 And welcome back everybody to the Peter Schiff Show. Tom Woods in for Peter. And very glad to be joined by, well as it turns out, another Peter. Peter Klein is the Executive Director and Carl Manger Research Fellow of the Ludwig von Mises Institute and also Associate Professor in the Division of Applied Social Sciences at the University of Missouri, where he also directs the McQuinn Center for Entrepreneurial Leadership, and he holds a PhD in Economics from the University of California at Berkeley. Peter Klein, welcome to the program. Hi Tom, you're great to be here. Thanks a lot. I mean, there are a lot of things you and I can talk about, but the item that I think precipitated your presence here was a blog post you had the other day on the subject of Nelson Mandela and apartheid and capitalism, et cetera, et cetera. And what I found interesting about this post of yours is that Mandela thought of the apartheid, the racial apartheid system as being some sort of form of capitalism. And so therefore, in order to get rid of apartheid, we're really involved in an anti-capitalist struggle. So before we get into the details of that, why don't you define for us what capitalism is so that we can better understand what is so preposterous about an understanding like that. That's a great point, a great way to set up the discussion. So the word capitalism is kind of potentially confusing term. This was the term that was popularized by Karl Marx, a critic of the free market system. You and I, Tom, might talk about the free market or an open economic system, laissez-faire, something like that. So a true capitalist economy that we would support would be one in which there is minimal or even zero government intervention in the economic system. Private property rights are secure, the government doesn't interfere with prices, there's no central direction of investment. In other words, capital markets are free, but of course labor markets are free, markets for land and other resources are free. In other words, what you and I would support is the free market system. People sometimes confuse that with a system in which large companies are specifically singled out for support or capital is somehow elevated above labor. We wouldn't describe a free market system that way at all. It's a system of private and voluntary interaction among all sorts of people, owners of capital, owners of labor, owners of raw materials, entrepreneurs, and so on. Having said that, I think it should be easy to explain why was the apartheid system not a capitalist system. I want to back up a little bit. I was a college student back in the 1980s when there was this big movement, especially on college campuses but elsewhere in the US and Europe, to divest or disinvest from companies doing business in South Africa. So this is when the plight of South Africa sort of became better known on the world stage. What Nelson Mandela still in prison at that point became an international celebrity. Everyone wanted to do something about the apartheid system. So the South African apartheid system was a system of legally mandated restrictions on what various groups in the economy could do, what various individuals in the economy could do, based on their race. So there were official racial classifications in the apartheid system, white, black, and what they called colored or mixed race and Indian. And whether you could own land, whether you could own certain kinds of capital, where you could live and what kind of jobs you could have were all circumscribed by this racial classification. So everybody, of course, would see this as an unjust and economically inefficient system. When the world took notice of the system and people began objecting to it and talking about it back in the 80s, the anti-apartheid movement was often described as sort of an anti-capitalist movement. In other words, South Africa, which has a very unique history, we can talk about that too, is a country like many others in that part of the world where you have a small, very wealthy elite, mostly white, controlling a lot of land and most of the equity of private companies and a large group of black, colored, and Indian individuals who have much lower socioeconomic status. So because the white minority also was heavily involved in production and were owners of factories and so on, it was assumed that the apartheid system was not only a system of racial prejudice, but also a system that favored capitalism and capitalists at the expense of workers. So the black liberation movement in South Africa was conflated with some kind of worker liberation movement, rights of workers and the disadvantaged more generally against the privilege of the capitalist and the wealthy. So what really was a legitimate protest against a statist socialist or in some ways you could describe it as fascist economic system was portrayed as a fight against capitalism. Now you've got it in this post of yours and this is over at the Mises Institute blog, so you can check out Mises.org and I don't mean to insult the intelligence of listeners of this program by spelling Mises, but just in case, M-I-S-E-S.org. And you quote Tom Haslett saying, the conventional view is that apartheid was devised by affluent whites to suppress poor blacks. In fact, the system sprang from class warfare and was largely the creation of white workers struggling against both the black majority and white capitalists. And by the way, that's not obviously an uncommon situation. I mean, if you look at American labor history, it's interesting to see how progressives try to deal with, on the one hand, they love labor unions and on the other hand, they hate racism and they got to somehow hold both opinions at once when you look at how exclusionary labor unions typically have been and they don't want the competition from the lower wage black. So they try to get rid of them. They try to get the minimum wage increase to completely get them out of the labor force, which they did of course. You can see when you correlate the minimum wage increases with black unemployment, it's just exactly the same line. This is a phenomenon everywhere and it's just, I always think it's funny to watch progressives who have such a simple view of the world that there are good guys and bad guys and unions are good guys and anti-racist people are good guys. But then what happens when you have a situation like this? Then they don't know what to do or think. You're absolutely right. It's very common for people to take fairly complicated social and economic issues and try to decompose them into, make them into a very simple morality play in very broad groups, you know, labor versus capital. If you look at labor economics, history of the labor movement, really all of the interesting dynamics are among different groups of labor, right? Labor unions representing typically high-skilled artisan occupations trying to keep unskilled lower wage laborers, workers, out of the labor market. And apartheid is a perfect example of that because its primary supporters, as you already mentioned, were members of the relatively affluent white labor unions in the South African cities. There's also support from the rural countryside, white farmers in the rural countryside. But the goal was to minimize competition from lower-skilled black workers who were willing to work at lower wages, obviously to undercut the higher wages of the white labor unions, capitalists, you know, business owners in South Africa, were not at all supporters of the apartheid system. Right? If you own a business, if you're an entrepreneur, a financier, a capitalist, you want to be able to hire, you know, the most qualified workers at the lowest possible wages. Why on earth would you cut off the majority of the local labor force and be required to deal with a very small portion of the labor force to which you would have to pay higher wages? In no sense were the business people, the business community, the capitalist community, the strongest supporters of the apartheid regime. It was mostly middle-class white labor unions. One other thing that's interesting about South Africa, and as I mentioned in the blog post, just so happens that I was doing a tour of South Africa last month and found out a lot more about its fascinating history. Even the apartheid movement is a relatively recent phenomenon. South Africa was colonized by two separate European groups, by British colonists and also a little bit earlier by Dutch traders. The descendants of the Dutch colonists became known as upper-conners or boars, slightly derogatory term, were mostly farmers, mostly in the rural areas, and were much more kind of nativist or likely to oppose mixing among the different racial groups and ethnic groups in South Africa than the English-speaking descendants of the British colonists. So there's always this struggle between the British and the Dutch. The Anglo-Boer War of the late 19th century was completely unknown to most American students or the American public or whatever, was a war between two different white colonial interests, and the apartheid movement, which was instituted by the upper-conner national party. This only happened after World War II. It was 1948 that the upper-conner party came to power. It's been argued by W. Hutt and other classical liberal scholars that the British settlers in South Africa and the South African sort of national polity when it was part of the British crown was much more classically liberal, that there was a movement to institute more security for property rights, more kind of emphasis on the rule of law, and not a kind of centrally planned economic system. The centrally planned economic system with government control, not only of labor but also of investment, was a relatively recent post-World War II socialist phenomena. So the white nationalist upper-conner government widely understood in the West to be only about racial issues, you know, combined belief in racial segregation with that socialist economic system. And that's what makes this story so interesting and complicated is that some of the resistance to the apartheid regime was based on, you know, desire to eliminate the racial barriers. But a lot of it was also a fight against socialism and an attempt to have a more decentralized system and something closer to a free market system.