by  Richard M. Ebeling
October 25, 2017

Politically we seem to be living in trying times. The political polarization, as portrayed in the mainstream news media, appears to be intensifying with even acts of destructive violence on the streets and campuses of American cities.

At the same time, pictures out of Houston during and following Hurricane Harvey show empathetic assistance and cooperation between people and groups that supposedly are in heated contention with each other.

How do we reconcile this?

To begin with, I am persuaded that the claim that racial and social “class” tensions are on the rise in America is not true. In fact, I would argue that in everyday interaction and association, race relations are far, far better than they were, say, twenty-five years ago, and most certainly compared to fifty or seventy-five years ago.


Race Prejudices of a Few Decades Ago

When I was a young boy, the evening news carried the imagery of violence on the streets of some Southern cities as people marched against segregation laws and faced sometimes brutal force by law enforcement agencies directed to put down the “uppitiness” of blacks and white civil rights workers insisting upon equal rights and equal treatment for all before the law.

Some white people, back then, had little reluctance or embarrassment in publicly and rudely using a variety of pejorative words and phrases when referring to Americans of African ancestry.  And what people did not say in public, they certainly freely said in their home to family members and friends.

I had a classmate in high school whose parents had persuaded him that blacks were inferior to whites. He was really uncomfortable when I made him go with me to see the movies, In the Heat of the Night and Guess Who’s Coming to Dinner?, both released in the theaters in 1967, and both starring Sidney Poitier. Here was a black detective, in the first movie, who solves a murder in a small Southern town that the white chief of police (Rod Steiger) can’t solve on his own; and in the second movie here is a successful black medical doctor planning to marry a white upper class young woman, while her “enlightened” liberal parents (Spencer Tracy and Katharine Hepburn) have a hard time coming to terms with it all, in spite of their “progressive” views.

This all may seem tame today, but in the 1960s these were considered socially controversial movies challenging the views and attitudes of many in society. The fact is, except for a small fringe in today’s society, very few even think anymore in terms of the attitudes and beliefs that these movies were designed to confront. We are certainly not a “color-blind” society, by any means, but 2017 is nowhere near the world of 1967 in the United States.


From the “Working Class” to the “Middle Class”

What about “class” relationships? I grew up in the era of the Cold War when it seemed a real question as to whether or not communism would triumph around the world instead of Western-style democracy and a system of private enterprise and personal freedom. It is easy to yawn about this today, but it should be remembered that there was an ideologically aggressive movement in the world that was determined to bring a socialist transformation everywhere around the globe, and whose adherents believed that the appropriate and essential means of bringing this about was through the use of political tyranny, a pervasive secret police, and social terror in the form of torture, imprisonment, and mass murder.

Both in the communist world and in Western nations, it was common to hear about the evils of capitalism and the abuse and exploitation of “the workers” by those who employed them. Indeed, in the West, it was taken as “obvious” that the only way to prevent revolution from crossing over to “our” side of the Iron Curtain was the introduction of “democratic socialism” in the form of the redistributive state.

In the more than twenty-five years since the disappearance of the Soviet Union from the map of the world, poverty, and general human material want is slowly but surely being eliminated in those developing countries that used to be referred to as “the third world.” Why? Because most of those countries have turned away from the Soviet model of socialist central planning and instituted forms and degrees of more market-based economic systems. They may not be “free market” societies, but they are most certainly freer market societies than they were fifty or even twenty-five years ago, with amazing economic results.

Here in America those on the political left rarely even use the term “the working class” anymore. Their rhetoric and stated policy goals almost always promise enlightened government interventionist policies to help “the middle class.” Why? Because while there are certainly still noticeable and serious pockets of poverty (by American standards), the vast majority of Americans have what are generally considered “middle class” standards of living and values.

Even in the financially trying times of the last ten years since the banking crisis of 2008-2009, the continuing improvements in the varieties, qualities, and availabilities of an immense number of goods and services to everyone in the United States, even during a period of supposed “stagnant” money wages for many in that “middle class,” has been transformative. Improvements in real standards of living, when adjusted for price inflation and for the qualities and types of goods offered on the market that most people buy and now take for granted, have been equally amazing.


The Long Path from Slavery to Equality of Individual Rights

My purpose in saying these things is not to be a “Pollyanna” and presume that all is well with mankind and the road ahead is bright and beautiful. But before one looks for “the bad” and tries to understand what it is and why it exists, it is at least worth reminding ourselves that if everything is not good with the world today, it is still better in some important ways than it was in the past.

This is easily forgotten and drowned out in the tidal wave of criticisms and critiques of “modern society,” with its spotlighted imperfections, contradictions, and hypocrisies. Again, reading and listening to the mainstream media easily gives the impression that America remains an inherently and inescapably racist society as reflected in too frequent acts of violence and insensitivity to “minority groups,” and as reflected in the unfair and unequal distribution of income that the “one percent” wealth-holders resist “sharing” with the rest of society through “socially just” levels of taxation.

Tragically, the tribal notions of being either a member of an “in-group” or an “out-group” defined by race, ethnicity, language or religion go back thousands of years. It has been a long and tortuous path for humanity to finally start to free itself from this conception of people and the human relationship.

