Markets and Minorities
The 1980 elections marked the end of an era in American race relations. Between 1964 and 1980 federal officials had argued about the moral legitimacy and practical benefits of particular strategies for helping blacks catch up with whites economically, but none had questioned the principle that the government should actively promote this goal. This consensus about long-term goals had led to three kinds of federal activity. First, a lot of money was spent on education and job training, and spent in such a way as to give blacks a substantial fraction of the benefits. Second, the federal government used its power to get private employers to assign blacks to jobs traditionally reserved for whites. Third, the government increased both cash and other benefits for families that were unable to take advantage of the new job opportunities, especially families without a male breadwinner.
Some parts of this implicit social contract between blacks and whites were unpopular from the very start. Even in the early 1960s many whites felt that Aid to Families with Dependent Children (AFDC), which was the major source of income for many families without a male breadwinner, encouraged both promiscuity and idleness. As more mothers entered the labor force over the next two decades, the idea that the government should pay women to stay home and take care of their children became less and less popular. The fact that an increasing percentage of these women were black did nothing to enhance the program’s popularity.
Other elements of the implicit social contract were initially popular but lost support as time went on. Early federal pressure on private employers to eliminate discrimination against blacks was widely accepted. Later, pressure to discriminate against whites in order to offset the effects of past discrimination against blacks was extremely unpopular. Education and job training also started out with broad support, but much of this support was predicated on unrealistic expectations about what such efforts could achieve, especially in slack labor markets. As this became obvious, enthusiasm waned.
The Reagan administration has abandoned the notion that the federal government should try to make black incomes equal to white incomes and has won congressional support for cutting back all the major federal programs designed to accomplish this goal. Spending on education and job training has been cut, along with many other government services. Since government has been a major source of new middle-class jobs for blacks over the past two decades, these cutbacks have reduced job opportunities for blacks more than for whites. Federal pressure on private employers to hire more blacks has also dropped sharply. Eligibility for AFDC, food stamps, and Medicaid has been narrowed, making life much harder for families without breadwinners. Perhaps most important of all, the goal of full employment, which has always been crucial for narrowing the distance between “haves” and “have-nots” in America, has been assigned its lowest priority since 1932.
Even if the Democrats regain control of the White House in 1984, they will not have a mandate to revive affirmative action, expand government services, or raise AFDC benefits high enough to lift recipients out of poverty. Some Democratic presidential aspirants still use traditional liberal rhetoric to rally their supporters, but none is likely to risk his political career by pursuing the policies this rhetoric used to imply. The implicit social contract between blacks and whites that prevailed from 1964 to 1980 is therefore dead. The question today is whether anything will take its place.
Thomas Sowell, a black economist trained by Milton Friedman and his colleagues at the University of Chicago, has been campaigning against special treatment for blacks since the early 1970s. In Ethnic America and Markets and Minorities he tries to lay the intellectual foundations for a more general argument that ethnic minorities do better in laissez-faire economic systems than in systems subject to government regulation. Ethnic America describes how the Irish, Germans, Jews, Italians, Chinese, Japanese, blacks, Puerto Ricans, and Mexicans came to America, how they dealt with the discrimination they all encountered, and how they progressed economically despite the absence of government help and sometimes in the face of government opposition. Markets and Minorities is a textbook for undergraduate courses on minorities; it uses conventional economic logic first to analyze the effects of discrimination and then to analyze the effects of government programs aimed at eliminating either discrimination or its presumed consequences, such as low wages, unemployment, and squalid housing.
Both books are, in effect, briefs for Sowell’s view that governments should pursue colorblind policies and let different ethnic groups look out for themselves. Both make three general claims in support of this view.
While racial and ethnic discrimination has been common throughout American history, the victims of such discrimination are often more affluent today than their former oppressors.
In a competitive economy, discrimination against racial and ethnic minorities is expensive to those who engage in it. Discrimination therefore tends to disappear once governments stop enforcing it. By 1969, Sowell claims, American employers were paying their black and Hispanic employees the same wages they paid whites with comparable skills.
Government efforts to eliminate both private discrimination and its presumed consequences do more harm than good, mainly serving the interests of white liberals and middle-class blacks, not the interests of the poor.
These three claims directly contradict conventional liberal assumptions about discrimination, namely:
Racial discrimination has been the most important—perhaps the only—cause of economic inequality between blacks and whites in America.
