All Commentary
Wednesday, May 1, 1996

Civil Rights Socialism

America Is Under the Spell of a Peculiar Form of Socialism

Mr. Rockwell is president of the Ludwig von Mises Institute in Auburn, Alabama.

The Fabian Society of Britain believed in three central doctrines of political economy. First, every country must create its own form of socialism. Second, socialism imposed slowly is more permanent than the revolutionary form. and third, socialism is not likely to succeed in Western countries if it appears undemocratic or authoritarian. On all these points, the Fabian Marxists disagreed with Marxist-Leninists.

And just as the Fabians recommended, today’s America is under the spell of a peculiar form of socialism, designed for our political and demographic conditions.

Under Fabian influence, Britain’s piecemeal socialism was marked by nationalized industries, soft planning, extreme labor union privileges, middle-class income redistribution, and a government-run medical industry.

Here in the United States, on the other hand, we have little reason to fear nationalized industries or comprehensive planning. Labor union power seems to be on the decline. Americans bristle at any hint of direct controls over production decisions. Our semi-socialized medicine resists change toward greater government control, or less, with the conservative Republican leadership dedicated to “saving” Medicare. But our labor markets, though increasingly devoid of direct union control, are more frozen and regulated than Britain’s were at the height of union power.

Socialism, U.S. Style

What accounts for this? American socialism is a carefully tailored product. First, it is designed to fit with America’s excessive devotion to abstractions like democracy and equality. Second, it is designed to exploit the radical heterogeneity of our population. Third, its implementation relies on America’s traditionally sanguine view of centralized executive power.

We could argue about when American socialism first took root. Many say it began with the Great Society. Others trace it to the New Deal. There’s a good case to be made that it began in the Lincoln presidency and the Reconstruction era, which used the language of democracy and egalitarianism, exploited our radical heterogeneity, and dramatically centralized power in an imperial executive. That period also provided a test run for inflationary monetary policy and income taxation, two institutions that the Progressive Era entrenched and which provide the fuel for American socialism today.

The symptoms of American socialism are easy to identify. They appear in legislation like the Americans with Disabilities Act, the limitless amendments to the Civil Rights Acts, the Community Reinvestment Act, in the egregious behavior of the Equal Employment Opportunity Commission, and in all manner of interference with the freedom of association. In addition, executive-branch agencies issue tens of thousands of regulations each year to manage the private lives of citizens and the conduct of private business, including the Department of Housing and Urban Development, the banking regulators at the Federal Reserve, and the bureaucrats at the EEOC.

The result has been tyranny. Civil rights lawsuits have shut down thousands of businesses. Many potential capitalists decide not to open businesses at all for fear of the race, sex, and disability police. Small companies routinely do anything within the law to avoid advertising for new positions. Why? Because government now sends out “testers” to entrap business in the crime of hiring the most qualified person for a job. Pity the poor real estate agent and the owner of rental units, who walk the civil rights minefield every day. If any of these people demonstrate more loyalty to the customers than to the government, they risk bringing their businesses to financial ruin.

The restaurants Denny’s and Shoney’s, two wonderful examples of capitalism in action, know all about this. In the last few years, they were both hit with class action suits alleging discrimination. It didn’t matter that the plaintiffs were all trumped up and the specific cases cited were patently fraudulent. For example, one plaintiff found a foreign object in her hashbrowns and claimed it was put there on grounds of her race. Both companies decided to settle out of court, establish extensive quota programs, pay off all plaintiffs, and set up new highly subsidized, minority-owned franchises. They did so not because they were guilty, but because the so-called justice system is stacked against them.

Denying the Obvious

The courts enforce an egalitarianism that tolerates no acknowledgment of the differences among people, especially not when they express themselves along group lines. But this denies the obvious. People do differ radically in their talents and weaknesses, their determinations to succeed, their mental facilities, their attitudes and character, their physical abilities, and their physical makeup. Moreover, these differences appear not only in individuals but also systematically in groups.

Men as a group, for example, are different from women as a group. Northerners are different from Southerners. Californians are different from Texans. Catholics are different from Baptists. Blacks are different from whites. Immigrants are different from natives. The rich are different from the poor. The evidence for these propositions is all around us and should be celebrated. As Ludwig von Mises pointed out, radical inequality is the key fact about the human race, and thank goodness. If we were all the same, there could be no division of labor.

