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Posts Tagged ‘capitalism’

Capitalism, except for the capitalists

Posted by M. C. on March 18, 2023

What happened over the weekend is bigger than Silicon Valley Bank; once again the wealthiest, most politically connected companies and executives are proving the rules don’t apply to them.

Eventually these excesses will have to be unwound, gradually or suddenly. When they are, you can bet that all the people who have made fortunes from cheap cash for the last 15 years will be reaching into someone else’s pockets to save themselves – just as they did over the weekend.And the only pockets left will be the federal government’s.

In other words, yours.

Alex Berenson

Back to the banks.

For a few hours on Sunday, they fooled me.

At 6:15 p.m. Sunday, the government and Federal Reserve announced they would guarantee all deposits at the two big banks they’d closed, Silicon Valley Bank and Signature Bank – removing the $250,000 limit on insured accounts to help prevent a bank run.

Taxpayers would not be on the hook for any losses, they said. The banking industry would pay for the extra insurance.

I didn’t think the deposit insurance should be extended at all.

When banks failed in 2008, we didn’t have unlimited deposit insurance, and we didn’t have widespread bank runs on healthy or unhealthy institutions. Very few individuals have more than $250,000 in their plain vanilla bank accounts (as opposed to brokerage accounts where they are saving for retirement).

So extending the limits at taxpayer expense to protect very wealthy depositors and – in the case of Silicon Valley Bank – venture-capital backed companies didn’t seem fair.

And we have limits on government backed deposit insurance for good reason. Without it, large depositors have every reason to chase the highest possible interest rates on their money, even at badly managed banks. Why? They know that even if the bank squanders their deposits on bad loans, they’ll get their money back.


This risk is not theoretical. In the 1980s, many savings and loans crashed after offering high-yielding deposits. As financial historian and journalist Roger Lowenstein explained yesterday in the New York Times:

When the Federal Reserve, under pressure of rising inflation, began to jack up rates, S.&L.’s had to pay higher rates to attract deposits…

Many switched to riskier assets to juice their returns, but as these investments soured, their problems worsened. Roughly a third, or about 1,000, S.&.L.’s failed.

But venture capitalists – led by David Sacks, a good friend of Elon Musk – spent the weekend screaming that bank runs would be inevitable if the government didn’t guarantee all depositors.

Many if not most of these folks had not-at-all hidden conflicts-of-interest – either personal deposits at Silicon Valley Bank or investments in companies that had deposits there. Nonetheless, they insisted that they were warning about bank runs solely because they wanted to save ‘Merica from bank runs!

Whether or not they were trying to worsen the crisis, their warnings certainly did. They essentially forced the government’s hand.

My old friend and colleague Jesse Eisinger (I guess he’s now a ex-friend, thanks to my reporting on Covid and the mRNAs, but that’s a story for another day) captured the dynamic nicely:

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Capitalism is a Machine of Subjective Value | The Libertarian Institute

Posted by M. C. on December 22, 2022

by Zack Sorenson

What is economics and why do we care about it? The economy is what we do and why we do it. Reality introduces scarcity to that equation, and competition results. Our desires and values translate into actions, and competition translates those actions into strategies and compromises. Economics is a question of how we do what we choose to do, and how our way of doing things evolves. We all want what we want, but what’s our praxeology? More importantly, how do we improve it? That’s what economics seeks to answer.

I have previously asked whether capitalism, thought of as an engine, might yet receive an upgrade for the twenty-first century. If capitalism is an economic operating system, what is it managing? What is the freedom we hope to obtain through capitalism? Economics provides an answer.

Conventional academic economics relies on the neoclassical model, which uses an abstract concept of utility. Utility is a continuous quantity, like a tank of gas, abstracting the sum of everything that’s considered valuable to people. Since utility is a uniform, universal value, the mathematics of equilibrium can be applied to it.

The main drawback of neoclassical economics is that its framework constrains analysis. It primarily works for situations where all value derived from goods and services can be quantified in the abstract, as interchangeable utility. This mode of analysis works for businesses, which measure their success in terms of money, where any dollar is interchangeable for any other. It’s not as useful for human economics, where a person’s or group’s hierarchy of preferences includes trade-offs that fundamentally alter their priorities depending on whether they have access to one set of choices or another.

Trade-offs create different sets of priorities. For example, if a person meets the love of their life, they may start a family. If, as fortune would have it, they do not find love, then they will face a completely different set of possible career priorities. There’s no room for abstracted, universalized utility here.

