CAPITALISM:
THE CURE FOR RACISM
PLUS
THE WHITE “PRIVILEGE” SCAM
THE MORAL NECESSITY OF DISCRIMINATION AND HATE SPEECH
THREE ESSAYS: CAPITALISM: THE CURE FOR RACISM; THE WHITE “PRIVILEGE” SCAM; THE MORAL NECESSITY OF DISCRIMINATION AND HATE SPEECH
George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics and the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996; Kindle Edition, 2012). See his Amazon.com author’s page. His website is www.capitalism.net. His blog is www.georgereismansblog.blogspot.com. Follow him on Twitter at GGReisman.
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CONTENTS
Essay One. The White “Privilege” Scam
Essay Two. Capitalism: The Cure for Racism
- The Accusations against Capitalism
- Capitalism: The Cure for Racism
- Capitalism and Justice for the Black Worker
Black Competition and White Living Standards
III. Forcible Obstacles to Black Progress: The Mixed Economy
- Introduction
- Antiprofit Legislation and Business Timidity
- Prounion Legislation
- Minimum‑Wage Legislation
- Public Welfare Laws
- Child‑Labor Legislation
- Compulsory, Tax‑Supported Education
- The Mixed Economy and the Living Conditions of Blacks
- Government Intervention in Housing
- Socialized Medicine
- Municipally Socialized Sanitation Services
- Franchise and Licensing Laws
- The Mixed Economy and the Higher Crime Level in Black Slums
- Conclusion: Capitalism Is the Cure for Racism
Essay Three. The Moral Necessity of Discrimination and Hate Speech
The Epistemological Necessity of Discrimination
Essay One. The White “Privilege” Scam
Over the course of American history, the individual rights of whites have been far better respected than the individual rights of blacks. Whites were never enslaved; they were not murdered by lynch mobs; they were never the victims of government-imposed racial discrimination/segregation in housing, schools, restaurants, stores, railways, buses, movie theaters, and elsewhere.
Now the obvious, blazingly clear solution for the lack of respect historically shown for the individual rights of blacks is to put an end to that disrespect, and henceforth to show the same respect for the individual rights of blacks as is shown for the individual rights of whites. The guiding principle is very simple: In each and every individual case, the rights of the individual, black or white, must be respected.
Indeed, to a large extent, this has already happened. Black slavery was ended in the Confederate States by Lincoln’s Emancipation Proclamation in 1863 and then, in 1865, by the 13th Amendment to the Constitution of the United States, in whatever states in the Union that still allowed it. The last reported lynching in the United States occurred in 1981. Racial segregation and discrimination have also greatly diminished as the laws that imposed them were repealed or struck down by judicial decision.
The obvious path that needs to be followed in order to complete the job is to extend to blacks recognition and respect for the same individual rights held by them that have been far more often recognized and respected in whites than in them. Nevertheless, a widespread movement has developed that holds that a very different solution is required. This alleged solution is the elimination of respect for the rights of whites insofar as it exceeds respect for the rights of blacks. The greater respect shown for the rights of whites is transformed from a matter of respect for individual rights into an alleged matter of group “privilege,” in this case white “privilege.” Thus whites allegedly enjoyed a privilege in not being enslaved. They allegedly enjoyed a privilege in not being murdered by lynch mobs. They were allegedly privileged in not being victims of government imposed racial discrimination/segregation.
The concept of white privilege is a giant scam. Like any other scam it leads people to give up something that is valuable, such as their life’s savings, in exchange for something that is valueless. In this case, they are bamboozled out of paying attention to and valuing the concept of individual rights and are left instead with the utterly nebulous and highly destructive concept of white privilege.
The very concept of privilege implies injustice and calls for the abolition of whatever privileges are in question. But since white privilege is used as a different name for what in fact is respect for the individual rights possessed by whites that have not been properly respected in blacks, the actual effect would be the loss of respect for those individual rights of whites. By the logic of the situation, whites could be enslaved, lynched, and otherwise wrongly treated all in the belief that it was merely a matter of stripping away white privilege. The concept of white privilege is an invitation to the violation of the rights of whites to the same extent that the rights of blacks have been violated.
The concept of white privilege is a formula for massive injustice. It obliterates the concept of individual rights and thus destroys the possibility of respect for anyone’s rights, white or black. It aims at a society in which everyone is a slave—not to a plantation owner perhaps, but to the state.
In calling rights “privileges,” what the white privilege scam seeks to accomplish is the abolition of rights, by means of trivializing and vilifying them. Calling rights “privileges” is a formula for the violation of rights. Never call a right a privilege if you do not intend to destroy rights.
Essay Two. Capitalism: The Cure for Racism
This essay is an explanation of how capitalism and the unhampered profit motive achieve equal pay for equal work and operate against all aspects of racial discrimination in the marketplace, and how the unjust treatment of blacks in contemporary American society is the result of government intervention, not capitalism.
The essay was originally delivered as a lecture in 1972 before an audience at the Hotel Biltmore in New York City. It appeared in print in 1982 as a six-part article in The Intellectual Activist and in 1992 in the form of a pamphlet. To avoid its date of writing being reflected in the text, I have updated the various arithmetical examples used.
I. The Accusations against Capitalism
A gross inequality exists in the United States between the economic level of the average black and that of the average white. In 2016, the most recent year for which such data are available, the average black earned only seventy-three percent of what the average American earned.
Because the United States is viewed as a fundamentally capitalistic country, such inequality is often blamed on the nature of capitalism. And, as a result, capitalism is frequently denounced as a system of economic exploitation of blacks.
I will refute the following major accusations commonly made against capitalism. 1) Under capitalism, black workers are paid less than whites for the identical work. 2) The skills and abilities of black workers are not utilized, i.e., blacks are arbitrarily shunted into low‑skilled, low‑paying jobs or into unemployment. 3) Blacks must pay higher rents than whites for the same or even inferior housing, and higher prices for the same or even inferior goods; and, while they do so, they must suffer the indignity of racial segregation—for example, they must live in separate neighborhoods, eat in separate restaurants, ride in the back of the bus, use separate washrooms, and so forth.
The basis of these accusations is the illegitimate treatment of a mere historical association as though it were a fundamental, causal connection. Namely: Capitalism is associated with the history of the United States. The history of the United States is also associated with a record of injustices committed against blacks. Hence, it is concluded, capitalism is guilty of the above accusations. The conclusion is obviously a non sequitur.
My theme is that the above accusations are absolutely incorrect insofar as they are levelled against capitalism; and that to the extent they are correct, as descriptions of past or present conditions in the United States, the cause of the injustices is a violation of the principles of capitalism. Far from being the source of such injustices, capitalism is the remedy for them.
Let us understand the nature of capitalism.
By “capitalism,” I mean uncontrolled, unregulated, laissez faire capitalism. As Ayn Rand, the leading philosophical advocate of capitalism, writes in Capitalism: The Unknown Ideal:
Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.
The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalistic society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self‑defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.
While capitalism is more than a purely economic system—as the quotation from Miss Rand shows—and recognizes man’s right to life, liberty, and property in all spheres of human activity, our particular focus is, of course, economic. And thus it is necessary to stress that under capitalism each individual is free to act—peaceably— to achieve his own gain. Capitalism is a system in which businessmen in their capacity as employers and as sellers are free to do what they consider to be most profitable to themselves. Wage earners and consumers, by the same token, are free to seek the highest wages and lowest prices they can find. The only restriction on the parties is that they are not to resort to the initiation of physical force (or to fraud, which is a species of force). At the same time, their freedom to act to achieve their own gains means that they are not to be the victims of the initiation of physical force. Each businessman, wage earner, and consumer under capitalism is free from the initiation of physical force both by other private individuals or groups and, above all, by the government itself as well. As Miss Rand points out, government under capitalism is the individual’s protector against force, and does not itself initiate any force against him. State and economic activity under capitalism are separate, in the same manner as state and church in the traditional American conception. In no way under capitalism does the government interfere in the peaceful pursuit of self‑interest or allow anyone else to interfere. (For a fuller discussion of the concepts of rights, physical force, government, and the nature of capitalism, see Ayn Rand’s articles “Man’s Rights,” “The Nature of Government,” and “What Is Capitalism?” in Capitalism: The Unknown Ideal.)
Capitalism has obviously never existed fully in the United States. Even in the nineteenth century, it was mixed with conflicting elements of government controls. And for the American black, capitalism never existed even as an approximation. Slavery, the forced labor of one man for the benefit of another, was the diametrical opposite of capitalism.
The mixture of capitalism with controls that apply to everyone greatly accelerated in the 20th century and has continued to increase thus far in the present century, to the point where it has long since ceased to be correct to describe the economic system of the United States as capitalism. The present system can only be described as a “mixed economy”—an economy which retains an essentially capitalistic structure, but whose functioning is grossly undermined by socialistically motivated acts of government intervention. And that is how I will refer to it in the pages that follow.
My purpose in this essay is twofold. First, to show how, if it did exist, capitalism would operate to eliminate all elements of the economic inequality between blacks and whites. And, second, to show what are the specific features of the mixed economy which constitute forcible obstacles to the advancement of blacks today and which would have to be repealed to make possible their advancement under capitalism.
II. Capitalism: The Cure for Racism
1. Capitalism and Justice for the Black Worker
Let us begin with the accusation that under capitalism blacks are paid less than whites for the identical work.
Such injustice is contrary to the operation of the profit motive, and is speedily eliminated where the profit motive is free to operate. Under the profit motive, if two kinds of labor are equally good, and one is less expensive than the other, employers choose the less expensive, because doing so cuts their costs and raises their profits. The effect of choosing the less expensive labor, however, is to raise its wages, since it is now in greater demand; while the effect of passing by the more expensive labor is to reduce its wages, since it is now in lesser demand. This process goes on until the wages of the two kinds of labor are either perfectly equal or the remaining difference is so small as not to be worth caring about by anyone.
As illustration of the fact that even very small differences in white and black wages could not be maintained under capitalism, consider the following example. Assume that white workers of a certain degree of skill are paid $20 per hour. Assume that black workers of identically the same degree of skill can be hired for just 5 percent less, i.e., $1 an hour less. Assume that a factory must employ 500 workers of this degree of skill. With a 40‑hour week, over a 50‑week year, this slight difference in hourly wage rates results in a saving of labor cost and a corresponding extra profit of $1,000,000 per year if the factory owner employs 500 blacks rather than 500 whites (for $1 x 500 x 40 x 50 = $1,000,000). A million dollars per year is a substantial sum and very much worth earning if one can, especially if all one has to do is replace workers of one skin color with workers of another skin color.
Even in the case of a small establishment employing only 10 workers, the annual saving in labor cost, and thus the extra profit per year attaching to the employment of blacks, would be $20,000 (since $1 x 10 x 40 x 50 = $20,000) —enough for the owner to afford a new small car each year or to make significant improvements in his business, such as equipping each of his 10 workers with a computer or other equipment of comparable value and to do so every year.
It is doubtful that there are many employers so bigoted as to be willing to indulge their personal prejudice in favor of whites at a cost of $1,000,000 per year, or even $20,000 per year. The clear implication is that even slight differences in wage rates woulds make the employment of blacks in preference to whites virtually irresistible. Not only would a 5 percent differential in wages not be sustainable, but neither would a 2 percent or even a 1 percent differential. Every such differential would lead employers to hire blacks in preference to whites, and would thus bring about a further rise in the wage rates of blacks and a further fall in the wage rates of whites, until a virtually perfect equality was achieved.
