- So today we're gonna talk
about what I advertised on last Thursday as the backstory behind the South African transition. Or at least part of the
backstory that involved business. And this is the first of
several classes in the second half of the course where
we gonna turn the lights up on business. We talked a lot about the
declining fortunes of labor in this course, and how
that's played out in politics. But we haven't spent
much time on business, just generally treating as a black box. Obvio
usly the power,
relative power of business has increased in the capitalist world since the collapse of communism. And that's brought new dynamics. It also, as a normative
matter tends when capitalism is the only game in town, it tends to make the old
Marxist critiques of capitalism a little beside the point. The more interesting questions
about business and capital are what are the conditions
under which they play a progressive role in politics? What are the conditions under
which they play a pr
edatory role in politics? And how might they be shifted
from a less predatory role, of the sort we saw in
Russia in particular? How might business be induced to play more constructive roles in politics? Even in very difficult politics. So that's one theme that's
gonna come back several times in the latter part of the course. But let's begin by going back
to Johannesburg in the 1990s. - [Tertius] All of a sudden,
I saw the security people running out. And I said, "what's up?" And I said, "they've
broken
through, and they're coming." (chanting) And my own security man simply
grabbed hold of me and ran. (chanting) - [Cyril] Pandemonium just broke out in the entire building. Many people on the ANC side,
from the government side, all huddled into the government offices. We thought that the
right-wingers would never dare this much into government offices, and start accosting
people, or assaulting them. And in fact, we even feared
that we would be shot at. (yelling) - [Narrator] The AWB overw
helmed
the police who retreated before them. (yelling) - [Mac] Signs of glass, and everything chattering, and everything. And reports coming through
that they are looking for us. Particularly ------- - [Narrator] Terrified
delegates barricaded themselves in their offices. (chanting) In the conference chamber, the AWB chanted and dubbed slogans demanding
a separate white state. (yelling) Soon after the invasion,
the negotiators agreed that an election should be
held the following April. - I have
the demands up here. - [Narrator] With the
ANC growing in confidence and looking certain to win the election, the national party had
retreated bit by bit on nearly all its power sharing demands. As the conference wound
up the ANC triumphant, Ramaphosa celebrated his 41st birthday . - I was able to see Roelf Meyer
for the first time dancing on the floor where we
were having this party. He was quite happy, he was quite jovial. And I kept wondering
whether I would have been as happy as he was if
I
was in his position, having finally given in
in the way that they had. - [Narrator] Key national
party negotiators were satisfied they'd struck
a workable deal with an adversary they had grown to trust. Now the election could proceed. (cheering) Terre'Blanche threw all his weight into stopping the election. He summoned a rally at
the Pretoria Monument to the Africana pioneers. He said if Mandela wanted
war, he would get war. (yelling) (drumming) Terre'Blanche then persuaded
the folks to boycott
and oppose election. - [Terra] (in foreign language). (cheering) (in foreign language) (cheering) (in foreign language) - Pretty frightening
stuff you might think. And the reason I put it up
there is just to emphasize that when Mandela and de Klerk
negotiated their agreement, that was not the end of the matter, it was to quote trachelism; it
was the end of the beginning. And there was a lot that had
to happen for the transition to actually to be consummated. And it was enormously fragile. And I
am just gonna walk you
though a bit of a timeline to give you a sense of how fragile it was. We saw last Thursday that on
the 2nd of February, 1990, the government announced
it was unilaterally freeing all political prisoners, and
banning all organizations, and planning to negotiate with the ANC. Three months later, the ANC
unilaterally suspended its armed struggle, and began
serious negotiations. That led in December 1991,
and then May of 1992, to two rounds of round-table negotiations, the so-
called CODESA; Conscience on a Democratic
South African negotiations, where all of the stakeholders,
there were 19 stakeholders initially, all the political parties, all social movements
had a seat at the table as a way of trying to
negotiate the transition to democracy. As I said to you in the last lecture, democratic path to democracy
is difficult because democratic political
orders are public good, and it's very difficult
to do that to provide them democratically. And indeed, there were
peopl
e and groups that didn't want to see this transition; the far-right we've talked about. And we'll see it in other
groups were not so interested in seeing this transition
to a unified democratic South Africa. So they became spoilers and
they perpetually interrupted the negotiations,
stone-walled the settlement. And in May of 1992, they
were sort of reconstituted having been floundering
since previous year. But a month later, there
was a massacre at a place called Boipatong, which where
about 45 p
eople were shot dead apparently, allegedly,
by Zulu supporters of the Inkatha Freedom Party, an ethnic separatist party that I'll tell you more about shortly. But it was widely believed
that the South African security police were
behind the seeds involved in the Boipatong Massacre. The result was CODESA collapsed, and the violence escalated dramatically. So dramatically, that the
ANC and the government started having secret talks. But they weren't really secret; everybody knew they were going on
. I was in South Africa that year
and everyday on the evening news, there would be
reports of what had gone on in the secret talks between
the ANC and the government. And eventually, they signed a deal; an elite pact, if you like,
in September that was called a Record of Understanding
about how things would move forward. This then led them to
create something called a Multiparty Negotiating Forum. And in the Multiparty Negotiating Forum, basically the ANC and
government told the other players wh
at was going
to happen to give them time to accommodate themselves and adjust. But they did not really treat
it anymore as multiparty negotiation as far as the
government and the ANC was concerned. It was a done deal, and people
