Special Treatment for Blacks?

1.

Have the government’s attempts to stop discrimination through “affirmative action” been a help or a hindrance to blacks? What is in question here is Title VII of the 1964 Civil Rights Act, which outlawed all forms of employer discrimination against blacks and other minorities, and Executive Orders 11246 and 11375, which required federal contractors to establish “affirmative action” plans for complying with Title VII. Since most large American firms do some business with the government, most now have affirmative action plans monitored by the federal government.

One of the Reagan administration’s avowed objectives over the past two years has been to make these programs less “burdensome.” In practice this has meant exempting many firms from their requirements, loosening the standards a firm must meet for its program to be acceptable, and failing to investigate or punish firms that fail to make good on their initial promises.

Thomas Sowell, the black laissez-faire economist, has long been a critic of affirmative action—in both the narrow and the broad senses. (Narrowly construed, affirmative action refers only to federal programs designed to increase minority employment among federal contractors. Broadly construed, it embraces all federal efforts to close the economic and social distance between blacks and whites.) In the last issue I dealt with Sowell’s historical and economic reasons for thinking affirmative action unnecessary.¹ In this article I turn to Sowell’s claim that affirmative action is not just unnecessary but actually harmful.

According to Sowell, affirmative action plans have “produced little overall pay or employment changes for blacks relative to whites, as measured empirically by a number of economists.” In fact, four studies have tried to estimate affirmative action’s impact on minority employment among federal contractors. One concluded that affirmative action had had no effect, while the other three concluded that it had increased minority employment by 6 to 13 percent. Whether this change is large or small is obviously a matter of opinion, but if all firms were to increase their black employment by 6 to 13 percent, black unemployment would fall to about the same level as white unemployment.

The effect of Title VII on minority wages is less clearcut. The ratio of black to white wages in 1969 was higher in industries that did a lot of business with the federal government than it was elsewhere in the private sector. But the black-white wage ratio in industries that did a lot of business with the government was lower in 1969 than it had been in 1959, before affirmative action.² This suggests that high-level jobs with federal contractors went mainly to whites during the 1960s, and that when federal contractors created new jobs for blacks, these jobs were not as well paid as those for whites.

While the ratio of black to white wages fell in industries doing a lot of business with the federal government, it rose elsewhere in the private sector. This is not as surprising as it might seem. Title VII outlawed discrimination even in firms that did no business whatever with the government, and legal action forced many firms with a history of discrimination to make sweeping changes in their hiring and promotion practices. Fear of legal action led many other firms to make such changes. Since industries that did little business with the federal government started the decade in a much worse position with regard to black employment than federal contractors usually did, it is not surprising that these were the industries in which blacks made the greatest gains. Sowell does not even consider these effects of Title VII on firms that were not federal contractors.

The rapid increase in blacks’ relative wages after 1964 could, of course, have causes other than Title VII. But if one compares the rate of increase in black wages after 1964 to the rate of increase during the 1950s and early 1960s, one finds that the black-white gap narrowed much more rapidly after Title VII passed than it had before then.³ Furthermore, if one calculates the impact of the other major factors that helped blacks to catch up with whites after 1964, namely migration from the rural South to the urban North and the narrowing of the educational gap between blacks and whites, they account for only a modest fraction of the change.

In light of all this I do not see how Sowell or other free-market economists can deny that Title VII increased black workers’ earnings. The most they can argue, it seems to me, is that while Title VII improved black workers’ earnings, it may also have made it harder for some blacks to find jobs.

Employers know that if they fire a black worker, he or she can appeal to the Equal Employment Opportunity Commission (EEOC), which is expensive for the employer. If an employer is considering high-risk applicants, many of whom will have to be fired, this could make high-risk whites look more attractive than high-risk blacks. In addition, EEOC investigations often focus on promotion rates. This could make employers reluctant to hire blacks they did not think likely to earn a promotion. Indulging such preferences is illegal, but that does not necessarily mean it is unusual.

