The Prophetic Truth

22nd May 2012

Post with 1 note

Theories of Radical Political Economy: A Study of African-Americans as a Symbol of Exploitation By Capitalism

Abstract: Theories of Radical Political Economy is an Independent Research Project, designed by Professor Floyd W. Hayes III and myself, in order to further elucidate the similarities and complexities of capitalism and racism through the scope of Critical Race Theory and alternative economic theory.  This paper is written as a more intense examination of my previous paper, “The Economics of Racial Discrimination: A Brief Overview of the System of Racist Economics in “Post-Racial”    America”, to explicate further research and developed theories on poverty, marginality, and their impact on the topic of “race”.  In our study, Professor Hayes and I have drawn from various authors in political theory and political economy in the hopes of gaining a deeper understanding of how these topics relate to the many forms of invidious discrimination that non-whites face in the United States and abroad.  Using Neo-Marxian analysis, we have focused primarily on the different socioeconomic trends that non-whites have been locked in to[1].

Introduction

As we look at the constantly changing world, increases in the levels of poverty, marginality, inequality, and economic disparity are becoming evermore apparent.  In light of the rise of the new global economy, the impact of these changes is daunting, especially in the case of African-Americans.  Of the many groups of people that have undergone the hardships that capitalism has implemented in the name of ‘economic prosperity’, these people have arguably suffered the most.  An historic symbol of perpetual degradation, African-Americans in the United States have experienced great suffering as they have been chained and shuttled in a cattle-like fashion throughout the history of this country from the slave economy to this new advanced capitalist economy, and they have borne the brunt of the socioeconomic consequences of these systems.

In this mode of production, capitalism produces certain ‘peculiarities’, inconsistencies, and inefficiencies that seem to contradict the definitions of the very tenets that it puts forward (i.e. tenets of freedom, equality, and human rights).  Marxian theory teaches us that capitalism has formed its own meanings of the words ‘freedom’, ‘equality’, and ‘human rights,’ meanings that oppose our traditional understanding of these words and therefore produce the contradictions that are enacted by this system.  Neo-classical economists attempt to explain these perceived challenges of the system by means of ‘empirical’ research. However, their research leaves much room for speculation.  How can an economic system that boasts efficiency and produces vast amounts of wealth, at the same time produce such immense dissimilarities in wages, and exclude so many people from the wealth that it bears?  Neo-classical economics expands upon itself with its models of supply and demand, but is never tested, only assumed to be true.  David Howell writes that the “prevailing vision of how the economy does and should function is one that is learned and can be self-perpetuating”[2] (Howell 57). Therefore, it seems that economic theory might need to be examined from a different approach.

In this paper, I plan to draw from the sources of various authors to argue that while neo-classical economic theory is one way to examine the capitalistic mode of production, it is not the only way.  Through the analysis of different historical and socioeconomic trends, I intend to show a different competing view of capitalism, one that I believe paints a more accurate depiction of the economic forces at work within this system.  Furthermore, using a theoretical understanding of the power-effects of capitalism on African-Americans in the United States, I argue that capitalism is an exploitative process, and that while African-Americans were not ‘predestined’ to be a group of people perpetually marginalized and ostracized from the society that has subjugated them, they certainly have been locked-into a state of uninterrupted social and economic disparity.  Finally, I maintain that both capitalism and racism create unequal and inefficient socioeconomic systems, and that these processes create greater tensions amongst races in this modern society.

The Fallacies of Neo-Classical Economics

Neo-classical economics (more commonly known as “mainstream” or “orthodox” economics) is a school of economic thought that emphasizes the relationship of the concepts of supply and demand with an individual’s rationality and an individual’s ability to maximize profits[3].  The intuition behind this is based on the notion that if individuals are allowed to act freely, and if markets are deregulated, there would in fact be large amounts of economic wealth due to the fact that all of these individuals would be looking to maximize their profits.  Straying away from traditional political economy, this form of economics uses mathematical models to explain economic situations and the actions of economic ‘agents’.  This approach to economic theory developed during the late 19^th century, in response to the “marginal revolution”[4], and since then has become the dominant form of economic thought.  However, neo-classical economics, as mentioned earlier, is flawed.  It operates on the premise that individual rational behavior will, in the long run, push supply and demand curves toward economic equilibrium; an ideal, in light of the growing economic disparity we see locally and globally, that has not yet been attained.   It is here where I will enter the use of the term “radical political economy” in order to provide a more nuanced version of economic theory.

