More capitalism, less government—that’s how you reduce racism

Government anti-racism strategies and programs are today politically fashionable and in wide currency. The stated intentions are good, but if such initiatives actually reduce racism and unfair discrimination in society, these findings have not been widely reported. On the contrary, the best-known anti-racism activity undertaken by the Trudeau government is the former employment (until last year) of an anti-racism contractor known for publishing antisemitic and racist slurs, and whose contract was not terminated until it became national news that he received hundreds of thousands of federal dollars.

Provincial governments too disburse money in the name of anti-discrimination with benefits that, if they exist, are unknown. The government of Prince Edward Island, for instance, recently gave a $30,000 anti-racism grant to a non-profit whose philosophy “recognizes intertwined systems of capitalism, colonialism, patriarchy, and white supremacy that actively work to undermine the mental health” of visible minorities. But that capitalism is intertwined with racism is nonsense. In fact, freer markets—through privatization, deregulation and significant government spending cuts—is one of the best ways to reduce the incidence of racism and unfair discrimination in society.

That capitalism and free markets have a prophylactic effect on racism is a longstanding and Nobel Prize-winning idea. Gary Becker’s 1992 Nobel Prize was given for his work on extending microeconomic analysis to a wide range of human behaviour and interaction, which included his work on racial discrimination. In his 1957 book The Economics of Discrimination Becker explained that “if an individual has a ‘taste for discrimination,’ he must act as if he were willing to pay something, either directly or in the form of a reduced income, to be associated with some persons instead of others. When actual discrimination occurs, he must, in fact, either pay or forfeit income for this privilege.”

In other words, racism and unfair discrimination is costly for the person doing the discriminating. A consumer who does not buy from people of a certain colour will have fewer places to shop and will on average face higher prices. A businessowner that refuses to hire people of a certain colour will end up paying more for labour, and one who refuses to serve people of a certain colour will lose customers. In the case of the business, racist or discriminatory behaviour is a cost and a competitive disadvantage.

The corollary is in highly competitive industries, the incidence of racism would be reduced. “Becker showed that discrimination will be less pervasive in more competitive industries,” as the Concise Encyclopedia of Economics explains, “because companies that discriminate will lose market share to companies that do not. He also presented evidence that discrimination is more pervasive in more-regulated, and therefore less-competitive, industries. The idea that discrimination is costly to the discriminator is common sense among economists today, and that is due to Becker.”

Gary Becker was not the only Nobel Prize-winning economist who many decades ago explained that capitalism reduces racism. “It is a striking historical fact,” Milton Friedman observed in his 1962 book Capitalism and Freedom, “that the development of capitalism has been accompanied by a major reduction in the extent to which particular religious, racial, or social groups have operated under special handicaps in respect to their economic activities; have, as the saying goes, been discriminated against.”

There are, meanwhile, no similarly striking facts or analyses illustrating the efficacy of modern government anti-racism disbursements doing as much good as capitalism. Those who want a more just and tolerant society might therefore give some attention to a well-proven method for accomplishing it—more capitalism and less government control.