Yet our central government attempts to abolish these differences by forcing individuals and businesses to act as if they did not exist. The primary means has been the criminalization of our most serious secular sin: discrimination. There can be no action in American life—save the decision of whom to marry—that discriminates on the grounds of any number of criteria as defined by the government. If anyone commits this sin, the penalty is cash to the government and the special interests, with a bundle going to the left-wing lawyers who arrange the transfer.

To see just how serious the government takes this sin, and how absurd the result, consider disabilities law. The EEOC has effectively defined disability as any physical or mental limitation. Along with other civil rights laws, this robs business of any operational discretion in the treatment of employees, how much they are paid, if they are promoted, or whether they are hired at all.

If you have hired a salesman who can’t remember names, he’s got a mental disability. You cannot demote him, much less fire him, because that would be discrimination.

Since the ADA went into effect, tens of thousands of complaints, which are threatened lawsuits, have been filed with the Equal Employment Opportunity Commission. Drunkards are suing for their right not to show up to work and still get paid. Students are suing for their right not to study and take tests. The government is siding with every conceivable complaint, from men who want to work as waitresses in restaurants with all-women workforces to people in wheelchairs who want to dance on stage.

The number of private complaints against employers in which no suits are filed but result in settlements would be impossible to count. The amount of lost wealth is vast and growing. With the ADA, there is eventually no way to comply, because there is no way to prepare for every possible contingency, every possible lawsuit or government ploy.

The ADA illustrates an important point about anti-discrimination law, the central pillar of American socialism. Contrary to myth, rules against discrimination never create a level playing field. Forbidding one form of discrimination must necessarily compel another. If a person is forbidden to discriminate in hiring on grounds of sex or race, the government can only discover a violation of the law by looking at who is hired. This compels active discrimination against people on grounds of their sex or race. It is a zero-sum game where one person’s winnings come from another’s losses. The only way to end this is through the repeal of all anti-discrimination laws, and all other laws that violate the freedom of association.

Until that happens, whole institutions are being destroyed in the name of stamping out discrimination. The banking sector has been racked by complaints that it discriminates against minorities in its granting of loans. You might think the regulators would consider that minorities have relatively weaker credit ratings and fewer assets. In fact, that doesn’t matter, since the executive agencies enforcing equality care only for the numbers.

In the banking sector, tens of billions have been doled out to satisfy interest groups who cry discrimination. Fleet Financial Group surrendered to an extortionist who used complaints of group victimology. Decatur Savings & Loan in Atlanta was put out of business by a federal lawsuit. Sovran Bank had to buy its right to become Nationsbank by handing out welfare checks to the politically correct.

This campaign has only just begun. Some people on the political left propose an explicit quota program for lending, which would effectively require banks to give loans to minorities regardless of credit history, job history, or assets. The pool of loanable funds has become a convenient substitute for direct welfare benefits, and it’s just as redistributionary.

The same is true in other sectors of the economy. Consider two recent government housing programs: Moving to Opportunity, which is administered by HUD, and residential integration, which is administered by the Justice Department. In both cases, the government has declared that all voluntary group associations resulting in racial disproportionalities are segregationist by definition. That term no longer refers to de jure action but to the de facto results of voluntary behavior. To remedy the non-problem that people tend to group themselves by their similarities, HUD has a program to give minorities in city slums the financial means to move to middle-class suburbs.

An incident in Vidor, Texas, illustrates something about the use of force. The Justice Department and HUD orchestrated a propaganda blitz against this insular and peaceful community, painting it as thoroughly racist. This paved the way for federal marshals to install some new minority residents into a housing complex whose residents wanted to be left alone. And this is representative of what is happening to every business in the country.

In many respects, a firm is much like a community. It has its own internal culture that best develops and thrives in the context of liberty. Whether the federal bureaucrats are invading Denny’s, Decatur Savings & Loan, or Vidor, the effect is the same: to snuff the very life out of the business world and the communities around the country.

The media and the government imply that because one firm hasn’t hired and promoted a member of every politically represented group then no firm is going to. This reveals a misunderstanding of the nature of competition. In a free market, competition is not only between laborers but also between whole firms and communities of firms. We must allow diversity between firms, even if it is does not exist within them.

Free markets and private property are all of a piece. We cannot have free labor markets so long as we don’t have the freedom to hire and fire. It is as essential that women’s health clubs be allowed to exclude men as it is for Korean restaurants to be able to hire and promote only Koreans. These are the rights and privileges that come with private property. If we limit them, we endanger the foundation of capitalism and civilization itself.