Radical political economy[5] has taken many names and subgroups: (Neo-) Marxist economics, Heterodox economics, Keynesian economics, Real-World economics, etc.  These theories are “radical” in that they move to challenge the theories that mainstream economic theory purports to be true.  RPE combats the “empirical tests in the professional literature [that] appear designed to confirm, rather than confront, the simple textbook vision” of neo-classical economic theory (Howell 55).  It critiques neo-classical economics for the very inconsistencies that it upholds.  Take a look, for example, of RPE’s critique of neo-classical economics’ concept of “scarcity”, and its rejection of mainstream economics as a science:

                The Post Keynesians argue that produced means of production within a circular production         process cannot be characterized as scarce and that production is a social process; while Institutionalists reject the view that natural resources are not ‘produced’ or socially created          to enter into the production process; and the Marxists argue that the concept is a              mystification and misspecification of the economic problem—that it is not the relation of the               isolated individual to given resources, but the social relationships that underpin the social               provisioning process. The three critiques are complementary and integrative and generate                 the common conclusion that the concept of scarcity must be rejected as well as the         mainstream definition of economics as the science of the non-social provisioning process          analyzed through the allocation of scarce resources among competing ends given unlimited     asocial wants of asocial individuals. Other critiques of the core propositions exist and arrive      at similar conclusions. Together the three critiques—internal, story qua model, and core propositions—form a concatenated structured heterodox critique that rejects and denies the              truth and value of mainstream theory.[6]

Aside from this argument, other arguments have come about to discredit the global economic theory.

Another critique of mainstream economics aligned with RPE is the idea that mainstream economics operates with a normative bias.  This bias requires economic models of a societal utopia, in which if forces X, Y, and Z happen, then we will reach equilibrium.  It constantly preaches what could happen, as opposed to what does happen.  Mainstream economics is also criticized for its use of the ‘rational’ or ‘economic’ individual for under this premise, he is conceived as  “a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift about the area, but leave him intact”[7].  Neo-classical economic theory fails in this because this idea of a person (based on economic models) in many ways contrasts with actual human behavior, and fails to account for the political, social, and personal issues that take place in the world.

Finally, looking specifically at racial discrimination, it is significant to analyze the theory of “taste-based” discrimination[8], as purported by the Nobel Prize winning, neo-classical economist, Gary S. Becker.  This theory claims that there are three forms of labor market discrimination: Employer Discrimination, Employee Discrimination, and Customer Discrimination. 

Employers are believed to have a taste for discrimination when they put in place “top-down”      policies to exclude certain peoples from participating in the labor market.  Employee      discrimination occurs when employees have a taste to work only with those that are like               them.  Working with African-American employees, for example, that are in managerial   positions, or even at the same occupational level as whites, would not be conducive to their              work-style, and so they would choose to discriminate.  And finally, customer taste-based   discrimination implies that if a firm decides to hire a select group of people, consumers that                 would naturally discriminate against this select group, would in turn, discriminate against           the firm and potentially boycott it.  (Moses 9)[9]

However, yet again, this neo-classical view of the labor market yields more loose ends, and can easily be challenged.  Becker theorizes that in our perfectly competitive market, in the long run, firms that do discriminate will be driven out of the market by firms that do not discriminate, and this will drive markets towards equilibrium.  He does not account, however, for the still ever-present discrimination that pervades throughout the labor market.  Arrow deconstructs Becker’s theory, and puts in place a more realistic idea for how racial discrimination exists within the labor market, which he calls, “the network of acquaintances and friends” (Arrow 98)[10].

            The network concept of labor allocation differs considerably from a market.  It is indeed very     easy to say how social segregation can give rise to labor market segregation through                network referrals.  Discrimination no longer has any cost to the discriminator; indeed, it    has social rewards.  Profit maximization is overcome by the values inherent in the         maintenance of the network or other social interaction. (Arrow 98)

While Arrow maintains that this theory still needs more thorough investigation, it still points out a major flaw in Beckerian and neo-classical theory.

Neo-classical economic theory is criticized for some of the same things that Nietzsche (considered radical in his lifetime) criticized certain 18^th century philosophers for: lack of an historical sense, and the creation of hypothetical situations to explain reality.  Therefore, since it is clear that orthodox economics has failed to give us an appropriate answer to the growing problems of the advanced capitalist system, I will spend the rest of this paper analyzing capitalism’s effects on African-Americans under the scope of radical political economy.

Racism and the Rise of Capitalism

Already showing that mainstream economics cannot adequately explain real world events, I now move to the examination of alternative economic theory as pertaining to African-Americans.  In this part of the paper, I write to show that racism, is systemic, and has been woven into the very fabric of American society; also that conjoined with the rise of capitalism in America, it has led to much of the marginalization and inequality that many African-Americans face today.  Before I begin, however, I would like to make clear the definition of racism that I am using in this paper.  Racism is defined as “the belief that all members of each race possess characteristics, abilities, or qualities specific to that race, especially so as to distinguish it as inferior or superior to another race or races”, moreover, racism is the act of  “prejudice, discrimination, or antagonism directed against someone of a different race based on the belief that one’s own race is superior”[11].  And its purpose, of course, is to “marginalize, desensitize, and disenfranchise the [inferior] people” (Moses 4)[12] in order to maintain power structures within society.  Alongside this historical approach to racism in America, I will be using theories of racism from Loic Wacquant to help solidify my argument.

The most recognized form of racism in the United States is the enslavement of African-Americans from the 17^th century to the mid-19^th century.  Before the beginning of African enslavement (circa middle 1500’s), Africans were thought to be on par with the European societies of the time.  However, as time progressed, and Europeans began out-matching Africans technologically, the stigma of inferiority was placed on them.  Soon after, the Africans became a part of a plan that would crystallize them in history as a subhuman race; only capable of doing labor that best suits people of their low-grade qualities.