had to get with the program so to speak, or be left behind. Later in that same month,
a young, charismatic ANC member, very much on the
radical flank of the ANC, was assassinated; Chris Hani. Very extremely charismatic,
also in the communist party. And the result of this
, he
was assassinated by a right, I think it was Polish
extraction white South African. And the whole country seemed to be on the verge of exploding. The violence escalated hugely. And the talks were in danger
again of falling apart. And I put up on the slide there that the election date was set. And the reason for that was
that Mandela and Ramaphosa came to declare conventionally
and said that the only way they could temp down the violence, was if it was a non-negotiable
agreed that the electio
n would take place within a
year of Chris Hani's death. So that the election had
to be held in April of 1994 became a hard deadline, if you like, a non-negotiable item, and that turned out to be important later. Realizing that they had
been handed a fait accompli, Buthelezi who was the head of
this Inkatha Freedom Party, walked out of the talks. And essentially the
Multiparty Negotiating Forum collapsed at that point. And true to the divided dollar
story we've been talking about earlier in the c
ourse, even though he was a leader
of an ethnic Zulu party, he joined forces with the
right-wing Africans Whites. And also the heads of the
traditional homelands, so the Bantustans, who saw themselves as losing
their power in the new South Africa, and they
announced that they were gonna be boycotting the elections. And that was important
because most people who know a little bit about the
South African conflict, know the story behind this pie chart. That as you can see, the Black African majorit
y
of the country was 79%, the Whites were fewer than 10%, and the rest were mixed-race,
or Indians and Asian groups. What is less well-known outside of the South African context, is the ethnic breakdown of
the non-White population. And there you can see that
Zulu were a plurality of a 28%, but the next race group,
almost 20% were the Xhosa. And why this matters is that
the Xhosa were more or less a 100% committed to the ANC. The ANC probably won, not 100%,
but over 90% of their vote. But the Zul
u were deeply
divided nationally between the ANC and Inkatha, but in the Eastern part of the country, which was then called Natal, today is called KwaZulu-Natal, they controlled the
majority of the Zulu vote, the Inkatha Freedom Party. And so from Buthelezi's point of view, a much better outcome
would've been a partition at the end of the day of some sort, where Inkatha could be in a majority, and so actually control
what is today KwaZulu-Natal. So he didn't really want
a transition to a country
in which all the polls
told them that they ANC would win a two-thirds
overall national majority. And so, Buthelezi here was not just, even though we talk about the deal between the ANC and the government, Buthelezi was the potential
spoiler of this settlement. And why did this matter? It mattered because the civil war in Natal would have made the transition impossible. The levels of violence
by 1992 in KwaZulu-Natal, had already reached civil war proportions. And the notion that the
country cou
ld really have a successful election, which
was boycotted by Inkatha, was not credible. And so, it was a huge
problem going forward. So just going back to the timeline. In June 1993, one of the far
right-wing groups torpedoed the negotiations yet again, similar to the clip I showed you, but a different meeting in Kempton Park, they just drove armed vehicles through the plate glass
windows and constantly were trying to upset and
harass the negotiators. All of the time this
election that had to oc
cur in April of 1994, lest the
deal between the government and the ANC come unstuck, was approaching. And indeed, a month before
the election, in March, it all came to a head
in one of the homelands. The homelands had been
sometimes called Bantustans, as I said, these were the
nominally independent states under apartheid migrant labor system. Violence exploded when
the leader of one of these said he was not participating
in the election. And some of the right-wing
Africanas went ostensibly to su
pport him in the hope
that this would precipitate a military coup; that the military would get behind, would get behind the
uprising in Bophuthatswana, and there would be a takeover, and the impending election
would be stamped out. And so, there were these people
went there in power model uniforms, lot of people were killed, including four white Africanas were killed and it was filmed on national television and shown over and over again. And it really seemed,
this now we're a month before the el
ection, it seemed like the whole
world was going up in smoke. If you think about April 1994, those of you who are
old enough to remember, this is when the Rewandan
genocide was in full swing to the North. These were the kinds of
pictures that South Africans were seeing on television and
in the newspapers every night. And so the idea that you
could have some horrific bloodbath, it wasn't an academic thought, you know, we're seeing it every
night on the evening news. And just literally weeks
befor
e the election; three weeks before the election. This is what was
happening in Johannesburg. - [Narrator] Johannesburg,
the commercial heart of South Africa paralyzed
by gunfire, and fear. (explosions) Chaos erupted on the
streets as thousands of Zulu supporter of the Inkatha
Freedom Party protested against the election. The rattle of AK-47s
echoed around the banks of the business district. (gun shots firing) As security forces tried to keep control. (explosions) Tear gas and stun grenades fille
d the normally quite squares. There were running gun battles
as police tried to force back gun-wielding demonstrators
using rubber bullets and buckshot. At least eight people were
killed by African National Congress guards when the
Inkatha crowds reportedly tried to attack the ANC headquarters. (explosions) Bodies littered the streets
as mayhem brought central Johannesburg to a standstill. - So it didn't look like
we were three weeks from a democratic national election. And at that point, Henry
Kissinger, and Lord Carrington of Briton, were brought in to try
and mediate a solution. They spent all of two
and a half days there, concluded the situation was hopeless, packed up, and left. And so then again, the
newspapers were just full of poor taint of failures. This is an article which you
can peruse at your leisure. But basically detailing the
way in which Zulu militias were preparing to escalate the civil war. And then, miraculously, we
turn on the evening news ad this is what we hear.
