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I really love when I get a real-world, concrete example of a principle free market economists point out all the time.
Today's lesson: The Free Market vs. Business Discrimination.
One thing I've stressed over the years is that contrary to what a lot of Hollywood and possibly your public education would have you believe, free markets actually discourage discrimination based on irrelevant criteria like race, gender or sexual orientation.
The reason for this is pretty straight-forward... By excluding customers of a different race than you, or hiring workers of your same gender instead of whoever does the best job, you actually get punished with lower profits, or even losses, in a free market. Either you're limiting your clientele to a smaller number of people than is necessary for no valid reason thus taking in lower revenues than you otherwise would, or you are accepting poorer workmanship at higher-than-necessary costs.
And of course, the second a competitor decides to make business decisions independent of extraneous factors like race or gender, they will find themselves in a position to hire cheaper, better employees and to accept money from a much larger population - and quite possibly put you right out of business as a result.
In fact... The threat of non-discriminating competition was so dangerous to many politically-connected racists in the American South that they actively sought to create legislation preventing minorities from owning property or starting businesses. And if that weren't enough, they passed more laws which made their brand of discrimination and segregation mandatory for all businesses in their community. That way, even if there were non-racists running local businesses, they were economically hampered by law in the same ways that the racists had hampered their own businesses by choice.
Pretty slick, right?
But just because the Jim Crow era is the case people usually think of when talking about discriminatory business practices, by no means is that the only type of discrimination that happens in reality... What's more interesting is the realization that not all discrimination is even necessarily "evil", and not all of it fits the stock narrative of the Anglo-Saxon oppressor keeping down minorities and other "undesirables".
One way or another though, free market pressures will erode away all types of discrimination - even some kinds that most of us probably think are alright.
For example, it was reported today that a popular lesbian-only resort in Florida is responding to the economic crisis by opening their doors to all genders & sexual orientations:
"...over this Thanksgiving weekend, Key West's only lesbian-exclusive resort is going "all welcome."Honestly, a few things came to my mind when I read this. The first reaction for me is just about the economics of it all.
The decision was made public about the same time Pearl's Rainbow was honored in October by Curve, the best-selling lesbian magazine, as the guesthouse that had the greatest impact on lesbian culture over the past 20 years.
Pearl's Rainbow's lesbian owner, Heather Carruthers, said it was a business decision based on tough economic realities, the request of some lesbian guests who would like to bring male family members or friends -- and on some good news. Lesbians are being more accepted and feel more comfortable in the mainstream these days."
ALL types of discrimination - be it white against black, American against Mexican, Christian against atheist - are punished by free markets. It is much smarter for employers to hire whoever is best for the job and whoever among qualified candidates are willing to work at the lowest rate or they will be over-paying for labor. It's also much smarter for business owners to sell to as many people as possible as well, regardless of who they are, what color their skin is or what they believe.
And here, with the Pearl's Rainbow example, we have a crystal clear case showing that the market - on its own, without any government force required - encourages greater levels of inclusion, especially when money gets tight. I love examples like this, because they help illustrate sound economics in the real world.
But I had another thought as well! This second thought I had is a bit more subtle... a bit more complex.
The Pearl's Rainbow lesbian resort made a perfectly legitimate choice to exclude men and I strongly believe that they should always be free to do so.
One might also argue that the right of the Ms. Carruthers to select her clientele and exclude those she did not want her resort to cater to not only contributed to her business' success, but as a result provided a unique and popular getaway to people who have historically not been so welcome or free to be themselves at other establishments. There's no question that having a lesbian-only, or gay-only resort is a wonderful thing for homosexuals... It's easy to see why someone might want to open such a resort.
But that choice obviously comes at the cost of potential clients. I'm sure you'd agree though that Ms. Carruthers' trade-off seems like a choice well made for the Pearl's Rainbow. However, now that we're experiencing tough economic times, her desire to continue operating the resort instead of going out of business has resulted in less exclusion and broadening the people she allows into her hotel... And maybe that's good too!
But this should make most people take a step back and consider what they think about freedom of association and the rights of business owners (and everyone else) to make their own choices about who can or cannot benefit from the products & services they offer. In America, those rights aren't equal for everyone.
