Bigots, boycotts and business

It is a common myth that bigotry, while endemic in the private sphere, is only eradicated when government's step in and take action. Yet the history of bigotry shows something else altogether.

During the era of segregation in the American South the Civil Rights movement got a major boost from the Selma bus boycotts. Rosa Parks refused to sit at the back of the bus and instead used a seat “reserved” for whites. This act of defiance set off the boycotts. Eventually the federal government stepped in with various civil rights measures and eradicated this example of bigotry.

But bus seats were not reserved by race at the whim of the bus companies. In fact the companies were compelled to obey various governmental regulations that required them to segregate the passengers on their buses. And they were prosecuted if they disobeyed. Private companies were forced into accepting racial segregation imposed on them by politicians.

The anti-apartheid fighter Helen Suzman noted that the South African government had separate schools for the various races and, in addition, separated white Afrikaners from English speaking whites as well. But she said: “Private schools, however, are integrated. Many of the private schools, in fact practically all of them, have not only English and Afrikaner students but students of other races as well.”

Merle Lipton’s exhaustive analysis Capitalism and Apartheid showed that repeatedly the government had to step in and force businessmen to discriminate on the basis of race. Left to their own “profit-seeking” devices they found such bigotry to be contrary to their own self-interest.

Today around the world the issue of rights for gay men and women is hotly debated in government. Moves to extend rights to gay couples are fiercely resisted by politicians in almost every country. Almost unnoticed is the fact that businesses are implementing policies that recognise gay relationships.

If anything, government’s tend to act against bigotry only after the private sector has already stepped in to eradicate it. The nature of politics is inherently conservative and resistant to change. But the private market thrives on innovation and change.

Bigotry like any other action has costs associated with it. And bigots in general don't like to pay those costs. They much more prefer to pass the costs on to third parties.

In a famous incident in South Africa a local city councillor of the Conservative Party, who opposed the ending of segregation, willingly sold his own home, in a white area, to black buyers. The reason was simple enough. In this case if he refused he had to take the second highest bid and the difference between the two bids was something he paid himself. Suddenly when bigotry was costing him directly he no longer advocated racial separation.

It is government intervention that allows bigots to impose their costs on everyone. Take for instance a bigoted employer who prefers not hire a specific type of person. He has to search through more potential employees to find what he wants. And if someone comes along who is highly qualified for the job but from a non-preferred group he has to send them away. He loses the opportunity to employ workers that will bring him benefits and instead sends them to his competitors.

In a free market the cost of his bigotry is paid entirely by him. But what bigots prefer to do is to have laws that require their competitors to act in the same manner. Then the competition is also prevented from hiring the workers that the bigot dislikes. When the government gets involved the bigot is able to pass on some of the costs of discrimination to his competitors.

And that is certainly what the white trade unions found to be true in South Africa. When mining companies were left alone to concentrate on maximising profits they preferred to hire the best workers at the best wage, regardless of race. To prevent this from happening job reservation was imposed by the state. Farmers that supported job reservation for urban jobs successfully fought off similar measures when it came to jobs in rural areas. The law prevented black farm workers from seeking out higher paying jobs in the city, which forced up wages in the city but kept farm wages low. The use of politics allowed bigots to pass the costs on to unwilling third parties.

Bigotry, like anything else, is price sensitive. People want less of it when they pay the cost themselves. So contrary to widespread opinion it is government intervention that allows bigotry to flourish while markets constantly undermine it.

Author: Jim Peron is a freelance researcher and writer who is currently a finalist in the Bastiat Prize for Journalism. This article may be republished without prior consent but with acknowledgement. The patrons, council and members of the Free Market Foundation do not necessarily agree with the views expressed in the article.

FMF Article of the Week\30 July 2002- FMF Policy Bulletin 24 November 2009