- In South Africa, a
breakthrough may be imminent to stem recent political violence. Political leaders appear
to have found a way to end the standoff over the country's
first all-race elections. Another meeting is set for
Tuesday to finalize the deal. CNN's Pete Arnet reports. - [Pete] Following six
hours of talk in Pretoria aimed at ending a major political
standoff in South Africa, the official line was guidedly optimistic. - Our talks today are going very well. - [Pete] So well, in fact,
that
sources tell CNN that details of a plan to bring
the Zulus into the election had been okayed by
negotiators for the government and for the Zulu chief. And a document has been
drawn up that must now only be approved by ANC leader Nelson Mandela. - And Mandela did approve
the document and the election went forward, and Ikatha did indeed
not boycott the election, and it occurred as planned
on the 27th of April, 1994. The ANC won almost more
than 62.5% of the vote. The National Party came in second
, and Inkatha came in
with 10.5% of the vote, and enough votes to get
control of the regional legislature in the new KwaZulu-Natal, as well as three seats in the cabinet. And so, that's the timeline
up through the election. Today's agenda is to talk about
business and the back story. You could see just from
what I went through, there were many points at which this might have fallen apart. And business had a great deal
to do with why it didn't. And in the course of considering the role of busines
s in this transition, we're going to revisit some
of our earlier, briefer, glancing visits with modernization theory, and look at what we should
think about businesses' attitudes toward authoritarian
and democratic systems. And then we'll also, part of
our theme is to think about the role not only that business
played during this crisis, but also before and after to
get a more panoramic historical sense. So, just to be clear
as to what I am saying, and what I am not saying. I am not arguing, and
it
wouldn't be plausible to argue that business caused the
transition from apartheid in South Africa. Apartheid was caused by many things, not least the negotiations
we talked about last time between leaders, and not least the activities
of the liberation movement. Business, however, did have
a great deal to do with the fact that the transition was peaceful, substantially peaceful, and that it ended up in a democracy. That is to say it is clear
that apartheid's days were numbered. The status qu
o as it
existed in South Africa in the 1980s was not going to survive. But that didn't mean you were
gonna end up with a democracy. There could've been a military coup, there could've been an ongoing civil war, there could've been
multiple other outcomes. There could've just been
a massive crack down of an apartheid authoritarian state. But so the role that business played was in facilitating a peaceful
transition to a democracy, rather than some other
more bloody denouement. And I am gonna focu
s on
four areas where business had an impact. The first is in getting
negotiations started in the first place. By the time Mandela in the
late 1980s was secretly talking to de Klerk in messages, various things had been actually been going on for some time
that made it propitious for those talks to begin. And I'll say something about that, then I am going to talk
about the role business played in actually brokering the deals between the government
and the ANC initially, and then between the
two o
f them and Inkartha toward the end. I am going to talk about
the role business played in managing potential spoilers. When I put that stylized
diagram up of transition negotiations last time, I mentioned that the people on the flanks of the government and the opposition, potential spoilers, and had to be convinced,
co-opted, or marginalized if the transition is not to be scuttled. And business played a role in that. And I also mentioned
that it's very important in the conversations about
from ab
ove and from below to build support for the new dispensation, which does not have a
constituency in the old order, because it's a deeply polarized situation. So those will be the four
areas that we'll focus on. Now, let's go back to the 1970s, this is the, you know, national party had come to power in 1948, it had spend much of the
1960s creating the apartheid order with compulsory segregation, forcing force removals of
Africans from the cities into these homelands, where they then worked
as mig
rant laborers. And by the 1970s, it
was firmly established that the government had
been in power fore more than a decade, there was no meaningful
white opposition party, and they seemed to be entrenched. In a setting like that, why might business decide
that it should start talking to the leadership
of the liberation movement? Liberation movement was illegal, it was underground, after 1963 many of them including Mandela were imprisoned, and Jacob Zuma. Others were like Mbeki,
were in exile in Lo
ndon, or elsewhere in Eastern Europe. Why would business leaders, now I am talking about big business, white big business. Why would they wanna start
talking to the leadership of the liberation movement? Yeah. - [Student] Thinking
about, like, business. - Speak up. (tapping on microphone) - [Student] Hi. No? - Or just yell. (laughter) - [Student] From a business perspective, 80% of the population,
if you empower them, 80% of the population
have to be democracy. - Okay, so business might
have a b
igger market if they could do better business. And it was certainly a view
that apartheid was produced inefficient labor markets, and so on. We'll come back to that. But we should notice
this is quite unusual. Typically in authoritarian systems, business does not get
involved in politics. If we look at China, business, when we talked about the rule
of law in China and so on, business might go to court
over business issues, but typically they keep
their heads low in politics in authoritarian syst
ems. You know, they may be
interested in the market, but that doesn't mean you
have to have a democracy to sell in the South African market. And indeed, Carles Boix, who
I put up on an earlier slide where we were talking
about modernization theory. His argument about, his modern version of
modernization theory, if you go back and look at that slide, you'll see I had him on
the slide which said, "modernization comes as a
result of pressure from below." And so this might seem
inconsistent with wha
t I am about to say now, but it's not, because many people
have made this argument, I am just giving him as an illustration, is the thought was that in
an authoritarian setting business is gonna resist democratization until they think that they're
pretty sure they can leave. It's a Hershman story. So, if I think I can't leave, and I give every body the vote, it's the, you know, the
