Crack-Up Capitalism Chapter 4: Libertarian Bantustan
This chapter hit different for me. I grew up in the post-Soviet world, so I know what it looks like when a government creates fake borders and moves people around. But what happened in apartheid South Africa takes it to another level.
In Chapter 4 of Crack-Up Capitalism by Quinn Slobodian (ISBN: 9781250753908), we leave the shiny skyscrapers of Hong Kong and Singapore. Instead we land in the dusty Eastern Cape of South Africa. Dirt roads, mud huts, cinder block buildings. Not the kind of place you’d expect free market experiments. But that’s exactly what happened here.
Apartheid’s Fake Countries
By the 1970s, South Africa’s white government had a problem. Across the continent, African nations were getting independence. New flags everywhere. But South Africa was still holding on to white minority rule.
So here’s what they did. They created “homelands” for Black South Africans. Patches of land, often split into disconnected pieces, based on the idea that certain ethnic groups “belonged” in certain places. Anti-apartheid activists called them Bantustans.
Some were even declared “independent nations.” Nobody in the world recognized them. The first one, Transkei, had a 101-gun salute at its independence ceremony. The only foreign guest was a general from Uruguay’s military dictatorship.
Over 3.5 million people were forcibly relocated into these homelands. Black South Africans lost their real citizenship and became “citizens” of places many had never visited. Steve Biko called them “sophisticated concentration camps.” The goal was to make South Africa whiter on paper while keeping Black workers as cheap labor.
The “African Hong Kong” Experiment
In 1981, a homeland called Ciskei was declared “independent.” On its independence day, the flagpole broke and had to be held up by South African soldiers.
But Ciskei became more than another fake country. It became a testing ground for free market economics. Milton Friedman had visited South Africa in 1976 and told two thousand people that democracy was overrated. Markets were better than ballots, he said.
A South African libertarian named Leon Louw ran with this idea. He founded the Free Market Foundation and attended Mont Pelerin Society meetings on Hayek’s personal invitation. Louw led a commission to shape Ciskei’s economy. The plan? Turn this homeland into an “African Hong Kong.” A banking haven.
They set up export processing zones (EPZs) in Ciskei. These are patches of land legally treated as “outside” the country, with different tax rules and regulations friendly to investors. By 1988, eighty small Taiwanese factories operated there, making everything from doll heads to fishing rods. One Taiwanese investor said, “This is like Taiwan 30 or 40 years ago: no competition, cheap labor.”
The Reality Behind the “Free Market” Label
But here’s the problem. This was not a free market. It was corporate welfare with extra steps.
Ciskei wages were set at 50 percent of wages in nearby East London, which were already 25 percent below the national average. The South African government gave investors a fifty-dollar monthly subsidy per worker. The Wall Street Journal reported that investors could “make money just by employing people.” Some companies hired workers they didn’t need just to collect subsidies. The state paid wages, covered 80 percent of factory rent, and charged zero corporate tax.
The workforce was mostly women in low-ceiling sweatshops, sewing garments under fluorescent lights.
And the violence was the worst part. Trade unions were banned. Activists were tortured. In 1983, police shot into crowds protesting a bus fare increase, killing fifteen people. Security forces beat a church congregation with rhinoceros-hide whips, killing a fifteen-year-old boy. A Black civil rights lawyer who set up a meeting between Louw and the ANC was later found beaten to death by Ciskei security forces.
The Times called Ciskei “an ugly little police state.” Meanwhile, the libertarian magazine Reason called it “a haven of prosperity and peace.”
The “Swiss Solution” and Voluntary Apartheid
Louw didn’t stop with Ciskei. He wrote a bestseller called South Africa: The Solution with his wife Frances Kendall, funded by Charles Koch. Their proposal: break South Africa into Swiss-style “cantons” where people could “vote with their feet.”
Here’s what was hiding in the fine print. You’d have freedom to move between cantons, but not the right to settle permanently. So you could work in a wealthy canton but couldn’t stay. Sound familiar? That’s exactly how apartheid already worked.
Louw told Time magazine: “We want to make it possible to let the tiger, the Black majority, out of the cage without whites being eaten.” The “Swiss solution” would replace forced apartheid with voluntary racial segregation. And if the result looked exactly like the old system, well, that was just the market doing its thing.
In their book’s epilogue, they imagined future cantons. One was a workers’ commune with Mao’s red book. One was a deregulated mini-Monaco. And one was “Witwaterberg,” a whites-only canton with racial covenants. Guess which one actually came to life?
Orania: The White Enclave That Exists Today
In 1990, a group bought land in central South Africa, kicked out the mixed-race residents, and created Orania, a whites-only Boer enclave. It was designed by Carel Boshoff, son-in-law of the assassinated apartheid president Hendrik Verwoerd.
Orania is structured as a private corporation. Its leader is the CEO. Residents are shareholders. It has its own currency. South African libertarians hold meetings there and call it “a rare example of a libertarian enclave” free from “the tyranny of the majority.”
By 2019, Australian far-right groups used Orania as a model. American white nationalists praised it too.
After Mandela: Did the Zones Win?
In 1990, Nelson Mandela walked out of prison. In 1994, he won a free election and spoke of a “rainbow nation.” The Bantustans were dissolved. It looked like the zone model had lost.
But Slobodian makes an important point. In 1986, there were 176 special economic zones worldwide. By 2018, there were 5,400. The sweatshops of the Eastern Cape were not some strange exception. They were a preview.
The author shares his own story too. He grew up in Lesotho, a real independent country surrounded by South Africa. But real independence didn’t mean much when your economy depended on South African mines. Political freedom without economic independence is an empty promise.
And that’s the lesson of Chapter 4. “Free markets” can be built on top of unfree people. Zones don’t need democracy. For many of their builders, democracy is the problem. When you break a country into small enough pieces, redistribution stops being the government’s job.
Neal Stephenson saw where this was heading. His 1992 novel Snow Crash features the “New South Africa Franchulate,” a privately owned apartheid enclave. A journalist asked after the Cold War: “There are about 160 countries in the world today… Why not 500?”
For some people, that’s not a warning. It’s a goal.
This retelling is based on Chapter 4 of Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy by Quinn Slobodian (ISBN: 9781250753908). I recommend reading the original for the full picture with all sources and footnotes.
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