The Economics of the Colour Bar

IT MAY be felt that, although the power of the white labour unions was abused in the circumstances we have just discussed, collective bargaining remains essential to protect both Whites and non-Whites from exploitation. It is true that, in the extremely rare1 cases in which managements are really in a position to exercise monopsonistic powers as ‘monopoly’ buyers of labour, ‘exploitation’ may occur. But in a good society, would not the prevention of this possibility be undertaken by the enforcement of laws designed to maintain competition and so prevent such abuses of managerial power? The need for this action by the state in a liberal society is first, to protect the right of the community as consumers to have access to the least-cost source of supply; and second, to protect the right of the community as entrepreneurs to substitute the least-cost form of output. It has been the denial of this second right which has created the grossest injustices to which, as producers – i.e., as wage-earners – the non-Whites have been subjected.

I cannot here attempt to explain the almost universal current tolerance of the private or sectional use of coercive power (or of state fixing of prices and wage-rates).2 But the sceptical reader might give his mind to the following considerations.3

If the price of timber rises, the price of furniture will rise; and if the price of the labour making the furniture rises, again the price of furniture will rise for exactly the same reason. The circumstances in which such a reaction would not follow are of negligible importance; yet most economists have obscured this vital issue by concentrating all attention upon the obviously unimportant theoretical case in which a rise in material prices or in wage-rates is absorbed to the detriment of profit claimants or interest claimants on the value of the product. But when the price of any commodity is raised above the free market level, by strike threat or action or by state edict, the effect is always regressive, harming poorer consumers relatively more than wealthier consumers. Moreover, such a process distorts investment in human capital. It causes, inter alia, relatively more people to be trained for and employed in occupations of low productivity and remuneration, and hence relatively few to be trained for and employed in occupations of high productivity and remuneration. And in South Africa it has been the non-Whites who have suffered most harm from this process. It has occurred most seriously (as we shall see) since the middle 1920s mainly through standard rate enforcement under the Industrial Conciliation Act and the Wage Act.

4The ‘rare’ is my own judgment after nearly four decades of interest in the question.

5It should be noticed that the case for such protection by the state does not justify resort to the fixing of prices of wage-rates by state edict, except in the case of ‘natural monopolies’.

6The logic of this problem is discussed in my Theory of Collective Bargaining (1930, reprinted in 1954).

• 1The system has recently been changed. Any African may now choose whether he wishes to be subject to tribal or Portuguese law. If he chooses the latter, he has the right to vote (whatever that means in a dictatorship) but he then becomes liable to taxation.
• 2Inter-marriage is a crime in South Africa. It is officially encouraged in Mozambique.
• 3The present government of the Republic of South Africa deny that this is the purpose of apartheid (separate development). I propose, however, to show why that must be the consequence of their policy.
• 4Some injustices may be due more to class barriers than to colour barriers. For instance, there is much resentment felt against Portugal as an intransigent colonial power. But no legally enacted colour bars exist in any Portuguese territory; and a South African who crosses into Mozambique is at once struck by the wholly different attitude, at least superficially, towards colour. Yet the overwhelming majority of the Africans of Mozambique are extremely poor. Some critics conclude that Portugal maintains a de facto if not a legal colour bar. But there are approximately an equal number of Whites and non-Whites with ‘assimilado’ status (that is, who have achieved both literacy and the ability to live at defined civilised standards) who have long enjoyed absolute equality of rights before the law. Yet only 160,000 out of the population of 6.6 million enjoy this status and only 5 per cent of the non-white assimilados are Africans (the rest are Indians and half-castes). If the evident backwardness of the masses is caused by deliberate policy rather than by unrestrained population growth and a paucity of natural resources, there is certainly cause for complaints of class injustice, but not of colour injustice. But educated and responsible non-Whites are not subjected, in the Portuguese territories, to the indignities and humiliations they suffer in South Africa.
• 5Some injustices may be due more to class barriers than to colour barriers. For instance, there is much resentment felt against Portugal as an intransigent colonial power. But no legally enacted colour bars exist in any Portuguese territory; and a South African who crosses into Mozambique is at once struck by the wholly different attitude, at least superficially, towards colour. Yet the overwhelming majority of the Africans of Mozambique are extremely poor. Some critics conclude that Portugal maintains a de facto if not a legal colour bar. But there are approximately an equal number of Whites and non-Whites with ‘assimilado’ status (that is, who have achieved both literacy and the ability to live at defined civilised standards) who have long enjoyed absolute equality of rights before the law. Yet only 160,000 out of the population of 6.6 million enjoy this status and only 5 per cent of the non-white assimilados are Africans (the rest are Indians and half-castes). If the evident backwardness of the masses is caused by deliberate policy rather than by unrestrained population growth and a paucity of natural resources, there is certainly cause for complaints of class injustice, but not of colour injustice. But educated and responsible non-Whites are not subjected, in the Portuguese territories, to the indignities and humiliations they suffer in South Africa.
• 6I shall illustrate my thesis almost entirely by reference to experience in the Republic of South Africa where I have been living whilst my ideas were forming. But the lessons learned from a study of colour bars, apartheid and other manifestations of colour prejudice in South Africa, are of direct relevance wherever skin pigmentation or other racial characteristics serve as a principle for confining individuals to any sort of economic or social inferiority.