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Racism, Free Markets, and Libertarian Deceit
The problem of whiteness as property

by Tim Wise
01.15.03

there are at least a few things I’ve learned. First, that it makes almost no sense whatsoever for a child to argue with his or her parents about bedtime. Secondly, that it makes almost as little sense to argue with a cop about a speeding ticket. And finally, that it makes even less sense to argue with a libertarian about anything.

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

That said, it is still necessary to understand why this particular libertarian logic is flawed on any number of issues. This is true not because it is particularly helpful in winning arguments with its adherents, but rather to fully understand the realities of power and privilege and the ways in which the current economic system perpetuates massive inequalities. It is also helpful as a pre-emptive antidote for those who may be vulnerable to the simplistic, almost-sounds-like-it-makes-sense worldview of free market fanatics.

Examining the libertarian position on racism and racial discrimination is particularly fascinating, and makes clear the degree to which those who cleave to this ideology are living in a world completely divorced from reality.

According to libertarians, racial discrimination in the workforce cannot occur to any real extent in a market economy, because it is fundamentally irrational and would cost employers money. Even though the current U.S. economy is not a pure free market, most libertarians likewise claim that racism in the labor market is rare today, and for this same reason: namely, that to discriminate against a more qualified worker of color just because of his or her race would result in that employer losing money, relative to their non-racist competitors who would presumably snatch up the passed over employees and reap the benefits of doing so. To the extent that there are large racial differences in income, wealth, or occupational status, libertarians assume this must be the result of people of color being objectively less qualified. Passing a person of color over for a certain job or promotion is therefore not evidence of racism, but merely a rational calculation of merit.

Yet this argument assumes that racial discrimination only manifests in direct acts of overt bias (i.e., the racist employer who refuses to hire blacks). But much of the inequality in the labor market stems from factors other than overt bias. For example, 85-90% of all jobs are never advertised, according to the National Center for Career Strategies, but rather are filled through informal networks of associates, friends, family and assorted connections.

As such, there is no free and open competition for most positions; employers aren’t even in a position to size up all the possible people they could hire, and then make an overtly biased decision on the basis of race. Rather, most hires are made without a broad, open competition, and since blacks and other people of color are disproportionately excluded from the best informal networks for jobs (the result of past and ongoing unequal opportunity in housing and education), many qualified people of color will never have a shot to be hired (or directly rejected for that matter), since the employers in question won’t even know about them.

Similarly, since the employer can’t know about the possible employees who didn’t apply (because they were out of the word-of-mouth network), they can’t possibly realize, after the fact, that perhaps they lost out by not doing more to diversify their hiring. They wouldn’t be able to see that there were equally or more qualified people of color they might have hired, because they would have no awareness of such persons in the potential pool. Nor would their competitors be much better in this regard, since they too are likely to hire within networks and other informal mechanisms.

In other words, the market in most cases is an insular one that fails to provide adequate information to employers that they would need to make true merit decisions, or to recognize the mistakes that come from maintaining discriminatory networks for jobs and opportunities.

The libertarian argument also assumes that it is possible for an employer who makes a racist decision to realize, after the fact, that they made a mistake because presumably less racist competitors will gobble up the passed over employees of color and reap greater profits. But this is only true in theory. In practice, employers cannot possibly know whether hiring a particular person, or not doing so, was the key to their profits in the following quarter: there are too many variables that impact profits, of which labor productivity is only one.

Also, since the marginal productivity differences between employees hired and those passed over are often quite small, discerning the impact of a racist hiring process versus a non-racist one is virtually impossible.

Thirdly, even in theory the only way that the argument could work is if the passed over (black, let’s say) potential hire then applies for work with a direct competitor in the same market and industry as the racist employer.

For example, if a racist employer in the insurance industry doesn’t want to hire black people because he thinks they are generally lazy, unless the spurned applicant who is black applies for work with a direct competitor, how in the world could employer number one ever be able to see the result as a mistake, due to the productivity of the rejected applicant? If the rejected applicant then proceeds to get work at a car dealership, how would that worker's productivity at the car dealership (a) even come to the attention of the racist employer who passed him/her over; (b) be comparable to the productivity of whatever white worker was ultimately hired by the racist employer to sell insurance, and ;(c) therefore be capable of “teaching the racist a lesson”?

Furthermore, in a society where racism and white privilege have been so important to the way in which the world of work is organized, and have come to define what constitutes a “good neighborhood,” a “good job,” or a “good school,” it is no exaggeration to say that whiteness has become a form of property itself. As such, to view racism as inimical to property interests and profit is to ignore the extent to which white skin is property in a racist culture, and the extent to which one might seek to preserve that form of property and “profit” even at the expense of other more tangible kinds.

After all, the history of the labor movement has been one where white workers often sacrificed their rational economic interests for the sake of maintaining an edge and privileged position over persons of color. To expect employers to act any differently is preposterous: economic interests can and have been viewed in both absolute and relative terms. In absolute terms, racism may be unprofitable, but in relative terms it is anything but—and in a racist society it is, by definition, the relative that counts.

Finally, to the extent that accumulated credentials have been afforded to whites as a result of past discrimination and privilege, employers can make “rational” hiring decisions based on “qualifications” and still perpetuate racism, since the greater “merit” of the whites will be contingent upon having had greater opportunity in the first place. Since libertarians don’t deny the reality of past racism, it is hard for them to then deny the accumulated impact of this racism on present-day job-seekers, business people seeking contracts, or even students applying to college.

Ultimately, libertarian principles dictate an approach to racism far different from the laissez-faire methods currently in vogue. After all, the libertarians generally insist that for a distribution of goods to be just, it must come about from productive exchange and “just transfer.” These terms are defined as any and all exchanges that result from free, uncoerced mutual agreement between parties: a condition missing from racial distributions—even under the most conservative or libertarian analysis—for the better part of our nation’s history.

Coercion, force, fraud, deceit, and the lack of mutuality in contracts have governed relations between whites and people of color for the better part of this nation’s history. The so-called free market was vitiated from day one on behalf of elites seeking to multiply their wealth and power at the expense of chattel slaves, first peoples and Mexicans, (not to mention imported and oppressed Asian workers). As such, a total free market would have the effect of cementing in place existing inequities: inequities which, even under libertarian logic, are unjust, having come from unnatural, anti-market interventions in the economy so as to benefit whites.

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

Inheritance of parental assets and ongoing financial support from parents has given the typical young white couple a net worth almost $20,000 above that of similar blacks. Indeed, the wealth gap between whites and blacks has increased over the past twenty years even as the income gap has closed. Housing preferences alone for white Americans in the middle of the 1900’s (provided via racially restrictive FHA lending as well as blatant anti-black discrimination by banks offering conventional mortgages) were worth hundreds of billions of dollars in equity and now are part of nearly $10 trillion being inherited by white baby boomers and their children.

Even whites below the poverty line are more likely to own their own home than blacks with three times more annual income, because of assets passed down from white parents. This wealth disparity makes it much easier for whites to maintain or improve their economic status intergenerationally.

The black middle class, though growing, remains far more vulnerable to economic disruption than its white counterpart. In fact, the typical black middle-class family has net financial assets of less than $300 and would be unable to sustain even one month of unemployment at the poverty level, due to a lack of net worth. By contrast, 75% of whites have enough assets to go a month without income and 40% could last three months without pay.

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