median voter problem. They're gonna tax me, they're gonna expropriate my assets once they have the votes. So I have
a strong incentive
to resist democratization. But once I can, if I can
leave with my capital, and with my assets,
then the threat of exit, my threat of exit makes
it less likely that they will be willing to
risk the economy's future by taxing me. So this variant of
modernization, as I said, it assumes the pressure to
democratize is coming from below, but the argument is
businesses can align up with authoritarian systems
so long as there's what economists refer to as
high asset specificity . Tha
t is, you can't take it with you. You know, if it's a world
revolving around human capital, I can just walk out of the
door with my human capital in my cranium, and, you
know, set up shop elsewhere. But if what I own is a goldmine, I can't take the goldmine with me. Right? I can't take the diamond mines with me. Right? And so this is why it
seems counter-intuitive, at least form the standpoint
of those traditional theories, it seems counter-intuitive
that business would actually favor an opening
to the
liberation movement, because very high asset specificity, there were big business
was invested in big mining, and the diamond mining, and so on. They were also invested
elsewhere in the economy, but they didn't have
much credible capacity to threaten exit. And so that's initially a passall
and we'll come back to it. But it means that there must
have been sticks and carrots. There must have been
sticks to make business think that they needed to start talking, and there must have also been
carrots to make it look appealing. And I wanna start with the sticks. Sticks matter because things, if people don't have to change, they're probably not gonna change, for the most part. Particularly, I said most
politicians are risk-averse, and most business people
are also risk-averse in that sense, they might wanna take business risks, but they're not gonna
get involved in trying to shape the political future unless they start to feel that the status quo is as what an economist
would call a w
asting asset. That things are changing
in ways that are not likely to be good for them. So, what could the sticks have been? Yeah. - [Student 2] To avoid collapse. - Sanctions. Okay, so sanctions, the difficulty with sanctions, and this was the era of boycotts, disinvestment. David Swensen who's managed
the Yale endowment since 1985 will tell you a story
if you have lunch with him. That he came to Yale
from Wall Street in 1985, and he went to the investment office, and he found it occupied
by an
ti-apartheid student demonstrators, and he said,
"right then I knew I left "Wall Street." (laugher) There were boycotts,
past over Reagan's veto, the truth about sanctions is
that they don't work though. Industrial sanctions don't work, and in South Africa they didn't work, because, you know, Kodak
left, but AGFA came, Ford left but Toyota came. And indeed, the sanctions led to
stimulation of the indigenous capital markets in the growth
of the South African economy. So, industrial sanctions didn
't
really make any difference. I'll come back to financial
sanctions in a bit. But a principle stick
here was that South Africa had illegal black trade unions. They had outlawed black
trade unions under apartheid. And this hadn't mattered
that much to business, because there had been labor
quiescence through the 1970s, as you can see from that slide. There'd been almost no industrial action. In the early 1970s that starts to change, and although it's child's play compared to what's coming later,
as you can see, if you look at what happened in the 1980s, as compared with what they were used to, there were these big
outbreaks of wildcat strikes and the mine owners didn't
know who was running them, and they wanted to be able
to negotiate with them. They wanted to be able to
negotiate industrial peace, because they' were
trying to run the mines. So in the first instance, they wanted unions to be
legalized so that they could have basically a corporatist
arranged where the management and lab
or could negotiate
industrial deals, and they could be
enforced by a government. The government was strongly
apposed to this for the obvious reason that with all
political opposition illegal, if you legalized unions, they would become magnets
for political activism. The mine owners said, "yes, we know that, "but we should do this,
we have to do this. "We can't run the mines." And there was something of
a standoff for several years in the mid 1970s, but eventually, the business leaders beat the
g
overnment into submission. And something called the
Wiehahn Commission was appointed that was nominally gonna look at it, but it was run by a man, Wiehahn, who was an academic, who
was known to be a supporter of legal trade unions for blacks. Anglo-American, the biggest multi-national in South Africa, and one
of the biggest in the world at that time, actually had someone on the Wiehahn Commission. It recommended the
legalization of trade unions, and they became, indeed,
magnets for political act
ivism, and many people criticized Anglo-America and big business for
having supported this. But they did it anyway. And from the point of view of the economy, it worked for them. They did have to deal with
very dramatic strikes later, but they did create first the
National Mineworkers Unions, then something called COSATU, the Conference of South
African Trade Unions; one of the most powerful
union movements in the world was finally created, and certainly one of the
most powerful union movements
in the world today. So, that turned out to be important. It also led to the
development of relationships, personal relationships
between business leaders, and people who were widely represented in the libration movement; something that had not previously existed. I said that industrial
sanctions didn't work. The same was not true
of financial sanctions. In the mid 1980s, amidst all the pressure, eventually Chase and Citi
Bank refused to roll over South Africa's debt, and
they couldn't pay it, so
it was a massive run on the banks. And huge capital outflows,
and that created a crisis in the financial sector
that was not resolved. What the leaders, and you can
see this if you go on the case and look at the interview
with Sidney Frankel, now deceased, they responded to this
by running junkyards, and bringing business
people to the country to try and convince them that South Africa was worth investing in,
that they shouldn't leave, and they had set up meetings for them with government offic
ials, and took them around plants, and so forth, and weekends in Cougar National Park. And they also had them meet
with leaders of the liberation movement, which the