A more salient mode of economic analysis comes from the Austrian School. Early economists such as Carl Menger, Jean-Baptiste Say, and Ludwig von Mises promoted the concept of subjective preference hierarchies. Humans do not experience general utility. We have a hierarchy of needs and wants. It is a discrete function, counted one at a time. It’s a matter of rigid trade-offs and high complexity.

The subjective basis of economic value better suits newer theories of business strategy which depend on game theory to generate meaningful conclusions out of the interlocking trade-offs faced by market participants. Consider the basic logic of game theory; it’s about who can afford to walk away, and who can’t. This defines who has power, and through power one derives a greater claim over scarce resources. A player with the smallest advantage can end up owning the whole game if that advantage becomes essential.

The concept of subjective, ranked value speaks to another truth of human economics. A product, tool or asset has no intrinsic value. Everything into which economic value is added, through labor, merely represents a value proposition. The value which an actively used tool or asset can provide represents the value of that item in the moment of use. This is because a human being’s needs change throughout the day and with the passage of time. Economics shouldn’t be structured as an equilibrium problem, but rather as a game with trade-offs and variable opportunities to cooperate or compete. Consider this dynamic within the economy if it were to be described as a technological system.

The human economic actor possesses limbs, mobility, and a mind. Economic activity is the employment of mind and mobility, the manipulation of matter with limbs and digits, to gather and organize resources. In essence, humans are knowledge machines, who configure systems of materials and energy while learning ever more sophisticated ways of doing so.

What an individual man can’t build, organize, or invent himself must be produced through a division of labor. This entails social organization. There must be a division of tasks and a distribution of gains. The tools which lay down these divisions and govern human economic cooperation are social technologies. With labor specialization leading to technological development, the division of labor can be interpreted as a meta-technology which enables discovery.

Any organized group of economic actors will need some cooperative basis for their division of labor. There needs to be a process for assigning tasks. There will have to be some system for paying individuals out of the common pool of realized value. Usually, a way to enforce rules. These dynamics can be described using cooperative game theory.

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Before Progressives Condemn Capitalism, They Should Be Able to Define It

Posted by M. C. on August 10, 2022

If there is no growth in the money supply, prices and interest rates will best reflect the preferences of a society. An Austrian economics definition of capitalism is the interplay of supply and demand, without any growth in the money supply. In this form of capitalism individualism will never pay off. Profits can only be realized if people in society stand to benefit as well.

Heiko de Boer

Many people blame capitalism for ever-increasing consumption, individualism, and the greedy pursuit of profits. Not very often do we see capitalism defined in any other way. In this article, I suggest an Austrian economics definition of capitalism that explains capitalism economically and without moralistic tones.

Human Actions Determine Prices and Interest Rates

The basis of Austrian economics price theory is human action. People must make choices on how to spend their scarce time and resources. They aim to improve their situation by ranking their subjective preferences and realizing as many of these preference, one by one.

This explains why the price of water is much lower than the price of diamonds. The supply of water is more than sufficient to meet almost all our needs. It is the last added unit of water that determines its price, which is many times lower than if the supply of water would satisfy the most important use only.

Interest rates are also a category of human action and are an indication of our time preference. This time preference applies to money and goods and services. A young society will be more inclined to save and invest than an older society. Their lower time preference translates into a lower interest rate as more money is offered for investing. Additional investments make it possible to expand the production structure.

By expanding a production structure, a society can consume more in the future. Consuming more can mean many things. If the purchasing power of people stays the same, but people only need to work three days a week instead of five days, people may still feel better off. Or, by investing we can produce similar goods, but with less pollution.

The interplay between interest rates and prices as they come about in a free marketplace, is shaping the production structure such that it meets the needs of society. The interplay of supply and demand could be termed capitalism. However, for a proper definition, more is needed.

What Money System Works Best?

The signaling function of prices and interest rates is distorted by central banks policies. Monetary policies prescribe that consumer goods prices must rise, according to the European Central Bank by “on average” 2 percent per year. Central banks find it unacceptable if a free market creates prices that are going down or do not rise sufficiently.

Central banks are creating money out of nothing, aiming to stimulate demand. More money means more competition for the same amount of goods, with upward price pressures as a result. Banks and central banks jointly issue more credit than what would be possible by savings alone. The additional offer of money pushes the interest rates down. The balance that prevailed in the time market is artificially disturbed.

Initially, money growth will ‘be good for the economy.’ More money is available for investing at a lower interest rate. It is as if the market has given a signal that people in society want to consume more in the future. However, consumers did not signal any change in consumption preferences.