This conclusion is reinforced by the fact that profits are typically a much smaller percentage of sales than is a business firm’s payment of wages. For example, in the case of supermarkets, profits are typically on the order of 2 percent of sales, or less, while wages are on the order of 14 percent. This implies that a 5 percent saving in wage costs would translate into a 35 percent increase in profits. In cases in which hiring blacks would increase profits by such a large percentage, only the most fanatical bigots would be able to resist employing blacks.
Indeed, profit‑seeking employers qua profit‑seeking employers are simply unconcerned with race. Their principle is: of two equally good workers, hire the one who is available for less money; of two workers available for the same money, hire the one who is the better worker. Race is simply irrelevant. Any consideration of race means extra cost and less profit; it is bad business in the literal sense of the term.
It follows from this discussion that there is a very simple method that is available to every businessman for substantially increasing his profits in conditions in which blacks are paid less than whites for the same work. And that is, copy as far as possible the methods of the most successful firm in your industry, but with this one difference. And that is, in every possible case, hire lower-paid blacks in preference to higher-paid whites. Your savings in labor costs will represent equivalent additions to your profits and thus to your ability to save and expand your business and employ still more lower-paid blacks and make further additions to your profits to the precise extent by which you employ more of them and they are paid less than whites. As you and others do this, there will soon be no unemployed lower-paid blacks. All of them will be employed and no additional black workers will be available. To the extent that their wages have not already risen, they will certainly shoot up now, since additional quantities of their labor will now be available only by making it so expensive that other employers will no longer be able to afford it, at least not in the quantities they had been employing it.
It should be realized that one of the great merits of capitalism is that by its very nature employers are virtually compelled to be oblivious to race. The freedom of competition under capitalism ensures this result. For even if, initially, the majority of employers were so fanatically bigoted as to be willing to forgo extra profits for the sake of their prejudice, they would be powerless to prevent a minority of more rational employers from earning these extra profits. (Rationality@ in this context means not committing the contradiction of passing moral judgment against a person on the basis of his racial membership, and not allowing such an absurd judgment to outweigh the desire for profit. Such a judgment represents a logical contradiction in that morality pertains only to acts open to choice, while a man’s racial membership is not open to his choice.) The more rational employers would thus have a relatively greater income from which to save and expand their businesses than the irrational majority. Moreover, since they operated at lower costs, they could afford to charge lower prices and thus increase their profits still further by taking customers away from the irrational majority. The result of these factors would be that the more rational employers would tend to replace the less rational ones in economic importance. They would come to set the tone of the economy, and their attitudes would be transmitted to all other employers, who would seek to emulate their success. In this way, capitalism virtually guarantees the victory of rationality over racial bigotry.
(It should be realized that everything in this discussion applies equally to the employment of women. If women are in fact paid less than men for the same work, then a simple formula for growing rich is to employ only women to the maximum extent possible.)
Our discussion provides the answer to the second accusation—the charge that under capitalism the skills and abilities of black workers are not utilized. It follows from our discussion that the unhampered profit motive leads employers to place blacks in the highest positions for which their skills and abilities qualify them. Consider the following example. Assume that a skilled lathe operator must be paid $20 per hour, and that black workers who have been taught this skill in a trade school are presently employed as janitors at $10 per hour. The black workers would almost certainly be willing to change their jobs for a raise to, say, $15 an hour. Any employer who hired them as lathe operators at $15 per hour would thereby add $5 to his profits for every hour of their work, as compared with employing whites. Over the course of a year composed of 50 40‑hour weeks, his extra profit would amount to $10,000 in employing the labor of just one man.
It is obvious that under capitalism, if the skills and abilities of blacks are being wasted in low‑skilled, low‑paying jobs, it is to the financial self‑interest of employers to change the situation, indeed, to seek out such blacks, and in many cases even to incur substantial costs in training them. And it follows that the greater is the extent to which a black’s skill or ability is wasted, the greater is the profit to be made by rectifying the situation. For example, if a black with the ability to do the work of an $200,000‑a‑year company vice president is working as a $20,000‑a‑year file clerk, it is even more to the interest of an employer to seek him out and rectify the situation than in the case of the lathe operator working as a janitor. In this case, the employer could triple the black worker’s salary to $60,000, and at the same time add $140,000 to his own profits by employing him in a capacity commensurate with his skill and ability.
Of course, just as in the initial case, the wages and salaries of blacks brought into the more skilled and higher‑level jobs would soon come to match those of the white workers performing these jobs. Because as employers competed for blacks, their wages would rise, while, in order to be competitive with the black workers, the white workers would have to accept reductions.
It is implicit in what I have said that the free operation of the employers’ profit motive and of the wage earners’ desire to increase their income would eliminate black (and white) unemployment, thus rectifying whatever nonutilization of black skills resulted from the existence of unemployment. When workers are unemployed and receiving no income, it is to their self-interest to offer to work for less than workers holding jobs, and it is to the self-interest of employers to take advantage of the situation. Because unemployed workers can be hired for less, employers are in a position to make their present workers accept lower wages, in order not to be replaced. However, as wages fall, the same total funds expended in employing labor can employ more labor. In other words, what appears to be a competition for a given number of jobs has the effect of expanding the number of jobs.
For example, if $5 trillion is the aggregate payment of wages in an economy, that sum can employ 100 million workers at an average annual wage of $50,000, or 200 million workers at an average annual wage of $25,000, or any number at the appropriate average annual wage. The general formula is that the number which can be employed equals the aggregate wages paid, divided by the average wage per worker. Under capitalism, free competition makes the average wage per worker go to the point where there is full employment. (It cannot go lower, because then employers would be offering more jobs than there were workers to fill them.) Thus, black unemployment under capitalism is self‑liquidating, because its existence makes the unemployed workers and the employers take actions which eliminate it.
For reasons to be presented, it should not be assumed that the fall in wages required to eliminate black unemployment, or unemployment generally, implies a fall in the standard of living of wage earners. It does not.
Black Competition and White Living Standards
Given the existence of the kind of injustices against black workers described above, the adoption of capitalism and free competition in the labor market would clearly result in a reduction in the wages of the average white. Two points must be realized concerning this reduction.
First, it would be proportionately far less than the rise in the wages of the average black. This follows primarily from the fact that white workers outnumber black workers so heavily, and, to a lesser extent, from the very fact that the wages of the average white are initially higher than those of the average black and thus their change is calculated on a higher base.
As illustration, assume that white workers outnumber black workers by 9 to 1, which approximates the actual ratio. Assume further that initially the wages of the average black are no more than half those of the average white, counting unemployed blacks as earning zero wages. (This relationship, of course, overstates the difference inasmuch as the wages of the average black are almost three-fourths those of the average white, as I reported at the beginning of this essay.)
These assumptions can be concretized by imagining that for every black who earns $5 in wages there are nine whites each of whom earns $10 in wages in the same period of time. Now observe that the aggregate wages of all 10 workers in this example are $95, and that the average wage is $9.50. If free competition were to bring about a full equalization of white and black wages, which it would do if the composition of white and black skills were equal, it would mean that the wages of the average black worker would rise from $5 to $9.50, while the wages of the average white worker would fall from $10 to $9.50. Thus, while the wages of the black would rise by 90 percent, the wages of the white would fall by a mere 5 percent.
Now this description of matters would be sufficient if it were the case simply that blacks worked alongside whites, performed exactly the same labor and yet received less money. Then, all that would occur with the establishment of free competition would be a change in wages, as described. But the fact is that the cases in which blacks receive less money for the identical work are comparatively rare—at least outside the South. What brings down the earnings of blacks is that they are shunted into low‑skilled jobs or forced into unemployment or, for a variety of reasons to be discussed, simply never develop their talents. Thus, it is not simply that their earnings are less, but also, and more fundamentally, that their contribution to production is forcibly held down in comparison with that of white workers. The establishment of free competition, therefore, would bring about an increase in the contribution to production on the part of black workers.
This brings us to the second and far more important point concerning the reduction in white wages: namely, that it would be accompanied by a fall in commodity prices and a reduction in taxation which would more than make up for it. Thus, even though free competition with blacks would reduce the money earned by the average white worker, it would nevertheless raise his standard of living. It would enable him to buy more with his lower wages than he previously could buy with his higher wages.
The underlying principle here is that one man’s gain resulting from an increase in production is not another man’s loss. Where men gain money income as a result of increasing their production in competition with others, as do the black workers in this case, they simultaneously act to reduce commodity prices by virtue of offering an increased production on the market. The rise in their money incomes and the fall in commodity prices are different aspects of the same thing. And it must work out that the fall in commodity prices caused by their increased production is in direct proportion to the money income which they compete away from the rest of the economic system—in this case, to the fall in wages of the white workers. Thus, in our previous example, in which the wages of the average white worker fell from $10 to $9.50, commodity prices would also fall by 5 percent.
To understand why commodity prices as well as the wages of whites would fall by 5 percent, we need only trace the implications of the assumption that the black’s gains are the result of an increase in his production. Thus, assume that initially the average black produced one unit of output while the average white produced two, and that it was for this reason that the black earned only $5 while the white earned $10. Now assume that, with the freedom of competition, the black doubles his production to equality with that of the average white, and that it is for this reason that both earn the same wage of $9.50. Observe. If the black now produces two units of output instead of one, and nine whites go on producing a total of 18 units of output, the combined output of the black and the whites together rises from 19 to 20 units. Now an increase in supply in the ratio of 20 to 19 (the total spending to buy the supply remaining the same) acts to reduce commodity prices to nineteen‑twentieths of their initial height, or by 5 percent—the same as the reduction in the wages of the white workers. For example, imagine that $1,900 represents a fixed amount of spending to buy the total output of blacks and whites combined. If only 19 units are produced and sold for this sum, then the average price per unit is $100. If 20 units are now produced and sold for this sum, the average price becomes $95. The relationships hold for any given amount of spending. Thus, the doubling of the black worker’s output is responsible for an equal fall both in commodity prices and in the wages of whites.
In fact, the black man’s gain would actually be the white man’s gain. The standard of living of the average white worker would actually be increased. There are two reasons why this would be the result.
First, to the extent that the larger output on the part of blacks was the result of a reduction in black unemployment, there would be fewer blacks on relief. This would make possible a reduction in the taxes of the white worker. The white worker would earn less money and buy at correspondingly lower prices, and he could keep a larger proportion of what he earned. This would represent a net gain to him. For example, instead of earning $100 per week and having to pay some portion of that sum in taxes for the support of unemployed blacks, the white worker would now earn $95 a week, buy at prices 95 percent of what they were, and not have to pay these taxes. (The present discussion does not refer to a system of full capitalism, but to one that is moving in the direction of full capitalism. It is only in this context that my references to taxation to support government relief measures are to be understood. For in a system of full capitalism, it would not be a function of government to support the unemployed or to engage in relief or welfare measures.)
Second, to the extent that the larger output on the part of the blacks was the result of their exercising skills and abilities which they had previously been prevented from exercising, the effect would be an increase in production not only on the part of blacks, but also on the part of whites. This follows from the fact that to the extent that those in the higher positions in the economy are better qualified, the men under them produce more. Thus, for example, if there are blacks who can be better foremen, engineers, plant managers and vice presidents than some of the whites now occupying these positions, the effect of blacks’ obtaining these positions would be a rise not only in their own output, but also in the output of the white workers who would be under them. The white workers would produce more because they would work under better direction. This further rise in output would make commodity prices fall in greater degree than the wages of the white workers. And this, of course, would represent a net gain to the white workers.
The phenomenon of workers in lower positions being able to produce more as a result of an improvement in the men in the higher positions is an application of Ayn Rand’s principle of “the pyramid of ability.” According to this principle, the success of the less able depends on the abilities of the more able.
