David R. Henderson  

Ryan Avent on Economic Growth and Jim Crow Laws

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In his partial defense of the Pope's views on economic policy, Ryan Avent writes:

Neither did economic growth magically free American slaves or end Jim Crow. There was nothing inevitable about the end of institutionalised racism in America, and without the end of institutionalised racism in America growth would manifestly not have led to greater justice and inclusiveness in the world.

Avent is right that economic growth didn't end Jim Crow. But it certainly reduced its effect. One of the main ways around Jim Crow laws was for black people to leave the South. Economic growth created opportunities in the northern United States, attracting hundreds of thousands of black people. This certainly reduced the power and effect of Jim Crow laws.

The Pope, or his ghost writers, writes:

This imbalance [in earnings] is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control.

Scott Sumner has pointed out that that's hard to believe given that the Pope claims to be talking about the real world and there doesn't seem to be a country in the world in which "the absolute autonomy of the marketplace" is respected.

But put that aside. Instead, note the irony. The Jim Crow laws were laws that did not respect people's autonomy in the marketplace, did not respect people's right to engage in exchange with each other. Remember that the Jim Crow laws were laws. As W.E.B. DuBois pointed out in Black Reconstruction, the Jim Crow laws made it illegal for black people to go searching for better jobs. If they were caught moving from point A to point B, they were charged with vagrancy. Those laws, in fact, were examples of what governments often do when they want to disrespect the marketplace.


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COMMENTS (15 to date)
Daniel Kuehn writes:

I'm confused about the irony you claim in the last paragraph.

You don't think that by saying states have a duty to pursue the common good that states always will pursue the common good, do you? I don't study papal pronouncements closely, but I feel pretty safe guessing there are lots that condemn injustice from the state too.

So where exactly is the irony? Or am I missing your point?

Is the argument that to want any social institution to do something we must validate all actions of that social institution?

I have been amazed at this backlash against the pope. Some of it was overwrought, but I thought it was a compelling call to inclusion.

Daniel Kuehn writes:

Are you just saying it's not the best example from Avent I guess?

mb writes:

There are many problems with the pope criticisms not the least of which is the premise is ridiculous given the fact world wide poverty was cut in half during the last 20 years. The places where life is worse or no better are the places where the pope's prescriptions were/are used (e.g. North Korea, Cuba, and of course Zimbabwe - which implemented the pope's plan). All in all, I think people have been too respectful in their critiques of his statement, they need to call him liar.

James writes:

Daniel: The irony is that Avent's example is a counterexample to the point he is trying to make. Jim Crow laws were not rooted in some ideology based on the autonomy of the market. They were based on an ideology which held that the market should be subordinate to the state. And here Avent is citing those laws to endorse exactly the ideology that lies at the root of those laws.

"Is the argument that to want any social institution to do something we must validate all actions of that social institution?"

No one said anything like that. Do you honestly think that's the most plausible reading of Henderson's comment or are you just grasping for the easiest interpretation to reject?

Bedarz Iliaci writes:

That market has to be subordinate to the state is not an ideology but inevitable reality that the libertarians vainly deny.

My basic question is What do libertarians mean by
1) Nation
2) State

Private property is sacrosanct in libertarianism but do the libertarians have an adequate definition of "ownership"? Or is property confounded with control or possession?

Tom West writes:

Once again, this becomes an issue of stated motives rather than actual outcomes.

By making economic freedom an end rather than a means, there's a pretty common sentiment that Libertarians countenance any number of evils as long as they're the natural outcome of a free market.

The fact that such evils may not occur or that they may even be less frequent than in a state-run society is completely secondary to the fact that Libertarians aren't willing to directly confront such evils with force (government regulation, usually).

Stated motivation and direct action means significantly more than the actual long-term outcome.

Tom West writes:

That market has to be subordinate to the state is not an ideology but inevitable reality that the libertarians vainly deny.

While I agree, that doesn't mean there isn't value in Libertarians fighting for greater freedom.

People forget that the middle ground *isn't* the natural outcome. It's the result of the extremists on both ends of the rope pulling as hard as they can. I may not usually agree with the extremists, but I'm usually glad they aren't dropping their end of the rope.

Daniel Kuehn writes:

James -

re: "are you just grasping for the easiest interpretation to reject?"

Obviously not. That would be a waste of my time. It's not a very clear criticism to me. Markets don't clear away exclusion. They often exacerbate it (I'm not, for example, convinced that on net the market reduced the effect of Jim Crow - although in certain instances it certainly did). And sometimes, as David points out, they ameliorate it. The fact that many of these exclusions don't have their source in the market doesn't seem especially relevant to the point to me, and certainly not ironic.

Don Boudreaux writes:

I've one nit to pick with David's otherwise excellent post: Following Hayek's practice, I recommend that legislation not be described as - and, hence, not be given the presumption of legitimacy that rightly attends - "laws." Jim Crow was not law; it was legislation. The evolving social practices, in which law is rooted, of the late 19th-century south were running counter to the practices imposed by force through legislation.

