Bigots, boycotts and business.

It is a common myth that bigotry, while endemic in the private sphere, is only eradicated when government’s step in and take action. Yet the history of bigotry shows something else altogether.

During the era of segregation in the American South the Civil Rights movement got a major boost from the Montgomery bus boycotts. Rosa Parks refused to sit at the back of the bus and instead used a seat “reserved” for whites. This act of defiance set off the boycotts. Eventually the federal government stepped in with various civil rights measures and eradicated this example of private bigotry.

But bus seats were not reserved by race at the whim of the bus companies. In fact the companies were compelled to obey various governmental regulations. Bus companies were prosecuted for disobeying the segregation laws. Private companies were forced into accepting racial segregation to please politicians.

The anti-apartheid fighter Helen Susman noted that the South African government had separate schools for the various races and, in addition, separated white Afrikaners from English speaking whites as well. But she said: “Private schools, however, are integrated. Many of the private schools, in fact practically all of them, have not only English and Afrikaner students but students of other races as well.”

Merle Lipton’s exhaustive analysis Capitalism and Apartheid showed that repeatedly the government had to step in and force businessmen to discriminate on the basis of race. Left to their own “profit-seeking” devices they found such bigotry to be contrary to their own self interest.

Today around the world the issue of rights for gay men and women is hotly debated in government. Moves to extend rights to gay couples are fiercely resisted by politicians in almost every country. Almost unnoticed is the fact that business—ranging from multinational corporations to small companies— are implementing policies which recognize gay relationships.

If anything government’s tend to act against bigotry only after the private sector has already stepped in to eradicate it. The nature of politics is inherently conservative and resistant to change. But the private market thrives on innovation and change.

Bigotry like any other action has costs associated with it. And bigots in general don’t like to pay those costs. They much more prefer to pass the costs on to third parties.

In a famous incident in South Africa a local city councillor of the Conservative Party, who opposed the ending of segregation, willingly sold his own home, in a white area, to black buyers. The reason was simple enough. In this case if he refused he had to take the second highest bid instead and the difference between the two bids was something he paid himself. Suddenly when bigotry was costing him directly he no longer advocated racial separation.

It is government intervention which allows bigots to impose their costs on everyone. Take for instance a bigoted employer who prefers not to hire a specific type of person. He has to search through more potential employees to find the one he wants. And if someone, who is highly qualified for the job comes to him—but is a member of the group against which he discriminates—he has to send them away. He loses the opportunity to employ a worker who will bring him benefits and instead has to send them to his competitors.

In a free market the cost of his bigotry is paid entirely by him. So bigots prefer to have laws which require their competitors to act in the same manner. Now the competition can’t hire the workers, which the bigot dislikes, either. When the government gets involved the bigot is able to pass on some of the costs of discrimination to his competitors as well.

That is certainly what the white trade unions found to be true in South Africa. When mining companies were left to seek a profit they preferred to hire the best workers at the best wage, regardless of race. To prevent this from happening job reservation was imposed by the state. Farmers, who supported job reservation, when it came to urban jobs, successfully fought off similar measures when it came to jobs in rural areas.

The law prevented black farm workers from seeking out higher paying jobs in the city. This forced up wages in the city—making the racist trade unions happy—and forced down wages in the rural areas keeping the farmers happy. Meanwhile farm workers were paid less and business had to pay more for urban workers. The use of politics allowed bigots to pass the costs on to unwilling third parties.

Bigotry, like anything else, is price sensitive. People want less of it when they pay the cost themselves. So contrary to widespread opinion it is government intervention which is necessary to allow bigotry to flourish. And it is markets which act constantly to undermine it.