Free Market v. “Bigotry”

I often spar with people about various facets of free markets or libertarianism, but one lengthy and heated debate I had yesterday was so productive that I feel like I must lay out my general thoughts and arguments about the issue, and I am sure many other libertarians come across this issue too. I know others have to address this argument because Aljazeera has an article slamming Ron Paul for free market rhetoric.

The argument is that in a libertarian society, the government would not make anti-discrimination laws, and this would lead to the proliferation of discrimination. I use the word “bigotry” here to stand in for all forms of discrimination, including against gays, blacks, muslims, trans -well, essentially all minority groups. In a libertarian society, the argument generally goes, these groups would suffer even greater societal ills than they do currently because rampant discrimination would shut them out of things they greatly need in their daily lives: employers wouldn’t hire them, insurance companies wouldn’t sell them health insurance, and so on. Government-backed anti-discrimination policies are the only way to provide protection to these groups who would otherwise be cast out into a hateful, uncaring world.

I argue the exact opposite: a free market would lead not to more intense polarization and proliferation of bigotry, but instead would push people and groups towards integration and cooperation. 

In a free market/libertarian society, a shop owner certainly has the power to turn away all black customers. As a matter of fact, a whole bunch of store and firms could have this policy - perhaps the American South, so maligned for racism, would try to pull a de-facto Jim Crow pt. 2. I see there being two checks on this sort of situation:

First off, bigotry will be punished in a free market. I consistently argue that the internet is an immensely powerful tool for enabling free markets to act in the name of justice and fairness. the ability to disseminate information about how Business X is turning away all blacks will spread quickly, and people have the agency to react to this. They will no longer patronize the business, and Business X will either fail, and disappear because of its racist policies, or it will have to give them up and again accept black customers to remain competitive. Being racist is, frankly, a shitty decision, in terms of being a good human and in terms of business.

Secondly, bigotry leads to disenfranchisement, which leads to unmet demand, which then leads to profit-motive. Now let us assume people are not as gracious as I describe them in the first point. Let us assume that even though customers have the knowledge that Business X is being racist, they do not care, and choose to continue shopping there. If all business are racist because they are not required to accept black customers (which is extremely unlikely, as I will soon demonstrate) then the black population is left out of luck. They demand goods that they cannot get because because supply is withheld from them. In this case, the demand will be met by other means: an outside source will enter the market to meet the unmet demand of the disenfranchised group. 

Another example of this that was discussed yesterday was the issue of health insurance providers. Let’s assume that all health insurance providers don’t like gays and refuse to acknowledge gay couples. Again, there is unmet demand and I argue that an insurance provider will spring up to cater specifically to homosexuals. Hell, it can even be run by homosexuals for homosexuals, but in the end it is a business that will work because the demand cannot be met elsewhere. 

Not here I seem to argue for a magical free-market deus ex machina that will consistently save the disenfranchised group, which may leave many people skeptical. There is however precedent, and even a perfect example that came up yesterday. In case of this being TL;DR, the gist is this: because of the horseshit of SOPA, PIPA, and now the terrifying CISPA, a gentleman is launching an Internet Service Provider (ISP) that is based on that idea of keep your data secure by not sharing it and encrypting communications. We see here: ISPs and other services have shaky privacy policies, people grow concerned about their online privacy in response to garbage like CISPA. Demand for more security and privacy grows and lo and behold it is met.

This creates competition - other ISPs are now going to have to tighten security and privacy too in order to not lose customers.Because of this, I want to return to a previous issue: gays are likely not going to be denied insurance and blacks are not likely to be turned away from shops because that is lost revenue. There is an incentive to cater to ALL groups because that makes you most competitive in a market. as mentioned previously, bigotry is a bad, bad, bad decision not just because you might lost customers who think your racist policies are screw up. it is also a terribly decision because then your competitor has potentially more clients because blacks are welcomed there! 

again, I want to firmly re-iterate: bigotry is punished in the free market

I suppose what I am arguing here might strike people as suspect because it also can be seen as an argument for “greed is good.” Some people might say that this approach encourages avarice rather than generosity, that it focuses on money rather than humans. This in some senses is true - indeed, the bigotry suffered by some groups is seen as profit-motive. But I also believe that this leads to integration and cooperation between groups. those who right now have no interest in associating with “the other” are now forced into a mutually beneficial relationship.


Lastly, I want to mention that it is in many cases the government’s policies that are causing the divisions and leading to the disenfranchisement and unmet demand that the free market will heal and solve. Note that homosexual marriage is not official in the eyes of the law and various insurance related gibberish could in principle be withheld because gays cannot legally marry. As mentioned previous, insurance providers have the incentive to provide insurance to everyone, including the homosexuals. If it weren’t for government meddling in so silly and inconsequential an issue as marriage, this would not be a problem. Yes, I’m taking a jab at marriage as a legal institution as a whole, but that’s a discourse for another time. 


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