government didn't like but they tolerated it. It was complete failure form
the point of view of either stopping capital outflows,
or bringing capital in. But again, it was a way in which leaders of the South African
financial sector developed personal relationships with people in the liberation movement that would turn out to be imp
ortant later. So, these relationships were built, and they had the effect of
breaking down the barriers, at least at the elite level, between the leaders of
the liberation movement, and the leaders of both
the big mining companies, and South Africa's financial sector. What about carrots? Why might carrots matter? Carrots are important
because even if people think the status quo is not an option anymore, they may nonetheless dig in their heels. So for instance in the
1960s, and 70s, in Rhodesia a
s it then was, the white
farmers didn't see any good future, and so they dug in behind the Ian smith government until the very end, until basically the British
pulled the plug on him. We're gonna talk more about
Israel Palestine in a few classes from now. But I can't tell you how
many Israeli businessmen I have interviewed who say,
"the status quo is terrible "we hate it, it sucks, and the
alternatives are all worse." And they mean it, they believe it, that's how the world looks to them. So in a
ddition to thinking
that the status quo is bad, maybe even untenable, people have to be able to see
a possible future that has some appeal, at least greater appeal
that then status quo. And the important thing here
was the collapse of communism. Because the leadership of
the ANC and the leadership of the South African
communist party had pretty much been the same people; the same actual individuals,
people like Joe Slovo. And believe me, these people were not like Euro-communist in expensive Ita
lian suits. Just to give you a sense of
what kind of communist party it was, during that coup in Moscow, or failed coup in Moscow, that I talked about in the first class on the collapse of the Soviet Union, those three days when
Gorbachev was locked up in his dasher on the Black Sea. Three communist parties in
the world recognized the coup, one of which was the good old SACP. So these were hard-lined
Stalinist communists, and known to be such. Why are they known to be such? And in fact, the lead
er
of the South African communist party, Bram Fischer, had been an Africana judge, and a son of the state president, and was caught and horribly tortured for the rest of his life in prison. So you know their gloves
were off with the communists, and people, and as far
as white business elites were concerned, the big
fear was that if you had a transition to majority rule,
there would be communism. Right? The ANC and the South
African communist party were were wanting the same thing
from their poin
t of view. Once communism started
to go off the table, that reality changed. As one business man I interviewed put it, he said, "I woke up one
day and realized we do not "have to be Cuba, we can be Brazil." And when that light bulb went off for him, it was an epiphany, because they suddenly realized that there was a possible future for them in a new order. And particularly once you see
the status quo is collapsing, you wanna get to a better
future if once you can see that possibility. So, an imp
ortant fact about
South African business is that the ownership of
the economy was highly concentrated at this time. Mining had long been
dominated by a small number huge companies: Anglo-American
and DeBeers being the two most important. Just to give you a sense, in 1985, Anglo controlled more than
half of the capitalization of the whole Johannesburg Stock Exchange, and the top five corporate
groups controlled 80% of it. Concentration in manufacturing
had been increasing since the 70s, and by 19
85,
the largest 5% of firms contributed at least 50% of output. So, even though the South
African economy is not an oil curse kind of a story, it was a pretty diversified economy. It was owned by a small
number of large conglomerates. Mike Spica who is the
general manager of Anglo that I interviewed in one of those videos, which you can see in the case, he said, "you can get nine
people around a table, "would have been nine men, "you can get nine men around the table, "and you basically had
the
whole South African "economy there." So, this is just, again, you can peruse this at your leisure, but this captures the
conglomerate quality of Anglo, all the bits and pieces that it owned, and its subsidiaries. Why did that matter? It mattered because it meant that business could act together. This is a picture of what economists, or political economists, have referred to as a K Group. So if you have a lot of actors
who need something together, there's a collective action problem. Right? How d
o you get them to
coordinate and pay the costs of coordinating to provide
some good from which they will all benefit. A classic collective action problem, for which man sir Olsen is famous. So the idea of a K Group is,
is if there's a sub group within that group that has
the quality that if they can solve their own
collective action problems within the sub group, and provide the collective good, it's worth it to them to
let everybody else freeride. The benefits of providing
it for them are such
that it's worth it let
everybody else freeride. So these big corporate players
like Anglo, and DeBeers, and Paula Rand, and the
other major companies formed a K Group, and they get and meet at
somebody's house and talk about what business was going to do, and that made it possible
first to solve their collective action problem, but it also made it possible
for them to intimidate the government. If you read Adam Tooze, a
former colleague sadly lost to Columbia, he's fantastically good. Economic h
istory of the third Reich; The Wages of Destruction. You know, part of Tooze's
story is that when German big business started
giving Hitler trouble, he threw a couple of people in prison, and everybody else fell into line. A bit like the story
of Putin and Tarkovsky that I talked to you about earlier. I think it would be too much
to say that in the 1980s, South African government
were country bumpkins. But they basically, their
big base of voter support was Africans farmers, they
were not very i
nvolved in the commercial sector, that changed over the course of the 1980s; Africanas began moving
in significant numbers into the corporate sector. But certainly at the
beginning of the 1980s, if they had tried to
take over Anglo-American, the government wouldn't
have had the first clue to what to do with. So business was in a
strategically strong position vis-a-vis the government, and they could act together, the big players could set the tone, and maybe the terms of
what was going to happen.