Thus, in sum, free competition in the labor market is not only just, but it is also in the economic self‑interest of the average white worker.
2. Capitalism and Justice for the Black Consumer
Laissez‑faire capitalism would supply blacks with housing and all other goods on the same terms as whites. To understand why this would be so, one need only assume that it were not so, and then observe the operation of the profit motive.
Thus, as a demonstration, assume that blacks had to pay monthly rents just 5 percent higher than those of whites, while the landlord’s costs were the same in both cases. This 5 percent premium would constitute a major addition to a landlord’s profits. If a landlord’s profit margin—his profit as a percentage of his rents—were normally 10 percent, a 5 percent addition to his rents would constitute a 50 percent addition to his profits. Even if his profit margin were initially as high as 25 percent, a 5 percent addition to his rents would constitute a 20 percent addition to his profits.
In response to such premium rates of profit, housing construction for blacks would be stepped up, and a larger proportion of existing housing would be rented to them. The effect of this increased supply of housing, of course, would be to reduce the rental premium paid by blacks. And because a mere 1 percent premium would mean significant extra profits in supplying blacks with housing, even a premium of this small size could not be maintained. Thus, blacks would pay no higher rents than whites, and obtain housing equal in quality to that obtained by whites.
Likewise, assume that merchants in black neighborhoods charged higher prices than the same goods would bring in other neighborhoods, while the merchants’ costs of doing business were the same in both places. The higher prices in such a case would constitute a clear addition to profits. With higher profits to be made in black neighborhoods than white neighborhoods, merchants considering the location of new stores would choose the black neighborhoods. The influx of new stores, of course, would lower selling prices in the black neighborhoods; and the process would go on until the prices and the profits to be made in those neighborhoods were no higher than elsewhere.
It is worth noting that supermarkets in particular, which are frequently criticized for charging higher prices in black areas, would be among the first to reduce their prices to the level of other neighborhoods. For, as previously mentioned, the profit margins of supermarkets are normally on the order of 2 percent of their sales revenues. In the case of supermarkets, therefore, prices and profit margins only 1 percent higher would mean a rate of profit 50 percent higher. This would be an extremely powerful inducement to the opening of new supermarkets in black neighborhoods, and to immediate price reductions, to forestall their opening.
Thus, in retailing as in real estate, businessmen seeking profit would quickly see to it that blacks were supplied on the same terms as whites. (Why it is that in fact higher prices in black areas persist without drawing in additional competition is explained later, in Section 5 of Chapter IV.)
Moreover, under laissez faire capitalism racial segregation would disappear, even though it would be legally permissible on private property. It would disappear because it is fundamentally incompatible with the requirements of profit‑making and because it is irrational.
The businessman seeking profit is vitally dependent on the patronage of customers. This dependency is expressed in such popular sayings as “The customer is king” and “The customer is always right.” Blacks are customers, and, as they rose economically, would be more and more important customers. It is absurd to believe that businessmen would want to turn customers away by denying them access to their premises or by humiliating them with such requirements as separate drinking fountains. The businessman’s desire for profit makes him put aside all such malice. It does not matter that he personally may not like blacks. All he has to like is their money. Competition with other businessmen for the patronage of blacks then does the rest.
It might be objected that despite the willingness of businessmen to abolish segregation when doing so is profitable, the attitudes of white customers would prevent such action from being profitable. For example, it would obviously not be profitable to gain 5 poor black customers and lose 10 good white ones as a result of desegregating.
Cases such as this could very well have existed, especially in the deep South. But they could have existed only in an ever‑diminishing sphere. Even in the deep South, there were many whites who positively desired equal treatment for blacks, and many more who did not oppose it strongly enough to withdraw their patronage from a business which voluntarily desegregated. As a result, there would have been many businessmen in the South who would have found that, while they might lose some white customers by desegregating, they would by no means lose all, and would gain more black customers than they lost whites. This would have been certain to occur in areas where the population was relatively concentrated—that is, lived in cities or large towns—and in which the proportion of blacks was relatively high. In such areas, a businessman who desegregated would be able to count on a relatively large black market to more than compensate him for his loss of white customers. For example, imagine a mass merchandiser, such as Sears, in a Southern town where there were two other such stores. If this store abolished segregation, it would certainly not have lost all of its white customers. Not that many Southern whites were so irrational that they would have refused to shop there just because it no longer humiliated blacks. Desegregating, however, would have enabled this store to gain a large number of black customers from the other two stores, for the blacks would have flocked to where they were treated as human beings. Desegregation would thus have been profitable for this store.
This case would have been repeated throughout the South. From practically the first day of capitalism, there would have been voluntarily unsegregated stores, restaurants, hotels, etc., etc. The existence of these unsegregated establishments in their midst would then have acted to change the attitude even of those whites who had initially refused to deal with them. They would see with their own eyes that others were not contaminated by contact with blacks and that they would not be either. Thus, as time went on, fewer and fewer whites would be prepared to withdraw their business from establishments which desegregated. The result would have been that businessmen would have had less and less to lose by desegregating; and the rising earning power, and thus growing buying power, of blacks would give them more and more to gain. Finally, segregation would have been regarded as eccentric and then have ceased to exist altogether.
In this way, even such barriers as racially restrictive covenants in real estate would have been overcome. Property free of such restrictions would become more valuable than property which carried them. Such covenants would have fallen into disuse and been eliminated by voluntary consent.
Thus, even in areas as backward as the deepest South, the introduction of capitalism would have meant a significant measure of immediate integration, followed by a continuing growth in integration. And it would all have been achieved voluntarily, in the pursuit of self‑interest, in a spirit of mutual good will.
III. Forcible Obstacles to Black Progress: The Mixed Economy
1. Introduction
In view of all of the preceding discussion, why is it that blacks have continued to be the victims of racial prejudice in the United States? Why haven’t blacks long since been assimilated to the point of full equality with everyone else?
The answer is that blacks have never lived under a capitalist economic system in the United States.
In order to understand why this has been the case, it is necessary to understand something about the history of the geographical distribution of the black population in this country. Thus, according to The World Almanac, “Their [the blacks’] distribution over the [period 1920‑1970], but especially during the [period 1945‑1970], has changed radically from a concentration of the great majority in the rural South to urban centers in substantially every part of the nation.”
The significance of this fact is very great. What it means is that where a rough approximation of capitalism existed, the blacks were not present. And by the time they got there, even the approximation was gone.
This requires explanation.
From the end of the Civil War in 1865 until shortly before World War I, the Northern United States enjoyed an economic system that was a rough, though diminishing, approximation of capitalism. But in this period, almost all of the blacks—90 percent or more—continued to live in the South, where the economic system contained major elements of statism specifically directed against them.
The following will convey some idea of the antiblack legal environment that prevailed in the South until well beyond the middle of the 20th century.
From the General City Code of Birmingham, Alabama:
It shall be unlawful to conduct a restaurant or other place for the serving of food in the city, at which white and colored people are served in the same room, unless such white and colored persons are effectually separated by a solid partition extending from the floor upward to a distance of seven feet or higher, and unless a separate entrance from the street is provided for each compartment.
From the Code of Durham, North Carolina:
In all licensed restaurants, public eating places and Aweenie shops@ where persons of the white and colored races are permitted to be served, and eat food, and are allowed to congregate, there shall be provided separate rooms for the separate accommodation of each race. The partition between such rooms shall be constructed of wood, plaster or brick or like material, and shall reach from floor to ceiling. Any person violating this section shall, upon conviction, pay a fine of ten dollars and each day’s violation thereof shall constitute a separate and distinct offense.
An even more obnoxious ordinance of the city of Greenville, South Carolina, declared:
It shall be unlawful for any person owning, managing or controlling any hotel, restaurant, cafe, eating house, boarding house or similar establishment to furnish meals to white persons and colored persons in the same room, or at the same table, or at the same counter; provided, however, that meals may be served to white persons and colored persons in the same room where separate facilities are furnished. Separate facilities shall be interpreted to mean:
(a) Separate eating utensils and separate dishes for the serving of food, all of which shall be distinctly marked by some appropriate color scheme or otherwise.
(b) Separate tables, counters or booths.
(c) A distance of at least thirty‑five feet shall be maintained between the area where white and colored persons are served.
(d) The area referred to in subsection (c) above shall not be vacant but shall be occupied by the usual display counters and merchandise found in a business concern of a similar nature.
(e) A separate facility shall be maintained and used for the cleaning of eating utensils and dishes furnished the two races.
In the State of Florida, regulations of the State Board of Health required that “Separate (lavatory) facilities shall be provided for each sex and for each race whether employed or served in the establishment.”
In the State of Arkansas, a statue declared:
All railway companies carrying passengers in this state shall provide equal but separate and sufficient accommodations for the white and African races . . . and they shall also provide separate waiting rooms of equal and sufficient accommodation for the two races at all their passenger depots in this state. . . . No person or persons shall be permitted to occupy seats in coaches or waiting rooms other than the ones assigned to them on account of the race to which they belong. . . . The officers of such passenger trains and the agents at such depots shall have the power and are hereby required to assign each passenger or person to the coach or compartment or room used for the race to which such passenger or person belongs. Any passenger or person insisting on going into a coach or compartment or room to which by race he does not belong shall be liable to a fine of not less than ten dollars nor more than two hundred dollars, and any officer of any railroad company assigning a passenger or person to a coach or compartment or room other than the one set aside for the race to which said passenger or person belongs shall be liable to a fine of twenty‑five dollars. . . . All railway companies that shall refuse or neglect to comply with the provisions and requirements of this act, shall be deemed guilty of a misdemeanor, and shall, upon conviction before any court of competent jurisdiction, be fined not less than one hundred dollars nor more than five hundred dollars, and every day that such railway company shall fail to comply with the provisions of this act, and every train run in violation of the provisions hereof, shall be a separate offense, and any conductor or other employees of such passenger train having charge of the same, or any agent at such depot who shall refuse or neglect to carry out the provisions of this act, shall on conviction, be fined not less than twenty‑five dollars nor more than fifty dollars for each offense.
Because of such ordinances and statutes, any businessman in the South who desired to desegregate his establishment was prevented from doing so. He was prevented by the fact that it was against the law to desegregate. In other words, he was stopped by an open, explicit threat of physical force on the part of his state or local government.
Given the naked hostility toward blacks on the part of state and local governments in the South, it was also not possible for businessmen to take advantage of the lower wage rates of blacks and to employ or promote them in preference to higher‑paid whites of no greater skill. Sometimes, Southern governments may have explicitly intervened against the employment of blacks through legislation. But usually this was not necessary. It was enough to let businessmen know that the government would find some way of punishing them for employing blacks in disapproved ways. (In some places, where there were neither state laws nor local ordinances requiring segregation, this was also the method of enforcing segregation in serving customers. And it always stood as an added threat where such legislation existed.)
The punishment could be that state and local government officials, acting under arbitrary laws backed by the threat of fines or jail terms, could decide to find health, safety or fire hazards on a businessman’s premises; or they could decide to raise the tax appraisal of his property; or they might revoke or deny a needed license or permission. In all of these ways, and others, state and local governments had the power to injure and even ruin any businessman who pursued a just policy toward blacks. And, if the action of the government officials was not enough, there was the ever‑present threat of “nightriders,” whose activities were sanctioned by a governmental policy of inaction and sometimes even of outright cooperation. The nightriders represented a threat of physical destruction of the businessman’s property and of physical injury to his person and family. And, of course, the black workers or customers of such a businessman would have had to fear similar harm.
