Posted on January 15, 2003

Published in LIP Magazine, www.lipmagazine.org, January 15, 2003

In my 34 years on this Earth, I’ve learned a few things. First, that it makes little sense for a child to argue with his or her parents about bedtime. Secondly, that it makes even less sense to argue with a cop about a speeding ticket. And finally, that it makes no sense whatsoever to argue with a libertarian about anything.

That band of market-worshippers, so prominent on the Internet, proffers a worldview that is not only ahistoric (after all, there has never been a free market, nor could there be one given the tendency of the powerful to seek protection for their power), but irrelevant to the world in which we live. To believe that pure capitalism is a good idea requires first that one can imagine such a thing existing. But since such a scenario would require an end to subsidizing industries, an end to inflated executive salaries unrelated to performance, an end to limited liability protection and a likely return to strict torts for corporate misconduct, and an end to foreign military interventions to prop up private interests, we can rest assured that such a utopic future is not in the cards. Simply put: capitalists can’t afford capitalism.

That said, it is still necessary to understand why libertarian logic is flawed; not because such wisdom is particularly helpful in winning arguments with its adherents, but rather to understand the ways in which the economic system perpetuates massive inequalities. It is also helpful as a pre-emptive antidote for those who may be vulnerable to the free market fanatics. Examining the libertarian position on racism is particularly fascinating, and indicates the degree to which those who cleave to this ideology live in a world divorced from the one in which reality takes place.

According to libertarians, racial discrimination in the workforce cannot occur to any real degree in a market economy, because it would cost employers money. Even though the U.S. is not a pure market, libertarians claim racism is rare today for the same reason: namely, to discriminate against a more qualified worker of color would result in an employer losing money relative to non-racist competitors who could hire the passed-over applicant and reap the benefits. If there are racial differences in income or status, libertarians ascribe this to people of color being less qualified, such that passing them over for certain jobs is not evidence of racism, but a rational calculation of merit. The inadequacies of this position are many.

First, such an argument rests on the assumption that discrimination only manifests in direct acts of bias (i.e., the racist employer who refuses to hire blacks). But much inequality in the labor market stems from factors other than overt bias. For example, more than eighty percent of all jobs are never advertised, according to the National Center for Career Strategies, but are filled through informal networks of associates, friends, family, and other connections. As such, there is no open competition for most positions, such that employers can size up all the possible people they could hire, and then make an overtly biased decision. Rather, most hires are made without a broad competition, and since blacks and other people of color are disproportionately excluded from the best informal networks for jobs (due to past and ongoing unequal opportunity in housing and employment), many qualified people of color will never have a shot to be hired or directly rejected for that matter, since the employers in question wouldn’t know about them.

Similarly, since the employer can’t know about employees who didn’t apply, because they were out of the network for doing so, they can’t realize after the fact that they lost out by not doing more to diversify their hiring. They wouldn’t see that there were equally or more qualified people of color they might have hired, because they would have no awareness of such persons. Nor would their competitors be better in this regard, since they too likely hire heavily by networks and informal mechanisms. In other words, the market fails to provide adequate information to employers, the likes of which they would need to make true merit decisions, or recognize the mistakes that come from a racially unequal network for jobs.

Secondly, the argument that racial discrimination would cost employers money and convince them to stop discriminating over time, assumes it’s possible for an employer who makes a racist decision to realize, after the fact, that they made a mistake because presumably less racist competitors hired the passed-over employees of color and reaped greater profits. But in practice, employers cannot know whether hiring a particular person (or not) was the “key” to their profits in the following quarter: there are too many variables that impact profits, of which labor productivity is only one. Also, since the marginal productivity differences between employees hired and those passed over are often small, discerning the impact of racist hiring versus non-racist hiring is virtually impossible.

Third, even in theory the only way the argument could work is if the passed over applicant then applied for work with a direct competitor in the same market, industry, and geographic locale as the racist. For example, if a racist employer in the insurance industry in Indianapolis doesn’t want to hire blacks because he thinks they are generally lazy, unless the spurned black applicant applies for work with a direct competitor, in the same town, how could employer number one see the result as a mistake, due to the productivity of the rejected applicant? If the rejected applicant got a job selling cars, or in another town altogether, how would that worker’s productivity at the dealership, or in Chicago, even come to the attention of the racist employer who passed him over, let alone be comparable to the productivity of whatever white worker was ultimately hired by the racist to sell insurance? It wouldn’t and couldn’t; as such, the spurned applicant’s abilities would be incapable of teaching the racist a lesson.

