Race and the Free Market

With the fiasco surrounding L.A. Clipper’s owner Donald Sterling’s racist remarks uttered in private to his mistress it seems when race is involved proper due attention to important moral considerations goes out the window. His statements were deeply asinine but they were done in private. And it is troubling to think that the media that reported on this and those that leapt to condemn him seem to see no moral dilemma in reporting the private words of a man without his knowledge. Who hasn't said something in private that they would be deeply embarrassed if it was broadcast publicly? I could guarantee the editors at these newspapers have skeletons of their own they wouldn't want revealed.

I for one wouldn’t care if Barack Obama was deeply racist against whites in his personal life and said all sorts of vile things about whites in private. What matters to me are the man’s policies because he is important as the President of the United States, and it is his actions as the President of the United States that matters. Same with Sterling, as David Henderson points out, the market imposes costs on racists so there is every incentive for them to treat everyone fairly.

"What I find interesting about the case of Los Angeles Clippers owner Donald Sterling is how well it illustrates Gary Becker's insights on the economics of discrimination. Becker pointed out that the market makes people "pay" for discriminating on racial grounds. The white person who refuses to hire a black person who is more productive than a white employee (assuming the same wage for each) will find himself doing less well economically than if he hired the black person. Linda Gorman, in her article on Discrimination in The Concise Encyclopedia of Economics, lays out this insight nicely.

How does that apply here? Well, it seems fairly obvious that Donald Sterling is a racist. But you couldn't tell that by looking at the race of the players whom he has paid big bucks to hire. So, however foolish he might have been--tip for budding racists: don't make racist comments to a young lover whom it's clear you don't trust, and, even better, DON'T GO CHEATING ON YOUR WIFE--he was not so foolish as to try to win basketball games with an all-white roster. Indeed, take a look at the Clippers' payroll. The top 3 players alone made in salary this season a total of over $46 million while the payroll for the whole 18-person roster was $73 million. And guess what race these top 3 are.

In other words, the market disciplined Donald Sterling. In hiring players, he didn't discriminate against black men. Doing so would have been too costly."

 

I might also add that Sterling employs a black coach even though the majority of the coaches in the NBA are white. 

It's often heard that the American Tea Party with its emphasis on small government is racist, and in Australia those that object to welfare benefits for Aboriginals - no matter how ineffectual - are likewise denounced. But this belies the historical examples of who was on the right sight of the moral debate over race back during an era when racism was politically accepted. I don't think its a coincidence that many of the classical liberals of the past were also opposed to slavery and other racist policies. Take Australia's very own Bruce Smith, for example. Smith was a businessman, barrister and politician in the NSW parliament, he was also a follower of Adam Smith and wrote a defence of his principles in a work called Liberty and Liberalism in 1887. He was against high taxation, favoured free trade when it was less fashionable to do so, and believed the government should not interfere unnecessarily into the private property of its citizens.

Bruce Smith is also famous for being one of the most vociferous opponents of the White Australia Policy and thought women were deserving of equal pay. Being a former employer and a free marketeer, he believed that everyone should have equal opportunities and that labor should be able to cross borders as easily as goods. So the same person was both Australia's standout classical liberal and standout opponent of the WAP. 

Certainly not all the proponents of free trade were as opposed to WAP as Smith. Some, like William McMillan, believed not excluding certain races was a threat to "...the purity of our race and the future of our nation" (quoted in Nicholas Dyrenfurth, 2009; 254). But having said this, as Nicholas Dyrenfurth points out, he was pressured to justify his racism and to invent dire consequences for breaking white Australia taboos by his adherence to free trade principles. Dyrenfurth writes

"...McMillan appears to have worried more than any other member of the federal parliament that what Australians were doing in their immigration policiy could not easily be tallied with the ideal of open borders he advocated in connection with goods." (Ibid)

There's certainly plenty of evidence that Australia and the other English-speaking nations at the time were filled with racist sentiments - and just about every other nation on the planet for that matter - but to reiterate Henderson's point, the institutions that were at play in those countries were heavy restraints against all forms of racism.