The Myths Behind the “Capitalism Is Racist” Claim
Though numerous studies prove the contrary, it is still widely assumed that capitalism perpetuates racism. Celebrities and academics incessantly broadcast the message that capitalism engenders racism. For example, recently on Twitter, superstar athlete Andre Iguodala informed his followers that capitalism cannot be divorced from racism: “Capitalism and racism go hand in hand. And you can’t have one without the other.” Equally scathing is the blistering declaration of sociologist Edna Bonacich in an academic review: “Capitalism and racism are closely connected….The huge wealth of America’s white-owned corporations rests on the backs of the hard labor of workers, many of whom are people of color.”
Despite the popularity of anticapitalist rhetoric, it is woefully mistaken. Some entrepreneurs will express racist tendencies, but if they are determined to succeed in business, they have no alternative but to jettison such beliefs. Gary Becker pointed this out years ago in his frequently cited book The Economics of Discrimination. Becker posited that competition in the free market made it costly for companies to discriminate against individuals due to group identity. By refusing to hire qualified applicants because of race or sex, businesses would lose market share. Racists may object to employing people outside of their race, however, the crux of the matter is that self-interest trumps the collectivism of racism. Although racists may abhor minorities, the urge to accumulate wealth is far more potent than the desire to discriminate.
Similarly, recent research corroborates Becker’s thesis that firms engaging in discrimination are less likely to remain competitive. Devah Pager in an innovative 2016 study testing the relationship between observed discrimination and firm longevity concludes that these firms show a greater propensity to fail:
This study builds on the findings of an experimental audit study of racial discrimination in employment conducted in New York City in 2004….We see that 17 percent of nondiscriminatory establishments had failed by 2010, r
Article from Mises Wire