   By way of the African Slave Trade, Africans were taken from their homes, brought to the American Colonies, and forced to work on plantations; increasing the production of goods such as tobacco, cotton and rice.  Slavery provided plantation owners with a free source of labor, and consequently, large returns in revenue from products sold.  This process continued and expanded even after the colonies declared and won their independence from England[13], because they no longer had to pay taxes (these fees were substituted with paying for more slaves instead).  While “[o]ne might wonder as to how such a small and relatively new nation could generate such an abundance of productivity in a new economy” (Moses 7), it really becomes self-evident as to how the United States, a country just born from revolution, began to present itself as a dominant economic force in the world.  “Purchasing more slaves leads to a lager work force, a larger work force leads to greater productivity, and greater productivity leads to a higher [gross domestic product]” (Moses 7).  While being leaders of trade at this time, and not paying wages to their plantation subjugates, America was well on its way to being a frontrunner in the newly emerging capitalist economy[14]. 

After capitalism has come to grow within the American economy between Colonial America and Industrial America, we notice a more robust country in the mid-19^th century than we have seen almost one hundred years prior.  In the north, mass migration from Europe led to a booming influx of economic growth for those industrious states dealing in the shipbuilding industry, creating financial institutions, and building bridges and factories.  In the south (still primarily rural), they still relied heavily on slave labor to produce the crops in which they used to trade with other states and countries, as this was the backbone of their economy.  However, after the Civil War, much of their economic fervor was long gone. 

If we look at the situation of African-Americans after the Civil War, while they are no longer in bonds and chains, this group of people remains subjugated by their former white slave owners.  This time period of the post-Civil War era held the north experiencing even greater economic growth than prior to the war due to the advancements in technology and industry made during the war; while the south was left decimated and its economy highly inflated.  Adding on to the ill feelings felt by the south, the fact that slaves, by this point, had already been emancipated, the south was struggling to maintain intact, and was experiencing very rough fiscal times.  Southerners were faced with a question in which the answer to would create a new social order while at the same time maintaining the proverbial bonds and chains that African-Americans were tied to before the war:

            [H]ow to secure anew labour of former slaves, without whom the region’s economy would          collapse, and how to sustain the cardinal status distinction         between whites and ‘persons of      colour,’ i.e. the social and symbolic distance need to prevent the odium of ‘amalgamation’ with a group considered    inferior, rootless, and vile. (Wacquant 46)[15]

The answer to this question of maintaining dominance over African-Americans in the post-slavery era came about in the year 1976, and its name was entitled “Jim Crow”. 

The southern law of the Jim Crow regime called for complete and absolute separation of African-Americans and White Americans, while at the same time tying the former “in a relation of suffusive submission backed by legal coercion and terroristic violence” (Wacquant 46).  This held African-Americans to using separate eating facilities, schoolhouses, and even restrooms.  Most of all, interracial relationships were forbidden and warranted death to any African-American that disobeyed.   The idea of keeping the white race pure from the ‘black monster’ was a concept held very seriously in order to maintain a domineering superiority over African-Americans.

Until the mid-19^th century, slavery in America was key to the rise of capitalism, however once it was abolished; capitalism had found a way around the crisis it had succumbed to.  Jim Crow was successful for nearly one hundred more years, and during that time, historical trends show mass migrations of African-Americans from the south to the north in search of better work and less oppression (a migration of nearly 1.5 million people between the years of 1910 and 1930 and another 3 million from 1940-1960) (Wacquant 47).  What they found were menial jobs that were dangerous and had terrible working conditions, and the newly founded ‘ghettos’.  Even though these migrants did not face the same types of discrimination that Jim Crow impeded upon them in the south, and became conscious of the fact that they could come and go as they pleased with protection from the law, they soon came to realize that their hopes of social equality (i.e. equality with that of White Americans) were dismal at best.

For the north, booming with factories and the super-charged car industry, capitalism viewed this influx of African-Americans as great sources of low-grade, expendable, and interchangeable labor.  As mentioned earlier, even though they were doing much better than their southern counterparts, “they remained locked in a precarious position of structural economic marginality and cosigned to a secluded and dependent microcosm…”(Wacquant 48).  Exploited for their labor power, capitalist employers garnered the greatest amounts of surplus value from African-Americans due to the economic despair they faced in a socioeconomic realm that would continue to deem them cheap labor.

With the advent of the 1970’s, the abolishment of Jim Crow, and the structural changes of the Civil Rights Movement, African-Americans, for the first time ever had the opportunity for full citizenship within a country that denied them the basic rights to live and work freely since their forced extraction from Africa.  After being exiled and marginalized to the ghettos in the north, and the shantytowns in the south, African-Americans realized that once grouped together, their collective voices could withstand even the harshest tongues of white oppression.  Thanks to federal policies like the Equal Pay Act of 1963, and the Civil Rights Act of 1964, in the span of ten years (1965-75) African-American men increased their mean earnings relative to White American men from 62.8 cents for every dollar, to 74.4 cents to every dollar; African-American women during this time period also increased their mean earnings relative to white women from 67.9 cents to 96.3 cents for every dollar[16]. 

