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Stop the Attack on Wal-Mart

June 23, 2001

Tags The EntrepreneurU.S. Economy

Wal-Mart is the latest victim of the discrimination police.  Now most people, of course, rather like Wal-Mart (which also operates Sam’s Club).  It makes inexpensive goods available to a great many Americans.  It also employs nearly one million people, three-fourths of them women.

But, you see, not enough of these women are in executive positions, according to a new class-action lawsuit against the department store chain, and spokesmen for the suit are sure they know just how many female executives Wal-Mart should have. 

The suit, filed in San Francisco’s U.S. District Court, claims to represent as many as 500,000 former and current female workers at the chain.  The precise amount of damages to be sought has not yet been determined.  Although I’m no Ayn Rand sycophant, this kind of incredibly destructive war on the productive makes me yearn for the businessmen’s general strike described in Atlas Shrugged.

The prima facie case against Wal-Mart does not seem especially strong.  As of now, 37 percent of Wal-Mart’s 55,000 management positions are held by women, and since Wal-Mart does not count store department managers as management, the relevant figure is likely higher still.  

The plaintiffs would have us believe that executives at Wal-Mart, a store which operates in an environment of intense competition, would rather indulge an irrational loathing for women than enjoy the added profits that hiring and promoting qualified women would bring.  No one ever bothers to explain why an employer would behave like this.

The war on Wal-Mart provides an opportunity to review the destruction wrought by antidiscrimination law.  Under such law, statistical disparities are routinely cited as evidence of "discrimination," and it is all but impossible for a business to defend itself against such accusations—especially when a hostile media is unlikely to report any mitigating factors.  

Thus, for example, the discrimination hustlers have set their sights on lending institutions: Banks, they contend, must be discriminating against blacks because blacks do not receive loans in proportion to their representation in the general population.  Never mentioned in any of these reports is that blacks, on average, have poorer credit ratings than whites, or that default rates for whites and blacks are identical.  If blacks were really being held to a higher, discriminatory standard, their default rates should be lower, but they are not.

Nevertheless, federal agents have sent spies into banks around the country, testing to see whether loans would be offered to people of various races.  To protect themselves from ruinous charges of discrimination, banks have effectively established quota systems in lending, passing over qualified whites in favor of minorities whose credit ratings do not justify such loans.  Using Jesse Jackson-like tactics, left-wing agitators have engaged in shakedowns worth hundreds of millions of dollars at bank after bank.

There can be no question that quota systems in hiring, which businesses have generally established in order to protect themselves from charges of discrimination that are nearly impossible to disprove, result in the hiring of (often dramatically) less qualified applicants.  Several years ago, Forbes senior editor Peter Brimelow estimated the cost of quotas to the American economy as $300 billion.  No mainstream media outlet ever troubles to mention this figure.

In order to justify itself, the state routinely poses as the fountainhead of all prosperity, justice, and achievement.  Without antidiscrimination law, say the state’s minions, blacks and women would be intolerably oppressed.  

Never mentioned is the fact that the black middle class was well established long before anyone had even suggested affirmative action andthat it was not accelerated by either the Civil Rights Act of 1964 or by preferential policies; nor is the fact every mentioned that women’s workforce participation and rising prosperity long predated the women’s movement.  None of that fits in with the cartoon version of American history that liberals consistently peddle.

Thomas Sowell should have demolished these tired claims once and for all in his indispensable book, Civil Rights: Rhetoric or Reality? He writes: "In the period from 1954 to 1964, for example, the number of blacks in professional, technical, and similar high-level positions more than doubled.  In other kinds of occupations, the advance of blacks was even greater during the 1940s—when there was little or no civil rights policy—than during the 1950s when the civil rights revolution was in its heyday."

And, Sowell continues:

The rise in the number of blacks in professional and technical occupations in the two years from 1964 to 1966 (after the Civil Rights Act) was in fact less than in the one year from 1961 to 1962 (before the Civil Rights Act).  If one takes into account the growing black population by looking at percentages instead of absolute numbers, it becomes even clearer that the Civil Rights Act of 1964 represented no acceleration in trends that had been going on for many years.  The percentage of employed blacks who were professional and technical workers rose less in the five years following the Civil Rights Act of 1964 than in the five years preceding it.  The percentage of employed blacks who were managers and administrators was the same in 1967 as in 1964—and in 1960.  Nor did the institution of "goals and timetables" at the end of 1971 mark any acceleration in the long trend of rising black representation in these occupations.  True, there was an appreciable increase in the percentage of blacks in professional and technical fields from 1971 to 1972, but almost entirely offset by a reduction in the percentage of blacks who were managers and administrators."

Likewise, the Japanese in America were discriminated against so badly that 120,000 of them were interned in relocation camps during World War II; yet by 1959, Japanese-American households had equaled those of whites in income, and by 1969, they were earning one-third more.  None of this fits in with the standard story of discrimination, either.  

"The history of Asians and Hispanics," Sowell writes, "likewise shows long-term upward trends that began years before the Civil Rights Act of 1964 and were not noticeably accelerated by the Act or by later ‘affirmative action’ policies.  The income of Mexican Americans rose relative to that of non-Hispanic whites between 1959 and 1969 (after the Civil Rights Act), but no more so than from 1949 to 1959 (before the Act).  Chinese and Japanese-Americans overtook other Americans in income by 1959—five years before the Civil Rights Act."

The only people who benefit from all of this immensely costly and destructive antidiscrimination legislation are the lawyers who grow rich from it and the politicians who use it to court certain preferred groups.  The rest of us are made immeasurably poorer by decreased productivity, the gross inefficiencies of the quota system, and the astronomical legal costs involved—to say nothing of the invasions of privacy and atmosphere of suspicion that now pervade the workplace.

Don't let anyone tell you that these suits are actually good for business because they make the employee base more diverse. Shoney's and Denny's, two other companies beloved by regular people, were seriously injured by these suits. They constitute a grave danger to profits and future investment. That is why a growing number of companies have begun to resort to private arbitration agencies, requiring prospective employees to agree to settle discrimination or harassment claims that way rather than in the kangaroo courts of the government, where arbitrariness and ludicrously high settlements terrorize productive businessmen.

In a free society, the right to hire, fire, and promote belongs to the property owner.  If he behaves irrationally, he will be swiftly punished in the market by competitors who base their decisions exclusively on merit.  Arbitrary hiring and firing has its costs—in bad public relations (which in turn make it more difficult to find prospective employees), in the destruction of workplace morale, and in profits foregone when superior individuals are passed over to satisfy the prejudices of the employer. Such behavior is not free, and when practiced irrationally makes no business sense at all.  

This market mechanism is the only form of business regulation, as it were, that respects the just claims of property owners and does not lead to general impoverishment or the corruption of the legal system.  The present system of ceaseless litigation, on the other hand, only encourages the proliferation of discrimination hucksters like Jesse Jackson and, now, the insufferable anti-Wal-Mart cabal.

This common-sense approach is routinely dismissed out of hand—if it is raised at all—as "extreme," yet it is the only path to civil peace and prosperity.

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Thomas E. Woods, Jr., adjunct scholar and faculty member of the Mises Institute, teaches history at Suffolk Community College. woodst@sunysuffolk.edu. Read his essay on  The Colonial Origins of American Liberty,


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