And, they had a double agenda, they wanted, first of all,
not to have a civil war, or some massive repressive
outcome that would be horrific to live in, but they also, so they wanted a transition, and they maybe thought
some kind of transition was more or less inevitable, but they also wanted to have
a big influence on the ANC. Because the ANC, who were
were the ANC leaders? After all, they were either living in, they were either imprisoned
on Robben Island, Mandela and his friends, or, you kno
w, they were scattered around, some in London, some in East Europe. What they knew about economics, they had learned from reading, you know, summaries of Das Capitale
and the Communist Manifesto in East European Guerrilla Training Camps. And, you know, the leaders
of South African business knew this. So what they wanted to do was, you know, they like everybody else
were reading the Economist every week, and drinking up
the Washington Consensus, and all of that, South African Business. They wante
d the new South Africa to be part of that new story. And so a big part of their
agenda was to influence the ANC. This is why I said dual-agenda; to be handmaidens for a peaceful
transition to democracy, and to disabuse the ANC of
its traditional positions, which were about nationalizing the command during the heights of the economy. And so they acted first. In 1985, the head of
Anglo-American, Gavin Relly, just went to Lusaka and
met with the leadership of the ANC in exile himself. And the gover
nment as furious, they criticized him,
and they attacked him, but they couldn't stop him. When student groups, and church groups, and others said, "we're gonna do it too," they said, "we'll throw you
in jail if you do that." But they didn't stop business groups, and this became known as the Lusaka trek. These business elites
started going backwards and forwards to Lusaka and to Mozambique, and eventually a whole second
set of business leaders started meeting thanks to
Kans Gold Consolidated Gold
Company in London, with the
leadership in exile in London. And so they started having these talks. And they then also decided
they had better start talking to the ANC,
underground ANC in the country. The ANC was banned, but there
was a front organization called The United
Democratic Fund, the UDF, and they started having
secret meetings with them. In people's living rooms. This is stuff for which you
could be thrown in prison without trial, for 90 days,
and then later for 180 days. And what the
y would do, they would throw you in prison
for 90 days, or 180 days, without trial, and as you
were walking out the door, they would throw you
in for another 180 days without trial. There were people who
were in there for years, many years, under these detention laws. So these people were taking
huge risks meeting with the leaders of the UDF in the mid 1980s. And after a while, the UDF got, you know, irritated with this, they said, "well, you know, it's cool
to have nice conversations "in people
's living rooms,
but we need an organization "to deal with; we need
you to form a group." And so eventually they did, they formed this group called the Consulted Business Movement in 1988. And what was hugely important
about this group was that they were the first
group of white elites to say, "we favor majority rule
democracy for South Africa; "one person, one vote." Because all the white
parties in government, including the white opposition
had been talking about power sharing deals, you know,
vetos for minority groups, educational qualifications
for the franchise, you name it. But the CBM was the first group to say, "we are for a normal." ANC had kept calling it,
"we want a normal democracy "in South Africa." So that solved their credibility problem. They didn't say, "we're
neutral about the politics. "If we're committed to
a democratic transition, "then we will work to bring it about." And that meant they were
the only credible brokers. Church groups were all aligned with different
political parties. There was nobody else that
could be credible brokers between the government an the ANC. And so, just to give you
one pointed illustration of how they broke it, this is a famous Sidney Frankel story. He thought it was important
that the two chief negotiators, who would be
the two deputies of the ANC and the government, should
get to know each other. They turned out to be the
two chief negotiators, Ramaphosa and South African
deputy president Roelf Meyer. So the took them fishi
ng
on this trout farm. He arranged for them to
be brought in helicopters. So the story goes, they went
fishing and Ramaphosa got a fish hook stuck in this finger, and I am sorry, Meyer got a
fish hook stuck in his finger, and Ramaphosa said, "I
Know how to fix that, "bring me some pliers,
and a bottle of brandy." And they did, and he said,
"you drink the brandy, "give me the pliers, but
you have to trust me." And so the story goes that
this was the bonding moment between, who knows whether it's
true, but it stands for the proposition
that the business elites were facilitating the
personal interaction between the government and the ANC. They formed the Consultative
Business Movement, as I've said to you. And then once the CODESA
talks were planned, there was no other group
that could be trusted to function as a
secretariat for the groups, for the CODESA talks. So, the CBM became essentially
the convener the round table talks between, among, the 19 parties. And when CODESA I collapsed,
i
t was the CBM people who did all the running around
to get CBM reconstituted the following May, CODESA
reconstituted the following May, as CODESA II. And when CODESA II collapsed
after Boipatong and all that, it was they who became the back channel, walkers in the woods, so to speak, keeping the conversation going. So hugely important role
that business played in convening the talks and
then picking up the pieces when they fell apart. So, managing spoilers. I talked earlier about the
Kissinger C
arrington visit. That was also organized
at the behest of the CMB, but more importantly, once it fell apart, it was then that the Consultative
