Chapter 10: How To End Economic Racism

A friend and colleague said I depressed her with my talk about how the world is and the way racism destroys both its believers and the oppressed. Her next question was always, “Well, what is the solution?” I believe we must know the problem before we can solve it. I also know that sometimes, the problems are so enormous that we mull them over a lot before we come up with a solution, especially if we are the ones facing these tribulations. Furthermore, the answers may seem so fundamentally against the reality we face, such that they seem impossible. However, if we understand racism to be profoundly distant from our ideal human values, then radically sweeping solutions may be perfectly reasonable.

Economic racism is one of those big problems that I see as a market externality. In economics, an ‘externality’ is the consequence of consumption, production, or any decision on an individual group who did not have an option or choice in the market-driven event and whose interests were never taken into consideration. These externalities can be positive or negative. For illustration, imagine a factory that produces luxury fur coats that dumps waste from the rabbits onto the land and pollutes the air from burning rabbit corpses; a beautiful neighborhood with mansions that pipes its sewage into the river, polluting drinking and groundwater downstream closer to a lower-income neighborhood; mining gold in a river to make beautiful necklaces, that leads to mercury poisoning of a local native tribe; or building a new airport opening up the region to global travel, thus adding noise pollution, jet fumes in the neighborhood air, and hearing deterioration of nearby residents. These positive, productive efforts all resulted in a negative externality. Similarly, enslavement, Jim Crow, Black Code, redlining, lack of voter rights, land grabs, mass incarceration, and economic racism all lead to negative externalities. They benefited one group of people at the expense of another and eventually negatively affected our entire civilization.

A positive externality is where a public good like education is accessible to all regardless of income, class, or so-called ‘race,’ resulting in a more productive, harmonious, and motivating nation that is better equipped to solve its problems, whether personal or societal. Public goods that are available to everyone mean that a larger, more inclusive society is more equipped to solve problems. In the case of the coronavirus global pandemic that hit us starting in 2020, white Americans realized that due to hundreds of years of deeply entrenched racism in every aspect of society, not only were brown and black people more likely to die or become seriously ill from the virus, they were also the ones most difficult to vaccinate due to lack of simple facilities like nearby pharmacies, health insurance, or trust in a vaccine developed mainly by white people, notorious for secretly experimenting on brown people (Golden, 2020).

In the case of a positive externality like education, some governments decide to subsidize to ensure that everyone benefits as equally as possible. Then, they spend fewer resources on combating crime and dealing with social problems. Studies by the National Bureau of Economic Research show that “an additional four years of education lowers five-year mortality by 1.8 percentage points; it also reduces the risk of heart disease by 2.16 percentage points and the risk of diabetes by 1.3 percentage points.” Education has the positive externality of improved health and earnings, just to name two benefits (Picker, 2007). This is why in Scandinavian countries, tuition fees for tertiary education are either very low or sometimes free for nationals. These countries have a higher quality of life due to more focus on supporting positive externalities and taxing negative externalities.

‘Cap and trade’ policy of the United States’ is a method to tax and incentivize companies that pollute the environment to account for their negative externalities. The ‘cap’ reduces greenhouse gas emissions with limits on pollution, and the ‘trade’ is a market that allows companies to buy and sell allowances in a mechanism that makes pollution-resulting production more expensive and non-polluting processes cost-effective (Keohane & Kizzier, 2021).  Cap and trade have reduced sulfur dioxide pollution, causing acid rain in a shorter time than expected.

Racism is similarly a positive and negative externality in its results. Of course, much of the negatives go to the poor white people, brown and black people, while the other white people—sometimes unwittingly, as if these results were normal to all lives—benefit positively from the system. The destructive producing practices are linked to racism that deprives a group of people of possessions and freedom to prosper uninhibited. Attempts to right the resource grab attract confrontation from white people. Just as pollutants cause harm to everyone, so too does racism. Moreover, these negative externalities are triggered by the very wealthy, hoarding of economic growth among a few people—top one percent, the raison d’etre for exploitation of people’s including via racism (Matthews, 2017).

As a negative externality, racism and its accompanying wealth hoarding should also be taxed and regulated to redistribute resources to support the positive externality or equity in all aspects of society. Civil rights laws are passive and weak in their anti-racism and, more importantly, anti-hoarding effects. Anti-racism must be incentivized via a system of taxes and subsidies at the institutional level. A movement towards anti-racism requires access to grow brown and black wealth and power, to own their rural and urban lands, small businesses, and large corporations. Brown and black people do not need meager handouts to assuage the guilt of white supremacists.  

For starters, some of the inequality is coming from the tax structure America has today.

To understand more of how the tax structure and machinery can be used to solve racism and solve much of our waste of resources, read more in Economic Racism – Memoir of a Heroic Nonconformist, by Martin Kush