There will come a time when the artificially low interest rate tends to rise, and prices adjust reflecting people’s actual preferences. Producers will be faced with rising production and refinancing costs. After the boom a bust will naturally follow.

The best money system is one that best reflects the preferences of people in society. This will be the case if there is no growth in the money supply. The Austrian school describes this as a sound money system. A proper definition of capitalism would then be the interplay of supply and demand, without any growth in the money supply.

Individualism, Profits, and Externalities

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Watch “Here’s Why Blaming Inequality on Capitalism is Absurd” on YouTube

Posted by M. C. on May 27, 2022

In this episode, Douglas Murray and I discuss the current assault on the West, slavery, gratitude, racist mathematics, whiteness, (non-Western) accomplishments, and individual sovereignty. Douglas Murray is the associate editor of The Spectator and the bestselling author of seven books, including The Strange Death of Europe: Immigration, Identity, Islam; The Madness of Crowds, and The War on the West.

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Capitalism Facilitates Mutual Aid. It Can’t Be Dismissed as “Selfish Materialism”

Posted by M. C. on May 24, 2022

In his analysis, Rothbard applies a tactic he frequently uses, to devastating effect. He takes an argument he opposes and shows it leads to the opposite conclusion its proponents draw from it.

David Gordon

Many people criticize the free market as “materialistic”; it reduces everything to monetary values. Murray Rothbard analyzes this charge against the free market, and in this week’s column, I’d like to consider his distinct perspective. He first sets the stage:

One of the most common charges levelled against the free market (even by many of its friends) is that it reflects and encourages unbridled “selfish materialism” Even if the free market—unhampered capitalism—best furthers man’s “material” ends, critics argue, it distracts man from higher ideals. It leads man away from spiritual or intellectual values and atrophies any spirit of altruism.

Rothbard answers this criticism in a striking way. He says that money is just a means, not an end. People seek money to get whatever they want, but the ends people have need not be “selfish” or “materialistic.” It’s up to each person to decide that for himself. He says,

In the first place, there is no such thing as an “economic end.” Economy is simply a process of applying means to whatever ends a person may adopt. An individual can aim at any ends he pleases, “selfish” or “altruistic.” Other psychic factors being equal, it is to everyone’s self-interest to maximize his monetary income on the market. But this maximum income can then be used for “selfish” or for “altruistic” ends. Which ends people pursue is of no concern to the praxeologist. A successful businessman can use his money to buy a yacht or to build a home for destitute orphans. The choice rests with him. But the point is that whichever goal he pursues, he must first earn the money before he can attain the goal.

An objection that might occur to you is that some people take it as their goal to make as much money as they can. They don’t want the money to buy other things: they just want more and more money. But Rothbard could answer this by saying that this is just another goal. The free market doesn’t tell people to pursue it.

Rothbard next turns to what I regard as his best point. Suppose you think that people ought to devote themselves totally to serving others: they ought to be complete altruists. Rothbard, I hasten to add, doesn’t hold this view. But, he says, even if you do hold this position, you should still support the market, People who make money in the free market are those who best satisfy consumers. If you want to help others, then, you should try to make as much money as you can. The contemporary “effective altruism” movement has accepted this argument, or a variant of it, although I doubt they got it from Rothbard. People in this movement think that you should try to get a high-paying job so that you can donate what you make to others.

Rothbard explains his argument in this way:

Whichever moral philosophy we adopt—whether altruism or egoism—we cannot criticize the pursuit of monetary income on the market. If we hold an egoistic social ethic, then obviously we can only applaud the maximization of monetary income, or of a mixture of monetary and other psychic income, on the market. There is no problem here. However, even if we adopt an altruistic ethic, we must applaud maximization of monetary income just as fervently. For market earnings are a social index of one’s services to others, at least in the sense that any services are exchangeable. The greater a man’s income, the greater has been his service to others. Indeed, it should be far easier for the altruist to applaud the maximization of a man’s monetary income than that of his psychic income when this is in conflict with the former goal. Thus, the consistent altruist must condemn the refusal of a man to work at a job paying high wages and his preference for a lower-paying job somewhere else. This man, whatever his reason, is defying the signaled wishes of the consumers, his fellows in society.

If, then, a coal miner shifts to a more pleasant, but lower-paying, job as a grocery clerk, the consistent altruist must castigate him for depriving his fellowman of needed benefits. For the consistent altruist must face the fact that monetary income on the market reflects services to others, whereas psychic income is a purely personal, or “selfish,” gain.