Business Movement people who decided that they had to
act to pick up the pieces. And if you look at the
interview with Colin Coleman in the video. Colin Coleman is an interesting man. He was an architecture student at Wits, University of Witwatersrand, came of age, he just
graduated in mid 1980s, and was the first full-time
employee of the CBM, and they h
ired him right out of college to work in facilitating
the talks with the ANC. Today, he's, by the way,
the head of Goldman Sachs for Sub-Saharan Africa. But in those days he was
actually a member of the ANC, young ANC member, although
he was white was unusual, and so he had a certain
amount of street credibility in talking to the ANC. And he was he one after
the Kissinger people packed up and left, who went racing around
trying to figure out what would get Buthelezi to
participate in the electio
n, what would get Inkartha to participate? And they basically, they
wanted various guarantees for the Zulu king, Goodwill Zwelithini, they wanted protections of
property in KwaZulu-Natal, they wanted a variety assurances that they were gonna have
some say in the politics. And so, it was crisis
management and shuttle diplomacy that defused the violence
that you saw in the final run up to the election. There were also just massive
issues of election mechanics. So, one interesting tidbit
here is be
cause the election date was non-negotiable,
it had to occur in April, or the country would have really descended into a complete civil war. The ballots had already been
printed when it was clear that Inkatha was not going to participate. And finally, virtually
Coleman and others had gotten Inkatha to agree to
virtually to virtually all, gotten the government and the ANC to agree to virtually of Inkatha's demands. But one of the wants, they said, "we've gotta push the election back, "cause we hav
en't been campaigning." You know, so they wanted
to push the election back. And of course, both the
government and the ANC knew that that was a non-starter. And so, finally, they were
confronted with the problem, again, tiny things, you know. The person who said don't
let small things bother you, has never spent the night in a tank with a mosquito. So, the problem was
that the national party was on the bottom of the ballot, and they had been
campaigning on the slogan: "Vote the bottom line,
vote
the bottom line." But there was no other
place to put a stick on, on the ballots. And these stick-ons had to be printed and, you know, in record time. And this is a developing country, it's not you know, I mean
I know we have our issues with butterfly ballots
and election interfering and all that, but this was a huge logistical operation. So first, the national
party had to be convinced that it was so dangerous
not to have Inkatha on the ballot, that they had to not withstand it. Their "vote th
e bottom line"
slogan on all their literature, that had to, there was no other place for
the stick-on but to go there. Then the stick-ons had to be printed, they had to be flown around the country. Business played a role in all of that. And so you get the election result. And, the election as I
said to you last time, was widely declared to be free and fair. And there is a wrinkle to that though that's always struck me. I've never seen reporting upon on it, which is that the election
results took
several days to, you know, finally offer the case. And when you got paper
ballots being counted by hand, it took three or four
days to get the final election results. But at the end of the first day, it was declared that KwaZulu, that Inkatha had won KwaZulu-Natal regional parliament, and that they had enough
votes for three seats in the cabinet. And so, you know, I could never prove it, but I have sneaking
suspicion that that part of the election results
was negotiated in advance of the electi
on. Building civil society support. Again here, business
worked with church groups and others to put together
hundreds and hundreds of meetings, where they would come
and talk about scenarios, they would come and talk about
how the economy might unfold in the future. They would do this, part of their effort to influence the ANC. Which, by the way, they
succeeded in doing. When the ANC came to power, it still articulated a
pretty staunch socialist economic program. They had a manifesto called Rec
onstruction and Development, and it talked about nationalization. Mandela's first international visit when he came out of prison was to Cuba; heavily criticized by the Americans. Yet, but within months of coming to power, the ANC had largely repudiated its RDP, Reconstruction and Development Plan, and instead embraced something called GIER, Growth In Economic Reconstruction. I forgot what it stood for, but basically it was a shift
to the Washington Consensus to a very large extent. It basically
put off massive
transformation of the economy, the effects of which I'll talk
about briefly in a minute. They created an election fund, they helped with the
logistics of the election, and ensured that the elections
would be free and fair. So, quite a remarkable story in many ways. Business does not normally
behave in this way. And there were undeniably
notable achievements. The first is that they
avoided catastrophe. I think that it is a fair
retrospective judgment that but for the things that
b
usinesses were able to do, both in creating relationships
and networks in serving as through the consultant of
business movement convener of talks, and picking up the
pieces when they repeatedly failed, helping to manage the spoilers, and getting them to participate. In all of those ways, there
were important achievements. They really did help abolish
apartheid in a peaceful way. End the country's pariah status. And had a lot to do with the
resurgence of the economy; this was the era where peopl
e
were talking about the BRIC countries, right? Brazil, India, China. Brazil, Russia, India, China. They started talking about
the BRICs because South Africa had a big economic resurgence. If you look at sort of
macro-economic and social indicators, in the first 12 years or so, the number of people living
