87 per cent of the country's area for whites; and the Population Registration Act, which classifies people by race.

The death knell was heard clearly enough in parliament, where members of the opposition Conservative Party walked out of de Klerk!s opening address, shouting "Traitor!" and "He is burying the flag of the Afrikaner nation!" But it was not heard in the streets outside, where 15,000 supporters of the African National Congress and the Pan-Africanist Congress demanded that de Klerk close the "white racist" parliament instead of opening it. There were fiery speeches from the baroque balconies of city hall, with he crowd smothering a statue of King Edward VII for a better view. But the demonstration went off peacefully, which is saying something in South Africa these days.

The pressures on the "reform process," from Left and Right, could hardly be better illustrated. The segregationist Conservatives have declared that the fight will go on, but have offered no alternative to de Klerkes policies. Under the existing constitution another "whites only" election-their best hope of regaining power-is not due until 1994. And by then, de Klerk devoutly hopes that a new multiracial constitution will be in place. The Conservatives must wait on the sidelines, trusting that the reforms will fail through deadlock at the negotiating table or mayhem and bloodletting. The miracle is, they haven't collapsed yet. This is partly because the ANC (or that part of its leadership which is in favor of negotiations) has come round to the government's way of thinking. It was the government which first proposed a multi-party conference, consisting of all groups that have demonstrable support. The ANC held out for an elected constituent assembly" (which it would expect to dominate), but then adopted the government's proposal as its own. Where difficulties have arisen, as over the notorious paragraph 3 of the Pretoria Minute in which the ANC "suspends the armed struggle," compromises have been cobbled together. The latest fudge, by which the ANC promises not to create new military structures or to engage in "war talk" (one hopes Mrs. Winnie Mandela is listening) has sent the two sides pottering off again down the road to a multi-party conference, perhaps in May.

Mr. de Klerk and Mr. Nelson Mandela, deputy president of the ANC, clearly get on famously over the tea and biscuits (though, curiously, they are still not on first-name terms). But while Mr. de Klerk shows every sign of being able to deliver his white constituency, there are grave doubts about whether Mandela has much influence over young black militants. The Mandela name may produce an earnest liberal glow in Georgetown, but in South Africa his pleas for peace and reconciliation often fall on deaf ears. When he told the warring factions in Natal to Take your knives and pangas and throw them in the sea," no one took a blind bit of notice; and when he told children to return to their schools, the teachers went on strike. Only weeks after his release from prison a year ago, youngsters, angry with his moderation, had cut his portrait from their Nelson Mandela T-shirts.

The Pan-Africanist Congress, like the Conservative Party, has said it wants nothing to do with a multi-arty conference. With its chilling slogan of "One Settler, One Bullet," the PAC appears to be increasingly popular with the young lumpenproletariat of the townships. Among the lost generation which foolishly chose "liberation before education," antiwhite feelings run very deep. When PAC supporters chant: "Peace among the Africans, war against the enemy," there is no doubt who the enemy is. Mr. Joe Slovo, white leader of the Communist Party, learned this the hard way at a recent rally. A section of the crowd began chanting: "One Slovo, One Bullet."

It is this gallery that ANC militants must also play to. The military efforts of the ANC's armed wing, Umkhonto we Size (Spear of the Nation), have never amounted to more than a few tawdry township killings, and an occasional bomb. But a liberation myth is in the making, the myth of a white, racist, colonialist regime being overthrown by force. Hence the importance to the government of Mr. Chris Hani, head of the armed wing, and now the likely successor to Mr. Mandela. I recently asked a senior government minister whether he could deal with Mr. Hani. "If he can deliver, it's fine by me," he said, grinning a somewhat wolfish grin. We've learned that lesson. We don't want to deal with puppets any more."

White liberals, of course, watch the unfolding events with a mixture of self-righteousness and indignation. The Democratic Party has had its clothes well and truly stolen by the governing National Party, and watches, powerless, as old enemies line up for photo opportunities. It is also beginning to dawn on some liberals that the ANC might not be the bastion of freedom and democracy they had fondly imagined it to be. On the dreaded subject of the crime wave-a black crime wave, it must be emphasized-liberals are beginning to sound distinctly authoritarian. The murder rate last year was, after all, five times that of the U.S.

The extraordinary events at the trial of Winnie Mandela-when half the defendants absconded, one key witness was apparently kidnapped by ANC members, and the other witnesses declared themselves too frightened to give evidence-were too much even for the liberal press. The Weekly Mail, who had been a thorn in the flesh of the Botha government, described the ANC as "tarnished" and questioned its commitment to justice. "The problem was symbolized by the arrogant ANC marshalls who took control of the streets, strutting around in makeshift military fatigues, and abusing journalists and others." The headline on its editorial read: Is This Rule by the Toyi-Toyi Macoute?"

The toyi-toyi is a sinister shuffling war dance" much favored by ANC crowds. It is mindless and intimidating. Byron wrote that he wanted slavery to be swept from the African continent, so that he could "gaze on the first dance of their freedom." So as saintly Mr. Mandela and nice Mr. de Klerk go wandering off down Negotiation Road, we must hope that the first dance of the "new South Africa" does not turn out to be the toyitoyi.