Racism: The Free Market Remedy – Eccentric Economics


Of the many economic systems that have been attempted throughout history, no system has brought distant cultures and races together, in a positive manner, more than a capitalistic free market system.

The free enterprise system hinders the prejudices that one may hold against another, in pursuit of a monetary gain. This is not to say a flourishing free market system will remove prejudices within an individual. It will, however, limit the systemic effects of a system of racism that weakens the financial power of minorities.

This cannot be said about a centralized economy, as the rules of the market are subject to reflect the prejudices of those in power. Though there are anomalies, the vast majority of savvy entrepreneurs care more for the color green, than their disdain for the color of another’s skin.

The desire for wealth accumulation renders man’s biases to a minuscule level.

This notion is applicable to all levels of exchange, whether international or local.

The American business executive, whose grandfather died fighting against the Japanese in WW2, is now purchasing a Japanese executive’s textiles in order to decrease the costs of his firm’s production. Perhaps a businessman maintains a dislike for those of darker skin color. Regardless of his bigotry, he does not realize he is indirectly exchanging with a man in Central Africa, who extracts rubber and sells the commodity to a tire company. The bigot then purchases these tires to place on his automobiles, inadvertently enriching the man he dislikes due to his skin color.

On a local level, a merchant may suffer from racism. If the merchant chooses to not accept their business, it has consistently shown to be very damaging to their revenue, especially in our modern economic environment. Either his competitors will capitalize on his prejudices by gathering the discarded customers, or perhaps face community backlash due to the bad public relations discrimination is coupled with. He must either set aside his prejudices, or his competitors and community outrage will force him out of business.

Regarding the influence the free enterprise system has had on the positive convergence of different cultures, one may counter that inhumane acts such as enslaving other races and exploiting primitive peoples shows otherwise. But these are simply lazy arguments.

Firstly, slavery is not a feature of a free market. This is due to the fundamental institution of private property, which implies self-ownership, since individuals maintain property of themselves. This standard of private property and self-ownership is an absolutely vital component of a free market. The term “free” preceding “market” does not only insinuate being free from governmental force, but any outside entity that may handicap one’s ability to navigate through the market system. Contrary to mainstream belief, there are rules that exist in a free market, even in the absence of a government regulator. For the sake of expediency, I will not dive into those theoretical standards now. Instead, I urge the reader to seek the mass amounts of literature on the subject.

It is well-known that stronger countries have historically siphoned off the resources of their weaker neighbors. This is not being denied. But we must recall that imperialism was conducted through nation-states, or companies protected and supported by the government, not individual entrepreneurs. This is one of many aspects that separates a free market from a country that engages in a form of state capitalism, which has elements of a planned economy. Unfortunately, conflating the two opposite terms has been rampant in today’s discourse. This is not to say some entrepreneurs do not induce malignant practices; rather, they can do so in a very limited fashion.

Now what of the “greedy” and rather large multinational corporations? Do they not construct factories in areas to exploit “slave labor” from a poor populace? This is a thoughtless claim, and only one who maintains a limited knowledge of international economics would assume this.

As stated earlier: Slavery violates a “rule” within a free market, which is private property and self-ownership. Additionally, exploitation has become such an unrestricted and loosely-used term that maintains little substance.

How one can be exploited if they enter into a voluntary contract, knowing the stipulations, is beyond me.

In a free market, if one does not like being “exploited” by their employer, they are free to leave the business and sell their labor elsewhere, or venture into their own business.

What many activists fail to realize is that the luxurious environment and multitude of occupational choices they are surrounded by, are not present in these less developed economies. Although these laborers are still free to make choices, they have very limited options in choosing an occupation that is fruitful. Will farmers in Thailand then work in the Sun-drenched rice patty, with the hopes of harvesting a yield that will produce a measly $1,790 annually? Or accept employment in a foreign textile factory in which they are paid nearly triple, at $4,812 annually? By advocating the abandonment of corporations in developing nations, activists are harming the local populace they intended to help.

Unfortunately, economic growth does not happen overnight. Over decades, or even centuries, economies must adopt new technologies and practices to reach the next stage.

Foreign investment is a powerful tool in raising the standard of living, which ignites slow and steady growth through capital investment, which is a necessary factor of production to increase the quality of life. If a community remains an agricultural economy, which produces a minimum sustenance, it will take ages to increase their quality of life. This process can be exponentially sped up through foreign companies investing their capital and assets into these developing economies, who in due time are empowered to accumulate enough capital to innovate and generate their own wealth. It is no coincidence that with the increase of free enterprise and capital investment, smaller economies have obtained massive amounts of growth in the past century.

This brief column is not to convince the reader that racism and deeply-held prejudices are not practiced in many businesses and enterprises. Free enterprise is a medicine, not a cure for racist tendencies. It intends to support the observation that if people are left freely to exchange with their neighbors and foreign strangers, the profit motive has done a tremendous job of not only suppressing prejudices, but also removing cultural barriers and empowering economically disadvantaged nations.

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Logan Davies

Logan Davies is a Regional Manager in the Banking Services industry, and the director of the non-profit organization, Voluntaryism in Action. He graduated from Middle Georgia State University with a degree in Business Administration. He is the father of a loving son, an avid outdoorsman, firearm enthusiast, and unwavering supporter of liberty.


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