Thus, it was not capitalism and the profit motive that held blacks down, but a vicious desire on the part of governments to suppress blacks—a desire that was implemented in contradiction of capitalism and against the profit motive. To suppress blacks, it was necessary for the government to violate rights guaranteed by capitalism and to force businessmen to act in ways opposite to the way the profit motive would have led them to act.
This consciously antiblack policy of government was not confined exclusively to the South. To some extent it existed even in the North. The possibility of its existence was everywhere that government officials possessed arbitrary power in any form that they might use to threaten or reward businessmen. But in the North, antiblack legislation disappeared in the decades following the Civil War, and the antiblack policies of governments enjoyed far less popular support than in the South and could not be proclaimed openly and defiantly. Thus, had the degree of capitalism existing in the North circa 1900 been maintained, Northern blacks would have been assimilated.
Unfortunately, such capitalism as existed at the turn of the century was not maintained. Starting in the decades prior to World War I, the whole country began to move away from capitalism at an accelerating rate. The federal government and, to a lesser extent, the state and local governments in both the North and the South adopted an ever‑increasing array of economic controls and regulations. By the mid‑1930s, after the implementation of the policies of President Hoover and then of the New Deal of President Roosevelt, the economic system of the North had become far removed from that of capitalism. Instead, the economic system of the North and of the whole country had become a mixed economy.
Thus, by the time the great migration of blacks to the North took place—during World War II and the generation following—a very different kind of economy awaited them than had awaited the European immigrants of the nineteenth and early twentieth centuries. Under the mixed economy into which they moved, blacks were deprived, and have continued to be deprived, of many of the benefits they would have received from the unhampered operation of the profit motive. And they have been made to bear other burdens and suffer other ill effects which result from the general policy of attempting to impose sacrifices on some men for the benefit of others.
The mixed economy at the federal level and in the North is not motivated by a desire to suppress blacks. That is not its conscious intention. But that is its effect. It is its effect by virtue of policies carried out against businessmen and against taxpayers.
Among the aspects of the mixed economy most relevant to the present discussion and which I will consider in turn are: antiprofit legislation and business timidity; prounion legislation; minimum‑wage legislation; public‑welfare laws; child‑labor legislation; and compulsory, tax‑supported education. These measures may be grouped together as suppressing the black in his capacity as a producer or income earner. In addition, however, another set of measures suppresses the black in his capacity as a consumer and in his general life. Thus, under the separate heading of “The Mixed Economy and the Living Conditions of Blacks,” I will go on to consider the effects on blacks of: zoning laws; rent control; public housing; urban renewal; socialized health and sanitation services; and franchise and licensing laws. And, finally, as part of this same discussion, I will consider the problem of crime in the black neighborhoods.
2. Antiprofit Legislation and Business Timidity
It must be obvious that all legislation which reduces the incentive of businessmen to earn profits thereby reduces their incentive to bring justice to blacks.
The most extreme form of such legislation is the limitation of the height of profit to some prescribed maximum, such as a fixed percentage of a given capital base. In such cases there is simply no incentive to increase profits above the prescribed amount, because all additional profits will be taken away. There are numerous examples of industries whose profits are controlled in this way in the mixed economy: among them are all public utilities and all defense contractors. In addition, other firms not necessarily subject to formal control, such as those in the steel and automobile industries, know that they must keep their profits within certain limits in order not to become the target of governmental hostility, which could result in antitrust suits or special legislative action against them.
Besides such controls on profit, there is the taxation of profit under both the corporate income tax and the personal income tax. Until the Reagan era, it was not uncommon for a businessman to be faced with the prospect of having to pay in federal taxes alone almost eighty‑five cents of each additional dollar of profit. This was the case when he had to pay a corporate income tax of approximately fifty percent and then wanted to take the remaining fifty percent in the form of a dividend and had the misfortune to be in the top bracket of the personal income tax. In that case, after paying the corporate income tax, he had to look forward to having to pay seventy percent of the remaining fifty percent under the personal income tax. And at one time the top bracket of the personal income tax was even substantially higher. Such rates of taxation, of course, greatly reduce the incentive to earn additional profit.
Antiprofit legislation is clearly the enemy of every black. It weakens, and in many cases completely thwarts, his most powerful and most reliable ally: the businessman’s motivation of financial self‑interest.
Antiprofit legislation must be viewed in conjunction with the general climate of uncertainty and timidity which prevails among businessmen in a mixed economy. This was a further powerful factor operating against the interests of blacks, until it became clear that, at the federal level at least, the government wanted to intervene strongly on behalf of blacks.
In the mixed economy, a businessman cannot calculate the future financial consequences of many of his actions. At any time he may become the victim of a costly strike on the part of a labor union with which the law compels him to deal and which it permits to resort to intimidation and violence; or he may become the victim of some new government regulation, or suddenly discover that the government has changed its interpretation of some existing regulation and now finds him in violation of it; or he may be deprived of a government contract, under conditions in which it is impossible to operate his business successfully without having the government for a customer. Whether or not he will suffer in this way, or the extent to which he will suffer, is determined by the good‑ or ill‑will of anonymous individuals—anonymous union members, anonymous government officials, and even anonymous members of the general public—of anyone who has the ability to bring governmental power to bear against him or to influence others to do so. Thus, the businessman in the mixed economy becomes fearful of offending anyone. He fears doing anything “controversial.”
This fear applied, and in some cases may still apply, to actions of benefit to blacks.
The fear would have been overcome by a sufficiently high rate of profit. But it is this which antiprofit legislation prevents. The mixed economy makes businessmen fear the incurrence of penalties while at the same time depriving them of the prospect of rewards. This combination stopped businessmen from initiating changes which would have been of benefit to blacks. It enabled such things as sheer inertia and the desire not to ruffle the sensibilities of some of their white workers to outweigh the economic advantages of pursuing a just policy toward black workers.
While the government’s more recent policy of “affirmative action” programs and racial quotas may have largely eliminated businessmen’s fear of initiating changes of benefit to blacks, it has introduced new problems that work against the advancement of blacks. For it has made all credentials possessed by blacks—such as university and technical‑school degrees, and job titles and records of job experience—appear highly suspect, since no one can know whether the credentials were actually earned or were the result of government coercion. As a result, employers have largely lost the ability to distinguish between blacks who deserve to be hired or promoted and blacks who don’t. And thus, while employers have had to offer the higher titles and salaries which the government mandates, their rational self‑interest has dictated that they avoid, as far as possible, turning over commensurate responsibilities to blacks. And thus, the changes of benefit to blacks that employers need no longer fear instituting turn out largely to be changes for purposes merely of good relations with the government, and to have no substance.
3. Prounion Legislation
As a result of prounion legislation, such as the Wagner Act and the Norris‑La Guardia Act, employers are compelled to deal with labor unions. Labor unions are given monopoly privileges by the government, and employers are forced to meet their demands. The consequence is that wage rates are pushed above the free‑market level. Because of these artificially higher wages, however, the number of workers which employers in the unionized fields can afford to employ is reduced. For employers, like consumers, have only a limited quantity of money at their disposal, and the higher the wages of any species of labor, like the higher the price of any good, the less of it they can afford to buy. Moreover, higher wages mean that the employers’ costs are higher, which necessitates higher selling prices, which, in turn, means that a smaller quantity of the product can be sold, and thus that a smaller quantity of labor is needed to produce it.
For these reasons, the effect of employers’ being compelled to deal with labor unions is to create a scarcity of jobs: there are fewer jobs in the unionized fields than there are workers eager to perform them.
Given such an artificial job scarcity, some potential workers must be excluded. And given the existing degree of prejudice against blacks, blacks happen to be an easy and convenient group for the unions to exclude.
The further effect of the job scarcities created by labor union monopolies is to compel the workers who otherwise would have been employed in the unionized fields to crowd into other fields. The wages in these other fields are lower to begin with—otherwise, the excluded workers would have chosen them in the first place—and they are reduced still further by having to absorb the workers excluded from the unionized fields. For example, if truck drivers and carpenters must be paid wages rates above the free‑market level, there will be fewer employment opportunities for such workers. Men who would have been truck drivers or carpenters will have to crowd into other, less remunerative lines of work, such as doing day labor, being a waiter, and so on. And now the wage rates in these fields will be depressed by the influx of this larger supply of labor.
The fact that large numbers of blacks are involved in this artificial shift of labor from higher‑ to lower‑paying fields, and that the differentials between the fields are artificially increased in the process, is a major factor accounting for the significantly lower level of income received by the average black family in comparison with the average white family.
Observe that under laissez faire capitalism, this state of affairs could not exist. Employers in the unionized fields would hire nonunion blacks until their wage rates were equal to those of the unionized whites. What stops this from happening—apart from the factors already considered—is that under the present mixed economy, the National Labor Relations Board would levy vast financial penalties against any employer who tried it, and, while the law stood aside, the labor unions involved would be free to resort to violence and intimidation against him and against the black workers he brought in.
The existence of such an unjust system, of course, frequently discourages blacks from acquiring the qualifications needed for the better‑paying jobs in the first place. To the superficial observer, it can then appear that blacks are in lower‑paying jobs simply because they are not qualified for anything better.
4. Minimum‑Wage Legislation
Like prounion legislation, minimum‑wage laws also raise wage rates artificially and cause employers to employ less labor. However, inasmuch as these laws apply to almost all employments, there is no place for the displaced workers to go. Thus, these workers are forced into unemployment and onto welfare rolls.
The impact of the minimum‑wage laws is greatest on the least educated, least skilled segment of the population. This is the segment which earns the lowest wage rates and whose wage rates are increased by the minimum‑wage laws. Accordingly, it is this segment which suffers the unemployment resulting from them. Since blacks comprise a disproportionately large share of this segment, they suffer a disproportionately large share of the unemployment. Black teenagers in particular, having been taught little or nothing in the public schools and lacking in previous work experience, bear the worst effects of the minimum‑wage laws. (According to Dept. of Labor data, their unemployment rate in March of 2018 was almost 28 percent. This compared with an overall teenage unemployment rate of 13.5 percent and an unemployment rate for the population as a whole of 4.1 percent.)
Thus, while prounion legislation acts to reduce the wage rates of blacks relative to those of whites by shunting them into lower‑skilled, lower‑paying fields, the minimum‑wage laws act in a more extreme way and reduce the earnings of many blacks all the way to zero.
Minimum‑wage legislation and prounion legislation operate in tandem. On the one hand, the displacement of labor from the unionized fields to the nonunion fields widens the sphere in which the minimum‑wage laws are effective; it acts to depress wage rates in the nonunion fields and thus to reduce a larger number of wage rates below the legally prescribed minimum. On the other hand, in forcibly preventing the existence of wage rates below the legally prescribed minimum, the minimum‑wage laws close the gates, as it were, against a part of the supply of labor spilling over from the unionized fields. This causes that labor either to be unemployed or to displace an equivalent supply of labor which must be unemployed.
It should be observed that both minimum wage and prounion legislation have a further, long‑term depressing effect on the income of blacks. They prevent, or at least greatly retard, subsequent advancement. For example, the black teenagers who are victimized by the minimum‑wage laws lose the opportunity to acquire knowledge and skills through work. They thus lose the opportunity of being able to qualify for higher‑paying jobs later on. In this way, the minimum‑wage laws cause them not only to be unemployed, but also to be fit for only the lowest‑skilled work. Similarly, the prounion legislation acts to arrest the advancement of blacks. For example, the black who is prevented from working in a plant is not likely ever to become a foreman or manager there. The black who is prevented from being a workman in the construction industry has no hope of ever becoming a construction contractor.