While it is considered to be deeply “politically incorrect” to say so, the change from social attitudes and political systems of collectivism to that of ones more “individualistic” began in “the West,” in Europe and then North America. That is a historical fact. It does not mean “white people” are better or superior. What it does mean is that a series of ideas, beginning in the ancient world among the Hebrews, the Greeks, and the Romans, slowly developed and took shape in more crystallized forms in the seventeenth and eighteenth centuries that resulted in the step-by-step formalizing of social beliefs in individual rights, freedom of association, and notions of representative and constitutionally limited government.


Overlapping Tensions About “Right” in the Minds of Men

Systems of ideas and beliefs always overlap at any moment of historical time. Thus, the new ideas of an individual’s “natural rights” to his life, liberty and honestly acquired property existed in the eighteenth century side-by-side with the older ideas of absolute monarchy and unequal privilege and status among groups in society.

This was no less true with the issue of slavery. The anti-slavery movement that arose and took form in America and Great Britain, especially, in the second half of the 1700s and which grew and was finally triumphant in the 1800s, existed for a long time in the same social space with the institution of slavery and those who insisted on its rightness, justice or simply economic expediency. Even those who found it difficult to overcome personal prejudices came to see and accept the need for abolition of an institution so clearly inconsistent with what they said they stood for as a person and a member of American society.

These co-existing systems of ideas, beliefs, and values not only separate groups of people holding antagonistic conceptions of human association, but the contradictory ideas and beliefs often exist in the same person.

Let’s go back to that movie I earlier mentioned, Guess Who’s Coming to Dinner? Spencer Tracy plays the publisher of a “liberal” San Francisco newspaper long defending equal rights among the races in America, and a voice against racial prejudice. But, suddenly, he’s confronted with having to practice what he’s been preaching. He and his wife brought up their daughter to believe that the color of a person’s skin does not matter; what matters is the content of a person’s character. Now, she is living the idea and ideal they have called for in society, with the daughter having met a man whose character and quality as a person has resulted in her falling in love with him.

If you watch the movie today it easily can seem such a cliché. The father does a background check on the man, expecting to find something “wrong” with him. Instead, it turns out he is a leading international figure in his field of medicine. The parents wonder how will society view and treat their “mixed race” children. They are concerned about the “cultural differences” between the respective worlds this black man and their white daughter have grown up in; are they really compatible for a future together? Of course, at the end of the movie – and who doesn’t like and want a “happy ending”? – the parents realize that the daughter is wiser than them and happily consent to the marriage and look forward to welcoming this soon-to-be son-in-law into the family. Liberal enlightenment triumphs over out-of-date bigotry and prejudice.

It is easy to look, today, at the character played by Spencer Tracy and say, what a hypocrite, what a bigot. What it actually represents is that which everyone must wrestle with at some point in his or her life: what do you believe is true in a world in which that truth may not be generally or widely practiced? And what do you do when circumstances put you in a situation of having to decide how to reconcile what you say you believe with the practices around you, including your own actual conduct? And how shall you make your actions consistent with your ideas, if you believe that the contradiction inside yourself can no longer be comfortably lived with, but many others in the society are not ready to accept those ideas?

The storyline of the movie captures the mental and emotional journey that many Americans have been traversing for over two hundred years. Do you believe in the principles and ideals expressed in the American Declaration of Independence? Do you believe in a society in which all people have equal rights before the law to their life, liberty and honestly acquired property? Do you believe in that freedom of voluntary association among the races that we’ve already been practicing concerning the differing religious faiths that Americans hold?

When we take the long view and look back over this period, each generation in America, certainly over the last century, has been moving toward greater racial tolerance, acceptance, and association – first in word and then, in various ways, in actual deed.

It is in emergency situations such as during Hurricane Harvey, for instance, that you see how people under pressure and concerned for the safety of their own family and loved ones actually act toward others. There have been no racial or color bars, from everything I’ve seen or heard, in the offering of that helping hand to those in danger. In earlier ages, and indeed, perhaps, not that long ago in America, such color-blindness might not have been present to the same nearly universal extent.


Free Market Institutions and Incentives Work for Racial Betterment

What, however, had delayed and deflected the course for even better racial relationships in the United States? To claim one or “the only” cause or factor would be presumptuous. But, speaking as an economist, a leading factor has been the direction and form of government policies.

The nature of a free, open and competitive market economy is that it offers and rewards the discovery of avenues for peaceful and productive social cooperation in the system of division of labor. At the same time, prejudices and bigotry have their costs that individuals are required to bear if they allow them to get the best of many of their economic decisions.

While some critics have charged the market with “depersonalizing” social life, it is forgotten that it also has great advantages. When you go into the supermarket and fill your shopping cart with a wide of variety of goods, it rarely if ever enters your mind to wonder or ask: What is the race, religion or ideology of the persons who have helped produce the products I take off the shelves?

All that matters is whether this is a product I’m interested in and can use, whether it has the qualities and characteristics I’m looking for, and whether it is offered to me at a price that I consider sufficiently attractive to buy it rather than spend my money in some other way. We know nothing about the actual individual human beings who have associated and cooperated through all the various stages of the respective production processes over time, the end results of which are those goods placed at our disposal in the market.

