Is the pursuit of profit racist? Some prominent voices, especially on college campuses, seem to think so.
Ibram X. Kendi, a professor at Boston University and author of How to Be an Antiracist, claims that “Historically capitalism + racism are interlinked, which is why I call them the conjoined twins + historians like me call them ‘racial capitalism’ in the singular.”
Similarly, far-left activist Angela Davis, who was twice the USA Communist Party’s candidate for vice president and a recipient of the Soviet Union’s Lenin Peace Prize, said in a speech at the University of Texas that capitalism “is at the very core of what we have come to perceive as structural racism.”
Even the American Medical Association is piling on. Its website states that “The concept of racial capitalism asserts that racialized exploitation and capital accumulation are mutually reinforcing.”
Is there any validity to these claims?
There has never been a shortage of controversy and misinformation surrounding capitalism and how it affects humanity. Capitalist economies aren’t perfect, but some of the criticisms are not only inaccurate, but confused.
To untangle these claims, it helps to first define what capitalism is.
The word “capitalism” began life as a pejorative. Karl Marx, and the 19th-century socialists who followed in his wake, wielded it to disparage an economic system they hoped to replace.
Yet capitalism is not a philosophy or a set of beliefs, much less a top-down system. No one invented it.
Capitalism describes an economy where people can freely choose to trade, or not, without interference from the government. As the economist and author Thomas Sowell explains: “You may get food from a restaurant, or by buying it from the supermarket and cooking it yourself, or by growing the food on your own land and processing it all the way through to the dinner table. Each of these is just as much ‘capitalism’ as the others.”
That’s it. Capitalism is all around us, and we are all part of it.
Despite their words, Davis and Kendi have thrived as capitalists. The University of Texas paid Davis $25,000 for her speech. Kendi charged my public school district, Fairfax County, Virginia, $20,000 for a one-hour online talk on racism. If Davis and Kendi are free to choose with whom they trade and at what price, shouldn’t others have the same right?
In fact, trading among humans—the core of capitalism—may be much older than the concept of race. Archaeological evidence shows that humans’ propensity to trade dates back to long before humans left Africa about 40,000 years ago. It is in all our DNA. It has likely played an important role in our species’ survival.
Free trade enables survival because it is mutually beneficial; each side gets something it perceives as greater value. If two groups of hunter-gatherers engage in trade, each comes away better off, increasing both groups’ chances of survival.
Trading enables our survival in modern times too. Today, people trade their labor for wages. They use their wages to trade with businesses, which are essentially groups of people specializing in trading a product or service, for their wants and needs, such as food, shelter, clothing, medicines, iPhones, etc. If all that trading were to stop, we would live in poverty or worse.
In exchange for providing goods and services, business owners get profits. Some incorrectly view profits as benefiting business owners at the expense of everyone else. Yet, in a capitalist economy, customers, suppliers, employees, and others freely choose whether they trade with a business, or not. If a business cannot make these stakeholders better off, they will refuse to trade with it, there will be no profits, and the business will cease to exist.
If capitalism has an opposite, it is communism, where trade is not decided by individual choice, but is directed by the government. Communism was supposed to end social divisions. Yet, racism is common in countries that still claim to be communist, including Cuba, Laos, North Korea, China, and Vietnam. Nor did communism solve any other problems plaguing humanity. Quite the opposite: It produced widespread starvation and oppression.
The evidence from the last couple of centuries clearly shows that all humans, regardless of race, do better when we continue trading freely, as our African ancestors did. Rich countries have abundant profit-seeking businesses, while poor countries lack them. There is no example of a nation that has thrived otherwise.
R. David McLean is the William G. Droms Professor of Finance at Georgetown University’s McDonough School of Business and the author of The Case for Shareholder Capitalism: How the Pursuit of Profit Benefits All, recently published by the Cato Institute.
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