Recently, Indiana and Arkansas made the news for passing “religious freedom” laws giving business owners the right to make decisions in acordance with their religious beliefs. These bills originally did not include protections for LGBT (lesbian/gay/bisexual/transgender) people, many of whom could be discriminated against under the basis that serving them violated one’s religious beliefs. This isn’t just wrong – it violates the idea of a free market that many of the supporters of these bills claim to adhere to.
Let’s briefly set aside the myriad of moral reasons as to why discriminating against a person’s race/ethnicity/religion/sexual orientation is wrong. Consider what the fundamental basis of the free market is. You, the rational consumer, have the right to freely and voluntarily trade your goods and services between that of another party without external interference. Put another way, you are free to allocate your capital and labor as you see fit; business owners tailor their practices and services to the demands and choices of their rational consumers. This the ideal form of the free market, in which this state of equilibrium can exist without the need for government intervention.
But the idea of the truly free market is a utopia, an ideal form of capitalism. A rational person would acknowledge that there is no legitimate reason to ban an entire segment of society from exchanging their goods and services due to superficial traits they cannot control; their money and labor is as much a part of the free market as anybody else’s. But we aren’t a rational species, are we? We freqently make decisions based on emotion, not logic. We fight wars and engage in petty rivalries that only serve to hurt both groups. We don’t cooperate when it would frequently be in our best interests to work together. We knowingly spend money we don’t have and throw ourselves into debt we cannot repay. We make decisions that have short-term payoffs and long-term consequences.
Many people who are reading this article own their own businesses. I congratulate you for taking the reins of entrepreneurship. But ask yourself this – what if it were you? Perhaps you think it’s your right to choose who you choose to do business with, for whatever the reason may be. Discerning the quality of your customers and clients is an important part of running a business; that’s not the fundamental issue being discussed here. What *is* the issue is taking it beyond having the right to ban people who are unruly, who break the rules, who damage your property, and so on. When you have laws that allow people to disenfranchise entire demographics of people, you have effectively excluded them from participating in the free market system. You have told them that they do *not* have the right to allocate their labor and capital as they wish.
The distortions that legalized discrimination introduce are profound and wide-reaching. Imagine if it were you. Imagine walking down the street as a member of a discriminated minority. You see a store that catches your eye. You walk up to the door, and notice a sign that in a big, eye-catching font says “NO _______S ALLOWED”. You are a member of _______s. So you turn around and try a different store, hoping that it is an isolated incident. You walk up to the store, and the shopkeeper doesn’t allow you in. Why? Because they don’t want your “kind” in there. One store after the next, all saying the same thing. Banks won’t lend to you, colleges and universities won’t accept you, neighborhoods refuse to sell homes to you, people won’t hire you. All because of a factor you have no control over. Nobody cares how hard working you are. Nobody cares that you have done nothing wrong.
This was reality for African Americans for a century under Jim Crow, and for far longer under slavery. An entire segment of the population excluded from operating within the free market system, all because of the color of their skin. Some managed to make it work in spite of the oppressive laws levied against them, but you can only do so much when white people manufactured a system that institutionalized their control over the vast majority of wealth, education and political power. The effects of these past distortions can still be felt today. A good example is in the impoverished Mississippi delta.
Long an economically suffering region of the country, many of these counties are amongst the most impoverished in America. Furthermore, many of these counties have African American majorities of 60% or more. Agriculture is the mainstay of this region, but many of the black farmers don’t own any of their own land. That land is largely in the hands of white families, many of whom have owned it for generations. Why? Because African Americans weren’t allowed to participate in the free market at large for most of Mississippi’s history, including having the right to own large tracts of land. They were denied the right to allocate their labor and capital as they wished. In doing so, the market system was vastly skewed in favor of whites, who were able to take advantage of African Americans’s capital and labor without having to worry about dealing with any arising competition from them.
That is one of the fundamental issues with these so-called “religious freedom” laws. Aside from the problematic slippery slope they present and the past use of religious beliefs to justify slavery and de jure discrimination, the supporters of these laws have taken a legitimate issue and weaponized it, using it as a bludgeon against a group of people that they have openly expressed contempt and disdain for. In doing so, they pretend to ignore the long and ugly history associated with that mindset, insinuating that the rights of those discriminated against are less important than the rights of religious bigots.
Outlawing de jure discrimination has had a profoundly positive effect on the economy, unleashing the economic potential of groups once relegated to the outer periphery of the American economy. A great example of this is in businesses owned by minorities. According to the quinquennial Survey of Business Owners, in 1987 blacks owned barely 3% of all businesses in America. By 2002, that share was 5.2%, and by 2007 it was 7.1%. Hispanics and Asians have similarly fast-growing numbers, and all minority groups collectively own nearly 6 million businesses. If the supporters of the “religious freedom” laws applied their same logic towards everybody else, many of those businesses would not exist, including all the wealth and jobs they create.
Perhaps you aren’t an ethnic or religious minority. Maybe you aren’t LGBT. Maybe you don’t see it as an issue. But for those of you who support laws like these, you have likely never have to wake up and worry that you will be the target of these laws. If you are, for example, a straight white male like myself, you know that there is absolutely no chance that somebody is going to use these laws to discriminate against you. If you are not a member of the demographics who are left at the mercy of these laws, it is easy to dismiss the concerns of those that are.
The free market is the best economic system in existence, but it is far from perfect. The free market ideal is just that – an ideal to strive for. It cannot and will not exist without laws and regulations that help to protect and defend the openness of the system and the rights of all those involved. The ability for all groups to participate in the system is what makes it so successful. Laws that explicitly deny people the right to discriminate against other on the basis of their race, ethnicity, religion or sexual orientation are necessary to preserve the integrity of the free market. The freedom to discriminate is not a freedom, in spite of what some people think.
Black business ownership in 1980s: http://articles.latimes.com/1990-09-18/news/mn-599_1_black-owned-firms
Figures for overall business ownership by race (scroll to near the bottom): http://quickfacts.census.gov/qfd/states/00000.html
Mississippi Delta inequalities: http://www.washingtonpost.com/wp-dyn/content/article/2007/06/19/AR2007061902193.html