5. Public Welfare Laws
The public welfare system serves not only as a refuge for those who are unemployed as a result of minimum wage and prounion legislation, but as an additional, independent source of unemployment, over and above that caused by minimum wage and prounion legislation. For it makes it possible for many people who could earn a modest income by working, to obtain a commensurate income without working. In this way, it induces men to lose the opportunity of acquiring in low‑paying jobs the knowledge, skill and experience which might later qualify them for higher‑paying jobs. It thus exercises a lifelong depressing effect on them by keeping them out of work and by thus limiting their abilities to the lowest‑skilled kinds of work.
In proportion to their number, blacks are the greatest victims of the welfare laws. The reason is that, as a result of historical factors perpetuated by the mixed economy, they begin in an inferior position in which a disproportionate number of them are among the holders of the kind of low‑paying jobs with which welfare allowances are competitive. Thus, a larger proportion of blacks than of whites are induced to seek welfare allowances.
The welfare system is a major and growing burden on the black, as well as the white, taxpayer, and with every increase in the burden the difference between the rewards of working and the penalties of not working is diminished. And thus the welfare rolls swell further. The result is a system which begins to grow by virtue of its own previous growth, with national bankruptcy the only logical resting place.
The welfare system is self‑perpetuating from one generation to the next. Children grow up in an environment in which they perceive no connection between work and income or between effort and reward and in which they would probably be resented for desiring such a connection. It should not be surprising that many of them grow up mentally inert and incapable of performing much beyond the lowest‑skilled work. What the welfare system inculcates and transmits is, in fact, a psychology very similar to that of slaves. For a slave there was also no connection between work and income or between effort and reward, which is why slaves tended to be mentally inert. The one important difference is that under slavery, physical force was employed against the slaves. Under the welfare system physical force is employed against the taxpayers, black and white, who must work as slaves in order to permit the welfare recipients not to work.
Public welfare provides the explanation of the grain of truth in such assertions as “. . . for these run‑down apartment dwellings, the black man in Harlem pays more money than the man down in the rich Park Avenue section. It costs us more money to live in the slums than it costs them to live down on Park Avenue.” (Malcolm X Speaks.)
If this statement were reworded to say that the rents charged for some black families on welfare and living at hotels are higher than those paid by many people on Park Avenue, it would be correct. According to press reports, the rents of such families have indeed been astronomical.
It is grossly unjust, however, to imply that black working families are being arbitrarily gouged by racist landlords and are thus the victims of capitalistic “exploitation,” which is the implication of the above quotation. That is simply a lie.
As I have shown, under capitalism blacks would not pay higher rents than whites for the same‑quality housing. But under a system of public welfare, if one compares the rents of black families on welfare with those of white families not on welfare, enormous disparities can exist. The reason is that the rents of the welfare families are paid out of tax revenues. The government officials who must approve the rents do not bear the financial burden of them. Thus, they do not care how high the rents go. Moreover, since the government officials involved are also not the ones who must live in the places for which they approve the rents, they have no personal interest in the living conditions there. Thus, not only can the rents be enormous, but at the same time the living conditions can be those of absolute squalor.
6. Child‑Labor Legislation
So‑called child‑labor legislation prevents large numbers of adolescents who are willing and able to work, from working. I say “adolescents” because it is doubtful that many children below the age of thirteen or fourteen would want to work in a serious way. And at the present level of economic development, it is doubtful that many working families with children below that age would feel any need to ask them to.
Blacks comprise a disproportionately large number of these adolescents, in part because their parents tend to be less able to provide them with money for dates and similar expenses; and in part because the compulsory, tax‑supported educational system has even less to offer them than it does to white adolescents, with the result that a proportionately larger number of them wish to leave school and work full time.
Forcibly preventing these young people from going to work not only denies them the chance to earn money, but, much more important, prevents them from acquiring knowledge, skill, and experience of work which would be of economic benefit to them in later life. At a time in life when then are most receptive to learning work skills and forming good work habits, the child‑labor laws compel them to be idle. The compulsory idleness resulting from the child‑labor laws and, for large numbers of teenagers—black and white—the corollary of compulsory poverty, combined in so many cases with the frustrations of compulsory school attendance, add up to an obvious encouragement to large‑scale juvenile delinquency.
The child‑labor laws are not an aid to education, as is often claimed. On the contrary, to the extent that they keep students in school who have no interest in learning, their effect is to reduce the level and quality of education for all. And it should be noted that under a system of voluntary, private education, child‑labor laws would stand in the way of education in a second respect: they would prevent students from earning a part of their tuition money, which might be necessary in the case of poorer families.
7. Compulsory, Tax‑Supported Education
Like many of the other aspects of the mixed economy, compulsory, tax‑supported education prevents large numbers of blacks from acquiring the knowledge and skills they need for economic success. It does so by depriving them of the possibility of obtaining an education.
The reason it deprives them is twofold. First, the average black child is far more dependent on formal schooling for his education than is the average white child. This is because he has fewer alternative sources of education outside the school. This in turn is due mainly to the fact that the average black parent of the present is likely to be significantly less educated and less knowledgeable and to have far fewer books and magazines in his home than is the average white parent. Second, and more fundamental, compulsory, tax‑supported education is an inherently inferior system, with virtually no limit to the deterioration of educational quality which it can cause. This inferiority and deterioration, of course, exist in the education of white children as well as in that of black children. But because these deficiencies can be more readily compensated for among the whites than among the blacks, they do not constitute as immediate or as visible a problem for the whites.
Why is compulsory, tax‑supported education inferior and prone to virtually limitless deterioration? The reason is that in principle it is a protected, legal monopoly against which competition is prohibited, and which the citizens are compelled to endure and support no matter what exactions it may make. It is similar to the old British East India Company or the old French salt monopoly. The only difference is that its financing is in the form of taxation rather than the payment of prices, which makes it even worse, for it leaves one no possibility of avoiding its cost, because one cannot simply refuse to buy it.
The monopoly of the system exists in two respects: its compulsory attendance aspect and its tax‑support aspect.
As a result of the compulsory attendance laws, the government must decide what constitutes an education and thus what is to be taught and how it is to be taught. The consequence is that while private schools can exist, no private school can introduce changes in its curriculum, course content, teaching methods, hours of instruction, and the like, that do not meet with the approval of the government. Nor can it refuse to introduce changes which the government requires. Thus, competition concerning such fundamentals as what an education is to include or how it is to be given is thoroughly controlled by the government.
An effect of this is that the cost of private education is kept artificially high. And when this high cost is coupled with the fact that parents must pay taxes for public education whether their children use the public schools or not, a situation is created in which the alternative is between a very expensive private education and a public education which appears to be free. And, of course, the controls on the nature and methods of what is taught tend to minimize the differences between the private and public schools.
The tax‑support aspect of the system is the second major element of its monopoly. The administrators and teachers in the tax‑supported schools are financially independent of the wishes of the schools’ customers: the students and their parents. Even if some parents withdraw their children and place them in private schools, not a single penny less flows into the pockets of the public schools’ administrators and teachers, for their income is paid out of tax revenues, not funds derived from tuitions. The public school administrators and teachers can thus afford to ignore the students and parents.
Because of its monopoly, the compulsory, tax‑supported educational system is cut off from reality at its very base. With potential competition throttled and financial support guaranteed, the system can introduce one disastrous policy after another, and be under no pressure to withdraw it. One need only consider the fact that the system has gone on with the “look‑say” method of teaching reading for over two generations, despite the fact that tens of millions of students have had their reading and conceptual abilities stunted by it. It has gone on for many years with the “new math” method of teaching mathematics, despite the fact that this method makes mathematics incomprehensible to anyone who has not already learned mathematics by a different method. It has gone on decade after decade with its destructive policies, despite the fact that it has turned out a growing number of ignoramuses with high school diplomas—students who do not know how to spell, how to write a grammatical sentence, how to multiply or divide, or how even to begin to organize their thoughts. It has foisted these students on the colleges and universities under the fraud that they have received an elementary and secondary education. And for a time, in the black neighborhoods, the system took even a further step into unreality. Unable to teach American children the English language and American history, it attempted to teach them Swahili and African history. Indeed, an extended study of African history goes on today in many of the schools attended mainly by white children as well as in schools attended predominantly by black children.
In sharpest contrast to compulsory, tax‑supported education, voluntary, private education would constitute a system of free competition. The parents—the paying customers—would be able to choose among various curricula, teaching methods, and educational approaches. And by means of their buying and abstention from buying of one type of education in comparison with another, they would determine which types would flourish and which would disappear. Those schools which provided an education that was wanted would be in great demand and would thus make large profits, while those which did not provide an education that was wanted would be in small demand and suffer losses. The profits of schools in the first group would both give them the means of financing expansion and serve as an incentive to others to follow their example. The losses of schools in the second group would both force them to close their doors if they did not change, and serve as a warning to others not to follow their example. And, of course, the field would be wide open to innovators, who might at any time introduce radical improvements in education, which could then out‑compete the best of the older types of education. In other words, education would become as free and open to progress as industry, or, more correctly, as industry used to be in this country. And it would in all probability eventually achieve the same spectacular results.
There are two objections which may be raised against the feasibility of voluntary, private education for black children (and children of poor parents generally). One is that most black parents could not afford to pay for private schools. The second is that, out of ignorance resulting from their own lack of education, black (and other poor parents) would be likely to undervalue education and choose not to pay for it even to the extent that they were able to do so.
To answer the second fear first: The fact is that in an industrial society it is almost as difficult for a working parent to avoid the knowledge that his child needs to learn reading, writing, and arithmetic as it is to avoid the knowledge that his child needs food. Even illiterate working parents easily recognize the advantages of such knowledge, for they perceive those advantages in their everyday lives. And to the extent that they have regard for their children, they must desire such knowledge for them.
Moreover, to begin to answer the first fear, in even a semi‑free economy, every normal working family enjoys an income many times greater than that required for bare, physical subsistence. And certainly in the United States today, there need be no normal working family which cannot afford to pay some significant sum for its children’s education—no more than there is any such family which cannot afford to pay some significant sum for its children’s food and clothing. And, indeed, every working family does pay a significant sum for education—in the form of various taxes which are used to support the public schools. (To the extent that it does not pay property taxes, the most popular school tax, it pays rents and commodity prices which are increased by the property taxes.)
Lower‑income working families, such as most black families today, could afford private education as the result of a number of factors. First, they would have available the funds they now pay in taxes and/or higher rents and higher prices on account of public education. Second, freedom of competition would greatly stimulate lower‑cost, more effective teaching—for example, reading might be taught in half or even a quarter of the time it now takes, with a corresponding reduction in the cost of teaching children how to read. Third, with the abolition of child‑labor legislation, funds would be available from the earnings of the students themselves to pay for education.
Fourth, with the abolition of the public welfare system, or even its mere reduction, low‑income taxpayers, who now bear much of the financial burden of it, would be relieved of this burden, and would thus have these additional funds available for paying the costs of private education. (A portion of this burden consists of taxes paid by businesses and high‑income taxpayers, who would otherwise have saved and invested those funds, and thus have raised the demand for labor and the wages of low‑income taxpayers.) Fifth, as we shall see, similar tax savings to low‑income working families would result from the abolition of other features of the mixed economy, such as public housing and urban renewal. Sixth, and very important, the repeal of prounion legislation, minimum‑wage legislation, and all the other governmental obstacles to employment would soon be followed by a substantial rise in the level of income of poor families in general and of black families in particular.
