In honor of Martin Luther King Jr. Day, I wanted to address the issue of businesses being bigoted and how a free society would deal with them.
When libertarians speak out against so called “anti-discrimination” legislation, we are often attacked and called reactionary bigots for our assertions. Because NOT seeing people as collection of stereotypes is some how xenophobic and closed minded. Additionally, as we are all told by local, state and federal government officials, they are vastly more attune to the will of the people. Never mind that the fact that the political feedback mechanism only functions every two to four years and we can’t NOT participate. Any attempt to explain a “free-market” solution is met with ridicule and hottie derision. (I blame republicans for dragging liberty based rhetoric thru the mud for years)
A free market deals with racism and bigotry in business like it deals with any other bad decision by business owners. It hits them right where is counts, their pocket book.
Businesses that refuse to serve or do business with all minorities (or even by singling one out) have just lost revenue and simultaneously have weakened their ability to with stand variation in the business cycle. Such companies will need to retain additional cash reserves to account for potential shifts in expenses which means less money for investment or inventory. Additionally, they will also not benefit as greatly from the economy of scale (thru bulk ordering, ect.), which will reduce the profits they earn. If the business also stupid enough to be bigoted in its hiring, they will be paying MORE money for Less qualified/productive/reliable employees, which again INCREASES their overhead(money out) and decreases their profit(money in). In this way the market levies a steep “tax” against those business owners who are bigoted or racist. No government intervention required.
The flip side to this is that, any non-racist business owner that is willing to hire and sell to minorities, will not only have a competitive advantage, but will have the support of the community. As such, the above “business” process is not the only way to create change in a free society. Boycotts, PR campaigns and unions can all function as part of the overall market, so long as they do not resort to violence in their measures. All of these have fiscal ramifications for a business owner who refuses to reassess their behavior to reflect the changing preferences of the populace. Failure to do so will at first be uncomfortable as profits slip away, then unbearable as losses start to mount, and finally if they refuse to change at all then the business will either go bust or be remanded to the tiny niche market where they sell used KKK baby onesies and blue contacts for brown eye-ed Aryans. So as long as the market is allowed to work, profits will flow from bigoted businesses to non-bigoted businesses.
The final point I’d like to make is that no human system is perfect and that particular outcomes for any system are not guaranteed. Markets are an outgrowth of the people that participate in them, so if the will of the people is corrupted and bigoted, the outcomes will likely be the same. However, our contention as libertarians is not that markets are perfect, but rather that they allow for more influenced by everyday people and that the feedback loop they run on is much shorter/exacting than that of politicians.
To read more on this subject, take a look at Rob Murphy’s book “The Politically Incorrect Guide to Capitalism”. And check out his site http://consultingbyrpm.com/blog