Sunday, January 11, 2015

The neoliberal model on discrimination is wrong

Image: A patient's husband relaxes outside the beautiful Monroe Community Hospital in Rochester, New York. Now a long term care facility, Monroe Community Hospital was designed in 1930 by Thomas Boyde, Jr.. Boyde's architectural firm only interviewed him by mistake, believing he was white until he arrived for his interview. Though impressed with Boyde, the head of the firm only hired Boyde after polling the rest of the firm to see if they would object to working with an African-American architect. (source)

I feel compelled to start posts like this with a disclaimer:  People are more than economic units. People do not exist to serve the economy. The economy should exist to serve people, and not the other way around. This post is about workplace discrimination, and workplace discrimination should be combated simply because discrimination is wrong.

But in a neoliberal world, you have to speak the language of neoliberalism--so the rest of this page is written in neoliberal.

Even economy-first neoliberals should take interest in fighting workplace discrimination. For example, the productivity lost to workplace gender discrimination has been particularly well studied. Obviously, systematic discrimination against half of the workforce is not without consequences. Sexism in the labor market means that huge numbers of women don't return to work after giving birth or are passed over for supervisory roles, and that takes talent and productivity away from the economy. Gwynn Guilford summarizes research attempting to estimate the phenomenal economic growth that would result if the talents and hard work of women were not underutilized: of Japanese women drop out of the workforce after having their first child. Getting them back to work could boost Japan’s GDP by as much as 15 percent...If American women worked at the same rates men did, U.S. GDP could grow 9 percent, say economists; France’s would pop by more than 11 percent; and Italy’s would see a whopping 23 percent boost, according to OECD calculations. The average across the OECD would total 12 percent.
How can such inefficiency persist in a free market? Neoliberals believe that inefficiencies are rapidly corrected by the free market, so how can such extraordinary inefficiency possibly persist?

Let's take a closer look at the neoliberal model of discrimination. To neoliberals, a firm that engages in discrimination will find themselves at a competitive disadvantage. Obviously, a firm that turns away the most qualified candidate because of their gender or color of their skin will not be as efficient as firms that don't discriminate. Non-discriminating firms will use their advantage to force the inefficient discriminating firms out of business. In this way, discrimination is eliminated without any government intervention.

To rephrase the neoliberal view, discrimination is acceptable as long as there is no economic penalty. Of course, most neoliberals are not so crass to actually express this view, but they are being dishonest. As the honest neoliberals will admit, if you assume that the market will automatically correct discrimination, you are necessarily arguing that any discrimination not corrected by the market is acceptable. You can't be against discrimination preserved by the free market if your only solution for discrimination is the free market.

Aside from moral shortcomings, the neoliberal model is flawed in theory and in practice. The theory collapses like a house of cards under the slightest scrutiny. Discrimination is not inefficient without full employment. When there are more qualified job seekers than job openings, firms can discriminate without any competitive disadvantage. Yet even in full employment conditions, discrimination against women is economically efficient; that's why we didn't see the end of workplace discrimination when the American labor market was in full employment in the 1950's and 60's. More fundamentally, however, the neoliberal model obviously cannot eliminate discrimination without equality of opportunity. Even in theory, the model is so clearly flawed.

Indeed, the obvious problems in theory translate to an utter failure of free markets to solve discrimination in the real world. We can see this in two ways First--and most obviously--the neoliberal model is clearly not working, and it's not as though the model hasn't had enough time to work:
Frederick Douglass put the matter succinctly during the Civil War. When Democrats asked, “What is to be done with the Negro?” once slavery was abolished, Douglass’s one-word answer was: Nothing. Leave the former slaves alone, free them from the restraining hands of their masters, and they would be fine. This was bourgeois radicalism at its most blinkered, narrowing freedom down to formal civic equality and letting the “market” do the rest of the work.

Only after the Civil War, when it became clear that leaving the freed people to fend for themselves was a recipe for disaster, did Douglas repudiate his former faith in the miraculous workings of the free labor market.
And while the neoliberal model has had a century and a half to work its magic on racial discrimination, it's had even longer to work on gender discrimination. In more modern times, we still rely on the free market to correct injustices. It still doesn't work:
Even in their highest paid major, electrical engineering, blacks earn $12,000 less a year on average than Asians and $22,000 less than whites with the same major...Female chemical engineering majors earn on average $20,000 less a year than male counterparts.
Compared to white men, women and minority men get paid less for doing the same work, and that has been consistent for decades. It's probably fair to say that discrimination is a scourge we should try to vanquish with all available means instead of waiting decades more for a free market "correction" that will probably never come.

To see the second reason the neoliberal model is flawed in practice, look no further than gap in discrimination between the public and private sectors. If the free market is the best tool for fighting workplace discrimination, then the public sector--largely independent of the free market--should be a cesspool of discrimination. It's not; the public sector prove itself far better than the private sector at limiting discrimination (ie, United States, Canada, Sweden). The public sector doesn't eliminate discrimination more readily in spite of its independence from the free market; it does so because of its independence of the free market.

In sum, the neoliberal model on discrimination has had over a century and a half to work it's magic. It hasn't worked. It's time for the neoliberal model on discrimination to be retired. With so many flaws in theory it's amazing this model was ever taken seriously.

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