01 Jun 1996 Why Capitalism Isn’t a Dirty Word – June, 1996
by Michael Session
Unfortunately, to many black Americans, capitalism is a dirty word. The word capitalism brings to mind images of racial subjugation and degradation. According to this world-view, capitalism is seen in its most hideous form when viewed within the context of the black American experience. After all, was it not capitalist America that held black people in bondage for over 400 years?
A mere casual reading of the evolution of economic thought and American history shatters this view. The Atlantic slave trade thrived during the age of political feudalism and mercantilist economics. America did not declare itself an independent nation until 1776 and its independence was not secured until the British surrender at Yorktown in 1781.
Between 1777 and 1784, Vermont, Pennsylvania, Massachusetts, Rhode Island, and Connecticut ended slavery. New York followed in 1799 and New Jersey in 1804. Also during the 1780s, black Americans did gain the right to vote in the North. Surprisingly, free blacks in the South could cast ballots in North Carolina, Maryland, and soon after in Kentucky and Tennessee. Overall, let us not forget that it was the capitalist industrial North that defeated the feudalist mercantilist South, thus ending American slavery.
The book, An Inquiry into the Nature and Causes of the Wealth of Nations, written by Adam Smith in 1776, which established the founding principle of American capitalism, was itself highly critical of slavery and was a tract attacking the status quo of mercantilist economics.
A careful study of capitalism shows it not to be a source of suppression but a force for freedom. To see this, it is necessary to understand the connection between economics and politics/capitalism and freedom.
Many people are unaware that economic freedom is a virtue in and of itself and actually serves to underwrite political freedom. In order for this thought to be grasped, it must be understood that capitalism at its most basic level is the mutually beneficial, voluntary exchange between individuals.
A key economic precept of capitalism is consumer sovereignty. This is to say consumers are empowered to make their own choices independent of the choices of others. This notion of consumer as king results in a diffusion of power, thereby avoiding a dangerous concentration of power. Thus capitalism serves to separate economy and state much as our constitution separates church and state. The benefit of capitalism is that not all things are decided by the zero-sum game of politics.
Another key precept of capitalism is the notion of rational self-interest. Rational self- interest states that people seek to maximize benefits and keep personal cost to a minimum. Rational self-interest is the force behind why individuals who may despise each other will still conduct business together. Self-interest is a compelling reason to set aside political and cultural differences for mutual benefit. In history, capitalist self-interest conflict and overrides political interests. Take the case of transportation in the American South.
It was not uncommon that public transportation companies operating in the South during the 19th century allowed people to sit anywhere they wanted to in such cities as Montgomery, Alabama. It has been documented that when cities began to pass Jim Crow segregation laws, streetcar companies publicly opposed them. In Mobile, Alabama, the streetcar company initially refused to comply until its streetcar conductors began to be arrested and fined for non-compliance with the law. In Jacksonville, Florida, the streetcar company delayed enforcing the segregated seating law of 1901 until 1905. Georgia’s state law of 1891 segregating the races was ignored by the streetcar company in Augusta until 1898, in Savannah until 1899. In Tennessee, the streetcar company opposed the state legislation imposing Jim Crow seating in 1903, delayed enforcement after the law was passed, and eventually was able to get the state court to declare it unconstitutional.
Given the political reality, there is every reason to believe the owners of the streetcar companies were just as racist as anyone else. However, it was in their capitalist self-interest to keep serving black customers in defiance of the law. The bottom-line was the company’s bottom-line.
While the central preoccupation of today’s black political leaders is defending the rights of victims of discrimination, little is ever spoken of the cost of discrimination imposed in a capitalist system. It is obvious that political leaders do not care about the economic cost of discrimination because they do not gain any political power from it and could very well lose power because of it. That is why today, black leaders speak almost exclusively in terms of government entitlements and political rights and economic freedom only in terms of it being through government.
In fact, if black American political leaders gave greater emphasis to economic freedom it would become clear to people that their economic freedom is being held back by the liberal welfare state agenda sponsored by the very political class that is supposed to serve their interest.
–Michael Session, Regional Coordinator for the African-American leadership group Project 21. ###