Mises Wire

Capitalism Is Not Racist; Capitalism Undermines Racism

Anticapitalist intellectuals have infused mainstream discourse with the idea that racial discrimination is baked into the DNA of capitalism. Usually, evidence of racial disparities in professional quarters is cited to buttress the narrative that capitalism is penalizing minority groups. Though it has become commonplace to argue that disparities constitute racism, the issue is more complex.

Racial discrimination is not an entrenched feature of capitalism, yet businesses must discriminate to remain competitive. Failing to reward the right competencies will result in failure. Therefore, discrimination is a legitimate policy that only becomes objectionable when done for nonmarket reasons. Even consumers discriminate on a daily basis, although they might not recognize it as such.

When parents insist that their children attend schools managed by capable educators, this is a form of discrimination because they are rejecting inferior schools. Secondly, other consumers prefer employing the services of formally educated workmen in contrast to their self-taught peers and are willing to pay a premium to obtain that labor. An unwillingness to discriminate is tantamount to incompetence, since the costs of inaction are detrimental to one’s business and well-being.

Using this pragmatic model of discrimination, it becomes easier to appreciate why some groups are less likely to be employed in white-collar jobs. Robert J. Morris presents data showing that the paucity of minorities in white-collar jobs is possibly a consequence of the achievement gap:

Black students made up less than three percent of the approximately 330,000 students from the graduating class of 2020 who took the ACT and were considered to be ‘‘STEM ready’’ students based on their Science and Math scores. Hispanics made up eight percent of the “STEM ready” students, whereas white students and Asian students made up 64 percent and 11 percent respectively.

Mediocre scores automatically disqualify minority students from attending elite colleges and becoming white-collar professionals. Likewise, in reading, the performance gap between whites and minority groups is abysmal. In Florida’s Alachua County public school district white pupils are reporting 72 percent achievement in reading and black students are reporting a paltry 25 percent.

Activist Tia Leather in an interview viscerally explained the implications of inept reading skills:

The reading level can mean that there are certain jobs, you can’t apply for. Certain levels of life, you just will never get to…. And as we know, through the research, it could mean jail time. And that’s how they’re building our prisons based on how well you’re reading by … third or fourth grade. So, the issue is there’s so many layers to unpack.

Moreover, Wells Fargo CEO Charles Scharf was recently vilified for observing that reaching diversity targets might be impossible due to the shortage of qualified minority talent. If the intellectual achievements of some minority groups are too meagre for them to join the ranks of the elite, then this is a problem to be solved by minority communities. Sociologists have penned compelling narratives linking the fortunes of students to family stability, and others assert that equivalent family patterns would narrow the racial wealth gap, but despite a treasure trove of evidence contradicting the racialist theory of capitalism, it continues to wield enormous clout in policy circles.

However, the sharpest evidence against the theory of racial capitalism is the preference for black workers during an era shaped by virulent racism. If capitalism is judging people on the basis of race, then in an environment where racism is acceptable, racist businessmen should refrain from conducting business with blacks. But this is not what we observe when studying the history of slavery.

Unsurprisingly, entrepreneurs are motivated by money, so even when they are racist, the pressure to accumulate wealth propels them to engage blacks. On slave plantations, overseers were responsible for executing important tasks requiring managerial competence. They supervised junior staff, disciplined slaves, and reported to planters. Overseers had to possess intimate knowledge of plantation management to reap success, hence planters selected for highly intelligent people.

Yet in the American South, black overseers were favored due to the deficiencies of their white peers, as Laura Sandy points out in a research article:

When compared with white overseers, the enslaved were not simply viewed as equivalent, and publicly advertised as “known to be equal to the management” capabilities of their white counterparts, but they were frequently considered to be superior.

Sandy’s account is corroborated by primary sources:

In 1784, Alexander Rose posted an advertisement in the Gazette of the State of South Carolina, which praised an enslaved man named Jonathan as having “more general or better knowledge of planting” than the majority of “White Men” in the state. Later in the decade another planter, who claimed to have purchased “perhaps one of the most valuable Negroes” in the Lowcountry, broadcasted the use of an enslaved man to manage his plantation without a white overseer present. With the enslaved at the helm, “any manager or overseer” was unnecessary; the enslaved overseer could direct plantation operations very profitably, independent of white supervision.

Relying on incompetent whites to manage estates was a losing strategy for planters, so to avert the demise of their plantations, they eagerly employed the services of blacks. Other than managing estates, enslaved workers were so competent at the trades that by the eighteenth century they were outperforming white men. Such findings are not peculiar to the American South: in Bridgetown, Barbados, free blacks dominated the market for skilled labor to the detriment of white artisans.

Irrespective of ideological positions, employers will prefer quality labor to inferior substitutes. Racist planters chose competent blacks over incompetent whites to the chagrin of their colleagues when racism was tolerable, so why would employers in an age where racism is perceived as deplorable penalize employees because of race?

Luckily, we don’t need to belabor the debate because the issue is indeed simple—some minority groups fail to attain parity with whites due to lower levels of human capital. In short, only lagging groups and their leaders can correct the achievement gap but a fixation on dubious theories of racial capitalism is sure to distract them from achieving worthwhile goals.

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