Capitalism and Freedom by Milton Friedman

Author:Milton Friedman
Language: eng
Format: mobi, epub, pdf
Published: 0101-01-01T00:00:00+00:00

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Chapter VII

Capitalism and Discrimination

It is a striking historical fact that the development of capitalism has been

accompanied by a major reduction in the extent to which particular religious,

racial, or social groups have operated under special handicaps in respect of their

economic activities; have, as the saying goes, been discriminated against. The

substitution of contract arrangements for status arrangements was the first step

toward the freeing of the serfs in the Middle Ages. The preservation of Jews

through the Middle Ages was possible because of the existence of a market

sector in which they could operate and maintain themselves despite official

persecution. Puritans and Quakers were able to migrate to the New World

because they could accumulate the funds to do so in the market despite

disabilities imposed on them in other aspects of their life. The Southern states

after the Civil War took many measures to impose legal restrictions on Negroes.

One measure which was never taken on any scale was the establishment of

barriers to the ownership of either real or personal property. The failure to

impose such barriers clearly did not reflect any special concern to avoid

restrictions on Negroes. It reflected rather, a basic belief in private property

which was so strong that it overrode the desire to discriminate against Negroes.

The maintenance of the general rules of private property and of capitalism have

been a major source of opportunity for Negroes and have permitted them to

make greater progress than they otherwise could have made. To take a more

general example, the preserves of discrimination in any society are the areas

that are most monopolistic in character, whereas discrimination against groups of

particular color or religion is least in those areas where there is the greatest

freedom of competition.

As pointed out in chapter i, one of the paradoxes of experience is that, in

spite of this historical evidence, it is precisely the minority groups that have

frequently furnished the most vocal and most numerous advocates of

fundamental alterations in a capitalist society. They have tended to attribute to

capitalism the residual restrictions they experience rather than to recognize that

the free market has been the major factor enabling these restrictions to be as

small as they are.

We have already seen how a free market separates economic efficiency

from irrelevant characteristics. As noted in chapter i, the purchaser of bread does

not know whether it was made from wheat grown by a white man or a Negro, by

a Christian or a Jew. In consequence, the producer of wheat is in a position to

use resources as effectively as he can, regardless of what the attitudes of the

community may be toward the color, the religion, or other characteristics of the

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people he hires. Furthermore, and perhaps more important, there is an economic

incentive in a free market to separate economic efficiency from other

characteristics of the individual. A businessman or an entrepreneur who

expresses preferences in his business activities that are not related to productive

efficiency is at a disadvantage compared to other individuals who do not. Such

an individual is in effect imposing higher costs on himself than are other

individuals who do not have such preferences. Hence, in a free market they will

tend to drive him out.

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