Since Title VII increases both the potential cost of hiring the “wrong” blacks and the potential cost of not hiring any blacks at all, it has forced employers to intensify their search for the “right” blacks. The beneficiaries of Title VII have thus been young blacks with educational credentials and mature blacks with steady work histories. Young blacks with neither educational credentials nor good work histories have gained little. Employers have bid up the wages of black college graduates, for example, but not the wages of black high school graduates. Among whites, by contrast, high school graduates’ wages have been rising faster than college graduates’ wages since 1969. By the same token, employers have bid up wages for black high school graduates over 35, but not for young black high school graduates. No such difference is found among whites. Unemployment statistics tell the same story. In 1964, when Title VII was enacted, unemployment was twice as common among non-white men between the ages of twenty and twenty-four as among those between thirty-five and forty-four. By 1979 the younger group was experiencing three times as much unemployment as the older. Again, no such trend is apparent among whites. All these statistics suggest that while most blacks have gained significantly from Title VII, young, poorly educated black men have not. They may even have lost ground, either because of Title VII or for other reasons.

While Title VII may have made it harder for young, high-risk blacks to find work, this seems a modest price to pay for a law that has dramatically improved the annual earnings of most other blacks. The most important negative effects of Title VII have, I think, been political and psychological, not economic. They derive not from Title VII’s ban on discrimination against blacks but from the fact that it has sometimes led to discrimination against whites. Some whites resent having been denied jobs or promotions that they think went to less qualified blacks because of affirmative action. Many others assume that every surly or incompetent worker they encounter who is black owes his or her job to federal pressure, while they blame surliness or incompetence among whites on permissive child rearing, drugs, or God.

Reverse discrimination has also reinforced white prejudices about black incompetence. In some cases a double standard in hiring leads to clear differences in performance between blacks and whites doing the same sort of work. Even when this doesn’t happen, the fact that well-intentioned personnel officers and hiring committees contemplate using a double standard reinforces white prejudices about black competence.

The same thing happens in elite private colleges that admit marginal black students. The presence of such students convinces many white students and faculty that blacks just aren’t very bright. The logic is precisely the same as the logic that convinces students and faculty that athletes, who are also admitted even if they are academically unpromising, aren’t very bright. The difference is that encouraging the nation’s future professional and managerial elite to think athletes are nitwits does no serious social harm, whereas encouraging the belief that blacks are nitwits does incalculable harm.

How did Title VII, which was supposed to forbid discrimination on the basis of race and ethnicity, end by encouraging it? The answer is partly political and partly legal. The ground rules for interpreting Title VII were established at a time when cities were burning and violent racial conflict was omnipresent. Public officials, lawyers, and judges almost all assumed that the roots of such conflict lay at least partly in black economic troubles, and that these troubles derived partly from past discrimination. Eliminating racial violence thus seemed to require an employment strategy that not only promised to treat black job applicants fairly in the future but somehow to offset the effects of past discrimination as well.

This posed two problems. First, good jobs usually demand information, skills, personal contacts, and work habits that can only be acquired in other jobs that are almost equally good, or to a lesser extent in school. Since blacks had been denied access to most good jobs and had had great difficulty attending good schools, colorblind hiring rules would exclude those already in the labor force from good jobs forever. Second, most good jobs carry an implicit guarantee of tenure so long as you continue to perform at whatever level your employer had judged acceptable in the past. Since most good jobs had been filled under Jim Crow rules, and since turnover in these jobs was often quite slow, even a system that guaranteed blacks fair access to jobs that fell vacant would not guarantee them their fair share of all good jobs for at least a generation.

