Explore Freedom

Explore Freedom » Race and the Market Process

FFF Articles

Race and the Market Process

by

In the 1850s, a Southerner named George Fitzhugh wrote two books entitled, Sociology for the South: or The Failure of Free Society and Cannibals All! Or Slaves Without Masters. The essence of his argument was summarized by him in one sentence: “Liberty is an evil which government is intended to correct.”

The free society and the market economy, Mr. Fitzhugh argued, had fundamental flaws: among them were the tendency for the strong to exploit the weak; for the laboring classes to be undisciplined; and for the basic needs of the masses to go unprovided for. Government had to rectify these injustices, he insisted. The working masses, Mr. Fitzhugh said, “have a natural right to guardians, committees, teachers and masters. Nature has made them slaves; all that law and government can do, is to regulate, modify and mitigate their slavery.”

He was sympathetic toward the socialists of 19th-century Europe. They wanted to eliminate competition, protect the working classes and do away with exploitive private property. The American South, however, Mr. Fitzhugh explained, had no need for socialism because the Southern states already had slavery — and slavery was socialism without the erroneous idea of an equality among men. All the purposes of socialism, he explained, “slavery fully and perfectly attains.” After all, “Slaves, too, have a valuable property in their masters,” who are responsible for their care and maintenance.

“Socialism,” he said, “is already slavery in all save the master. It had as well adopt that feature at once, as come to that it must to make its schemes at once humane and efficient.” The conclusion that Mr. Fitzhugh reached was that Southern slavery had been completely misunderstood. It was not racist in its essence; quite the contrary, it was a system of benevolence in which the blacks of the South were given that to which all members of the working class had a right: guaranteed work and welfare. The world needed more slavery, not less, he believed.

In the 19th century, the opponents of slavery were easily able to refute rationales for slavery like George Fitzhugh’s. They countered that it was the market economy that had done away with the exploitation of some men by others by establishing the rule of voluntary exchange, in which everyone serves his fellow man in the social system of division of labor. And they argued that it was a political regime of liberty that taught men the principles of self-rule, as each became responsible for his own actions and their consequences, for good or ill.

And the opponents of slavery could point to the state constitution of Mississippi, which, in the pre-Civil War days, had the following clause: “The legislature shall have no power to pass laws for the emancipation of slaves … [except] where the slave shall have rendered the State some distinguished service.” The greatest reward in other words, that Mississippi could bestow upon a slave was the freedom to plan and care for his own life.

In the 20th century, unfortunately, new George Fitzhughs have been able to rationalize a new slavery, and with much less opposition than the 19th-century George Fitzhugh had to face. Jesse Jackson, for example, constantly refers to the “economic violence” of a market economy. What is the nature of the “economic violence”? The market, it seems, manifests its “violence” by not providing everyone with a guaranteed job where and when they want it, at the wage they would prefer to have. And the market does not provide free of charge either food, lodging, health care or retirement insurance. “Economic peace” can only be assured, it seems, through the welfare state, government management of trade and industry, and government-guaranteed work and wages. Benevolent slavery all over again.

And as in 19th-century America, the primary victims of “slavery with a human face” are many members of the black community. From the stigma of being the recipients of “minority” earmarked programs (so much nicer and nondescript than to call them “black programs”) to the indignities of being wards and victims of peering and supervising welfare bureaucrats, American blacks are classified and treated as separate and unequal — needing special programs and unique assistance different from every other group of individuals in American history (with the possible exception of American Indians). And every black in America, if affirmative action trends and policies continue, will soon “know his place.” He will be assigned a quota in each and every occupation in the economy commensurate not with individual talent, market value or ability, but on the basis of how many “of them” populate a particular region or geographical area.

In the name of group equity and equality of outcome, as measured by the number of ethnic members in each profession and occupation, America is moving toward a new caste system.

Why is it that an apologist for slavery like George Fitzhugh and a descendant of slaves like Jesse Jackson both abhor the market economy? Because in the long run, a market economy is color-blind. In the market process, there is only one meaning to everyone’s finding their appropriate place — where they can be most effectively employed to satisfy consumer demands. But each individual’s position in the division of labor tends to have nothing to do with his color or ancestral background.