It might be argued that, in the short run at least, a larger sum of money is expended on the education of the average black child as a result of government interference than would otherwise be expended. Even if this were conceded, nothing would be proved in favor of public education. This is because the whole of any such additional sum—and most of the equivalent of what would have been spent by black parents on voluntary, private education—is simply wasted in the public education system. The result of compulsory, tax‑supported education is that the average black child receives little or no education. Under voluntary, private education, he would receive a vastly improved education with a smaller expenditure of money.
IV. The Mixed Economy and the Living Conditions of Blacks
1. Government Intervention in Housing
As I have indicated, the mixed economy holds the black man back not only in his capacity as an income earner, but also in his capacity as a consumer. It—not capitalism—is responsible for the squalid living conditions of many blacks.
Prounion legislation is responsible for the costs of new construction being far higher than they need to be, since it is responsible both for artificially high wages and for feather‑bedding practices in the construction industry. The expenditures of state and local governments for welfare and also for public education greatly add to the burden of property taxes. Artificially high construction costs and high property taxes place decent housing out of the reach of large numbers of blacks.
In addition, zoning laws—a clear infringement of the rights of property owners and thus a violation of the principles of capitalism—have the effect of excluding blacks from areas in which they might otherwise be able to live. By such means as prescribing minimum sizes for home‑building lots and prohibiting high‑rise apartment buildings, zoning laws artificially raise the costs of housing in the areas to which such restrictions apply. The requirement that a building lot be of a certain minimum size, such as an acre or a half‑acre, obviously makes the costs of land acquisition far higher than is dictated by the technology of construction. The prohibition of high‑rise apartment buildings also increases the land cost per unit of housing, for the shorter the building, the fewer the apartments over which the cost of the land can be spread. Because of their lower level of income, blacks are the group relatively most affected by zoning laws. For they can least afford to buy homes or rent apartments at an artificially increased cost. It is they, therefore, more than any other group, who are excluded by zoning laws. In this way, zoning laws bear a major portion of the responsibility for the existence of racially exclusive neighborhoods.
The effect of zoning laws and other government interference that limits the supply of new housing is by no means limited to the interference that directly impacts blacks. Restricting the supply of new housing in any portion of the market, including luxury housing, serves to raise housing costs at the low end of the market as well, which is the part of the market on which most blacks presently depend. If the market were free to build more luxury housing, those who occupied that housing would vacate their present housing, and those who occupied that vacated housing would vacate their present housing, and so on down the line. In this way there would very soon come to be a larger supply of housing at the low end of the market. The principle is the same as prevails in the automobile market, where more purchases of new cars serves to increase the supply of used cars and thus make them lower priced and more affordable. Thus it is not necessary that local governments trouble themselves with trying to ensure the existence of a large supply of “affordable housing.” If they are concerned with a larger supply of low-cost housing, all they need do is stop their interference with the supply of new housing at all price levels.
The housing problems of blacks are enormously compounded by the existence of rent control, public housing, and urban renewal.
Rent control is responsible for the radical deterioration and wholesale abandonment of buildings in the black slums in which it exists. The reason that rent control has particularly disastrous effects on blacks is their relative poverty. As a result of this, blacks tend to live in neighborhoods in which land values are lower and in which the buildings are older and less valuable than in other neighborhoods. Consequently, the rents paid in black neighborhoods tend to be much closer to the operating costs of landlords—such costs as fuel, maintenance, minor repairs and taxes—than is the case in other neighborhoods. For the rents in the black neighborhoods do not have to cover the larger amounts of profit which would have to be made on more valuable land and buildings, nor do they have to cover the larger amounts of depreciation which would have to be charged on more valuable buildings.
Now, in a period of inflation and rising property taxes, landlords’ operating costs go up, and under rent control landlords are compelled to absorb these increases. The consequence of rising operating costs and frozen rents is less money in the hands of landlords with which to make improvements and major repairs. When operating costs reach the point where they exceed the rents, and no relief is in sight, it no longer pays a landlord to operate his building, and he abandons it. For he can no longer recover any portion of the money he has invested in the building, and continued operation only spells additional losses.
The landlords in black neighborhoods have the least ability to absorb increases in operating costs because, as shown, their operating costs are initially closest to their rents. As a result, it is these landlords who are the first to stop making improvements and major repairs, and who are the first to abandon their buildings. Thus, it is blacks who suffer most from rent control. Their housing deteriorates the most and is reduced in supply the most.
Rent control prevents the construction of new low‑income rental housing, as well as destroys the existing supply of such housing. It does so even if not immediately applied to new housing. The mere prospect of its being applied at some point in the future is sufficient. If prospective landlords believe that rent control is a real possibility in, say, five or ten years, then they will construct new rental housing only if they are able to recover most of the value of their investments in the coming five or ten years, before the combination of rent control and inflation can rob them. This represents a major increase in the effective cost of new rental housing—instead of being able to charge rents based on an ability to recover their investments over a forty‑ or fifty‑year period, as they would normally, landlords must charge rents that recover their investments in a five‑ or ten‑year period. Low‑income rental housing is simply impossible when the landlord’s investment must be recovered so rapidly. In these circumstances, the same physical housing that might have been available for the low‑income market can be afforded only by higher income groups.
The destruction of the rental‑housing industry is especially serious for blacks, and for poorer people generally, since they lack the savings required to buy their own homes, condominiums, or cooperative apartments. Their best hope for decent housing is rental housing, and that is destroyed by rent control.
In response to the housing problems created by its own policies, the government undertakes public housing and urban renewal programs. The effect of both is to raise the taxes of black working families and thus to make them still less able to afford decent private housing.
Public housing quickly deteriorates into new slums, because there is no profit‑and‑loss incentive to keep it otherwise. A private landlord is motivated to keep his investment as valuable as possible, because it is his own money which he invests. Government officials have no such motivation. It makes no personal financial difference to them what kind of tenants move into the projects and what those tenants subsequently do to the premises. And even if, as a question of principle, it did matter to them, it would not be possible to give to public‑housing officials the discretion of a private landlord with respect either to the selection of tenants or to the making of repairs. Both must be done in accordance with a prescribed legal procedure, i.e., in accordance with the requirements of bureaucratic “red tape” and all its notorious inefficiencies. Otherwise, there would be no way to prevent the officials from committing such acts as arbitrarily giving apartments to their friends or squandering tax money on unnecessary repairs.
The consequence of public housing is that black taxpayers pay higher taxes and receive new slums in place of old ones.
The once‑popular urban renewal program was undertaken in major part for the purpose of replacing slum housing with improved, new housing. It differed from public housing programs in that it applied to the rehabilitation of commercial and industrial areas as well as residential areas, and in that the new construction was frequently intended to be undertaken by private developers and to be privately owned.
Under urban renewal, the government provided funds for the purchase and clearance of land in slums, and funds for making certain improvements on the cleared land, such as streets, water mains, sewers and lighting systems. Subsequently, the land was generally sold or leased to a private developer.
Now, because the urban renewal program made a government agency the owner of land at a key stage of every project, it removed the incentive for putting the land to use. A private landowner paying interest on a mortgage cannot afford to let valuable land lie idle. Even if he owns the land free and clear, and pays no interest, the knowledge of the income he forgoes makes him put his land to use as quickly as possible. But when a government agency owns land, there is no incentive to put the land to use. And the result was that in the heyday of the program, the average time required for executing an urban renewal project was eight‑and‑a‑half‑years.
Of course, in the period between the eviction of tenants from existing low‑rent housing and the completion of the urban renewal projects, the supply of low‑rent housing was reduced. Those displaced from the slum areas destroyed had to crowd into the remaining slum areas, making them still more overcrowded. And as the urban renewal program grew, the amount of low‑rent housing that was destroyed also grew.
But what happened when the urban renewal projects were completed? Wasn’t the supply of low‑rent housing restored at that point? As matters actually turned out, the answer is no. Most of the new housing was “luxury” or “semi‑luxury” housing. While, for the reasons explained, this did serve to restore the supply of housing at the low end of the market, the replacement supply was scattered here and there. The neighborhoods that had been destroyed were not replaced. The outcome would have been far better had the urban renewal programs not sought to “renew” anything—by destroying housing that already existed—but simply built new and additional housing on previously vacant land.
Thus, the effect of urban renewal was to deprive poor people of their homes and destroy their neighborhoods. And among these poor people, of course, was a relatively high concentration of blacks.
2. Socialized Medicine
Blacks are the principal victims of socialized medicine, which has existed in this country for many years, first at the local level, in the form of municipally owned clinics and hospitals intended to serve poor people, and, since the mid-1960s, in the form of Medicaid and, to an important extent, Medicare. Because of the relatively greater prevalence of poverty among them, resulting from the mixed economy’s interference with their ability to earn a living, a larger proportion of blacks than of whites has been dependent on these institutions. A larger proportion of blacks than of whites, therefore, has suffered from the poor quality of medical care that socialization in any form always brings.
There are several reasons for the poor quality of medical care under socialized medicine.
1) Because medical care is made available without charge or at only a nominal charge, all natural restrictions on the use of medical care are removed. Under the system, if a patient perceives the slightest advantage in visiting a doctor or clinic, he is likely to do so, for he incurs no cost. And if a doctor perceives the slightest advantage in a patient’s entering the hospital, he is likely to be inclined to recommend it, for he too knows that the cost does not come out of the patient’s income. It is only the anonymous, helpless taxpayer who pays. As a result, clinics and hospitals become greatly overcrowded, and the time and attention and quality of care that can be given to the individual case are sharply reduced.
2) Because the income of the doctors and the hospitals under the system does not come from the patients, but from the government, it is not the patient that they must primarily satisfy, but the government—specifically, its bureaucratic forms and regulations. Under the system, even if a patient has an alternative doctor or hospital to go to, it is not likely to represent any financial loss to the doctor or hospital he leaves, as it would under capitalist medicine. Their income from the government will probably be the same with or without him. This is likely to be the case even if the government pays by the patient, for probably his place will quickly be taken by someone else, drawn from a waiting list. Thus, under municipally socialized medicine, doctors and hospitals do not have to fear any economic loss as a result of dissatisfied patients. And, of course, they have no prospect of economic gain from doing a better job. Indeed, under socialized medicine, the normal competitive incentives are reversed. Doctors and hospitals who would do a better job are not able to charge higher rates and thus earn a higher income. All that they would gain for their troubles would be an additional crush of patients and thus more overcrowding. But if they did a poorer job than other doctors and hospitals, then they might experience some measure of relief. Thus, socialized medicine creates incentives for a competition in poor medical care.
(This discussion has application to the shocking conditions periodically revealed in many nursing homes for the aged. The revenue of these homes comes largely or entirely from the government, under the Medicare program, not from the patients or their families. Thus, the patients and their families lack economic power over the homes.)
3) In order to control the increase in costs that results from the removal of natural restrictions on the use of medical care, the government imposes restrictions of its own. Thus, it rules out or limits certain categories of operations and certain methods of care and treatment, and it monitors the activities of doctors, to be sure that they are in compliance. For example, it checks to see how much in the way of expensive drugs its doctors prescribe, how much diagnostic work and surgery they order, and the like. Such arbitrary restrictions impose a rigidity on doctors, who must work in the knowledge that government bureaucrats are looking over their shoulders.
4) The restriction both of their professional freedom and of their incomes when they work for the government leads the better doctors to shun the government-controlled clinics and hospitals. The staffs of these clinics and hospitals, therefore, tend to be comprised of less highly qualified doctors.
In all of these ways, therefore, the effect of socialized medicine is lower‑quality medical care.
In contrast, the ultimate effect of private medicine—once such a system was fully operational—would be correspondingly higher quality, and less expensive, medical care.
Blacks suffer from socialized medicine not only in their capacity as the relatively greatest users of the system, but, of course, also in their capacity as taxpayers, along with the general population. And the direct and indirect effects on blacks of the taxes to pay for socialized medicine are considerable.
