Out of Britain’s five former colonies of settlement—the United States, Canada, Australia, New Zealand, and the Cape—the first four have become the richest countries in the world, with a national per capita income of $3,000 or $4,000 annually. The fifth, South Africa, has remained a semi-developed country, with a national income of about $500 per capita, about as poor as Greece or Argentina. Yet the natural resources of South Africa are not less considerable than those of North America and are certainly more so than those of Australia and New Zealand. All five were colonized by men of the same northern stock, tough and fearless. The climate of South Africa is no less healthy than those of the other four. Finally, all five were connected with the same source of capital, London, and belonged to the same commonwealth of nations and the same mercantile and financial networks. One factor alone was different, namely, what happened to the indigenous population. Whereas in the other four colonies the total extermination of the natives was undertaken, in South Africa the colonists confined themselves to relegating them to the ghettos of apartheid. The result is that in the first four countries wages have reached very high levels, while in South Africa, despite the selective wages enjoyed by the white workers, the average wage level has remained relatively very low, hardly any higher than that in the underdeveloped countries, and below that of the Balkans, Portugal, and Spain.

Let us suppose that tomorrow the South African whites were to exterminate the Bantus instead of employing them at low wages, and replace them with white settlers receiving high wages. There would certainly occur, insofar as this operation was carried out more or less brusquely, upheavals, bankruptcies, frictions of conversion and adjustment, a transition period of great difficulty; but the ultimate result would be a leap forward by South Africa, which would soon catch up with the more developed countries. This is a frightful thought, I know, but it fits the reality of the capitalist system. To take the case of gold alone, despite the regulated market for this metal, the improvement in the terms of exchange would bring South Africa a considerable extra income. With white miners the cost of production in the great majority of the mines would greatly exceed the present selling price of 35 dollars an ounce. If the Federal Reserve Bank were stubbornly to refuse to raise this price, most of the South African mines would shut down. Only a very few especially rich ones would go on working.^[The average wage of the black workers in the gold mines in 1937 was 2s. 3d., plus 11d. to cover cost of food and quarters. The average wage of the remaining workers was 25s. The annual wage bill for 36,000 whites was £14,307,000, that of the 288,000 “others” came to £9,854,000. The “others” included Asians, whose wages were much higher than those of the blacks, though not so high as the whites earned; and South African legislation and statistics classify as Asians people who have come from such countries as Turkey, Cyprus, and Greece. Between 1937 and 1963 the nominal wages of the whites increased threefold; their real wages (allowing for the fall of about 50 percent in the purchasing power of money) increased by 50 percent. During the same period the real wages of the blacks did not change at all. According to figures given by the official Bulletin of Statistics, quoted by John Cope, South Africa (London, 1965), average wages in the mines were in 1962 as follows: whites £1,217 per year, coloreds and Asians £205, Africans £74. Thus the nominal wages of the blacks rose from 2s. a day under President Kruger in 1895 to 2s. 3d. in 1937 and about 5s. in 1962. Allowing for the actual devaluation of the currency between the last two dates, the real wages of the blacks hardly changed over these 25 years, so that Alex Hepple can write in South Africa, a Political and Economic History (London, 1966): “Their cash wages, calculated at constant 1959 prices, actually declined from £72 to £70 ($188 per year) between 1935 and 1960.” The remark quoted by S. H. Frankel, in 1938, is still true: “‘Nothing has changed so little in South Africa,’ an eminent South African authoress has written, ‘as the black man’s rate of pay’” (Capital Investment in Africa [Oxford, 1938], p. 83).] Production, which is at present about 900 tons, or about 75 percent of world production, not including the U.S.S.R., and 60 percent, including sales by the U.S.S.R. (base year, 1962), would fall to a negligible figure, perhaps 50 or 100 tons.

If we consider that since 1965 the gold production of the capitalist world, together with sales by the U.S.S.R., has been insufficient to meet the needs of private hoarders and of industry; that the currency stock held by the United States has had to be drawn upon to make up the deficiency; and that this stock has already fallen to about 12,000 tons, we can easily see that such a decline in South African gold production would threaten to clear out the vaults of Fort Knox in a few years.^[This passage having been written in 1967, the figures quoted no longer correspond to reality. Today the gold held by the United States does not exceed 9,000 tons ($10 billion).]

Faced with such a threat, the United States would have to choose between increasing the price of gold and putting an embargo on it. If it chose the latter course, it would save its own stock but would lose all control over the free market, which would then be thrown completely off balance. The private demand for industry and hoarding is at present around 1,500 tons, and world production, including U.S.S.R. sales, would, in the event of such a defection by South Africa as I have envisaged, amount to only 500 or 600 tons. Furthermore, there is no certainty that the U.S.S.R. would go on selling gold on the free market, if the United States were to proclaim an embargo. Logically, these sales would cease. On the other hand, the mere fact of the embargo would entail intensified speculation on a rise in price and an increase in propensity to hoard. Finally, the embargo would release the issuing authorities in the other countries from all their obligations to cooperate with the Federal Reserve Bank and from their present cautious policy, and a large share of their dollar holdings, which they would no longer be able to convert at the Federal Reserve Bank, would be used to buy gold on the free market. All these factors would increase private demand still further, and eventually it would be compelled to pay the price needed if South Africa was to bring its gold back into production, paying white men’s wages to its white miners.^[It goes without saying that the same results would be achieved if South Africa, instead of exterminating its blacks and replacing them with whites, were to be satisfied with raising their wages to the white level. Such an assumption being fanciful, however, I have assumed instead the straightforward extermination of the black population, as being, in present circumstances the less unrealistic of the two hypotheses. The embargo postulated in this passage has, moreover, actually been imposed since 15 August 1971: but because South Africa retains the low wage level for black workers in the mines, the quantity of gold produced and marketed by that country has not declined, and its price on the free market has so far diverged from the official parity by only 20 percent.]