Racism: Public and Private

Dr. Block is Senior Economist at The Fraser Institute. Vancouver, Canada.

When an individual or a group of persons in the private sector discriminates against a racial or ethnic minority, the results can be debilitating. Psychological harm, feelings of isolation, and a sense of hostility are likely to result.

Fortunately, in the private sector there is a little-recognized phenomenon which helps to protect minorities from great economic harm: the fact that private individuals tend to pay for their discrimination. For example, if a segment of the population is discriminated against in employment, this tends to drive down their wage rates. However, the lower wages they now command act as a magnet, inducing other employers to make them job offers. Employers who discriminate pass up these lower wages. Other things equal, competition will tend to drive the discriminating employers out of business.

This is hardly an ideal situation from the viewpoint of the minority—they would be better off with no discrimination. But at least this aspect of the free market tends to reduce the injury which would otherwise accompany discrimination.

Things are far worse for the minority victimized by government discrimination. For one thing, the incomes of prejudiced bureaucrats and politicians are protected from market forces. Their incomes do not tend to fall, as they do for prejudiced businessmen in the private sector. For another, civil servants do not run the risk of bankruptcy at the hands of nondiscriminating competitors—their jobs are guaranteed.

Consider, for example, the “back of the bus” rules which discriminated against blacks in the South. This aspect of Jim Crow was part and parcel of government. The buses were part of the public sector; they were subsidized, and no competition was allowed. As a result, blacks had to suffer discrimination for many years, un til the “back of the bus” rules finally were changed through massive demonstrations. Had blacks been told that they could ride only in the back of the bus in a market situation, other bus companies would have been formed, and would have enjoyed an inside track in competing for black customers.

Sometimes discrimination in the public sector is so well camouflaged that few people realize it is taking place. For example, the Hutterites were victimized by discriminatory legislation in the Canadian province of Alberta that did not even mention them by name! These people commonly live in colonies of 100 families or more. But the economics of farming in this part of the prairie are such that each colony needs two or three square-mile sections to support itself. An Alberta law which restricted holdings by size thus made it very difficult for the Hutterites to form colonies.

But well-hidden public discrimination is by no means limited to rural areas. In Vancouver there is a crackdown on illegal suites, and a ban is in the works for second kitchens in areas zoned for single-family occupancy. None of the laws mentions the Sikh community by name; nonetheless, this spate of legislation singles out the East Indian community for discriminatory treatment. The reason is not difficult to fathom. Like the Hutterites, Sikhs live in very large groups. According to Gurnam Singh Sanghera of the East Indian Workers Association of Canada, many ethnic communities live with three or four generations under one roof—and with an extended family in each generation of aunts, uncles, cousins, and so on.

Were the private sector discriminating against the Sikhs or Hutterites, these groups could find accommodations, albeit perhaps at slightly higher prices. But when they are victimized in the public sector, their plight is far more serious. They must convince a majority of the electorate—many of whom are hostile to them—f the injustice in discriminatory laws. History tells us this is no easy task.

Given that public-sector discrimination is far more harmful to minorities than private discrimination, those who sympathize with racial and ethnic victims should think twice before entrusting human rights to the state. The market is a far better alternative.