"The Danger of Deplorable Reactions": W. H. Hutt on Liberalism, Populism, and the Constitutional Political Economy of Racism.

• Author: Magness, Phillip W.

In a democratic society perhaps the most vital nondiscrimination principle which has to be entrenched is that majorities shall have no power to enrich themselves through government at the expense of minorities.

--W. H. Hutt, "South Africa's Salvation in Classical Liberalism" (1965)

The British economist W. H. Hutt spent most of his career at the University of Cape Town in South Africa before retiring in 1965 and moving to the United States. In 1964, he published The Economics of the Colour Bar with the London-based Institute of Economic Affairs, and upon his arrival in the United States he spoke on many college campuses about the problems of racism and the transformation of racist institutions. In this essay, we explore Hutt's constitutional political economy and address the tension between his unapologetic, vocal opposition to apartheid and his proposal for an income-weighted franchise during South Africa's transition to democracy. Hutt's desire to shield liberal institutions from the populist pressures that had undermined liberal, democratic institutions in other postcolonial governments motivated his proposal for a weighted franchise. (1)

Perhaps most significantly, Hutt thought that sudden, universal enfranchisement during the transitional period could make black Africans worse off if it empowered a populist strongman. He proposed a stable democratic constitutional system with "ironclad" property-rights protections as prerequisites before extending the franchise. Hutt didn't oppose democracy per se or even a widely shared franchise, but he was very skeptical of "one person, one vote" during the transition period. Majoritarianism, he thought, could not be relied on to protect civil and economic liberties in the absence of explicit constitutional safeguards for other democratic institutions. In this regard, Hutt's antipopulism anticipated the destabilization of nascent democracies that has afflicted many African countries in the postcolonial era, particularly where populist demagogues have used land-redistribution policies to reward political allies and penalize political enemies. Hutt understood that restraining democratic majorities in the short term could improve prospects for a prosperous liberal democratic order in the long term.

Hutt opposed racial discrimination, which he "regarded] as the worst social evil of the contemporary era" (1968, 12). Despite this view, though, he was no starry-eyed idealist when it came to democratization in postcolonial Africa. Hutt argued on theoretical grounds that democratic majorities, if left unchecked, could exploit political minorities. He also had empirical reasons for this argument. Experiments in African populism--Tanzania, for example--had already had mixed results.

Hutt stated the point in his essay on James Buchanan and Gordon Tullock's The Calculus of Consent: "The whole raison d'etre of a constitution is to prevent officials, or elected rulers, or certain sections of the electorate who have exceptional voting strength, from using the machinery of the State to obtain some privilege--some differential advantage; and when we fix our attention on the problem of what a constitution ought to be, we are, as the authors themselves put it, viewing the State as 'an artifact,' something which can be fashioned to fulfil desired purposes, or refashioned to fulfil intended purposes better" ([1966] 1975b, 16, emphasis in original).

Our inquiry sheds light on several important issues. First, there is "the violence trap," as explained by Gary Cox, Douglass North, and Barry Weingast (2019). When the de facto distribution of power does not match the de jure distribution of power, a society undergoing institutional change can descend into violence. The long-run solution to the problem might be implicit or even explicit payments to or exemptions from prosecution for existing elites. The notion offends our intuitions about justice; however, speedy and secure transitions to a more efficient set of property rights curb future injustice and promote economic growth. To the extent that perfect justice and perhaps even vengeance delay or reduce economic growth and a peaceful political transition, they come at very steep prices.

Hutt's proposed solution (property protection and a qualified franchise) contrasts with other transition-period approaches that have had questionable consequences. One alternate approach is immunity from prosecution, such as was provided to Chilean dictator Augusto Pinochet and his military men. Pinochet's regime, which lasted from 1973 to 1990, provided autonomy from pressure groups that allowed the Chicago Boys to implement economic liberalization, privatization, and strongly anti-inflationary macroeconomic policy--policies that Milton Friedman thought surprising not because they worked (which he expected) but because a junta allowed them and because those same policies provided pressure for democracy as the economy improved. Pinochet and his generals avoided prosecution due to immunity deals, but starting in 1999 Chilean judges began ordering arrests of military men, and Pinochet himself was arrested, with subsequent legal battles over immunity. These deals presume that chaos is worse than democracy and that immunity from crimes is a necessary evil, though the means of avoiding chaos--immunity--differs from Hutt's private-property protection, which is less controversial than providing cover to an autocrat who routinely "disappeared" those who opposed him.