The costs of discrimination fall largely on the victims. As a result, nobody but the victims gains much from eliminating discrimination. In the absence of government action, discrimination may therefore persist more or less indefinitely.
Government efforts to eliminate private discrimination have had a major part in reducing economic inequality between blacks and whites since 1964. Further government effort will be required to achieve full equality, and perhaps even to maintain the gains made since 1964.
The truth is more complex than either of these approaches suggests. The effects of discrimination, for example, depend on its pervasiveness. Sporadic discrimination of the kind many European immigrants encountered in America does not seem to have harmed its victims and may even have helped them in the long run. Universal discrimination over many generations, which is what blacks have encountered in America, has had disastrous economic effects, many of which show no signs of disappearing even today, when many traditional forms of discrimination have been eliminated.
Eliminating discrimination is also more complicated than Sowell assumes. Some kinds of discrimination lower profits, so once a few firms abandon them, they disappear everywhere. Other kinds of discrimination raise profits and therefore persist unless the government stamps them out. As a result, government efforts to eliminate discrimination have played an important role in narrowing the wage gap between blacks and whites since 1964.
Nonetheless it would be a mistake to dismiss Sowell as a polemicist who plays fast and loose with the truth. He is a polemicist, and he does make many factual mistakes. Of the half dozen factual claims in these books that I checked, all but one were seriously misleading. Yet in some cases the actual facts supported Sowell’s theoretical arguments as strongly as the facts he cited, and in other cases they justified his rejection of traditional liberal views, even though they did not support his preferred alternative.
The remainder of this article looks more carefully at the nature and consequences of discrimination. A subsequent article will assess Sowell’s argument that federal efforts to eliminate discrimination are counterproductive.
It is hard to argue with Sowell’s claim that many ethnic minorities overcame discrimination and achieved extraordinary influence in America. Both Ethnic America and Markets and Minorities begin with a table showing the relative income of families from different American ethnic groups. The table covers only the largest groups of European origin, fails to distinguish affluent Irish Catholics from relatively impoverished Irish Protestants, and relies on a survey that underrepresented poor Jews. But correcting these errors strengthens Sowell’s argument instead of weakening it. My Table 1, for example, uses data collected from 1972 through 1980 by the National Opinion Research Center’s General Social Survey (GSS) to estimate the household income of people who said their ancestors came to America from Europe—people who, for convenience, I will simply call “Europeans.”
The table includes all sizable white ethnic groups except Hispanics, most of whom came to America via Latin America and most of whom are much poorer than those who came to America directly from Europe. The table supports Sowell’s claim that the victims of discrimination are often more affluent today than their former oppressors.
While Jews do not look as prosperous in my table as in Sowell’s, they are still far better off than any other American ethnic group. Irish Catholics are second. Americans of British origin—the “WASPs” who were once said to run the country—have only 1 percent more income than the average American of European origin. Northern Europeans are for the most part worse off than Southern or Eastern Europeans. Contrary to what one might suspect, these differences persist even when one looks exclusively at families living in the urban North.
There is plenty of room for controversy about which European groups encountered the most discrimination in America, but few would argue that the Dutch or the Scandinavians had a harder time than the Jews; that the country was run by a French establishment that kept immigrants of British origin in their place; or that Irish Protestants encountered more discrimination than Irish Catholics. Indeed, Irish Protestants (often known as “Scotch Irish” to distinguish them from Irish Catholics) blended so easily with their British cousins that few people are even aware that they constitute one of the largest ethnic groups in America—larger, for example, than Irish Catholics. Because Irish Protestants never established their own churches, political machines, or voluntary associations, they never entered American consciousness the way Irish Catholics did. The absence of organizations for mutual aid may, in turn, help explain why Irish Protestants are now worse off economically than Irish Catholics, though many other factors are also involved.
Far from suggesting that discrimination kept its European victims impoverished, Table 1 suggests that it spurred them to greater success. This is certainly consistent with Sowell’s argument. But Table 1 does not offer much support for another of Sowell’s recurrent arguments, namely that an ethnic group’s success in America depended to a great extent on the values, skills, and traditions it brought from the “old country.”
If cultural legacies were of critical importance, one would expect groups that prospered in Europe to have done the same in America. This may be true of the Jews, who may have been more affluent than their gentile neighbors in Europe as well as in America. But among gentiles the European economic order seems to have been almost completely reversed in America. Germans and Scandinavians are richer than Italians and Czechs in Europe, but poorer in America. Irish Protestants are richer than Irish Catholics in Ulster, but poorer in America.