In this new period of renewed hope for socioeconomic equality, African Americans had begun rising to the challenges of the time with increased labor market productivity and looking for returns on education.  However, with this new sense of African-American pride and prosperity simultaneously came with another crisis in the capitalist mode of production.  The economic stagflation of the 1970’s caused great economic turmoil across the country, even in fiscally charged cities like New York and Chicago[17].  Again, capitalism was forced to adapt to the changing times, and it is here where we begin to see the emergence of a new system of economics, charged with the removal of old forms of capital, and the atomization of the poor and marginalized, especially African-Americans.

African-Americans and the Advanced Capitalist Economy

Beginning in the 1970’s, a change in the economic structure that America formed had started to take place.  This change involved massive shifts in labor demanded, toward high-skilled workers, a move from manufacturing to finance, and an economy that was no longer purely national, but global.  It is at this point in America’s history, where we see the country entering the age of globalization.  This era has been signified by the dissolution of power from the nation-state to the rise of the “global city”[18], the retrenchment of the welfare state, and the advanced marginality and inequality within these cities.  Since, in the labor market, African-Americans have acted as a buffer (first fired, last hired), they were the first to be subjected to the harshness of this system.  African-Americans, after just winning their freedom within a system that has denied them their liberty since they arrived in America, are once again the objects of exploitation in this advanced capitalist economy.

In this new economy, the African-American slums, ghettos, and housing projects came under attack.  The areas in which these people were confined to, acted as a way to 1) “protect the city’s residents from the pollution of intercourse with tainted but necessary bodies of an outcast group” (Wacquant 51) and 2) “to facilitate exploitation of the interned category” (Wacquant 52).  As mentioned earlier, the advanced capitalist economy has shifted from industry and manufacturing, to more of a focus on financial markets and institutions, and its function is to remove old sources of capital, so that they can be replaced with new ways of attracting and accumulating capital.  Most African-Americans (being only poor to low middle class workers at the time due to the systemic racism that crippled them for over three centuries) had relied on their ‘unskilled’ labor to make a decent living for themselves, and their families, however with this change in the economic system of production, their skills are were longer useful.  African-Americans have become old sources of human capital; redundant labor, and as such; it is capitalism’s job to remove them.

One way to examine the redundancy of African-American labor is by looking at the use of gentrification as a part of capitalism’s mechanism of urbanization in the advanced capitalist economy.

Gentrification is defined as “the process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents”[19].  Since capitalism’s inherent nature is to grow and expand, the only way for it to do that within a finite, physical space is to remove old structures in place of new ones; to displace people that have not brought capital into these “deteriorating” areas, in the hopes of attracting wealthier people.  There is a certain intuition behind this process of gentrification.  At first, the city recognizes that there is an area that is low income and has low property value, but has the ability to attract new capital.  Then investors, with permission from the government, enact major redevelopments on the area, and this raises the property value, hence attracting new families and businesses than were in the area before.  However, the people that lived in this area prior to these redevelopments no longer can afford to live there because property taxes and rents/mortgages have now increased beyond their means.  Therefore, they are forced to move and find other low-income property neighborhoods in which to live (Moses 7) [20].  

African-Americans in Harlem, New York, are perfect examples of the process of gentrification through urbanization.  By 1950, approximately 233,000 African-Americans were living in Harlem, and accounted for 98% of the area’s population.  After the crisis that capitalism underwent in the 1970’s, it began ‘revitalizing’ much of the city.  Areas like SoHo and Chelsea were changed almost instantly, and soon capitalism set its sights on the last remaining urban working class area: Harlem.  In the 1980’s, Harlem lost almost 30% of its residents just as this part of Manhattan had begun to gentrify:

                The western corridor of Central Harlem is experiencing the beginning of gentrification.                  Above average increases in income and rent levels as well as in the number of high-          income families were matched by a rapid increase in sales activity.  This simultaneously rising        property market and rising socioeconomic profile in the neighborhood constitute the    hallmark of gentrification. (Schaffer 357)[21]

As of 2008, it became clear that “blacks [were] no longer a majority of the population…their share had declined to 4 in 10 residents”[22].  Over the years, Harlem has gentrified and more White Americans have started to fill the outskirts of this ‘city within a city’.  A place once known to be the “Black Capital of the World”, the center for African-American culture and solidarity has begun to deteriorate at the hands of capitalism’s exploitative system.

Actions on behalf of the advanced capitalist system, like that of gentrification, push poor and lower income level people out of their homes, and further away from the care of the state.  Literally, these people are pushed to the margins of society, facing the harshest of socioeconomic climates: Poverty and Social Inequality. 