Furthermore, in a society where racism has been so important to the way in which work is organized, and has influenced what constitutes a “good neighborhood,” “good job,” or “good school,” whiteness has become a form of property itself. As such, to view racism as inimical to property interests is to ignore the extent to which white skin is property in a racist culture, and the extent to which sacrificing profit might not matter as much as losing the “profit” of being in a superior position, vis-a-vis another group. After all, the history of the labor movement has been one where white workers would often sacrifice their economic interests for the sake of maintaining an edge over persons of color. To expect employers to act any differently is preposterous: economic interests can be viewed in both absolute and relative terms. In absolute terms, racism may be unprofitable (even this is arguable to be sure), but in relative terms it is anything but–and in a racist society it is the relative that counts, by definition.

Finally, since accumulated credentials have been afforded to whites as a result of past racism and ongoing discrimination, this means employers could make “rational” hiring decisions based on apparent qualifications and still be guilty of perpetuating racism, since the greater “merit” of whites would be contingent upon having had greater opportunity to begin with. This is an important point, since libertarians hold (as with Robert Nozick’s classic work, Anarchy, State and Utopia), that for a distribution of goods to be just, it must come about from productive exchange and “just transfer.” These concepts are then defined as exchanges that result from uncoerced mutual agreement between parties: a condition that surely was missing from racial distributions even under the most conservative analysis for most of our nation’s history. If coercion, force, fraud, deceit, and the lack of mutuality in contracts governed relations between whites and people of color for the better part of this nation’s history; and if conversely, the so-called free market was vitiated from day one on behalf of elites seeking to multiply their wealth and power at the expense of chattel slaves, conquered first peoples and Mexicans, not to mention imported and oppressed Asians, then to now advocate a total free market would be to cement in place the existing inequities. This, despite the fact that these inequities, even under libertarian logic, are unjust, having come about from unnatural, anti-market interventions in the economy so as to benefit slavers, white consumers, and white workers.

Under a libertarian “utopia,” the accumulated wealth from centuries of admittedly non-free market actions on behalf of whites and against people of color would be left in place, and its holders allowed to continue banking their privileges, to the detriment of fairness and future free exchange. After all, how “free” are those at the bottom of the economic structure to enter into contracts (or not do so) with the more powerful, especially if those contracts (for jobs perhaps), however bad they may be, are the only ones available?

And make no mistake: the accumulated advantages of systemic white supremacy are far from minimal. As Melvin Oliver and Thomas Shapiro explain in Black Wealth/White Wealth, even though young two-earner black couples have closed the income gap between themselves and young two-earner white couples of similar educational background, their life situations remain quite different, thanks to the effects of past racism. Because the parents and grandparents of young whites were able to accumulate assets and professional security at a time when the parents and grandparents of blacks were restricted in their ability to do so, today’s young black couples continue to have net worth less than one-fifth that of young white couples.

Inheritance of parental assets and ongoing financial support from parents has given the typical young white couple a net worth almost $20,000 above that of similar blacks. Indeed, the wealth gap between whites and blacks has increased over the past twenty years, even as the income gap has closed. Housing preferences alone for white Americans in the middle of the 1900s (provided via racially-restrictive FHA lending as well as blatant anti-black discrimination by banks offering conventional mortgages) were worth hundreds of billions of dollars in equity and now are part of nearly $10 trillion being inherited by white baby-boomers and their children. Even whites below the poverty line are more likely to own their own home than blacks with three times more annual income, thanks to the assets passed down from previously preferenced white parents. This wealth disparity makes it much easier for whites to maintain or improve their economic status intergenerationally.

In short, racism matters and racism continues to maldistribute opportunity, income and wealth. The effects of racism are not eradicated by capitalism; indeed they have been magnified by it as practiced in places like the United States. Whiteness has taken on the trappings of property itself–a kind of property for which far too many whites are still willing to fight. And until and unless that changes, the claims of conservatives and libertarians that racism is best defeated by way of a free market will fail to make sense, in theory or practice.