The compromise that emerged gave whites almost everything they wanted, but blacks did get something. Firms were allowed to retain all their old employees, no matter how unfair the procedures used to hire them. Firms were also allowed to consider education and work experience in filling future vacancies so long as they could demonstrate that these factors were actually relevant to job performance. But firms also had to estimate the proportion of nonwhites they would hire if fair rules prevailed, and in some cases they had to hire disproportionate numbers of non-whites until these goals were reached. If, for example, a firm agreed to a goal of having 20 percent black workers in a given job, and if none was currently black, it might have to offer half its openings to blacks for several years in order to meet its goal. This often meant offering jobs to blacks whose credentials were less impressive than those of whites who were turned down.

No one knows to what extent black economic advances since 1964 depended on reverse discrimination, as against the establishment of colorblind policies. Thus we have no way of saying what impact if any, outlawing reverse discrimination might now have on black workers’ earnings. My own guess is that the effect would be minimal, but I know no way of proving this.

Many conservatives want to go far beyond just banning reverse discrimination. Sowell seems to believe, for example, that the government should not try to regulate discrimination at all, and the Reagan administration has taken a series of administrative steps, such as eliminating travel funds for EEOC investigations, designed to ensure that Title VII will no longer be enforced. If Title VII is not enforced, firms in competitive industries will find themselves under increasing economic pressure to engage in both “statistical” and “consumer-directed” discrimination against blacks. This will close off many jobs to all but the most qualified black workers.

(As I explained in the first of these articles, “statistical” discrimination arises when skin color really is related to job performance. This can happen either because black and white job applicants with similar credentials tend to have different skills and attitudes, or because supervisors and fellow workers treat blacks differently from whites after they are hired. In such situations employers often decide it is more profitable not to hire any blacks at all than to hire colorblind and then fire workers who perform poorly. “Consumer-directed” discrimination describes situations in which blacks and whites perform identically, but in which employers hire whites because they think their customers prefer whites. Refusing to use black sales representatives with white customers or refusing to hire black flight attendants are obvious examples.)

Sowell recognizes that what I have called statistical discrimination may persist in a competitive marketplace, and he concedes that it may make life harder for blacks who exceed the statistical norm for their race. But he argues that statistically accurate stereotypes do not hurt the average black, since they are by definition accurate for him or her. Unfortunately, matters are not so simple. Black cashiers may, for example, be slightly more likely to steal than white cashiers. But it does not follow that the average black cashier steals more than the average white cashier. The average black cashier, like the average white, steals nothing at all. Refusing to hire black cashiers because they are “more likely to steal” thus means punishing all blacks for the sins of the least virtuous. This violates our proclaimed standard that people are “innocent until proven guilty.” It also reinforces racial antagonisms that have caused us endless grief, and shatters the illusion, to which we are all somewhat committed, that we can attain justice for individuals as well as for groups.

That is why Title VII forbids racial discrimination even when it is based on statistically valid stereotypes. Sowell is so concerned with overall economic efficiency that he is almost blind to such ethical issues. He writes like a police chief whose sole concern is with minimizing crime in his district and who therefore has no scruples about arresting the innocent as well as the guilty if this will make the streets safer for everyone else.

While few conservatives openly favor not enforcing Title VII, many argue that enforcement should not include numerical goals (“quotas”) for minority hiring. This argument is either ignorant or disingenuous. Without numerical goals Title VII is virtually unenforceable. Hiring decisions inevitably depend on a multitude of complicated factors, the weighting of which is somewhat arbitrary. Proving that racial bias has affected any specific decision is therefore next to impossible. The only way to prove discrimination is to look at a series of decisions and ask whether they favored white applicants more often than comparable black applicants.

To do this one must reach some explicit agreement about the characteristics of desirable applicants and then calculate the percentage of all desirable potential applicants who are black. If blacks get less than this percentage of the jobs, something is awry. If one finds such a pattern of discrimination, the only practical remedy is to insist that a firm bring the percentage of blacks hired up to the level one would expect if hiring were colorblind. Trying to monitor hiring decisions case by case is impossible, and attempting to do so creates a mountain of useless paper and a lot of unnecessary jobs for lawyers.