            Where poverty in the Western metropolis used to be largely residual or cyclical, embedded         in working-class communities, geographically diffuse and considered remediable by means of further market expansion, it now appears to be increasingly long-term if not permanent,    disconnected from macroeconomic trends and fixated upon disreputable neighborhoods              of relegation in which social isolation and alienation feed upon each other as the chasm         between those cosigned there and the rest of society deepens. (Wacquant 1640)[23]

With their skills rejected in this new economy, and with bars set against higher education in the hopes of better paying jobs, African-Americans are reluctant to turn to the state, because of lack of trust, and its inability to provide care due to its welfare retrenchment.  In this case, we see here that African-Americans then turn to the informal economy.  The informal economy (named so for its lack of government regulation) is the realm in which drugs, gambling, prostitution, looting, and etc. roam freely.  Seeing these ‘professions’ as easy ways to make money, unchecked by the government, African-Americans normally engage in this economy in the hopes to earn capital for themselves and their families.  However these actions do not go without consequence, and even though the welfare state has retreated, the oppressive state is ever-present, and, prisons have become the new slave masters to these people.  Prisons, Wacquant writes, serve

            Only to warehouse the precarious and deproletarianized fractions of the black working class,      be it that they cannot find employment owing to a combination of skills deficit, employer            discrimination and competition from immigrants, or that they refuse to submit to the       indignity of the substandard work in the peripheral sectors of the service economy.                                                                                                                                                                                       (Wacquant 54)

Prisons break down the homes of African-American families, and atomize these individuals; separating them so as to cause helplessness and disunity.  These complex systems move to place African-Americans in another subservient state, yet again.  The prison system cripples African-Americans due to loss of political power while during incarceration and afterwards, loss of skills overtime, and those that are incarcerated are likely to go to jail again for similar crimes and longer sentences.  It acts as a way to regulate the African-American race in the name of ‘protecting society’.  In place of the abolition of Jim Crow, and the gentrifying of the ghettos, prisons have been delegated the task of becoming the new dominant institution in the lives of African-Americans.

Conclusion

Capitalism has been the breeding ground for inequality and inefficiency since its inception.  In tandem with racism, it has been able to dominate the lives of all non-whites, but especially African-Americans.  These theories of radical political economy put forth in this paper move to counter the ‘traditional’ or ‘mainstream’ views of economic theory pushed by neo-classical economists, and portray a real world account for the discriminatory face that economics has shown African-Americans.  Systemic racism is to blame for the great income disparity faced by African-Americans in light of the capitalist system.  In this globalized economy, one based on finance and technology, capitalism has rendered African-Americans helpless to the movement towards being ‘obsolete’.  The African-American race, the prime example of both Marx’s ‘proletariat’, and Harvey’s ‘urban class’, has reached a crossroad, and it must decide either extinction, or revolution. 

This author writes on behalf of revolution.  Revolution holds the means to obtain power.  This is a call to action.  With the capitalist system nearing what many seem to think is the “final crisis of capitalism”, a sudden resurgence in Marxist theory, and the rise of the Occupy Wall Street Movement, the proletariat is coming to realize that the way in which the world has been run is wrong.  The proletariat is coming to realize that its government has not been following the tasks that the people have granted it the power to complete.  The proletariat is coming to realize that now is the time to act, and with the further oppression of African-Americans as a symbol of capitalism’s tyranny, it is only a matter of time before change occurs.  Capitalism cannot function (in)efficiently without racism.  The only way to remove racism is to remove class structure (Schulman, Darity, and Higgs 1989)[24], but how this happens is a function by which only time can tell.

Bibliography

1955-1965: U.S. Census Bureau, Current Population Reports, Consumer Income Series P-60, various           Issues 1970 and beyond: U.S. Census Bureau, Historical Income Tables-People, Table P-38                 ”Full-Time, Year-Round Workers by Median Earnings and Sex” from,      http//www.census.gov/hhes/www/income/histinc/incpertoc.html.

Arrow, Kenneth J. “What Has Economics To Say About Racism?” Journal of Economic    Perspectives         12.2 (1998): 91-100. Print.

Becker, Gary S. The Economics of Discrimination. Chicago: Chicago, 1957. Print.

“The Colonial Economies - The Mercantilist Tradition.” - England, Colonies, Industry, Trade, Tobacco, and English. Web. 15 May 2012. <http://www.libraryindex.com/history/pages/cmxyrdbg17/colonial-economies-mercantilist-tradition.html>.

“Critical Race Theory.” Wikipedia. Wikimedia Foundation, 19 May 2012. Web. 08 May 2012. <http://en.wikipedia.org/wiki/Critical_race_theory>.

“Criticisms of Neoclassical Economics.” Wikipedia. Wikimedia Foundation, 05 Oct. 2012. Web. 17 May 2012. <http://en.wikipedia.org/wiki/Criticisms_of_neoclassical_economics>.

“Economic History of the United States.” Wikipedia. Wikimedia Foundation, 20 May 2012. Web. 05 May 2012. <http://en.wikipedia.org/wiki/Economic_history_of_the_United_States>.

Feagin, Joe R. Racist America: Roots, Current Realities, and Future Reparations. 2nd      ed. London:           Routledge, 2010. Print.

