Memo to Obama: Capitalism Trumps Racism

A new political thriller from PBS, “Endgame,” provides the little-known, true back story of apartheid’s end in South Africa, with credit given to a for-profit mining company. Foreseeing that deteriorating conditions in South Africa would likely result in a total loss of their assets, Consolidated Goldfields initiated secret discussions between representatives of the white South African government and the exiled black African National Congress (ANC), paid for and hosted at the company’s estate in England. These talks resulted in Nelson Mandela’s being set free after nearly 30 years in prison, and the public promise by South African President F.W. de Klerk to end the government-sanctioned system of discrimination known as apartheid.

Thus, Malcolm X had it completely wrong when he opined: “You can’t have capitalism without racism.” As our new book, Race and Liberty in America, shows:

Capitalism punishes racial discrimination in the marketplace. Capitalism undermines racism by penalizing those who act on their “taste for discrimination.” Firms willing to recruit workers and market their goods and services without regard to color or national origin have a competitive advantage. American streetcar companies, to take but one example, fought segregated seating because it added to their cost of doing business.

This is not to argue that there are no bigots or racists. But Jim Crow, apartheid, and other race- or gender-based laws are at root institutionalized protection from competition, enacted to penalize and make illegal voluntary activities that are taking place in the absence of such laws. In the post-Civil War South, for example, the races were intermingling, intermarrying, and doing business together as a natural course of events. It was only through enacting Jim Crow that those who did not want competition from blacks were able to prohibit, with the full force of the government behind them, these voluntary activities. In the absence of such laws, bigots themselves bear the costs of their own discriminatory behavior, and individuals seeking to maximize their profits and opportunities receive benefits from doing so without racial or other discrimination.

Racism is thus only successfully institutionalized and sustainable through the power of the State, and its cure is to remove the ability of the State to either confer privileges or prohibit peaceful activities for any ostensible reason whatsoever.

Of course, the end of apartheid in South Africa involved many events subsequent to the Consolidated Goldfields peace talks. As portrayed in “Endgame,” for white Afrikaners, “Our fear (of ending apartheid) stems from the knowledge that one day we will be punished for all the terrible wrongs we have inflicted.”

The solution for that challenge—as well as forestalling white revenge against the ANC for its history of terrorist activities—was provided through Archbishop Desmond Tutu’s leading the extraordinary Truth and Reconciliation Commission. For his charming, entertaining, and incredibly moving account of the experience, watch the video of Archbishop Tutu’s address to the Independent Institute’s Gala for Liberty: here.

Mary L. G. Theroux is Chairman and Chief Executive of the Independent Institute.
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