Numerical quotas have acquired a bad name because they have often been used to encourage reverse discrimination. In leading universities, for example, hiring depends largely on the quantity and quality of applicants’ scholarly publications. If those who set hiring goals for blacks wanted to ensure colorblind decisions, they would presumably try to set numerical goals by considering, for each academic field, all the books and articles written by scholars of the relevant age and then attempting an assessment of the proportion of competent work written by blacks.

This would obviously be a difficult and controversial process, but it would not be impossible if the faculties in the different disciplines were willing to work at it. But neither federal nor university officials charged with formulating affirmative action plans have been primarily concerned with colorblind hiring. They have wanted a substantial increase in the proportion of black faculty, even if this meant resorting to reverse discrimination. Instead of looking at young black scholars’ contributions to their discipline, therefore, they have looked only at the percentage of recent PhDs who are black. This substantially increases the number of black scholars that leading universities are expected to hire. The universities then have three choices: they can hire some blacks whose scholarly records are weaker than those of the best available white applicants; they can fall short of their hiring targets; or they can formulate new criteria for evaluating both white and black applicants that yield the desired black-white ratio when applied on a colorblind basis. Universities have chosen some combination of the first two options. None has even attempted the third.

Whereas academic organizations have often used a double standard to increase the proportion of black students and faculty, nonacademic organizations have sometimes eliminated traditional standards altogether. Many traditional job requirements, such as educational credentials and high scores on multiple-choice tests, exclude more black than white applicants. The Supreme Court has held that when this happens an employer must demonstrate that those who meet the excluding requirement actually perform better on the job than those who do not meet it.

Many large employers have responded to the Court’s decision by hiring psychologists to evaluate their traditional hiring and promotion requirements. Often these psychologists cannot find any relationship between a traditional requirement and their measures of job performance. This may mean that no relationship exists and that the requirement should be dropped. But in some cases it just means that sampling and measurement errors have obscured the relationship. By placing the burden of proof on employers to justify their practices, the Supreme Court has forced them—and ultimately their customers—to pay for the limitations of social science. This is unfortunate. Shifting the burden of proof from employers to black job applicants would make blacks pay for the limitations of social science. This would be an improvement from the employers’ viewpoint and perhaps even from the customers’. It would hardly be a step toward “justice,” as conservatives often imply.

The problems with both numerical hiring targets and judicial scrutiny of job requirements are not, it seems to me, inherent in Title VII. Rather, the problems arise when judges and public officials try to use Title VII to increase black employment without regard to other objectives. Sowell assumes that such abuses are an inevitable result of government intervention in the market-place. Yet his entire analysis of the political process suggests that public officials are more responsive to the views of the white majority than to those of the black minority. This being so, the most plausible explanation for the occasional abuse of Title VII is, I think, that public officials have been more concerned with increasing black employment in the short run than with longerterm problems of equity and efficiency. While these priorities may look unwise now that we have the wisdom of hindsight, they may also have helped to keep the racial conflicts of the late 1960s from becoming even more violent and embittered than they were. To suggest that we can now afford to change these priorities is hardly to demonstrate that they were a mistake from the start, as Sowell would have it. What we need now is not de facto repeal of Title VII but case by case reexamination of hiring quotas for minorities in specific firms. Such reexamination should try to ensure that these quotas lead to colorblind hiring rather than reverse discrimination.

2.

Sowell’s books are not, of course, just about ethnic minorities and discrimination. They are also part of a broader conservative campaign to discredit “big government” and revive faith in “the free market.” This campaign has been quite successful. According to the Harris Poll, the percentage of Americans agreeing with the statement that “the best government is the government that governs least” rose from 32 percent in 1973 to 38 percent in 1976, and reached 59 percent in 1981. The change reflected the widespread feeling that the growth of government during the Johnson and Nixon administrations was somehow responsible for the nation’s subsequent economic problems.

