All Commentary
Monday, October 1, 1990

Book Review: Preferential Policies: An International Perspective by Thomas Sowell

William Morrow & Co., P.O. Box 1219, 39 Plymouth Street, Fairfield, NJ 07007 • 1990 • 221 pages • $17.95 doth

Advocates of preferential policies can’t afford to ignore this book—at least, not if they care about how their policies are working in practice.

With the diligence and insight his readers have come to expect, Thomas Sowell doesn’t skimp when it comes to presenting and analyzing the relevant empirical data. He looks at the often bloody results of coerced preferences in a variety of political and social contexts around the globe and comes up with some disturbingly similar patterns.

By preferential policies, Sowell means “government-mandated policies toward government-designated groups,” policies “which legally mandate that individuals not all be judged by the same criteria or subjected to the same procedures when they originate in groups differentiated by government into preferred and non- preferred groups.”

In the first part of his book, Sowell discusses three major contexts for such policies: “Majority Preferences in Majority Economies,” “Majority Preferences in Minority Economies,” and “Minority Preferences in Minority Economies,” in three riveting chapters of economic and historical analysis.

By labeling economies “minority” or “majority,” Sowell is specifying which group or groups tend to dominate economically in a particular society. In the United States, the majority (roughly speaking) dominates, while the government-preferred minority (e.g., blacks) is regarded as disadvantaged and requiring special government help. Minority economies include places like Malaysia, Nigeria, and Sri Lanka, where an ethnic or racial minority—often composed of better-educated and/or better-motivated outsiders—economically outstrips the indigenous majority and so incurs at least some of that majority’s envy, resentment, and political wrath.

The motivation of concern over unfair discrimination, which we are familiar with in this country, doesn’t wash when the beneficiary of preferential policies is the majority. After all, the minority has no evident means, aside from political force, of systematically excluding the rest of the populace from certain economic or social contexts (which is why South African apartheid is not, and could not be, a free-market institution). But neither, it turns out, does the majority have any such means. Majority preferences have had to be imposed by force in both majority economies (as in the pre-‘60s South, with the Jim Crow laws) and minority economies such as Malaysia. It had to be by coercion because, in the marketplace, discrimination is costly. And the individual who indulges in unjust discrimination, forgoing a more economically rational alternative, must pay those costs. “When apartments remain vacant longer because minority tenants are turned away, the landlord pays a cost for discriminating. So does the discriminating employer whose jobs remain unfilled longer or can be filled more quickly only by offering higher pay.” In the free market, the more rational, non-discriminating businessman has a competitive edge—regardless of his own group membership or that of the other parties involved.

On the other hand, the discrimination costs for government are negligible. When a legislator passes a law or a bureaucrat enforces it, neither is obliged to pay the resulting costs to the businesses or other institutions that must obey it.

These differing incentives manifested themselves in the wake of the Jim Crow laws, the network of restrictions against blacks that were imposed in the post-Reconstruction South. When streetcars were a private, profit-making, relatively unencumbered enterprise during the 19th century, streetcar owners in the South did not segregate blacks and whites into different compartments; that would have entailed new costs (the disaffection of black customers) without new profits. (They did, however, segregate passengers into smoking and non-smoking cars, a move justified by economic demand.) As racial segregation was legally mandated around the turn of the century, furthermore, streetcar companies in towns like Mobile, Montgomery, and Augusta initially refused to comply with the law. in Tennessee, Jim Crow legislation was delayed (and later overturned in court) through the opposition of the streetcar company there. Sowell notes that, because of the economic burdens involved, evasion of legally enforced racial discrimination is common in other industries and countries as well. With infuriating insensibility, government imposes arbitrary costs on innocent citizens.

Preferential policies have been instituted throughout the world. Almost always, in the name of some “higher goal” of equality among groups, reason, economic efficiency, and simple civility are scrapped, with a small elite typically benefiting at the expense of everyone else—not excluding the intended beneficiaries. Often, those in a position to benefit from preferential policies are already the more advanced members of their group, with the education or income needed to take advantage of the politically imposed opportunities others cannot touch.

In Malaysia, a majority economy dominated by an outside minority (the Chinese), political preferences for Malaysians benefited “at most 5 percent” of Malays. “While the statistical representation of Malays on corporate boards of directors in Malaysia rose under preferential policies, so did the proportion of Malays among the population living below the official poverty line,” Sowell notes. “In short, the Malay masses provided the political support for preferential policies that ben efited the Malay elite—in the name of the masses.”

In the United States, “the largest gains in black wages relative to those of whites between 1960 and 1970 occurred in private sector industries less regulated by government and less likely to be government contractors.” Furthermore, “Black males with more education and more job experience have advanced in income, both absolutely and relatively to whites, while black males with less education and less job experience have retrogressed relative to whites over the same span of years. In short, the gains have gone to those already more fortunate, as with preferential policies in other countries.” That’s one pattern that Sowell notes.

Another pattern is violence. One is struck by the extent to which preferential policies stir up and exacerbate the racial resentments which often motivated those policies to begin with. Blacks against whites in the United States, Assamese against Bengali in India, Hausa-Fulani against Ibos in Nigeria. In Nigeria, where the Moslem North lagged behind the South in areas like education and jobs, group polarization attending preferential policies for Northerners led to mob violence, the hunting down and slaughtering of Ibos, and ultimately civil war. The Ibos, who had tried to split off from Nigeria and form their own country, ultimately surrendered, and fortunately at least some preferences were rescinded (in one of the few instances of such backtracking anywhere).

The consequences of preferential policies, which Sowell covers exhaustively, are disastrous. But what if consequences don’t matter to the policy molders? One of the most startling passages in this book is from an ethnic “spokesman” conceding the generally superior qualifications of a competing ethnic group, but concluding, “Maybe they are better qualified but why is merit so important? We can have some inefficiency. That will be necessary if our people are to get jobs. Are we not entitled to jobs just because we are not as qualified?” One would suppose that qualifications were important so that you could do the job for which you have been hired; but, alas, that’s irrelevant if the real point of a job is not production but the satisfaction of arbitrary racial demands, and costs be damned.

The more theoretical second part of the book discusses the illusions of knowledge, control, and morality that have influenced support of preferential policies. There are echoes of the Hayekian perspective on the distribution of knowledge through society here, and of Sowell’s own analysis in Knowledge and Decisions, which make this section particularly intriguing—and devastating.

Regarding the question of morality in particular, the book provides convincing evidence that if being moral has anything to do with the promotion of human life, racism at the point of a gun has little to do with it.

David M. Brown is the managing editor of the Laissez Faire Books catalog and a free-lance writer.