(The full effects on blacks, and poorer people generally, of the taxes to pay for socialized medicine, public housing, and all other aspects of the welfare state, are not limited to the taxes they pay directly out of their own pockets, which might be relatively small because of their low incomes. To the extent that blacks participate in the economy as wage earners and consumers, they suffer the effects of taxes for socialized medicine paid by corporations and the so‑called “rich.” They suffer these effects in the form of lower wages, less employment, and higher prices for the goods they buy. For if corporations and the “rich” did not have to pay these taxes, most of the tax money would have been reinvested in production. As such, it would have raised the demand for labor, materials, and machinery. The larger demand for labor would have raised wage rates or reduced unemployment. The larger demand for materials and machinery would have brought about a greater ability to produce, thus resulting in larger supplies of goods and lower prices. The prevention of these results because of taxes to pay for socialized medicine and other features of the welfare state, therefore, makes wage rates lower, unemployment greater, production smaller and prices higher than they otherwise would have been. And thus, blacks and other relatively poor people suffer from the welfare state not only as taxpayers, but, perhaps even more important, in their capacity as wage earners and consumers. This is in addition to their loss as consumers of the specific services financed by the welfare state—a loss resulting from the deterioration of those services.)
3. Municipally Socialized Sanitation Services
Sanitation services are socialized at the municipal level insofar as they are owned by local governments or fully controlled by local governments, which thereby exercise the substantive powers of ownership.
The consequences are similar to all other cases of socialization, whether of education, housing, or medicine. Namely, lack of incentives and competition on the part of the suppliers, and thus, sooner or later, poor and deteriorating service to the consumers. When sanitation services are supported out of taxes, there is no connection between the services rendered and the payment received. The suppliers do not financially lose by providing the consumers with poorer service, and they do not financially gain by providing them with better service. The consumers are made helpless. Competition with the socialized service is made difficult or impossible both by direct legal restrictions and by the fact that the government is able to offer its service at no charge or very little charge, as a result of the taxes it collects.
It is no accident, but follows from the nature of the system, that the streets of many major cities in the United States are littered with filth. No one enjoys collecting garbage, and where there is no profit‑and‑loss incentive for doing it better rather than worse, it is not likely to be done well. What is surprising is that conditions are not worse than they actually are.
Blacks are the greatest victims of socialized sanitation for a variety of reasons connected with the mixed economy. The vacant lots and overcrowding created by the urban renewal program, the abandoned buildings and further overcrowding caused by rent control, the widespread sense of helpless poverty resulting from government interference with the ability to earn a living, the restrictions on the ability of landlords (not only public housing officials, but also private landlords) to select and to get rid of tenants, the lack both of financial ability and of incentives by landlords to maintain their property as a result of rent control—all these effects of the mixed economy are in turn causes of sanitation problems. And as all of them bear down more heavily on blacks than whites, for the reasons already explained, they are causes of worse sanitation problems in black neighborhoods than in white neighborhoods. But while conditions in the black slums clearly call for greater efforts on the part of sanitation services, there is no way under socialization for a greater need to be translated into an incentive for suppliers to meet it. The fact, for example, that there is more garbage to be picked up does not mean under socialization that there is more money to be made in picking it up. Under socialization, all it means is that there is more thankless work to be done and no reason to do it.
The solution to the sanitation problems of the black slums is the repeal of socialized sanitation service and its replacement with private ownership and the freedom of competition. Equally necessary is the repeal of all those aspects of the mixed economy that have a direct causal role in creating sanitation problems—above all, rent control and public housing.
4. Franchise and Licensing Laws
Franchise and licensing laws prohibit or restrict competition. For example, a city franchise on bus service covering a particular route prohibits competition on that route. Licensing requirements for work as a barber, druggist, taxicab driver, etc., restrict competition. The effect of all such measures is to make a service poorer and more expensive than it would otherwise be.
In this case, too, such laws are particularly inimical to blacks, as a result of their poverty. If the franchised bus service in a black neighborhood is inefficient, the people are less likely to have an alternative at their disposal, because they are less likely to own cars or to be able to afford taxicabs. Likewise, the higher prices which must be paid for haircuts, medicines, taxicab rides, and the like, as a result of restricted entry into these various fields, are experienced more acutely when they must be paid out of low incomes.
These laws injure blacks not only in their capacity as consumers, but also in their capacity as producers. To a large extent it is blacks who are denied entry into the franchised or licensed fields. (Consider how many are kept out by arbitrary educational requirements alone.) If these laws were repealed, blacks could open more barbershops and drugstores, provide more taxi service, and the like. They could even establish needed bus services with small capital investments: they could begin with old, second‑hand equipment as small in size as station wagons, and then, out of the profits earned, they could build up more substantial operations. The effect of repeal would be greater opportunity and higher income for black businessmen and lower prices and better service to black consumers.
5. The Mixed Economy and the Higher Crime Level in Black Slums
The crime level is significantly higher in the black slums than in middle‑class, white neighborhoods. The cause is certainly not anything innate in blacks. Crime is not a matter of genes. Nor is the cause the poverty of blacks. Poverty is not a cause of crime. A century ago, for example, the average person in the United States was much poorer than he is today, and yet the crime rate was not only not higher but actually lower than in succeeding generations. Indeed, in the depression years of the 1930s the crime rate steadily declined from the levels it had reached in the boom years of the 1920s.
The higher crime rate in the black slums is the result of a combination of two closely related things: the mixed economy, and, more fundamentally, the philosophy which underlies the mixed economy.
As a result of the mixed economy, the average black finds most avenues of advance either cut off or seriously impeded, and he is surrounded by squalor. In these circumstances what is required is extra effort and harder struggle, if success is to be achieved. But this is where the philosophy of the mixed economy—particularly of its current form: the welfare state—enters the scene and undercuts such effort and struggle at their very base.
Two of the leading tenets of that philosophy, for instance, are the doctrines of determinism and altruism.
According to the doctrine of determinism, the individual is a pawn moved by forces beyond his control. All of his failures, according to the most prevalent form of this doctrine, are the result of the sins of society, and it is therefore pointless for him to struggle to achieve personal success.
Now, because of the mixed economy and the special difficulties it places in their path, the personal experiences of blacks are likely to appear to confirm such beliefs. The crime rate in the black slums is therefore not a mystery. For when individuals give up on the possibility of achieving anything through their own productive efforts, life becomes intolerable, and drugs and crime appear to offer an escape.
According to the doctrine of altruism, a man must place others above himself; self‑sacrifice is regarded as the highest virtue; personal achievement—the advancement of one’s own life and happiness—is regarded as a selfish evil. On this view, blacks who struggle heroically and do succeed, are not to be given any moral credit; on the contrary, they are often denounced as “Uncle Toms,” who have accepted self‑interest as their goal rather than self‑sacrifice for the needy. This is hardly the sort of philosophy that would inspire the effort and struggle required to get out of the slums.
In addition, if men believe that sacrifice to the poor is the proper moral rule and thus that the poor have a moral claim on those who are better off, the conclusion may be drawn by many that by right the wealth of others is owed to them, and is withheld from them only through immoral callousness and indifference. Such a view encourages the criminal mentality, by making crime on behalf of the needy appear to be an act of moral restitution.
The influence of doctrines such as determinism and altruism, coupled with the repressive conditions imposed on blacks by the mixed economy, is the basic cause of the higher crime rate in the black slums.
The higher crime rate explains why prices in black slum neighborhoods tend to be higher than in white, middle‑class neighborhoods. The reason is specifically because of higher rates of robbery and pilferage. These make the costs of doing business in the black neighborhoods higher. If stores in the black areas are to remain in business, the customers must pay prices which cover all of the store owners’ costs. Thus, they must pay prices which cover not only the cost of the goods which are sold to them, but also the cost of goods stolen or pilfered by others. These higher prices not only do not represent higher profits to merchants in the black slums, but very often do not compensate them for their higher costs. The fact that customers can shop outside the area places a limit on the ability of the merchants to raise their prices, even though their costs may have risen by much more. The result is that, despite the higher prices in the black slums, merchants are moving out of black areas rather than moving in, as they would if the higher prices reflected higher profits. The further result is that blacks are deprived of stores in which to shop.
Looting and fire‑bombing, of course, have a similar effect on costs and prices as robbery and pilferage. And when they occur, they are often the precipitating cause of immediate shutdowns and abandonments of stores which have no long‑term prospects for profitability.
Looting, fire‑bombing, and the more conventional forms of robbery and theft are incited to a considerable extent by the unthinking spread of such stories as the claim that businessmen arbitrarily charge higher prices to blacks, that landlords arbitrarily charge them higher rents, and that employers arbitrarily pay them lower wages. Such stories mislead the ignorant and unintelligent, and serve as a rationalization for the vicious. An intelligent and honest news media would lose no opportunity to cite the evidence demonstrating the falsehood of such claims.
V. Conclusion: Capitalism Is the Cure for Racism
All of the significant injustices which blacks suffer are the result of laws representing the initiation of physical force. The solution to their sufferings is the total repeal of the mixed economy and the establishment of one‑hundred percent laissez faire capitalism.
Today’s intellectual establishment and today’s black leaders, however, do not understand the nature of the problem. And the solution which they advocate is the further initiation of physical force. Thus, they advocate that the government compel the employment and promotion of blacks and the achievement of racial integration by force.
The effect of such measures is to intensify the very problem of prejudice against blacks which they are intended to overcome. So long as there is an artificial job scarcity created by unions and minimum‑wage laws, the compulsory employment of blacks means the compulsory unemployment of whites. So long as blacks, for all of the reasons discussed, do tend to be less skilled, experienced and educated than whites, their compulsory promotion over whites generally means the preferment of the less able over the more able. So long as whites do not want to live on a fully integrated basis with blacks, the use of force to compel them to do so increases their fear and resentment of blacks. Thus, the use of force to counter the symptoms of prejudice places whites in a position in which they experience a conflict of interests with blacks, in which injustices are committed against them in the name of blacks, and in which they must fear and resent blacks.
Blacks, of course, are all too well aware of the hostility and resentment they encounter with every seeming success. By the nature of the means employed on their behalf, they cannot achieve what most of them want, which is to be accepted on their own merits as individuals. Indeed, as I have indicated, they must view all of their gains with the suspicion of fraud. For example, can any black today know whether he holds his job because he has earned it in fair competition with other workers, or merely because he happens to be a black and is being used as window‑dressing by his employer in compliance with the requirement of filling a racial quota?
In the late `60s and early `70s, the sense that they were resented and could achieve no genuine success under the existing social order made significant numbers of blacks prone to consider desperate, irrational alternatives of a kind which further inflamed prejudice against them—such as demands for a separate black nation or the establishment of a socialist dictatorship under black control, demands which were often accompanied by the large‑scale use of violence. For the time being, these demands have been withdrawn, and the organized violence has disappeared. But they could easily re‑emerge, as the result of the same causes that produced them in the first place. And, once again, they would be certain to evoke irrational responses on the part of many whites, such as support for antiblack political candidates, which in turn could result in blacks’ being deprived of legitimate rights. This, of course, would even more radically intensify all conflicts.
The first and most important step in halting and then reversing the forces creating America’s racial conflict is simply making it known that the conflict is the product of the mixed economy, and that the establishment of laissez-faire capitalism would achieve full justice and a harmony of the rational self‑interests of all men. The mere recognition of this fact on a sufficiently wide scale would alone be enough to restore the spirit of reason to race relations. For it would give men the vision of a rational society toward which they could work by rational means.