We allow certain demographic groups (such as lesbians) to discriminate while restricting that very same right for others. Not very principled, is it?
Consider that the arguments typically made in favor of anti-discrimination laws claim that restaurants & hotels are "public" services, regardless of whether or not they are privately owned or state-controlled. But by the arguments that many people who support the more proactive parts of the Civil Rights Act make, Ms. Carruthers should never have had the right to discriminate against men.
Just to be clear, by "proactive", I am referring only to those parts of the CRA which made racial discrimination illegal... I am not referring to the parts which repealed the legislated segregation through Jim Crow - which was, of course, a very very good thing. People have an unfortunate tendency to push for extremes, and too often in America, what isn't mandatory must be prohibited. I know it's complicated, but I'm saying that sometimes... just occasionally... it shouldn't be one or the other - but neither.
Discrimination should neither be required, nor prohibited.
That said... The Pearl's Rainbow is clearly a hotel and I'm quite sure it also sells food and refreshment to its guests. And until now, it clearly discriminated against a group of people based on gender & sexual orientation.
Under our current rules, the only organizations which can discriminate in their clientele legally are those which charge a membership fee - thus rendering them "private clubs" in the eyes of the law. Hotels & resorts don't charge membership fees of course, so they are (incorrectly) deemed "public" institutions. But because they are deemed public, they are limited in the forms of discrimination their owners can engage in. Were the Pearl's Rainbow a hotel catering only to straight men, or "worse" - only straight white men - I believe we can be quite sure such an establishment would have either been sued out of existence or forced to allow non-white gays & lesbians and women.
But as far as I'm concerned it should all be ok!
Firstly, it's purely an issue of principle. If people are to be free to retain private ownership of anything (and that's kind of foundational for a healthy economy), that necessarily means that people are free to decide what to do with what they own. It doesn't matter if what you own is a house, a baseball card or a successful Key West resort & hotel, ownership means getting to choose what you do with the things you own - and part of that in business is being free to decide who to hire and to whom you will sell your services & products.
Thing is... Freedom is messy.
Sometimes people will make bad or mean-spirited choices. Sometimes people will decide to discriminate against people because of the color of their skin and sometimes those doing the discriminating will be people in the majority who hold historical positions of power. Sometimes, people will be bad guys... No one likes that and it should be vocally decried and boycotted wherever possible.
But it's also only one side of the coin...
Freedom for individuals to do what they want with their own property also means that people who have historically been without power like lesbians & gays can form their own communities and cater to their own niches when no one else will.
And that's remarkably empowering!
In the case of the Pearl's Rainbow, I think it's clear that Ms. Carruthers' empowerment became a model and an inspiration to other homosexuals who have historically had few places where they can feel at home. The freedom to own property & start businesses also greatly empowered many recently freed blacks in the Antibellum South - allowing many to become successful & relatively prosperous... at least, until the Jim Crow era came along and put a stop to all that.
In environments where certain groups are heavily discriminated against, it is ironically the very same power to own property and discriminate which provides minority groups the ability to discriminate in their own favor and thus provides way for the disenfranchised to become prosperous!
And all the while, market forces continue to put pressure on discrimination of all kinds and eventually freedom will wind up encouraging people to come together, trade with each other, become economically interdependent and eventually - with a bit of luck - even learn to like each other.
Oh by the way... This effects me pretty directly as well, though I am not gay or a member of an American racial minority.
I have elected to trade in a broad market for multimedia production services in favor of a specific niche. I don't discriminate based on gender, religion, sexual orientation or race... But I do discriminate - a lot - based on "creed".
My services are not available to everyone - at least they're not available under the CitizenA banner to everyone. And while I know that I'm sacrificing a good deal of money I could have attained by accepting all clients, the intellectual discrimination I engage in is important to me for many reasons. For my business to be what it is and for me to maintain the respect of my clients and my own self-respect, I actually must discriminate, as odd as that seems, because my business is a reflection of ideas and principles that I actually believe and strongly support.
Everyone should be free to discriminate, even those we believe are doing it for the wrong reasons... Freedom is messy, and not everyone will use it wisely, but it's also worth the mess because it is such a powerful tool for positive change and empowerment.
Just check out the lesbian community in Key West... I'm suspect they'll agree.
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