So David is correct that Jim Crow had nothing to do with the market; it was an assault by government on market arrangements - an attempt to socially engineer market arrangements away from the patterns that competition was driving those patterns to assume. Jim Crow, in short, was a government-led effort to break the law.

Too few people know this history, but it's well-documented. See, for example, Jennifer Roback, "Southern Labor Law in the Jim Crow Era: Exploitative or Competitive?," University of Chicago Law Review, Vol. 51 (1984); and Jennifer Roback, "The Political Economy of Segregation: The Case of Segregated Streetcars," 46 Journal of Economic History, Vol. 46 (1986). A superb book-length treatment is Robert Higgs's 1976 volume Competition and Coercion:
http://www.amazon.com/exec/obidos/tg/detail/-/0226333949/qid=1130605185/sr=1-12/ref=sr_1_12/103-2724537-6513457?v=glance&s=books

See also this column by Thomas Sowell:

http://www.washingtontimes.com/news/2005/oct/28/20051028-104403-5873r/

A slice from Sowell's column:

"Those who see government as the solution to social problems may be surprised to learn it was government that created this problem. Many, if not most, municipal transit systems were privately owned in the 19th century and the private owners of these systems had no incentive to segregate the races.

"These owners may have been racists themselves but they were in business to make a profit — and you don’t make a profit by alienating a lot of your customers. There was not enough market demand for Jim Crow seating on municipal transit to bring it about.

"It was politics that segregated the races because the incentives of the political process are different from the incentives of the economic process."

Bedarz Iliaci writes:

It was politics that segregated the races because the incentives of the political process are different from the incentives of the economic process

No doubt. But the thing is, if the people in power, that is, the ruling element, wanted segregation, or putting it stronger, if they saw segregation as a solution to certain problems, maybe they saw segregation as a lesser evil, then were they not justified in overruling the market process?

If you say that they were not justified, then I ask whether in your opinion, the political process, the ruling element is never justified in overruling the market process? Or only when you don't like the results?

David R. Henderson writes:

@James,
Nice answer. Thanks.
@Daniel Kuehn,
I'm not, for example, convinced that on net the market reduced the effect of Jim Crow - although in certain instances it certainly did).
By necessity, the market had to reduce both the effect of Jim Crow and Jim Crow itself because Jim Crow violated free association, an important part of the market.
@Don Boudreaux,
Good point.
@Tom West,
Libertarians aren't willing to directly confront such evils with force (government regulation, usually).
I would have been willing to use force against the enforcers of Jim Crow laws had I been an adult and had I thought I wouldn’t get caught.

Daniel Kuehn writes:

David - re: "By necessity, the market had to reduce both the effect of Jim Crow and Jim Crow itself because Jim Crow violated free association, an important part of the market."

It could very well have reinforced the distortions of Jim Crow. Inequality of opportunity, in the market, leads to unequal outcomes which can exacerbate unequal opportunities.

In the famous Jim Crow case of Plessy v Ferguson, it was the RR that was opposed to the law that segregated the cars, because it was more expensive to run two when one would suffice. The state overrode the economic (marketplace) decision to integrate. Several more laws followed that enforced 'separate but equal', that markets would have eroded, if left free to do so.

And, as I asked elsewhere, what did more to end slavery, economic growth or the Catholic Church?

Tracy W writes:
That market has to be subordinate to the state is not an ideology but inevitable reality that the libertarians vainly deny.
I am surprised to hear you assert that this is reality. In my reality, there's an operating market in mind-altering drugs that are illegal, that indeed have been banned world-wide. If a market can operate in the face of open hostility from states, how is it that markets are inevitably subordinate? And there are a large number of historical reports of black markets operating in other areas too, for example during rationing in Britain during and after WWII, and in Communist countries. Are all these reports false? And how about unintended effects of market regulations? For example that binding price floors in the EEA led to milk lakes and butter mountains - were all those reports false?

Personally I think that states can influence markets but they can't control them because they can't control people that well.

Roger McKinney writes:

Since the 1500's, protection of life, liberty and property was the responsibility of the government, not the market. Slavery and Jim Crow laws were among the biggest failures of the state in US history. Socialists like RA are quick to condemn the market for imaginary failures, but are blind to failures of the state.

To slavery and Jim Crow, I could add every war since the war for independence, genocide of Native Americans, and the wars on poverty and drugs as major government failures.

The pope laments the lack of progress on inequality, but he is ignorant of the fact that freer markets caused the only reduction of inequality in world history. See Robert Fogel's "Escape from Hunger and Premature Death." According to Fogel, most of the reduction in inequality took place before the rise of the welfare state in the West.

The recent rise in inequality began after the launch of the massive welfare state under FDR and Johnson.

The state has never accomplished any reduction in inequality ever.

So the pope condemns the only institution that has ever achieved any degree of reduction in inequality and commends the institution that has failed at almost everything. That's shameful.

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