This anonymity of the extended division of labor distances people participating in the production processes from those whose purchases determine whether they successfully earn a living or not. As such, the modern division of labor shields some people in those production processes from possibly negative attitudes and actions if the final buyers knew some of the personal characteristics of those with whom they enter into these complex and indirect forms of exchange.

On the production side, the employer may possess various racial, religious and nationalist prejudices. But in the workplace, there are costs for him to allow them to guide his hiring and promotion decisions within his enterprise. He runs the risk of losing or never hiring the more qualified, experienced and skilled workers who would enable him to minimize his manufacturing expenses, produce a product of a better quality, and market his good or service at a more competitive price than his supply-side rivals.

The advantage to an open and competitive market is that it enables those discriminated against by potential or actual employers to search for alternative gainful employment. From whom? Invariably by some employers who may or may not have such prejudices but who place a higher valuation on a different color than human skin pigmentation: the color of the money through which products are bought and sold. Some businessmen will see their own self-interest is in putting aside any such racial prejudice (if they have them) so as to gain the greater market shares and larger profit margins by employing those they find to be better or best in the arena of production and trade.

Nothing works to reduce false and misplaced conceptions of others than daily interactions in the market. Biased individuals, over time, often discover that those whom they negatively viewed and treated as “different” are, in fact, not much different than themselves. The marketplace of production and exchange also works to create common experiences and values that potentially bring people to see each other in better ways.

In this context, it is worth recalling that the Austrian economist and Nobel Laureate, Friedrich A. Hayek, often made a point of emphasizing that the ancient Greek word, “catallactics,” originally meant not only “to exchange,” but “to turn from enemy into friend.”

That this is an inherently “natural” dynamic in open free markets is shown, I would suggest, by the fact that in order to prevent such mutually advantageous exchanges and associations among people of differing races or ethnicities, cultural racists and those fearful of interracial market competition have used political power to impose segregation laws legally prohibiting such interracial interactions. (See my article, “South Africa and Ending Apartheid: The Free Market Road Not Taken”.)


Government Policies Have Hindered Improvement in Race Relations

So why hasn’t the market succeeded more effectively and fully in improving the lot of those who are the descendants of slaves in America? To a great degree, I would argue it has been caused by the political power of special interest groups and economic policies introduced by government. In the nineteenth and through much of the twentieth centuries, white labor unions were notorious, in many instances, in using their strike threat power to exclude members of the black community from entering various segments of, especially, the skilled labor market.

At the same time, minimum wage laws have also worked to price many unskilled minority workers out of the labor market. It has legally prevented a member of a racial minority from making himself more attractive to a potential employer by offering himself at a wage (marginally) lower than, say, a white worker. This has limited the ability for market incentives to undermine and reduce racial discrimination in the marketplace over time.

Having been driven out of potential labor market opportunities due to minimum wage laws, government regulations of business have also often made it too costly for low income and relatively unskilled members of the black community to start their own private enterprises. As consequence, it has made enterprise and employment in illegal black markets more attractive in some minority communities. Locked away in government-subsidized housing and dependent on government welfare payments and in-kind benefits, dealing in the illegal drug market has seemed to too many as a way to escape from poverty through the making of “easy money.” It has also resulted in a disproportionately high incarceration rate among young black men, who then have prison records that add to the difficulty of later finding their way into a better economic life.


The New Tribalism of Identity Politics

This has been reinforced, I would say, by the focus on “identity politics” by many on the political left. However imperfect in practice, the idea and ideal of America have been the uniqueness, dignity, and respect for the individual, regardless of that person’s accidents of birth or country of origin. I consider this philosophic and political principle of individualism to be the source and the basis of the all the advancements and improvements in American society, including for a growing number of those who are of African descent.

However, people are being forced into a new tribalism and a new racial and ethnic collectivism in the public arena due to the renewed insistence on  “group-think” that is reinforced by a variety of government policies. It has ended up compelling people to think about others and themselves not in terms of whom they are as individual human beings, but about what racial, ethnic or gender group they belong to and what politically bestowed benefits or disadvantages come with that collectivist classification.

Do not get me wrong. The behavior of some police forces and some police officers around the country has been deplorable in terms of a disregard for a color-blind respect and enforcement of people’s rights in many black communities.  The political left feeds off highlighting these egregious acts of abuse of police power. But their worldview is based and dependent on the belief and insistence that race relations are as bad as or even worse than in the “bad old days.”

This is flagrantly not the case by any reasonable historical standard. But the political left’s agenda and policies are helping to make us a far more race-conscious society once again, which can only bring with it serious negative consequences for American society as a whole.

Still, what stands out throughout the American experience is that, in spite of these anti-individualist cultural trends and economic policies, there has endured enough of the American spirit of individualism and practice of free enterprise that has more than anything else, been a great and good force for reducing many of the racial animosities and tensions that may continue to linger in our society.


— Race Relations Are Improved by Free Markets, Not Collectivist Politics originally appeared at