As I mentioned, Rothbard isn’t adopting altruistic ethics. To the contrary, he rejects them. He points out that a consistent altruist would have to reject the pursuit of leisure. If you rest from work, you are depriving others of time you could spend helping them. Rothbard uses this point to criticize W.H. Hutt’s version of consumer sovereignty, but the point applies also to contemporary altruists such as Peter Singer.

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The Future of Capitalism | Q&A With MIT Students

Posted by M. C. on May 13, 2022

I recommend the entire interview. Go to 17:00~23:00 for Peterson’s opinion of the US free market system vs China.

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How Erosion of Social Cohesion Makes the World a More Dangerous Place — Strategic Culture

Posted by M. C. on February 2, 2022

The main characters of the global game are dealing mostly unprepared with the contradictions of the future world, Claudio Gallo writes.

Claudio Gallo

As the old joke says: capitalism’s centuries are numbered. Everybody knows that Marx’s millenarian predictions went wrong: the New Man didn’t come, and we are still here in a world divided between the haves and have nots, as Hemingway titled his most social novel. But the Western economy’s contradictions are indeed stronger than ever. Take the recent World Economic Forum Global Risks Report. It draws on the views of over 12000 country-level leaders: after two years of the pandemic, the most perceived medium-term risk for societies are “social cohesion erosion“, “livelihood crisis”, and “mental health deterioration”.

Notably, “Social cohesion erosion is a top short-term threat in 31 countries — including Argentina, France, Germany, Mexico and South Africa from the G20”. In the long term, the threat of “involuntary migration” lurks. The majority of the people interviewed judge the efforts to contain or regulate migration and refugee waves as absolutely inconsistent.

You can argue that Davos is “about rich men arriving on private planes to discuss climate change, sexism and inequality” and “most of its predictions are worthless”, as Simon Kuper wrote in the Financial Times. But the reality that our societies are crumbling away before of our eyes is difficult to deny. Instead, the Davos paradox is whether the very elites that create these problems are able or only willing to solve them.

WEF report says that by 2030, 51 more million people are projected to live in extreme poverty compared to the pre-pandemic trend. “Income disparities exacerbated by an uneven economic recovery risk increasing polarisation and resentment within societies”. In the U.S., these divisions are taking a unique and disruptive form. A recent poll in the United States found “division in the country” to be voters’ top concern: they expected it to worsen in 2022. The attack on the U.S. Capitol in January 2021 was one clear sign of the instability that political polarisation risks may create.

You can call it a democracy’s crisis. The Western system, largely symbolic and confined to the theatrical moment of the ballots, seems no more capable of answering the people’s fears. The impact of migration on Western countries is fated to grow dramatically. Davos’ gurus are not reassuring. In the following years: “A bifurcated recovery is likely to prompt an upsurge in economic migration. At the same time, worsening extreme weather and rise in political instability, state fragility and civil conflict, are likely to further swell refugees numbers”.

While in the West, ordinary people were receiving the vaccine booster against COVID-19, the super-rich’s richness was boosted by the circumstances created by the same virus. It is the conclusion of the recent Oxfam report “Inequality Kills: the unparalleled action needed to combat unprecedented inequality in the wake of COVID-19”. “A new billionaire has been created every 26 hours since the pandemic began — the document says — The world’s 10 richest men have doubled their fortunes, while over 160 million people are projected to have been pushed into poverty. Meanwhile, an estimated 17 million people have died from COVID-19—a scale of loss not seen since the Second World War. These issues are all part of the same, deeper malaise. It is that inequality is tearing our societies apart”.

Everywhere the same sad music. The perception of social decay is faced with mild desperation or the neoliberal choir’s same old song: “there is no alternative”. But, as Noam Chomsky said, in a 2021 interview on Jacobin Magazine, the corporate sector is “running scared”. “They’re concerned with what they call “reputational risks,” meaning “the peasants are coming with their pitchforks.” All across the corporate world — at Davos, and at the Business Roundtable — there are discussions of how “We have to confess to the public that we’ve done the wrong things. We haven’t paid enough attention to stakeholders, workforce, and community, but now we realise our errors. Now we’re becoming what, in the 1950s, was called ’soulful corporations,’ really dedicated to the common good.”

