Racism, labour supply shocks and the contrasting responses of the US and South Africa

In last year’s Shocking Contrasts: Political Responses to Exogenous Supply Shocks, Ron Rogowski discussed a number of supply shocks to land, labour and human capital. Here I noted that he never discussed a case involving exogenous gain of land, nor of loss or gain of physical capital. My older post was itself about the effects of sudden gain of land, and I do wish to discuss the physical capital issue, but will do so later. More interesting is that, whilst Rogowski discusses loss of labour through high mortality and loss of land via declining trade he never discusses loss of labour in a land-rich society through the latter mechanism. I have noted that this could have profound effects before here and here. For a labour-scarce twentieth-century nation, complete loss of access to the abundant labour of Europe and monsoon Asia would have created a much larger supply shock than the Black Death. Even in the populous United States, it would have amounted to a labour supply cut of 95 percent by a crude calculation, and elsewhere it would have been larger still. Complete loss of access to the labour of Europe and monsoon Asia would have totally upended the racial hierarchies of the US and South Africa. Oppressed black populations would have used skyrocketing wages from a decimated effective labour supply (noted in the first paragraph) to demand political and economic rights, whilst the wealthy would have been literally crippled because of:

• limited latitude to substitute for labour due to already having done so substantially due to labour’s scarcity
• risk of further retaliation from abroad if the ruling classes tried to further restrict black mobility or wages
• risk of disloyalty from their poor white supporters if they attempted a military solution
• this was a major factor behind Goldwater’s 1964 landslide loss, as many racially conservative whites refused to risk his Vietnam policies involving possible nuclear strikes

Shocking Contrasts never uses Southern Africa’s loss of access to the highly abundant labour of South Asia as an example of a supply shock. In communication with me Rogowski argued that it was endogenous and anticipated, but I question his argument. Before Indian independence similar if less severe racial policies had no effect. South Africa thus gained unlimited access via trade to labour-intensive products from South Asia. Hence, even if incoming Prime Minister François Daniel Malan and his advisers knew changes were likely when South Asia became independent, they would have not assumed major consequences.

The United States had similar laws of racial discrimination that effectively excluded African–Americans from voting or from living in virtually any rural or suburban area outside the plantation South, despite constitutional amendments aimed at creating such rights. Expanding trade after 1870 weakened the economic position of black Americans and increased the determination of whites to eliminate theoretical constitutional rights. The position of black Americans steadily deteriorated and — as had been noted by many commentators from Walter Dean Burnham to Frances Fox Piven and would occur again after 1973 — political influence was monopolised by the rich while poorer whites voted in smaller and smaller numbers. (Not discussing why this happened at the very time political participation in Europe was rising and suffrage expanding was a major omission from Commerce and Coalitions, although the contrast is precisely analogous to Eastern Europe versus Western Europe in the long sixteenth century discussed on pages 157 and 158.)

Mass influence upon policy in trade-open labour-scarce (as the US and South Africa are) economies is exceedingly unlikely for the simple reason that free trade eliminates requisite economic power for all except minimally the top decile and perhaps an even smaller elite. Nonetheless, neither:

1. those who acknowledge that mass interest groups have zero influence upon US government policy and that this state of affairs has been maintained since the 1973 oil crisis, nor
2. writers like Rogowski of David Lektzian and Dennis Patterson (who in the 2000s analysed theoretical practical effects of sanctions on countries with varying factor abundances)

seriously consider extremely plausible arguments that:

1. mass influence on politics in trade-open labour-scarce economies is generally implausible
2. the most probable political models for a trade-open labour-scarce society are the family business monarchy of the Gulf States or the semi-family dictatorships of the East Slavic and Turkic “core USSR”
3. only collapse of global trade could potentially produce anything resembling democratisation of such societies

By the 1940s, the US ruling class was acquainted with the spectre of widespread worker revolution in Europe. If successful, US capitalists would have been placed in direct conflict with workers’ states dedicated at least theoretically to their expropriation, and likely to redirecting exports away from the US. Another threat, already developed to some extent during the interwar period, was restriction of foreign access to the products of abundant local labour by bourgeois nationalists who wanted independent local development.

The US ruling class understood it had to compromise with Europe and newly independent Asian nations to expand trade. However, given that it gained immense profits by oppressing blacks, it never assumed that greater rights and opportunities for the mass of African-Americans would remain permanent. US policies between Smith v. Allwright and the 1973 oil crisis were contradictory because of conflicting needs to appease European workers and nonwhite nations versus maximising the profits and power of the rich. Rogowski notes that black leaders did not pursue the protectionist (or anti-IMF and anti-GATT) policies that would have immensely benefitted the mass of African-Americans, and their reliance on a federal government with conflicting needs is almost certainly the reason. Once the 1973 oil crisis established an alternative rentier-state model that made tax revolts by the super-rich easier and more rewarding, the US ruling class could establish a much more consistent policy of reversing civil rights gains, lowering or eliminating taxes on the rich, and completely eliminating the influence of mass interest groups (the bottom ninety percent) on government policy.

Unlike the US ruling class and perhaps even its white supporters, the National Party of South Africa and its Boer supporters undoubtedly came out of the war with no understanding of either the newly independent nations of Asia or the newly aligned nations of the Soviet bloc. Consequently, South Africa would be exposed to the labour supply shock that the US ruling class avoided. Its black population could therefore fight a longer and more effective struggle against apartheid. Unlike Jim Crow, apartheid would be completely destroyed, and with it South Africa‘s white ruling elite.

One might think the difference resulted from the much greater resources of the US ruling class, which gave it more access to information about global geopolitics. However, even under apartheid South Africa was not isolated from geopolitics and was relied on to restrain Stalinism in Africa. Moreover, Jan Smuts, Malan’s long-time predecessor, had played a key role in establishing the League of Nations, placing even more doubt that South African elites were that ignorant. Another critical difference might be that the most insular (and racially intolerant) regions of the United States — the Deep South, the Great Basin and the Plains — were virtually unrepresented amongst the postwar political and judicial elite. Thus, the most likely reason for the difference is that the US ruling class was much more acquainted with the threat of Communism and thus invested in short-term domestic compromises to help defeat it.