Human beings are individuals as well as members of groups. Due to the prevalence of stereotypes and prejudices in relation to groups, it is often thought that there is not much point in individual members of disadvantaged groups attempting to make economic progress. The prevailing notion, which is rooted in egalitarian ideologies and interventionist policies, is that economic progress is impeded by membership of a disadvantaged group. Any individual members of a disadvantaged group who achieve notable success—for example, millionaires or pop stars—are viewed as exceptional cases that prove the rule.
It is certainly true that individual life outcomes are influenced not only by the available economic opportunities, but also by constraints arising from the legal, social, or political system within which those individuals live. Historically, such constraints were explicitly enforced by a legal system that institutionalized discrimination based on one’s membership of a specific class or race. For example, the Master and Servant statutes of England were based on class and status distinctions. The Jim Crow legislation in America segregated citizens based on race. The earliest example of Jim Crow laws is from Massachusetts: “The term ‘Jim Crow Law’ was first used in 1841 about a Massachusetts law that required the railways to provide a separate car for black passengers.” In 1838, “The Eastern Rail Road began with trains running between East Boston and Salem, MA, but it provided separate cars for white and black passengers.”
These types of discriminatory laws restricted the extent to which members of disadvantaged groups could participate in market transactions, and therefore—from the perspective of the group—it could be said that they had fewer opportunities for economic advancement. However, the picture looks rather different when viewed from the perspective of individual members of these groups, because the fact that a group has fewer opportunities does not altogether prevent individual members of that group from making economic progress. The important question concerns the extent to which such progress is possible. If it is a case of a few exceptions that somehow manage to buck the trend, then little significance can be attached to the scope for making progress in free markets. That is the view held, for example, by those who claim that nothing can be learned by following the example of “model minority” groups such as Asians who also historically suffered from racial discrimination:
In particular, the model minority designation is often applied to Asian Americans, who, as a group, are often praised for apparent success across academic, economic, and cultural domains—successes typically offered in contrast to the perceived achievements of other racial groups.
However, if individual progress is the norm in free markets, even in the presence of such legal, social, and political constraints, then that would attest to the power of free markets to liberate all people including members of disadvantaged groups. This is one of the key issues studied by the economist Robert Higgs in his book Competition and Coercion: Blacks in the American Economy, 1865-1914. Higgs’s definition of racial discrimination emphasizes the effect on individuals: “when a black individual and a white individual receive different treatment under conditions that are identical in every other respect.”
His focus is therefore on individual treatment, not on measuring group outcomes. Group outcomes do not tell us the scope for each individual member of that group to make progress. To illustrate what he means by individual treatment, Higgs gives the example of an individual white man who works harder and produces more than an individual black man—in this case, paying the white man more is not evidence of racial discrimination. Higgs observes that, similarly, in a situation where freemen “were predominantly illiterate and endowed with very little experience in independent management,” a lower wage would not, by itself, be evidence of racial discrimination.
Higgs’s goal is to ascertain the extent to which individual outcomes improve over time with rising levels in education, property ownership, and managerial skills. He also considers the extent to which this progress was hampered by “the weight of racial discrimination forever pulling downward.” He gives the example of the treatment that black people could expect from public officials such as law enforcement and school authorities, acknowledging the fact that “when black people came into contact with governmental authorities, they could usually expect discriminatory treatment.” The question then arises as to the extent to which this discriminatory treatment might impede economic progress.
To answer this question, Higgs analyses the extent to which the interplay between “economic competition and racial segregation” operated as “joint determinants of the material condition of America’s blacks.” He concludes that “competitive forces profoundly influenced black economic life, indeed, that [economic] competition played an important part in protecting blacks from the racial coercion to which they were peculiarly vulnerable.” His argument is not that racial coercion had no impact on anyone’s life, but that individuals were able to make economic progress despite that impact.
Walter E. Williams adopts a very similar approach in his book, Race & Economics: How Much Can Be Blamed on Discrimination? Focusing on the individual experience of market participation, he argues that, “In markets, because their transactions are mostly an individual affair, it is unnecessary to win the approval or permission of others.” There is no need for the individual to “win over the majority” in order to achieve his goals. An individual job-seeker only needs to persuade one employer and agree to terms with that one employer—he does not need to persuade an entire race of people that he is worth being hired. The same pertains to anyone making contracts in open markets, for example, a salesman—he attempts to persuade individual buyers and not an entire race. Williams shows that despite social, political constraints, such as belonging to a group subjected to racial discrimination, individuals make significant economic progress over time to such a great extent that they cannot be dismissed as mere “exceptions.”
This is not to say that free markets eradicate discrimination or that discrimination does not exist. On the contrary, even in the absence of legal or institutionalized coercion, there will be many life constraints on an individual’s ability to participate in economic activity. For example, freedom of contract entails the freedom to enter into agreements or choose not to enter into agreements, so the same freedom that enables economic activity also constrains it in the sense that there is no guarantee that everyone one wishes to contract with will return the sentiment.
Free markets contain no guarantees. The same is true of freedom of association—the same freedom that enables people to associate with anyone of their choice also entitles them not to associate with anyone of their choice. Similarly, the sanctity of private property requires robust protection for property rights, but it must not be forgotten that property essentially entails the right to exclude. Thus, liberty is, in this context, a double-edged sword: its exercise by some may bring disappointment or even disadvantage to others in specific situations.
Nevertheless, the important question for any individual making decisions concerning his own life is whether economic activity can be expected to yield worthwhile economic outcomes for him even in the presence of such constraints. The lesson from economic studies is clear. As Williams explains:
...the fact that some blacks were able to earn a comfortable living and indeed become prosperous—in both the antebellum South, in the face of slavery and grossly discriminatory laws, and the North, where there was at best only weak enforcement of civil rights—gives strong testament to the power of the market as a friend to blacks.