Yet the connection between government growth and economic stagnation is by no means obvious. If one looks back over American history it is hard to find any connection between increases in the size or powers of government and the rate of economic expansion. If one compares countries with large public sectors, like Germany and Sweden, to those with small public sectors, like Japan and the United States, one discovers that those with large public sectors have grown as fast and are now at least as affluent as those with small public sectors. The linkage between big government and economic stagnation is more a matter of “logic” which in this context means ideology, than of experience.

Hostility to big government has deep roots in American history, but the recent increase in the supply of books promoting such hostility owes as much to corporate self-interest as to consumer demand. Just as foundations used to give many liberals the leisure and resources to write books urging government to reshape society, major corporations have recently been making it easy for conservatives to produce books arguing against such efforts. Sowell’s work, for example, has been supported by the American Enterprise Institute and by Stanford’s Hoover Institution, both of which get most of their money from business. The International Center for Economic Policy Studies, whose program director is George Gilder, the Republican speechwriter turned guru, sponsored Markets and Minorities as part of a campaign to win over American undergraduates to laissez faire by providing them with a conservative textbook. When ICEPS wanted to send Sowell on a speaking tour to promote the book, American Cyanamid, Armco, Chevron, and Gulf Oil paid the bills.

Sowell’s distaste for big government rests on a preference for the “hard” premises of nineteenth-century liberalism over the “soft” premises of twentieth-century liberals. Citizens are supposed to know their own interests better than anyone else, and they are also supposed to be more strongly motivated than anyone else to defend those interests. It follows that more choices are always better, and that restricting choice—as virtually all governmental interventions in the marketplace do—always makes people worse off.

In 1847, for example, the British Parliament passed legislation improving physical conditions aboard ships carrying emigrants to America. Most of us would evaluate such legislation by asking whether it lowered the percentage of emigrants who died on the way over, which was then very high. In view of the primitive state of medical knowledge at the time, the changes mandated by Parliament could easily have proven ineffective. Since the changes inevitably meant higher fares, which presumably discouraged emigration from famineridden Ireland, they might actually have increased total mortality instead of lowering it. But Sowell’s criticism of the legislation does not rest on evidence regarding its net impact on mortality. For him it is enough to show that some prospective emigrants preferred low fares and crowded conditions to higher fares and better conditions. Since the legislation eliminated these people’s preferred choice, he defines it as a change for the worse regardless of its effect on their life expectancy.

All political ideologies invest the group to which they assign ultimate power with implausible virtues, and the economists’ doctrine of “consumer sovereignty” is no exception. If it were true that private citizens always act in their own best interest, this doctrine would be extraordinarily attractive. In fact, however, we often lack the information or the wisdom we would need to make decisions in our best interest. We all recognize this about ourselves, so we look for “experts” we can trust to make decisions in our interest. Often we find we can trust the people with whom we do business; but often we can’t. When this happens we usually ask government officials to police the businesses we have found we could not trust. The resulting system is certainly inefficient. But in a world where citizens seldom know their own true interests, consumer sovereignty is also very inefficient. Laissez-faire economists like Sowell assume this problem away, but the rest of us cannot afford that luxury. Government intervention also reduces the range of choices available to individuals. But the price of complete liberty really would be eternal vigilance, and at that price the demand is quite limited. Socialism is not the only political system that would take too many evenings.

Because the public understands all this fairly clearly, the recent campaign against big government has taken a new tack. One key aim has been to discredit the motives of politicians, civil servants, and especially social reformers. Like many economists of the “Chicago School,” Sowell likes to portray reformers as if they were just businessmen in disguise. They may say they care about the public interest—or about the poor—but they are really just looking out for their own interests and lining their own nests like everybody else. Their altruistic rhetoric is no more to be trusted than that of a used-car salesman who professes to care more about a customer’s finding the right car than about making a sale. Since public officials are no more trustworthy than businessmen, the argument goes, it is safer to entrust our fate to the market than to government, since under market rules businessmen must persuade us to give them our money, whereas public officials can compel us to do so.

