THE SURPRISE ABOUT APARTHEID Much of the world thinks South Africa's abhorrent system is the creation of greedy capitalists. That's the opposite of the truth.
By DAVID R. HENDERSON REPORTER ASSOCIATE Jacob Park David R. Henderson, formerly a senior economist on President Reagan's Council of Economic Advisers, is a senior fellow at the National Center for Policy Analysis in Dallas.

(FORTUNE Magazine) – The dramatic recent events in South Africa give new urgency to an old question: What kind of government might a democratic South Africa have? Now that the African National Congress is legal and Nelson Mandela is free to lead it, won't it be the sure winner in any one-man-one-vote election? What about the ANC's many ties to Communist organizations? And in any case, wouldn't millions of newly enfranchised, mainly poor black citizens be likely to vote socialist, destroying a long-established capitalist system? Whatever the answers, that whole line of questions ignores an important fact: South Africa right now is a lot less capitalist and a lot more socialist than most people realize. The orthodox view holds that apartheid was created at the behest of business for the exploitation of native labor. What a surprise, then, to find not only that apartheid flies in the face of capitalist principles but also that socialists and Communists enthusiastically helped to create it. Moreover, most white businessmen oppose apartheid and always did. This is the fascinating story Walter E. Williams tells in South Africa's War Against Capitalism (Praeger, $37.95). Williams, an economics professor at George Mason University in Fairfax, Virginia, shows that apartheid was designed in part to protect white workers from competition with blacks. Writes Williams: ''Apartheid is the result of anticapitalistic or socialistic efforts to subvert the operation of market (capitalistic) forces. Indeed, it is the free play of market forces . . . that has always been seen as the enemy of white privilege and that apartheid ideology has always sought to defeat.'' An important step toward what later became codified as apartheid came in 1911 when South Africa's government, caving in to pressure from white labor unions, passed the Mines and Works Act. The first of a series of laws known as the color bar, this act required mine workers to obtain work certificates. Though rationalized on the ground of employee safety, these certificates were used to exclude black workers from the skilled mining occupations and even to limit the number of blacks allowed in unskilled mining jobs. Think of it as affirmative action for whites. According to Williams, the color bar broke down when many white miners went off to fight in World War I. On their return they found that the color-blind capitalist mine owners, trying to reduce their costs, had replaced them with lower-wage black workers. The whites demanded that blacks be once more excluded from skilled jobs. In 1922, after the mine owners refused to meet the whites' demands, 20,000 ; white miners, led by Communists and socialists, went on strike. Some strikers made violent, unprovoked attacks on blacks. Williams points out that one of the strike's leaders was W. H. ''Comrade Bill'' Andrews, later to become secretary of the South African Communist Party. Marching through the streets of Johannesburg waving red flags, the strikers chanted, ''Workers of the world, fight and unite for a white South Africa.'' Lester Maddox, meet Karl Marx.

Although crushed by the government, the strike cemented the alliance between white labor unionists, white socialists, and white nationalists. In 1923 this alliance was formalized by the union of the Nationalist and socialist Labour parties, which went on to win the 1924 elections, then proceeded quickly to set minimum wages and to reestablish occupational licensing of the skilled and semiskilled trades. The purpose of the minimum wages: to price blacks out of the labor market. Williams quotes the white Mine Workers Union's statement that because minimum wages would make black labor more expensive, ''most of the difficulties in regard to the coloured question ((that is, competition from black labor)) will automatically drop out.'' But as economist Thomas W. Hazlett has pointed out, continuing economic development constantly threatened to undermine the government's artificial restrictions on competition between employees: Employers, mainly white, could still cut costs by hiring equally qualified blacks at lower wages than whites. Whites tolerated this competition during the economic expansion that got rolling in 1940. But when the economic pie ceased to grow, whites in 1948 elected the white supremacist National Party. As Hazlett notes, the party and those who voted for it believed, probably correctly, that the only way to maintain separate labor markets was to maintain spatial and social separation of the races. Thus was born apartheid (the term did not appear until 1943), the policy of explicit racial separation. Under apartheid, South Africa's government classifies all people according to race. It also forbids marriages between whites and coloreds, and it segregates urban areas into sections for whites, coloreds, Indians, and blacks. This last law in particular -- dictating to people where they can buy or rent housing -- is of course an attack on people's right to engage in voluntary exchange with others, just as the restrictive labor laws are. In Williams's words: ''The whole ugly history of apartheid has been an attack on free markets and the rights of individuals, and a glorification of centralized government power.'' FORTUNATELY, apartheid is in decline, as Williams notes. In recent years the government has reduced the number of job categories reserved for whites, even in mining, where the white Mine Workers Union is still strong. The Liquor Act of 1986 now permits hotels, bars, private clubs, and restaurants to serve all races. And nonwhites are with impunity buying houses in areas designated as solely for whites: One ''white'' Johannesburg suburb, writes Williams, houses 5,645 Indians, 936 other nonwhites, and 6,321 whites. While apartheid is tattering around the edges, it is far from certain to die. Although white businessmen would benefit from free labor markets and have traditionally opposed apartheid, the white workers protected from competition with blacks and the more numerous white workers employed in South Africa's large nationalized enterprises still have a stake in apartheid. It may last a long time. But if it does, don't blame capitalism.

BOX: EXCERPT: The dominant black opinion in South Africa is that apartheid is an outgrowth of capitalism. Therefore, in the eyes of many black Africans and their benefactors in Europe, the United States, and elsewhere, a large part of the solution is seen as being in the promotion of socialistic goals.