"Discrimination is not done by villains. It's done by us."
- Vivienne Ming, theoretical neuroscientist, technologist and entrepreneur
A Q&A-style discussion about the relationship between capitalism and discrimination:
First, what is capitalism?
Capitalism is an economic system in which private citizens organize equipment and labor to provide products and services in a free, competitive market.
Is capitalism inherently discriminatory?
Some theorists believe so. They claim the profit motive embedded in capitalism encourages discrimination and oppression.
What evidence supports these claims?
In the United States, Jim Crow laws enforced racial segregation in the South. White-owned businesses discriminated against people of color by refusing to serve them or offering lower quality service. This is just one example of systemic discrimination that occurred under capitalism. In this case, the practice ended with the implementation of the Civil Rights Act. Nevertheless, some capitalists continue to engage in discriminatory practices – based on race, religion, sexual orientation, political beliefs, or other characteristics.
Does this mean capitalism is inherently discriminatory?
Not necessarily. We must look to the mechanisms that underlie and support capitalism – not just the outward actions of a few - to understand the behavior it encourages.
What is the profit motive?
Firms are driven by the profit motive. The field of economics assumes that the goal of the firm is profit maximization, or to make as much money as possible.
What does the profit motive mean for discrimination?
Discrimination is wholly incompatible with profit maximization because every customer turned away represents a loss of potential profits. If the firm seeks to make as much money as possible, then it is incentivized to serve everyone who can legally purchase the firm’s products or services. A firm that engages in discriminatory practices must pay for that discrimination in the form of foregone profits. Logically, discrimination is bad for business.
If discrimination is bad for business, then why do some capitalists do it?
Kenneth Arrow, a Nobel Laureate in economics, discussed the issue of racial discrimination in his widely cited 1971 working paper, The Theory of Discrimination. Arrow theorizes that firms may discriminate to maximize utility, not profits. In the economic sense, this implies that some firms care more about their human biases than profit maximization. Additionally, discrimination isn’t a byproduct of capitalism. It is a human trait present in all forms of socio-economic organization.
If discrimination is not motivated by capitalism, then why does it exist?
Discrimination is present in capitalism for the same reason it is present in Marxism, socialism, and every other –ism; no system built and practiced by humans can be free of human bias. Anti-LGBTQ discrimination was widespread after the Cuban communist revolution. There is also evidence of ethnic discrimination in the hiring practices of Chinese state-owned enterprises. Furthermore, Marx himself often used derogatory and insensitive language to refer to Jews and blacks, albeit during a time when such views and language were socially accepted.
So what can we say about the relationship between capitalism and discrimination?
Capitalism encourages freedom of choice – choice about how to conduct business and choice about where and how to spend one’s money. People use choices to practice discrimination in every aspect of life, from choosing their friends to dating preferences. Unfortunately, this means discrimination can also show up in business. Fighting against these practices should be done by attacking the root of the problem – human bias – not overthrowing an economic system that increases tolerance.