“Capitalism and Freedom” Summary, Chapter 7: Capitalism and Discrimination

by Danny Fenster

This chapter is a free excerpt from Quicklet on Capitalism and Freedom.

Capitalism has been accompanied throughout history by lessening economic discrimination towards minority groups. This was so for serfs and Jews through the Middle ages, Puritans and Quakers in America, and so on. When southern states imposed legal restrictions on Negroes after the Civil War they never denied them the right to personal property, reflecting a belief in private property "so strong that it overrode the desire to discriminate against Negroes." Capitalism and private property have created much opportunity for Negroes to make great progress.

Paradoxically, minorities have been the most vocally resistant to fundamentals of capitalism. "They have tended to attribute to capitalism the residual restrictions they experience rather than to recognize that the free market has been the major factor enabling these restrictions to be as small as they are." Capitalism provides incentives for dealing with the most economically efficient individuals of any group.

Discrimination is hard to define. We discriminate on the basis of taste against one singer for another but consider it different when paying more for the service of a person of one color over another. The difference is only that in "one case we share the taste, and in the other we do not. Is there any difference in principle …?"


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Capitalism has been accompanied throughout history by lessening economic discrimination towards minority groups. This was so for serfs and Jews through the Middle ages, Puritans and Quakers in America, and so on. When southern states imposed legal restrictions on Negroes after the Civil War they never denied them the right to personal property, reflecting a belief in private property "so strong that it overrode the desire to discriminate against Negroes." Capitalism and private property have created much opportunity for Negroes to make great progress.

Paradoxically, minorities have been the most vocally resistant to fundamentals of capitalism. "They have tended to attribute to capitalism the residual restrictions they experience rather than to recognize that the free market has been the major factor enabling these restrictions to be as small as they are." Capitalism provides incentives for dealing with the most economically efficient individuals of any group.

Discrimination is hard to define. We discriminate on the basis of taste against one singer for another but consider it different when paying more for the service of a person of one color over another. The difference is only that in "one case we share the taste, and in the other we do not. Is there any difference in principle …?"

While the principle is the same, tastes are not equal. Friedman himself does not discriminate based on skin color or religion and deplores those who do. But in a free society, the recourse, he says, is changing the minds of racists through free speech and discussion, not state coercion.

Fair employment laws inhibit the freedom of individuals to voluntarily enter contracts. Say an unprejudiced man is made to hire a Negro though his customers are racist. He may lose money or his business though he was only giving customers what they wanted. The customers, who's behavior the law sought to change, are not punished, though the proprietor is.

Proponents of these laws argue it's justified because denying the Negro employment hurts others--all in the Negro community. They are confused. There is positive harm--direct physical force or legal coercion, or that of third-party effects of pollution; and negative harm--when two individuals cannot agree on a contract, making one worse off. If a community prefers blues singers to opera singers, the opera singer is harmed in not finding work. The government has no right to ameliorate this latter harm, which is the case of the Negro seeking employment.

Friedman charges the American Civil Liberties Union with hypocrisy. "The ACLU will fight to the death to protect the right of a racist to preach on a street corner the doctrine of racial segregation. But it will favor putting him in jail if he acts on his principles by refusing to hire a Negro for a particular job." One must pursue the racist of his err, not use state coercion.

Right-to-work laws make it illegal to require union membership as a condition of employment, and are identical to Fair Employment laws. "Both interfere with the freedom of the employment contract." But most who favor the one are opposed to the other. "As a liberal, I am opposed to both," writes Friedman.

Given competition among employers and employees, employers should be able to offer any terms of employment they want.

Segregation in school is a unique problem because the government administers schools and must choose segregation or integration across the board. Forced to choose, Friedman finds it "impossible not to choose integration." But better still, is to free schools from government, and permit parents to choose where their kids attend while encouraging through free speech the normalizing of integration.

"It is desirable to let men follow the bent of their own interests because there is no way of predicting where they will come out," Friedman says of the relation between intentions and results.

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