Indeed, the corporate world needs a new mammoth global PR campaign. The Green Economy is ready to be just another example of commodification of every life’s aspect and not the beginning of a more human business’ era. The electric automotive big new frontier rush is not bound to really reduce the global pollution but only to open a new market with many environmental unsolved questions. A ridiculous result of this neoliberal “Greenwashing” wave is the European plans to allow gas and nuclear to be labelled as “green” investments. You can see here Western democracies’ crisis in action: instead of confronting the challenges, they change the meaning of the words.

It is not a surprise that the Edelman Trust Barometer 2022 found a world “ensnared in a vicious cycle of distrust, fuelled by a growing lack of faith in media and government. Through disinformation and division, these two institutions are feeding the cycle and exploiting it for commercial and political gain”.

The Edelman’s Barometer has been polling the world’s nations for years on trust in their governments, media, business and NGO. Today it says that “anger wins the clicks”, creating a “government-media distrust spiral”.

“The public has become widely aware that the media does not play it straight”. “We really have a collapse of trust in democracies,” said Reuters Richard Edelman, whose communications group published the survey of over 36,000 respondents in 28 countries interviewed between Nov. 1-24 of last year. The biggest losers of trust over the previous year were institutions in Germany, down 7 points to 46, Australia at 53 (-6), the Netherlands at 57 (-6), South Korea at 42 (-5) and the United States at 43 (-5). Russia wins the palm of the more sceptical nation. The very fact that countries not famous for their democracy, like China, United Arab Emirates and Thailand, are at the top of the trust’s index may show that their citizens do not share so much the faith in Western’s democratic ideals. They value more a “sense of predictability about policy” a “coherence” among the national leaders that the Western public seems to lack at all. China shows a staggering 83% public trust in institutions. Definitely, optimism about the future lies more in the East than in the West.

The Davos report rightly stresses that our world needs more than ever a “global governance and a more effective international risk mitigation” not only for the Covid’s threat but also to cope with “geo-economic confrontation”. Unfortunately, the numbers are telling a different story. The main characters of the global game are dealing mostly unprepared with the contradictions of the future world. Weak governments of divided European countries face geopolitical crises, as the Ukrainian one, trapped in the old American imperial scheme, entirely against their national interest. The West needs a “colour” revolution, not the East.

© 2010 – 2022 | Strategic Culture Foundation | Republishing is welcomed with reference to Strategic Culture online journal

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Industrialization Is the Antidote to Global Poverty. Global Warming Activists Don’t Care. | Mises Wire

Posted by M. C. on July 18, 2021

To everything I have said, some might retort that the state sector can effectuate the construction and development of a green energy economy better than the private sector can. History has repeatedly demonstrated that this is not the case—the Wright brothers beat the US government to the invention of the aircraft by a long shot, and much of America’s most basic infrastructure was built by competing private sector entities, after the state had made disastrous attempts

Eben Macdonald

Having long ago lost the argument that capitalism can’t deliver a higher standard of living, the Left’s current anti-capitalist strategy is to claim capitalism requires environmental destruction. Yet even if one were to assume carbon emissions are the driving factor behind climate change, we must acknowledge the moral and economic necessity of industrialization. Between 1250 and 1800, world GDP per capita barely budged; in 1800, global life expectancy was a mere thirty years, infant mortality was commonplace, and eight in ten humans lived below the poverty line. Since the advent of the Industrial Revolution, that has all changed: despite the environmental impacts, global per capita income has risen fourteenfold and billions have risen from poverty—a phenomenon the economist Deidre McCloskey describes as “the Great Enrichment.” Industry and the establishment of national industrial infrastructure are and have been the keys to economic growth and poverty alleviation. Data indicate that GDP per capita—the amount of goods and services produced per person—is the single best predictor against extreme poverty (graph displayed below):

Poverty to GDP

Moreover, although GDP growth can signal government increases in the money supply rather than true increases in production, poverty reduction has tightly tracked GDP per capita growth in the developing world. A 2010 paper produced a very clear correlation between GDP growth and the poverty rate in Sub-Saharan Africa (graph displayed below):

poverty and growth in Africa

It is unfair to use climate change to indict neoliberalism. Industrialization, albeit posing long-term environmental consequences, has lifted the human standard of living by extraordinary amounts. More importantly, the charge makes no sense, considering that the solution to climate change lies in the free market, as recent emissions trends and developments in the energy sector show. The central advantage of capitalism is its capacity for self-rectification and alleviation of the problems it initially creates. That is the miracle of innovation.

Market Development Reduced Greenhouse Gas Emissions

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Eben Macdonald

Eben Macdonald is a 16-year-old student, a keen free-marketeer, and he wants a society which is predicated on liberty.