in poverty went down no in a non-trivial way. And they did create a black middle class. Between 1995 and 2009,
half a billion Rand, and that was when the
Rand was worth a lot more than it is to
day, was transferred from white
business to black business. So, in all of these respects, you could say there was a
significant achievement. And business deserves considerable credit, some of these business
leaders for taking big risks and being willing to do what they did. But on the other side of the ledger there, pretty challenging legacies
of the way things unfolded. We still have a limited democracy; single party dominant democracy, as I talked about last week. Those tend to be very corrupt
, South Africa is not special in this. Go to Russia, go to Mexico,
go to India for a long time, single party dominant system, very high levels of corruption come with single party dominant systems. The politically entrenched
labor movement has been very costly for the country over time because it protects, and
this is the South African variant of the story we were
walking about in Germany and in the advance
capitalist countries earlier in the course. We have very high wage
economy in the formal
sector, but we have huge unemployment; we have 30% unemployment, and almost 50% youth unemployment, one of the highest youth
unemployment rates in the world. South Africa homages
textile jobs to Lo Soto, even to China. So you have the downstream
effect of this very powerful entrenched organized labor
movement that's wired into the government. By the way, that all exploded in 2012, at a platinum mine in a
place called Marikana. Where again, ironically
in view of the 1970s, wildcat strikes were
or
ganized against the unions and existing managements
for sweetheart deals that they believed were excluding them, and about 34, I think it
was, people were shot dead by the police, many in the back. Huge blood on Cyril Ramaphosa's character, because it made it much
harder for him to win the ANC leadership in 2018 because
he was one of the directors of Marikana mine. Since the transition, businesses
completely disengaged. While they were very proactive
at this time of crisis; it's much harder to g
et people's attention a chronic problem, than for a crisis. And after the transition,
South Africa's problems back from being crisis to chronic: The inequality, the poverty,
the lack of racial integration, except for elites. And so if you look,
this is a Lorenz Curve, which a Lorenz Curve is just
another way of depicting the Gini Coefficient
measure of inequality. You can see the dotted line is 2009, the blue line is 1996. So in the first decade and
a half after apartheid, the overall structure
of
inequality in the economy has not changed. And a decade later, it
would be much different. This was in the Wall Street Journal, four years ago now. But these numbers wouldn't have substantially different today. On the left-hand column there, you can see, again Gini Coefficients, you can see South Africa is one of the most unequal countries
even decades after the end of apartheid in the world. It's actually got the
highest Gini Coefficient of countries for which we have data. That doesn't mean
the
highest in the world, I suspect if we had data for
places like Saudi Arabia, it might have a higher Gini Coefficient. But in any event, it's basically 0.7, enormously unequal, even more unequal than, you can see there, than countries like
Columbia, Brazil, and Mexico. So, unemployment, I
already told you the story. But you break unemployment down by race, and you can see that, you
know, a third of the black population is unemployed. Half of the black youth
population is unemployed. If you l
ook at other social indicators, if you look at people living in poverty, half the black population
is still living in poverty. Adults with high school only education. Again, you've got, you
know, 15% of that black population has a high school education. Private health insurance, and the public health
insurance is not very good, 10% of the black population. Indoor plumbing, you know,
we're living in the richest country in Africa, this is in 2014, but not much different today, a third of the black
population does not have indoor plumbing. And so, you know, this is one way of saying
that good things don't all go together. So you avoided civil war, the outcome really would
have been catastrophic. Very few historians would
dispute the proposition that hundred of thousands,
probably millions of people would have been killed. And it would have gone on for a long time, and it's not clear, at all, what would have come out
of the other end of it. But we are in a world in which, you know, there's
very substantial
disillusionment as politics now normalizes and revolutionary
generation passes from the scene, and we face the
run of the mill problems that many developing countries face. Cyril Ramaphosa, you
saw him as a young man in that very first video that I showed, where he was a leader of the
National Union of Mineworkers, and then COSATU, the chief
negotiator for the ANC, and he was worried when
in that video talking about being shot at. You know, his story is a
very interesting depic
tion of the interaction between
business and politics in South Africa over time. He begins as an ANC activist, he then becomes the head of the National Union of
Mineworkers and COSATU, eventually the secretary
general of COSATU and chief negotiator for the ANC. He was edged out of the
succession to Mandela by Mbeki when he was the heir apparent, so he decided to go off and get rich, he became South Africa's
first black billionaire; hugely successful. Then he came back into
politics as Zuma's dep
uty, and in a very bitter fight, finally won the leadership of the ANC. But it would be another
entire lecture to go through the slandiness of his grip
on the ANC which is partly a result of the way in
which it's governed. But that will be a topic
for later in the course. Next, we will be talking about the ICC and the Doctrine of Responsibility to Protect. (xylophone music)
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