“The Flawed Assumptions of Neoclassical Economic Idealisation.” The Flawed Assumptions of   Neoclassical Economic Idealisation. Web. 03 May 2012.             <http://epress.anu.edu.au/cotm/mobile_devices/ch08s08.html>.

“Gentrification.” Merriam-Webster. Merriam-Webster. Web. 01 May 2012. <http://www.merriam-webster.com/dictionary/gentrification>.

“Heterodox Economics Directory- Introduction.” Heterodox Economics Directory- Introduction. Web. 15 May 2012. <http://www.heterodoxnews.com/directory/intro.htm>.

Howell, D. R. “Theory-Driven Facts and the Growth in Earnings Inequality.” Review of Radical Political Economics 31.1 (1999): 54-86. Print.

“James K Galbraith, “A Contribution on the State of Economics InFrance and the World”” James K Galbraith, “A Contribution on the State of Economics InFrance and the World” Web. 08 May 2012. <http://www.paecon.net/PAEtexts/Galbraith1.htm>.

Marx, Karl. “Chapter 12: The Concept of Relative Surplus-Value.” Capital. Vol. 1. 1867. Print.

Moses, Dylan K. “Does the City Still Need the Slum?: Studying the Questions of Urban Inequality and Urban Marginality Within New York City.” Thesis. The Johns Hopkins University, 2012. Print.

Moses, Dylan K. “The Profitability of Discrimination: A Study of the Discriminatory Capitalist in the U.S. Labor Market.” Essay. The Johns Hopkins University, 2012. Print.

Moses, Dylan K. “The Economics of Racial Discrimination: A Brief Overview of the System of Racist Economics in “Post-Racial” America.” Thesis. The Johns Hopkins University, 2011. Print.

“Neoclassical Economics.” Investopedia. Web. 16 May 2012. <http://www.investopedia.com/terms/n/neoclassical.asp>.

PBS. PBS. Web. 13 May 2012. <http://www.pbs.org/wgbh/amex/reconstruction/40acres/ps_so15.html>.

“Racism (ra¦cism).” Definition for Racism. Web. 16 May 2012. <http://oxforddictionaries.com/definition/racism>.

“Real-world Economics Review.” Wikipedia. Wikimedia Foundation, 16 May 2012. Web. 16 May 2012. <http://en.wikipedia.org/wiki/Real-world_economics_review>.

Roberts, Sam. “No Longer Majority Black, Harlem Is in Transition.” The New York Times. 06 Jan. 2010.      Web. 06 May                 2012http://www.nytimes.com/2010/01/06/nyregion/06harlem.html?pagewanted=all

Schaffer, Richard, and Neil Smith. “The Gentrification of Harlem?” Annals of the Association of American Geographers 76.3 (1986): 347-65. Print.

Shulman, Steven, William A. Darity, and Robert Higgs.  “What’s Left of the Economic Theory of   Discrimination?” The Question of Discrimination: Racial Inequality in the U.S. Labor Market :   Essays. Middletown, CT: Wesleyan UP, 1989. 338.      Print.

“Thorstein Veblen.” Wikipedia. Wikimedia Foundation, 05 June 2012. Web. 13 May 2012. <http://en.wikipedia.org/wiki/Thorstein_Veblen>.

Veblen, Thorstein. “Why Is Economics Not an Evolutionary Science.” The Quarterly Journal of Economics 12 (1898): 1-16. Print.

Wacquant, Loïc. “Urban Marginality in the Coming Millennium.” Urban Studies 36.10 (1999): 1639-           647. Print.

Wacquant, Loïc. “From Slavery to Mass Incarceration: Rethinking the ‘race Question’ in the US.” New Left Review 13 (2002): 41-60. Print.

“What Is Racism?” What Is Racism? Web. 10 May 2012. <http://www.adl.org/hate-patrol/racism.asp>.

Tagged: TheoryRadicalPoliticalEconomyMarxWacquantHarveyReichBeckerArrowcapitalismexploitationmarginalizationpovertyinequalityphilosophypracticeoccupyactiongentrificationdisastershockrevolutionpowerracismfoucaultheterodoxmainstreamNew Yorksociety

7th May 2012

Post

The Profitability of Discrimination: A Study of the Discriminatory Capitalist in the U.S. Labor Market

ABSTRACT: Taking as a given that discrimination does exist within the labor market, the purpose of this paper is to test discrimination at its very root, and to ask the question whether or not discrimination is profitable, or moreover, profit-maximizing.  This paper begins by showing that there is in fact discrimination within the labor market using Beckerian analysis.  Next, it makes the assumption that discrimination must be profitable (or profit-maximizing) due to the nature of the capitalist, and tests ways in which this theory could be true.  Then, after disproving discrimination’s profitability in the labor market, and proving that it is in fact inefficient, the question of why an employer would discriminate if it were not profitable comes to head.  Finally, the paper ends with a pseudo neo-Marxian analysis of how racial discrimination within the labor market has only the sole purpose of benefitting the capitalist.