The market is guided by the pursuit of monetary rewards for services rendered to others. In a money economy, the only way one can satisfy one’s own desire for the consumer goods and services available from others is first to have earned the financial wherewithal to do so by selling some product(s) to others that they desire, and on mutually agreed-upon terms. And in a competitive market environment, each seller must be constantly alert to product improvement, cost efficiencies and least-cost pricing of his wares.

From an employer’s point of view, therefore, (and as Karl Marx correctly observed!) workers tend to be evaluated as just so much of another commodity to be hired for the purposes of production. “Will hiring this individual add to the profits that I could earn and, if so, (at the margin) by how much?” the employer asks himself.

The potential employer who allows his racial prejudices to get the better of him in deciding on whether or not to hire a person, as a consequence, bears a cost — the cost of foregone profits by hiring a less qualified worker of a different race, and running the risk of losing out to a competitor who will hire the racially shunned worker, instead, and thereby gain a market advantage over the bigot.

Furthermore, in the free market process, nothing precludes an individual who believes that potential employers are failing to fully evaluate his market worth from moving to another location in the economy, where he thinks that “fair market value” is more likely to be paid for his labor service. Nor does anything preclude his entering into self-employment, where he may believe that his talents will more effectively receive the recognition and reward that he is convinced they deserve and can earn.

But this also means that over time in a free market, the outcomes received by blacks may manifest no group-specific characteristics. There will be rich blacks and poor; those who live in urban areas and those who do not; blacks in sports and those in academic professions; blacks who are politically individualist and those who are advocates of interventionism. And, in fact, to the extent that market forces have been permitted to function, these are precisely the outcomes that have been occurring — just as with every other ethnic group that has entered the American community.

In the market, there is only one color that matters — the color of your money. And this, like so many other things in a market economy, drives some people mad. For George Fitzhugh, market freedom meant that Southern blacks would be “undisciplined.” They would work at what they found attractive, at wages they found acceptable and under conditions they found reasonable. What chaos! They needed a task-master — a planner — to assign them their appropriate place, for their own good and that of the society as a whole.

For Jesse Jackson, market freedom means that blacks are not guaranteed employment percentages in various jobs, that their acceptance into schools of higher learning is not assured according to a racial quota, that they are not assigned their “fair share” in housing or of medical care, or assured a minimum of income. In spite of any appeal for a color-blind society, it is color-conscious politics that Mr. Jackson both wants and insists upon. And color-conscious politics requires a social engineers — task-master — who imposes the outcomes that he considers to be each group’s just due.

The market knows no political task-master. It has as many masters as participants in the market process, each in his role as consumer. But each is also a servant, in his role as producer. The market respects racial and cultural biases — but only at a price. It is because there are many who are not willing to pay those prices that the George Fitzhughs of the world have wanted, through the power of the state, to segregate the races and oversee their conduct. And it is because the market guarantees no outcomes for groups of people, but, instead, evaluates and rewards them as individuals, that the Jesse Jacksons of the world have wished to politically mandate economic outcomes and social results through the power of the state.

Do culture and tradition influence the paths followed and the outcomes attained by individuals? Of course. And are there not racists who judge men by their color rather than their individual characteristics? Unfortunately.

But the importance of the free market is that it offers individuals an escape from both. While culture and tradition can protect, nurture and bind men together for social stability and advancement, it can also straightjacket and retard. The free market and the open society, by offering an array of choices and options, allows each person, in a real sense, to select his own culture and tradition. And the market, precisely because it respects individual choice and a wide range of cultural diversity, imposes economic and social costs on those who do not respect and tolerate the differences among men — even when much of that cultural, ethnic and social diversity may not be to his own liking.

What George Fitzhugh defended, and Jesse Jackson advocates, is slavery, no matter how benevolent the mask worn to disguise it. And the way of life which both of them favor is inconsistent with the principles of individual liberty and the free market economy. America was born as a nation to escape from the old slavery — from the politically dominated society. The new century just ahead should not be allowed to be a pouring of the old slavery wine into a new political bottle. Black Americans, as well as all other Americans, deserve much better.

  • Categories
  • This post was written by:

    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).