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Sunday, February 19, 2023

The Real Race Revolutionaries: How Minority Entrepreneurship Can Overcome America’s Racial and Economic Divides

A review of Alfredo Ortiz’s new book.

Image Credit: iStock

Alfredo Ortiz has a message for all of the progressive politicians and activists working to close the economic gap between white and non-white Americans: Please stop.

In his new book The Real Race Revolutionaries (December 2022), Ortiz, a long-time advocate for small business owners and their employees in the US, argues that the government policies that are ostensibly intended to equalize economic outcomes between the white majority and minority groups in America have actually had the opposite effect. Given the growth of government regulation and spending and the relative lack of progress over the last several decades, it’s hard to argue with him.

Ortiz’s argument rests on one especially important insight that will be familiar to fans of market economics but remains stubbornly resistant to being understood by the general public. The laws and regulations that have long been promoted as disciplining businesses and protecting consumers usually end up protecting large established companies and restricting market access to new entrants and outsiders. Those established players are, of course, disproportionately the straight white males we’ve been warned about ( i.e., the ones who control the majority of enterprises and the largest share of wealth in America already). Greater government intervention into the productive sector of the economy therefore ends up actually harming minority workers and entrepreneurs on net, almost by definition.

Every new regulation and tax hike is subtracting something from the bottom line of existing businesses and making it harder for new start-ups to come into existence. As I wrote in 2021 regarding new environmental, social, and governance (ESG) rules, stricter standards and more expensive requirements privilege incumbents over new entrants, larger firms over smaller firms, and firms that already have larger legal, regulatory compliance, and lobbying departments. Because current regulatory frameworks are already biased in favor of larger firms, heightened burdens will only reinforce that effect. As JPMorgan Chase CEO Jamie Dimon noted in a 2013 interview, the regulatory requirements of the 2008 Dodd-Frank Act – sold to the American public as an anti-Wall Street accountability measure – simply helped him build a “bigger moat” for Morgan against its smaller competitors.

More regulation, higher spending, bigger deficits, and higher taxes aren’t the first things most people think of as obstacles to minority success, but they absolutely create economic conditions that disproportionately harm people climbing their way up from the bottom of the socioeconomic ladder. Inflation, which has been at record levels in recent times, will easily kill a low-margin restaurant or store that’s just trying to get off the ground. Sound money and stable economic conditions matter more to small business owners with less capital than to large enterprises with more access to financing options and thus room to maneuver in the long term. My Competitive Enterprise Institute colleagues Iain Murray and Ryan Young made this point back in 2016 when they were countering the then-popular work of French economist Thomas Piketty. They pointed out in their paper “The Rising Tide: Answering the Right Questions in the Inequality Debate” that sound monetary policy would do more to help working Americans than most of the interventionist policies championed by progressive critics of capitalism.

With these dynamics in mind, it begins to make more sense that maximizing economic opportunity for minority Americans means lowering the barriers to entry to the greatest possible extent. That includes barriers to employment as well as barriers to becoming a new business owner (which in the case of businesses with only a single employee are basically the same thing). Ortiz recently contributed an excellent short article here at FEE discussing the considerable barriers to people starting up their own gig titled “Occupational Licenses Are Killing Minority Entrepreneurship.”

Mandatory state-level licenses are stopping hard-working Americans from becoming everything from undertakers and hair braiders to florists and interior designers. The current state of occupation licensing is even stopping people who are already fully licensed in one state from moving and doing the exact same job on the other side of an arbitrary geographical line.

And Ortiz is not alone in going after such restrictions. A wide variety of economists, policy experts, and politicians have now come out in favor of reforming or abolishing occupational licensing requirements altogether (or at least recognizing existing qualifications across state lines). Just to mention a few recent examples, Adam Thierer and Trace Mitchell of the Mercatus Center published “Occupational Licensing Reform and the Right to Earn a Living: A Blueprint for Action” in 2020, Shoshana Weissmann of the R Street Institute wrote last year about licensing and the student loan crisis, former Brookings Institution fellow Ryan Nunn wrote about how to eliminate the anti-competitive effects of occupational licensing in 2019, and the Obama administration started a licensing reform effort back in 2016. The Institute for Justice has also become famous over many years for defending the rights of Americans across the country to work in their preferred professions without government permission. A handful of governors and state legislators, the ones who created this problem in the first place, are now starting to take some of this advice and begin fixing the mess.

But even with incremental wins like this, we are still left with a disconnect between the mainstream narrative by left-wing policy advocates who claim to care about minority success on the one hand but who advocate for policies that would lead to less economic growth and opportunity on the other. In part that’s because they don’t really believe in the possibilities of free markets in the first place. From this progressive – and often, explicitly Marxist – perspective, the only path to fairness for anyone who is not already rich is government control and redistribution rather than new innovation and production. Ortiz presents an old but classic example among black economic thinkers. He contrasts Booker T. Washington, who famously advised his fellow Americans to pursue entrepreneurship, hard work, and self-reliance with W.E.B Du Bois, a leading socialist thinker of his day, who insisted that capitalism itself was responsible for racism and thought a future intellectual elite of black leaders should focus on winning the game of political influence instead. Their legacies are similarly divergent: in 1946, Washington was honored on the first US coin to feature a black American, the Booker T. Washington Memorial half dollar. In 1959, Du Bois received the Lenin Peace Prize (formerly the Stalin Peace Prize), an honor bestowed by the former Soviet Union.

That divergence of perspectives, of course, continues today. Ortiz points to Ta-Nehisi Coates and Ibram X. Kendi as inheritors of Du Bois’ pro-socialist/anti-individualist legacy. Presumably he would also include the self-proclaimed “trained Marxists” who founded the Black Lives Matter Global Network Foundation. Meanwhile you have a deep bench of 20th and 21st century black intellectual leaders who fit quite well on Team Washington. Whether it’s economists like Thomas Sowell, the late Walter Williams, and Glenn Loury or the Hoover Institution’s Shelby Steele or Columbia University’s John McWhorter, there are plenty of writers, professors, and activists who don’t think that the future prosperity of non-white Americans has to come from the end of a government gun.

For some reason, however, the sort of well-meaning white progressive who has multiple copies of White Fragility on her bookshelf seems to have trouble understanding that.

Much of progressive legal and political theory has notoriously privileged intentions over real-world outcomes. The moral high ground ends up being ceded to people who can emote most persuasively rather than those who have ideas that actually work.

As Thomas Sowell himself put it, “Much of the social history of the Western world over the past three [now more like six] decades has involved replacing what worked with what sounded good.” Ortiz and his book are an example of a man trying to pull Americans and their ostensible leaders back from the false promise of what merely sounds good and guide them to what will actually work.

Let’s hope he’s successful.

  • Richard Morrison is the Senior Editor at the Competitive Enterprise Institute.