If one were to study discrimination by race and ethnicity, one might say that the concept of discrimination has changed its form throughout the existence of the United States.  Historically, from Colonial America to Corporate America, African-Americans have shown a trend of being discriminated against since the time of their forced exile from Africa.  It is a wonder, however, how exactly racial-ethnic discrimination can exist in the labor market in this advanced capitalist economy; within a mode of production that has a major tenement of using all available resources to perpetually produce more and more capital.  This is the issue that this paper seeks to address.  Is it profit maximizing, or even profitable, to discriminate in the labor market by race and/or ethnicity in the United States?  And if not, then why does this type of discrimination persist?  In order to answer these questions, this paper will draw from the sources of authors such as Holzer, Reich, Becker, Darity, and others to give us insight into how we can further understand these concepts of profitability and discrimination, and how they can exist within this new economy.

To begin an understanding of the context in which we are working, it is necessary to begin thinking within a theoretical framework that is suitable for the analysis of this topic, and for that, we must understand what labor market discrimination actually is.

Labor market discrimination, as defined by Ehreberg and Smith, is

            “…said to exist if individual workers who have identical productive             characteristics are treated differently because of the demographic groups to             which they belong. Put differently, the average wage differentials we observe             between demographic groups result from (a) differences in the productive             characteristics with which the groups enter the labor market (often called             pre-market differences) and (b) differences in the way the groups are treated             by actors within the labor market.”[1]

Gary S. Becker, in his book, The Economics Of Discrimination, wrote that if there were discrimination in the labor market, then in the state of perfect competition — a state in which “no ­individual actor (“agent”) in a market economy has the ability to influence price via his or her own decisions”[2]—that­ the economy emits, in the long run, non-discriminating employers would eventually drive out discriminating employers, because they would not be able to match the non-discriminating employers prices and human capital (and for that matter the overall ability to not discriminate)[3].  Neo-classical economic theory cannot account for why firms that do discriminate are not driven out of the market, and so it concludes that discrimination does not exist.  However, the very existence of this definition proves that there is discrimination in the labor market. 

Furthermore, continuing on this topic of “perfect competition” in what some would call a neo-liberal market, Dr. William Darity Jr., in his book, The Question of Discrimination: Racial Inequality in the U.S. Labor Market, contends that our perception of what perfect competition might be, is not in fact correct.  He purports that the “application of the Austrian process view of competition to racial earnings differentials effectively obliterates labor market discrimination.”[4]  This is the notion that this “alert” entrepreneur would be clever enough to undercut discriminatory entrepreneurs in order to gain profit.  Unfortunately, as Darity states, this “statistical inquiry consistently has led to the annoying finding of significant unexplained differences in earnings after controlling for human capital characteristics…”[5].  So, we find that even in a more accurate definition of perfect competition, Becker, and neo-classical economic theory for that matter, still cannot account for the discrimination that resides within the market place.

 In using this aforementioned definition of discrimination, we can put into context the understanding of the situation that African-Americans face when we discuss labor market discrimination.  While the labor market cannot account for the “pre-market differences” that some of these people possess, once they have entered the market, individual or collective actors within the labor market treat these people with prejudices.  This type of differential treatment might include poorer working conditions, lower wages, and less of a chance for advancement in certain firms than their white counterparts. 

Someone with a more neo-liberalistic mindset might then raise the question: Why is labor market discrimination wrong?  Logically, if someone owns a business, should not that person be able to hire whomever he or she wants to work there, or pay them whatever wage so that they can continue to function as productive human capital?  Employers that have this train of logic are correct, except up until the point where they exclude someone based on race, ethnicity, and even gender for that matter.  Two individuals that work the same amount of hours, have the same amount of experience, and are in the same occupation should receive the same wages, however, historically that has not been the case.   Racial discrimination in the labor market is fundamentally wrong.  It denies the group being targeted of their inalienable rights to work and make a living for themselves, and this is contradictory especially in a country that boasts itself a meritocracy.

In light of this knowledge, a sympathetic reader might try to understand the capitalist in his or her ventures of discriminating against a group of people.  A sympathetic reader might think that there must be some underlying cause for an employer to discriminate in his or her hiring processes, or his or her wage payouts.  An obvious conclusion from a sympathetic reader might be that the employer must be discriminating because it is profitable to do so.  Knowing that the true capitalist (like that of the Austrian entrepreneur) only cares about profit and profit maximizing labor; in order to produce more capital, the sympathetic reader might think that the capitalist is just doing his or her duty, because if they did not, according to classical economic theory, they would lose their capital.  So, for the purposes of this paper, we will continue under the assumption that employers discriminate by race and ethnicity because it is profitable to do so.

The ability to perpetuate and increase the flow of capital, as we have discussed, is the inherent nature and the true goal of the capitalist.  The capitalist locks his or herself into this form when agreeing to participate in this mode of production, because as they find out, this is the very nature of the system.  Therefore, since they discriminate, profit must arise from this process. 

If we, for example, look at racial discrimination by wage differentiation, there is room for interpretation of profitability.  For instance: If an employer has two equal employees and decides to pay them different wages because of their race, then the employer is extracting more surplus value from that employee for a lower wage, and of course, this is where we can see profit.  However, if the laborer realizes that he or she is not being the wage that he or she deserves (based on their levels of skill and occupation), then the rational laborer would leave the firm due to the irrationality of the wage giver.  Also, if the employer were truly interested in profit maximization, then he or she would lower both of the employees’ wages in an effort to gain the most profit that they could.