Forced Equality

America’s peculiar version of socialism is just as coercive as any other form. Yet because it is more expansively egalitarian than others have been, the ill-effects are made worse by the demographic differences in the American population. Forced equality has no chance of success in any country, but especially not here. The attempt has wrought destruction, and if extended much further, will create a reign of terror.

America’s fascination with equality stretches back to the Declaration of Independence, when Mr. Jefferson penned the obvious untruth that all men are created equal. He couldn’t have meant it literally or in the way it is used today. In the very same document, Jefferson accuses the King of exciting insurrections among the “merciless Indian savages, whose known rule of warfare is an undistinguished destruction of all ages, sexes, and conditions.”

In those two statements, we find the essential contradiction of the American democratic faith. We are supposed to want people to be equal. We are supposed to want the president to insure it to be so.

If we are ever to reverse our current course, we must pay closer attention to the wisdom of Alexis de Tocqueville, John C. Calhoun, John Randolph of Roanoke, Lord Acton, Helmut Schoeck, Bertrand de Jouvenal, Ludwig von Mises, Murray N. Rothbard, and all the others who have taught us that liberty and equality are incompatible goals. One always comes at the expense of the other. Equal protection of life and private property from violent transgressions is the only ideal of equality that is consistent with individual liberty.

The free market economy has a record like no other of offering economic advancement for everyone no matter what his station in life. But it does not offer equality of result or equality of opportunity. How can opportunity be equated between the quick-witted and simple-minded, between the energetic and the lazy? The free market offers not an unstratified society, but something of real value: liberty itself. And civil rights laws violate that liberty.

Libertarian philosophers have long pointed out that the conventional separation between human rights and property rights is a false one. If property rights are violated, so are human rights. If property rights are protected, so are human rights.

The same logic applies to civil rights. If they are invoked at the expense of private property—which they are by definition in the U.S. legal context—they violate rights. What Herbert Spencer called the “law of equal freedom”—in which a person has property rights and no special privileges—means a society in which people can discriminate or not discriminate, i.e., make choices, on any grounds of their choosing.

Sometimes those who think that civil rights have gone too far see the problem in terms of quotas. This is a misdirection of intellectual energy. Under a pure property regime, people are free to impose quotas if they desire. Even the alleged dream of a perfectly integrated society could be achieved if that is what market actors chose. It is also the case that a “separated” society could result.

Based on experience, what we are likely to see in a regime of pure property rights is authentic diversity, rather than the trumped-up form imagined by government bureaucrats. Some firms, companies, and communities would be homogeneous, while others would be heterogeneous. But the more important goals of social peace and prosperity would be met in a demographic free market.

But would vulnerable populations be helped? Yes, but not as a result of special rights and coercion. The division of labor finds a place for all sorts of people, and encourages a culture of productivity, which would eventually replace the no-win culture of envy and victimology.

As the Fabians recognized, there are as many varieties of socialism as there are nations. We are cursed with a particularly vicious sort that denies the right of association, rejects essential aspects of the freedom of enterprise, and combats natural inequalities as if they represented a disease on the body politic.

As executive agencies acquire ever more power and money, and run roughshod over all aspects of private life, we are encouraged to look the other way. At this rate, we may eventually disprove the old Fabian teaching that socialism in Western countries cannot succeed if it appears undemocratic or authoritarian.

Anyone familiar with Joseph Schumpeter’s paradoxical prediction that socialism would win out over capitalism might also think that the retreat of socialist governments in 1989 disproved him. In light of our present situation, let’s revisit Schumpeter. In Capitalism, Socialism and Democracy he defines his terms very carefully.

The capitalist or commercial society, he says, is defined by two elements: first, private property in the means of production; second, regulation of the productive process by private contract, management, and initiative. By Schumpeter’s definition, we only have capitalism in the first sense. We have private property, but no longer can we govern the productive process by private contract, management, and initiative. The government exercises veto power over all matters of economic management.

By socialist society, he further writes, he means an institutional pattern in which the control over the means of production itself is vested with a central authority, or as a matter of principle, the economic affairs of society belong to the public and not to the private sphere.

Which does our society most closely resemble: Schumpeter’s commercial society or Schumpeter’s socialist society? Certainly we know where the trend line is pointing. And we know what to do about it: eliminate all violent intervention in the market, and allow for the flourishing of freedom of contract and association, and the protection of private property.

That is the only way to dig ourselves out of the pit of this peculiarly American form of socialism called civil rights.

  • Lew Rockwell, Jr. is a libertarian author and editor, self-professed anarcho-capitalist, a promoter of the Austrian School of economics, and founder and chairman of the Ludwig von Mises Institute.