Hutt's universal public protection of property also contrasts with the way many transitional economies attempted to navigate away from communism. Former bureaucrats and party insiders were potential threats during transition after the fall of the Soviet Union. Their power also contributed to inequities, as manifested most clearly in the rise of the oligarchs. Private-protection rackets emerged. Russian oligarchs controlled much of the property, preferring protection for themselves but weak property protection for others (Sonin 2003). According to Sergei Guriev and Andrei Rachinsky (2005), some oligarchs came to power in the loans-for-shares scenario, where government-appointed bankers ran auctions of the state's assets in exchange for a loan to the federal government it did not intend to repay. Auctioneers excluded outside bidders, awarded the stakes to themselves, and thus consolidated support for Boris Yeltsin's reelection campaign in 1996. Many of the older oligarchs were Soviet-era nomenklatura who before the transition had managed their respective enterprises or worked for the government, converting de facto control into ownership. At the same time, younger entrepreneurs built their initial wealth during Mikhail Gorbachev's partial reforms and used their capital to buy ownership in private auctions. Russian reformers accepted rent seeking to provide property protection for the few, with harmful long-run consequences for property protection for all, and the oligarchs were directly responsible for the rapid rise in racketeering and hence private-property protection by small businesses (Frye 2002).

Second, we consider Hutt himself. Hutt introduced "consumers' sovereignty" to economics, defended liberal institutions, criticized labor unions, and supported vigorous antitrust enforcement to ensure consumers' sovereignty. He was also a reformer and a realist who tempered his vision of a good society by weighing tradeoffs and seeking acceptable compromises rather than seeking to dismantle structures of oppression and assuming that what replaces them will be better. "It is significant that Hutt defined competition as a process, not as a structure," writes John Egger (1994, 113), which brings to the forefront Hutt's insistence on constitutional protections that preserve the competitive process.

The solution to a multiracial society's constitutional problem, Hutt thought, was to flatten the hierarchy and specify a priori that no group--majority or minority-- could use the state to take advantage of another group. Notably, he argued, outlawing private and public coercion would enable citizens to solve problems by agreement and discussion:

Now among the discriminations imposed by or tolerated by the State, those which appear to conflict most seriously with the principles of freedom are based on race, colour or creed. For a host of psycho-sociological reasons, races (or other groups) possessing political power tend to exploit any race or class which lacks that power. But had the State in South Africa been restrained from discriminating on the grounds of race or colour, and had it prevented such discriminations as have been enforced through the private use of coercive power, problems for which many think it is now hopeless to expect a peaceful settlement could, we suggest, have solved themselves gradually--as they arose. ([1966] 1975a, 55) Together, these insights help us understand societies in transition from an intolerable status quo. Hutt faulted the South African government and white labor unions for black Africans' low social and economic positions. Hutt was concerned that in South Africa and its neighbor Rhodesia the left-wing populists' cure--often manifesting as a postcolonial socialist experiment--would be worse than the disease. Specifically, he was skeptical of the benefits of replacing rule by a white elite, admittedly engaged in intolerable racial oppression, with a populist autocrat seeking to reshape society along revolutionary socialist lines under a false pretext of black majority rule.

Robert Mugabe's illiberalism illustrates Hutt's argument. From 1983 to 1987, Mugabe's Zimbabwe African National Union-Patriotic Front (ZANU-PF) perpetrated the Gukurahundi massacres against the Ndebele ethnic group after its members supported an opposition candidate in the country's first open elections. Writing a decade and a half earlier, Hutt (1968) had warned against a Rhodesian settlement that...