 Another example of supposed profitability from discrimination would be in the hiring process of the employer.  Some employers might decide to racially discriminate so as to have only one group of people (for instance, Caucasians) with similar backgrounds because of their race and pre-existing market capabilities.  Theoretically, this can be shown to have an increase in worker productivity, and the homogeneity of hiring could provide for better work relations between employees.  Nevertheless, this too lacks in substantial evidence for an employer seeking profit-maximization, because it fails to account for the potential loss in human capital that an employer faces when hiring less qualified workers as opposed to workers of another race that might be more qualified.

Hiring employees with the best qualifications, and paying them wages comparable to their skills, is what economic theory teaches us to be profit maximizing.  But, if employers are not doing this, then how can they be obtaining profit? 

[6]

This graph depicts Gary Becker’s model for discrimination within the labor market; with one line representing the Marginal Revenue Product of Labor curve (MRP), and the other representing the Demand curve for labor (D).  Non-discriminatory firms will hire labor at quantity “L4” and at wage “W4”, and in this way, it maximizes its profits in figure “EGB”.  However, we see that when firms discriminate, more profit goes to the workers that are not being targeted in discriminatory hiring.  Labor shifts inward from “L4” to “L1”, and wages must then increase from “W4” to “W1”, thereby shrinking the firms’ profits from figure “EGB” to figure “HGA”.  It is here where we see that labor market discrimination is not only an inefficient use of resources, but also not in line with what we think the true nature of the capitalist to be.  Therefore, we have seen holes in the logic for why it might be profitable to discriminate, and if it were profitable, we would have to assume that discriminating on the basis of race and ethnicity cannot be profit-maximizing, because of its inefficiency.  So, then why discriminate?

One perspective of this comes from Harry Holzer, in his article “The Labor Market and Young Black: Updating Moynihan’s Perspective”.  Holzer writes:

Implicit in Moynihan’s discussion is the notion that, broadly speaking, two             sets of forces affect employment opportunities and outcomes for young black             men: (1) labor demand factors, including employer attitudes and hiring             behaviors toward black men, and (2) labor supply factors, including family             formation and skill development, which themselves can be responsive to             characteristics of and/or changes in the demand side of the labor market.[7]

Furthermore, he supplies other reasons for why employer demands might not be met with African-American employment.  He writes that, “the effects of urban segregation on employer demand; and employer reliance on informal networks to generate job applicants and trainees”, are certain factors that will continue to be the detriment of African-Americans in the labor market. 

In addition to this theory, Becker supplies another theory that might explain why discrimination would pervade the labor market, entitled “taste-based discrimination”(the word “taste” is used to understand some psychological reason that someone would favor discrimination).  This theory purports that there are three types of labor discrimination: Employer Discrimination, Employee Discrimination, and Customer Discrimination.  Employers are believed to have a taste for discrimination when they put in place “top-down” policies to exclude certain peoples from participating in the labor market.  Employee discrimination occurs when employees have a taste to work only with those that are like them.  Working with African-American employees, for example, that are in managerial positions, or even at the same occupational level as whites, would not be conducive to their work-style, and so they would choose to discriminate.  And finally, customer taste-based discrimination implies that if a firm decides to hire a select group of people, consumers that would naturally discriminate against this select group, would in turn, discriminate against the firm and potentially boycott it. 

In conclusion, this paper argues, that based on the evidence given, discrimination is not profit maximizing, nor is it profitable for the capitalist in the long run.  One of the major reasons for the survival of capitalism is its inherent nature of racism and racial discrimination.  The capitalist mode of production creates inequalities and inefficiencies throughout the market, and moves to further subjugate, marginalize, and ostracize African-Americans, and other non-whites.  The only people that do benefit from this system are predominately rich, White Americans, because all other peoples act as a buffer for this small select group.

In doing this research, it was also interesting to discover that certain White Americans are also victims of this system (typically lower middle class and poor Whites), but are blinded by the racial discrimination that is woven into the system.

            Today, by transferring white resentment toward blacks and away from             capitalism, racism continues to serve the needs of the capitalist system…the             economic concequences of racism are not only lower incomes for blacks but             also higher incomes for the capitalist class and lower incomes for white             workers.[8]

The only way to remove this type of ingrained prejudice in the minds of people would have to be a complete removal of the capitalist system.  Looking forward, a new type of society, one where hierarchical structures do not exist, would, in the opinion of this paper, be the most beneficial form of effective productivity and human ingenuity.

Tagged: PowerRacismDiscriminationLaborMarketCapitalismTheoryBeckerEconomicsU.S.AbstractSocialismChange

1st May 2012

Post reblogged from WE LOVE OUR BJ'S. with 3 notes

WHEN LOYOLA AND TOWSON GIRLS INFILTRATE SAE

thebestbj:

Source: thebestbj