By contrast, twentieth-century liberals have assumed that in the absence of the profit motive a combination of concern for others, commitment to legal principles, and social pressure from colleagues could induce officials to make the public interest their own. Conservatives habitually characterize this assumption as “naïve,” and radicals often agree. Yet the assumption that public officials are exclusively concerned with advancing their own careers, increasing their personal power, and lining their pockets is equally naïve. Public officials are different from used-car salesmen, even though they are nothing like as different as liberal reformers sometimes assume.

The public appears to understand this, too. A 1981 Roper Poll that asked whether ten different groups “tend to act more in their own self-interest or more in the public interest” found that while 83 percent of all respondents with an opinion thought that business executives in large corporations tended to put self-interest ahead of the public interest, only 51 percent thought government officials tended to do so. Questions about United States senators, members of Congress, and cabinet officers yielded much the same results as the query about government officials in general. Interestingly, only 27 percent of those with an opinion thought federal judges tended to put self-interest ahead of the public interest. Perhaps this explains why Americans have constructed a system in which government officials are expected to police big business, and federal judges are then expected to police the government. While Sowell offers plenty of evidence that public officials often make self-serving decisions, he does not even consider the limitations of private decision-making. So far as he is concerned the whole field of welfare economics, painstakingly developed over many years, seems not to exist.

Another key element in Sowell’s criticism of government has been his insistence that government policy does not usually represent the will of “the people” but only the will of powerful special interests. Major corporations have been understandably chary about endorsing this view, but it is central not just to Sowell’s thinking but to that of his former Chicago mentors George Stigler and Milton Friedman. Because government policy reflects the unequal distribution of political power, Sowell argues that government is more likely to be an instrument for oppressing ethnic minorities than for liberating them. Over the long run, he argues, minorities do best when they are free to compete in the marketplace without government interference.

American history certainly provides plenty of evidence to support Sowell’s contention that democratic governments can do minorities more harm than good. Without government support, many aspects of white supremacy would probably have withered long before they did. Yet the federal government twice played a key role in undermining white supremacy: between 1863 and 1877 and between 1964 and 1980. The question today is whether 1964 was a watershed, as most liberals assumed until the Reagan administration took power, or whether the years between 1964 and 1980 were a temporary aberration, like Reconstruction. To answer that question we need a convincing explanation of why a whitecontrolled government played such an active role in undermining white supremacy. The traditional liberal answer has been “public opinion.” If that is the only explanation, Sowell is certainly right in emphasizing the likelihood that public opinion will prove fickle, and in claiming that racial equality will depend on blacks’ ability to compete in unregulated labor markets, not on their ability to extract special favors from Washington.

But even if this conclusion is correct, as I suspect it is, it hardly follows that blacks should stop asking the government for whatever help they can get. The steel industry’s survival is also ultimately dependent on its ability to compete in unregulated markets, but it is still to the industry’s immediate advantage to exclude foreign steel from the American market if it can. Few people like competition. It creates a lot of anxiety and usually lowers the victim’s income. Left to their own devices both capitalists and workers always create “conspiracies in restraint of trade” to eliminate competition. This happens regardless of ideology. Supposedly “selfreliant” farmers insist that the government enforce “orderly marketing” agreements that prevent competition from driving down prices; right-wing builders demand mortgage subsidies to sustain demand for new housing; and conservative auto executives ask Congress to save them from the consequences of generous wage settlements and misjudging the demand for big cars. It is hard to see why blacks should sacrifice themselves on the altar of competition when hardly anyone else shows any inclination to do so. In today’s political environment the only argument that will persuade minorities not to seek protection from competition is prudential: certain short-term benefits, especially those that derive from reverse discrimination, may cost blacks more than the benefits are worth.

(This is the second part of a two-part review.)