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The Myths Behind the “Capitalism Is Racist” Claim | Mises Wire

Posted by M. C. on January 23, 2021

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.

Lipton Matthews

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, relative to 36 percent of those that did discriminate. The likelihood of going out of business for an employer who discriminated thus appears more than twice that of its nondiscriminating counterpart.

Under capitalism the allure of profit serves as a deterrent to discrimination. For instance, the strident resistance of streetcar companies in the Jim Crow South to laws mandating them to segregate black customers poignantly demonstrates the market’s hostility to unjust discrimination. Economist Jennifer Roback in an article titled “Racism as Rent-Seeking” lucidly illustrates that these laws were a result of political entrepreneurship:

Race relations in the U.S. South were in a state of flux in the period immediately after the Civil War and remained so until the turn of the century, when the “Jim Crow” system of rigid segregation was put into place….Municipal streetcars were segregated by law in many Southern cities….Prior to legislation, streetcar passengers in many cities sat wherever they wished, and next to anyone they wished. There is little to indicate that segregation was introduced in response to the demands of passengers, and in some cases, passengers of both races were dissatisfied with the new rule. Moreover, some of the streetcar companies themselves actively resisted segregation, on the grounds that segregation would be too expensive….White passengers seemed to be indifferent about segregation; streetcar companies resisted segregation; certainly, black passengers resisted segregation. Who then wanted it badly enough to work for its introduction? The most likely candidates are politicians who believed that there existed latent sentiment in favor of segregation among whites. Political entrepreneurs could offer white voters something they valued enough to vote for, but not enough to bear the costs privately. Through collective action, the costs of segregation could be imposed on the (disenfranchised) black passengers and the (regulated) streetcar companies.

Roback refers to such tactics as “psychic rent seeking,’’ indicating that people leverage the force of government to acquire psychological benefits for themselves, despite incurring expenses for others.

Notwithstanding the propaganda of leftists, rhetoric is no substitute for facts. History reveals that discrimination is primarily inspired by the corrupt agenda of rent seekers in cahoots with the government. South African leading economist Thomas Hazlett notes that this is usually the case:

The South African gold rush made the natural synergy between white-owned capital and abundant black labor overpowering….White workers feared the large supply of African labor as the low-priced competition that it was. Hence, white tradesmen and government officials, including police, regularly harassed African workers to discourage them from traveling to the mines and competing for permanent positions. Beginning in the 1890s, the Chamber of Mines, a group of employers, complained regularly of this systematic discrimination and attempted to secure better treatment of black workers. Their gesture was not altruistic, nor founded on liberal beliefs….But here they had a clear economic incentive: labor costs were minimized where rules were color-blind. This self-interest was so powerful that it led the chamber to finance the first lawsuits and political campaigns against segregationist legislation.

Likewise, South Africa during Apartheid is an excellent case study of the power of the market to eviscerate racism. To protect whites from competition, blacks were prevented by law from taking white-collar jobs. This not only limited their productivity, but also reduced the number of black employees able to take industrial jobs, thus creating artificial manpower shortages. As such the South African Employers Consultative Committee on Labour Affairs in 1977 lobbied for the elimination of discrimination based on race or color from all aspects of employment practices. Therefore, motivated by the goal to gain wealth, even vile racists will eschew racist policies.

Certainly, some owners and entrepreneurs will find niches in which they can cater to racist clients. But for those who wish to attain high levels of growth and success, the data is clear that serving all customers and workers indiscriminately is the way to wealth. Essentially, the power of the free market is the best antidote to racism. Entrepreneurs seek to win in business, and engaging in discrimination hinged on race is the surest way to lose. Of note is also the fact that people who migrate from other countries irrespective of race become wealthier after relocating to America. Yet, ironically, many who lament the racist nature of American capitalism also insist that immigrants improve their lives by immigrating to the United States.

Both theory and the empirical research show that a truly competitive marketplace is incongruous with racism, but, clearly, saying otherwise confers leftists with the benefits of expressing the “luxury beliefs” of elites. Author:

Contact Lipton Matthews

Lipton Matthews is a researcher, business analyst, and contributor to, The Federalist, and the Jamaica Gleaner. He may be contacted at or on Twitter (@matthewslipton).

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Posted by M. C. on January 14, 2021

Image may contain: 4 people, text that says 'The animating principle of American politics is neither socialism nor capitalism, but transferism. Politicians gather votes by promising to take from one group of voters to give to another. WORDS NUMBERS'

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