The Past Speaks

Johan Fourie

I know that some readers of this blog will be attending the World Economic History Congress in Stellenbosch in July. You and other readers may be interested in a recent post by Johan Fourie, a South African economic historian. (Fourie is a Senior lecturer at Stellenbosch University and the owner of Gabbema Books).

Fourie notes that nearly two decades after the end of apartheid and Afrikaner-dominance in South African, the Afrikaner bastion of Stellenbosch remains an important economic centre. Fourie shows that Afrikaans-speakers have done very well economically in post-apartheid South Africa and have established vast numbers of thriving new enterprises. He suggests that the prosperity of the Afrikaners is due to rather than despite the end of apartheid, a regime that clearly favoured them with various subsidies. Before 1994, Afrikaner-run companies profited from various crony-capitalist sweetheart deals with the state.

He writes:

1994 liberated not only black South Africans. Instead, I would argue, white South Africans were liberated from an incentive structure that guaranteed a ‘safe’ job in the public sector, or in white-owned, state-supported business. Whites were forced to create jobs for themselves, not simply fill jobs; entrepreneurship, not political (or Broederbond) contacts, became a way to gain power. This is true of many cultural minorities across the world that has little political power: why is it that Somalians thrive in South Africa while their own country falls apart? It is because they know that here they are on their own. There’s an attitude of “if we fail, there is no one to blame but themselves”.

Ironically, the 1994 transition may have had exactly the opposite effect for black South Africans. While a democratically elected government brought political freedom, it also created an incentive structure of entitlement. The attitude was that “we had suffered enough during those dark days and should now share in the economic spoils”. Government policy made this easier: black economic empowerment, for all its good intentions, did not create entrepreneurs, it created a class of connectors, networkers, tenderpreneurs or whatever you would like to label those with the skills not in creating something new, but in redistributing.

Read more here.

Fourie’s post reminds me of some of the arguments about the nature of crony capitalism made in Haber, Stephen H. 2002. Crony capitalism and economic growth in Latin America: theory and evidence. Stanford, Calif: Hoover Institution Press.

It also got me thinking about

Baumol, William J., Robert E. Litan, and Carl J. Schramm. 2007. Good capitalism, bad capitalism, and the economics of growth and prosperity. New Haven: Yale University Press.

It seems to me that historians of North American business have not done enough to engage with the literature on typologies of capitalism and entrepreneurship. In particular, they ought to pay more attention to Baumol’s distinction between productive, unproductive, and destructive entrepreneurship. There is a bit about this in the introduction of Canada’s entrepreneurs: from the fur trade to the 1929 stock market crash. However, vastly more work needs to be done on this subject between historians of Canadian and US business.