It would not be necessary to await the establishment of a full capitalist system. Each individual step toward capitalism would produce immediate benefits. For example, if nothing else were done but that minimum‑wage legislation were repealed, this would reduce black unemployment and permit greater black advancement. Indeed, even without outright repeal, if the operation of such laws could merely be restricted, there would be immediate benefits. If the minimum wage were held at its present level and not raised as the general level of wages rose, the harm it causes would steadily diminish; for the gap between the free‑market wage rates for unskilled labor and the legally prescribed minimum would steadily narrow. Similarly, if merely the eligibility requirements for the receipt of welfare payments were raised, a large number of blacks would be spared the degradation of that system, and the burdens of black as well as white taxpayers would be correspondingly diminished. And so it would be with the repeal, or even the mere restriction, of every control.
This knowledge, that the mixed economy is the cause of our racial conflict and that capitalism is the cure, must be given the widest possible dissemination. If men understood it, it would be almost impossible for them to choose any system but capitalism. For the choice is between a system which rests on logic and reason and which holds out the prospect of a nation enjoying the harmony of men’s rational self‑interests, and systems which offer nothing but irrational emotion, violence and destruction. Laissez-faire capitalism is the system which deserves the support of everyone who desires justice and prosperity for all men.
Essay Three. The Moral Necessity of Discrimination and Hate Speech
The very word “discrimination” has become a term of such opprobrium that to accuse someone of it is to brand him as guilty of the worst kind of moral indecency, deserving of the utter contempt and abhorrence of every right-thinking person. In today’s intellectual environment, to say of something that “it discriminates” is tantamount to damning it to hell and usually serves to end all further discussion of it.
Well, let me say immediately and unequivocally that I discriminate and that I do so every day, in many ways. For example, I discriminate in favor of food and against poison. I discriminate in favor of health and against disease. I discriminate in favor of truth and against error. I discriminate in favor of reason and against irrationality. I discriminate in favor of what is clean and against what is dirty. I discriminate in favor of better products and equally good but less expensive products and against poorer products and products that are more expensive but no better.
After considering such simple examples, can anyone seriously accuse me of being a “bigot” because I discriminate?
Most people will no doubt respond that when they use the word “discrimination,” they don’t have in mind the kind of examples I have used. What they have in mind, they will say, is primarily action that favors the members of one group of human beings, such as whites, and disfavors the members of another group of human beings, most notably blacks. That is no doubt what they have in mind. But in that case, they must learn how to use the English language, or any language. It is a major epistemological error to confuse what applies only to particular instances of a concept with something that applies to all instances of the concept, which is exactly what the enemies of discrimination as such are doing.
Indeed, that very same error of invalid generalization is what underlies the phenomenon of racial discrimination. For example, someone has had bad experiences with some blacks or has heard of wrong or downright evil actions on the part of some blacks and then assumes that such is to be expected of all blacks, ignoring the fact that each individual human being possesses free will and that the actions of other members of any group in which he may be classified prove nothing about the individual that is him. So not only do the enemies of discrimination make the very same epistemological error as do racists, in making an invalid generalization in their damnation of discrimination as such merely because of the evils of discrimination based on race. They also fail to see that what makes racial discrimination itself wrong is not that it is discrimination, but that it serves to prevent discrimination on the basis of rational factors, such as who is the better and/or less expensive worker or who is the more intelligent and ethical person. In other words, racial discrimination is wrong when it serves to override discrimination on the basis of quality and cost or when it serves to override discrimination on the basis of intelligence and character.
Further, while racial discrimination may be an evil, discrimination as such is so far from being evil that its practice is essential to human life and well-being, and, as such, is absolutely necessary and absolutely moral. Lack of discrimination between food and poison, between health and disease, between truth and error, etc., etc., is a sure path to disease, suffering, and death, and thus is evil.
The Epistemological Necessity of Discrimination
Before leaving the subject of discrimination, I must point out that not only is it morally necessary, for the reasons explained, but is also epistemologically necessary, i.e., necessary for human beings to be able to think. Of course, since thinking is the most fundamental requirement of human survival, the epistemological necessity of discrimination is also a moral necessity.
All concepts are discriminatory. They rest on making distinctions between different kinds of things and admitting into a concept only such things as meet the appropriate standards for membership. Thus, the concept “dog” says, in effect, “dogs only”; “no cats or any other non-dogs allowed”; “cats and all other non-dogs keep out.”
If this sounds hurtful and demeaning to all those excluded from the concept of “dog,” shouldn’t something be done about it? Shouldn’t decent, sensitive people stop using the concept of dog and all other concepts so long as they remain so discriminatory? Shouldn’t public pressure and government “clout” urge reform, so that each concept will incorporate at least a significant number of members of all other concepts that until now have been excluded?
Thus, shouldn’t there be room in the concept of “dog” for a least a few percent of cats, monkeys, and giraffes? And not only just of other animals, but also of virtually every other existing thing? Shouldn’t every concept include significant numbers of members of every other concept, so that whenever anyone thought or spoke about any one thing, he would simultaneously be thinking and talking about everything? Wouldn’t this be a truly democratic and egalitarian approach to thought and language? Isn’t this what many of the most prominent of our political and intellectual leaders must already be doing, since it is so often impossible to know what specifically they are thinking or talking about?
So shouldn’t one say, “Down with discrimination” even when it means “Up with chaos”?
Obviously, one should never say, “Down with discrimination” when it means “Up with chaos.” Discrimination is an essential foundation of concept-formation and thus of thought, language, and human life.
Those who oppose the phenomenon of discrimination as such do so because they have already largely lost the ability to discriminate in their thoughts. They have lost the ability to discriminate between discrimination as such and a particular, narrow sub-category of discrimination, namely, discrimination based on race. More than that, they have no comprehension of the extent to which discrimination based on race rests on a foundation of the use of physical force by government or with the sanction of government. They do not realize that without government involvement, such racial discrimination as might still exist would be merely a matter of personal aesthetic preferences, such as the preference of some men for fair-skinned blonde and blue-eyed women and thus lack of interest in black women and, of course, the same kind of preference on the part of other men for dark, black women and accompanying lack of interest in white women.
The real problem of blacks is not only not discrimination as such. It is not even racial discrimination. As my essay “Capitalism: The Cure for Racism” shows, it is the use of physical force or the threat of physical force against them by the state, or by private parties acting with the sanction of the state. And it is the use of physical force or the threat of physical force against third parties, above all businessmen and capitalists, whose free, voluntary productive activities work to the benefit of everyone but would especially work to the benefit of blacks in eliminating all arbitrary inequalities imposed on them by the use of force or the threat of its use. In these cases blacks are not the intended target of aggression, but they are nevertheless still its victims.
Hate Speech
Now to a few words about “hate speech.”
Here is an example of hate speech par excellence. “Hitler is a monster of wickedness, insatiable in his lust for blood and plunder….”—Winston Churchill.
Do not monsters such as Hitler and Stalin deserve to be hated? Do not the underlying ideas and philosophies that made possible their monstrous acts also deserve to be hated, namely, socialism, nationalism, and all other forms of collectivism? In speaking about monsters, is it wrong to express the hatred that their acts of torture and murder inspire? Or must one keep silent and not denounce evil? Is loving evil rather than hating it, the way to fight it? Is it good to love evil rather than hate it? Or rather is it not a defense of evil to quash expression of the hatred it deserves? The enemies of “hate speech” are the friends of evil, consciously or subconsciously seeking to protect and perpetuate it by silencing its critics and making its critics seem evil for the alleged sin of hating evil. Had they been around and had the power, the enemies of hate speech would have silenced Churchill for expressing hatred of Hitler. The enemies of hate speech are the friends of monsters such as Hitler and Stalin whom they seek to shield from the criticism, anger, and hatred these monsters deserve.
The advocates of silencing hate speech will almost certainly say that hatred for Hitler and Stalin is not what they have in mind when they call for silencing hate speech. All they have in mind, they will say, is speech that expresses or provokes hatred of innocent victims, such as members of various minority groups.
Like those who denounce discrimination, those who denounce hate speech are lost in epistemological error. One cannot legitimately attack a whole category of action—in this case, hate speech—on the grounds that in some cases it may constitute injustice to the innocent. To do so is to create a protective barrier in defense of evil, in defense of mass impoverishment, mass suffering, and mass murder. The enemies of hate speech are the defenders of what deserves to be hated.
It needs to be noted that there is hate speech against virtually every aspect of the capitalist economic system, hate speech to which hardly anyone objects because almost everyone accepts it as justified. For example, as I’ve written, “[t]he profit motive, is attacked as the cause of starvation wages, exhausting hours, sweatshops, and child labor; and of monopolies, inflation, depressions, wars, imperialism, and racism. It is also blamed for poisoned foods, dangerous drugs and automobiles, unsafe buildings and work places, `planned obsolescence,’ pornography, prostitution, alcoholism, narcotics abuse, and crime.” Such speech inflames hatred not only against the capitalist system but against businessmen and capitalists, who are living human beings and whose lives have been taken because of the acceptance of such beliefs and their endlessly repeated promulgation through speech and press. The logic of those who want to ban hate speech implies that hate speech of this kind too should be banned.
Obviously such a ban would be both impossible and absurd. It would imply that most people could no longer express what they believe. To put an end to such hate speech and to irrational, wrongful hate speech of any kind, what is necessary is not any kind of ban, but powerful, logical answers that will shut the mouths of ignoramuses far more effectively than any kind of ban could ever possibly do. What is needed to stop hate speech directed against capitalism is for people to read the works of Mises, Rand, and Reisman.
Postscript
Dear Reader,
If you liked these essays, please be sure to see Reisman’s other Kindle books at http://www.amazon.com/-/e/B001KCWY0Q. In particular, you should be sure to see his Capitalism: A Treatise on Economics, which is available in hard copy as well as in Kindle format. Much of the material in the main essay of the present book, “Capitalism: The Cure for Racism,” can be found in that book, in the subsection “Equal Pay for Equal Work” (pp. 196-199).
Capitalism: A Treatise on Economics provides not only a powerful critique of the charge that capitalism is racist, set in the context of a presentation of the principles of economics. It also deals equally effectively with all the other leading areas of economic theory and economic policy.
Aimed at both the intelligent layman and the professional economist, and written in language that both can understand, it is the most comprehensive and intellectually powerful explanation of the nature and value of laissez-faire capitalism that has ever been written. It represents a twofold major integration of truths previously discovered by other writers, combined with numerous original contributions made by the author himself. Within economic theory, it integrates leading ideas of the Austrian school with needlessly abandoned doctrines of the British classical school. It further integrates such reconstituted economic theory with essential elements of Ayn Rand’s philosophy of Objectivism. (The Austrian school has been the main school of procapitalist economic thought since 1871; von Mises is its most important member, followed by Böhm-Bawerk. The British classical school was the main school of procapitalist economic thought prior to 1871; Adam Smith and David Ricardo are its most important members.)
On the foundation of these integrations, the author is able to develop the numerous major original contributions that the book presents on the subjects of profits, wages, saving, capital accumulation, aggregate economic accounting, monopoly, and natural resources, among other vital subjects. Based on the same foundation, the book presents the most powerful critiques of Marx, Keynes, the pure-and-perfect competition doctrine, and environmentalism to be found anywhere.
A leading part of its trenchant economic analysis is a consistent demonstration of the natural harmony of the rational self-interests of all men under capitalism—of businessmen and wage earners, of consumers and producers, of men of all races and nationalities, including immigrants and the native born, and of competitors of all levels of ability—consonances most will find astonishing, given the prevailing misunderstandings of capitalism in the present day.
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