Milton Friedman and Harvey Weinstein

In today’s disgusting news, Harvey Weinstein, Hollywood big shot, is a serial abuser of women who wanted to work in show business. He’s been fired by his own company for this. We are now having another national conversation about sexual harassment. We can only hope that this one will do some good. Keep this in the back of your mind as I discuss Milton Friedman; I’ll come back to it.

I threatened promised you another post about Friedman. This post should extend my post on Becker, since I’m assured that Friedman’s 1962 essay is simply a “popularization” of Becker and thus Friedman certainly wasn’t guilty of merely making stuff up to support his free-market ideology. I want to return to these ideas by revisiting Friedman’s essay and think about its implications. To what extent does Friedman base his policy proposals on Becker’s evidence?  Second, to what extent does Friedman embrace an antiracist policy for the sake of combating racism as an end in itself–rather than to further some other policy agenda?

Unions and Right-to-Work Laws

Black-and-white drawing of a factory

Becker devoted quite a bit of space to the effect of trade unions on economic discrimination:

Chapters 3, 4, and 5 show that the greater the extent of monopoly, trade unionism, and government discrimination, the greater the market discrimination against a minority. There is more state government intervention against non-whites in the South, but more trade unionism and (perhaps) monopoly in the North. (p, 116)

Herbert Hill, the NAACP’s chief labor analyst was working long and hard in the 1950s and early 1960s against racial discrimination by unions:

As long as union membership remains a condition of employment in the building trades, on the railroads and elsewhere and qualified Negroes are barred from union membership solely because of their color, then trade union discrimination is the decisive factor in determining whether Negro workers in a given industry shall have an opportunity to earn a living for themselves and their families. (p. 110)

Here was an opportunity for the libertarians to join with those concerned with civil rights as both recognized the problem of racially discriminatory unions. What should be done about the problem? Becker was concerned with measuring the extent of discrimination; he had no specific policy recommendations in his book. Friedman, however, did have a policy recommendation in his chapter on “Capitalism and Discrimination.” His answer was to pass right-to-work (RTW) laws.

In a “closed shop” situation in a particular trade, union membership is a “condition of employment.” If you want to work as a printer, you need to belong to the printer’s union. If the printer’s union doesn’t accept black members, then there will be no black printers. An “open shop” is one where union membership is not a condition of employment; there may be a printer’s union at the local, uh, printery (is that a word?) but you can work there without being a member. A RTW law simply says that unions cannot enforce a closed shop anywhere. Theoretically this would mean that a racially discriminatory union could no longer bar black workers from becoming printers, thus striking a blow against racial discrimination.

The above paragraph is my best guess as to the effect a RTW law would have on racial discrimination. I have to guess because Friedman discusses RTW laws without discussing racial discrimination at all. Friedman is concerned about the discrimination any worker faces in a closed shop situation. Those not wishing to join the union are discriminated against, according to Friedman. Closed shops interfere with the individual’s right to enter into a contract with an employer and therefore Friedman opposes them in principle: he’s opposed to laws requiring union membership as a condition of employment and is equally opposed “equally to laws outlawing the so-called ‘yellow-dog’ contract (a contract making non-membership in a union a condition of employment)” (p. 115).

It is possible, of course, that a RTW law would decrease racial discrimination in employment by eliminating closed shops. Friedman expressly leaves the door open for the possibility that closed shops would remain even if RTW laws were passed. He admits, “It is doubtful that in a competitive labor market, it would in fact ever be profitable for employers to offer a closed shop as a condition of employment” it is also true that the market would supply many types of contracts to employees:

If in fact some employees would prefer to work in firms that have a closed shop and others in firms that have an open shop, there would develop different forms of employment contracts, some having the one provision, others the other provision. (p. 116)

In short, Friedman showed no concern whatsoever on the effect of labor unions on racial discrimination per se. If we assume, counterfactually, that labor unions were very effective in fighting racial discrimination, if they used their monopoly power for good instead of evil, Friedman would have still opposed them. We know this because he explicitly tells us so:

The coincidence of a closed shop and labor monopoly is not an argument for a right-to-work law. It is an argument for action to eliminate monopoly power regardless of the particular forms and manifestations which it takes. It is an argument for more effective and widespread antitrust action in the labor field. (p. 116)

The right Friedman was concerned with was the right for an employee and employer to enter into any contract they desired. As long as this right was secured, Friedman was satisfied. If it decreased racial discrimination, that was fine with Friedman. However, if it increased racial discrimination that might be regrettable, but a price he was willing that racial minorities paid.

Herbert Hill of the NAACP had specific policy recommendations. By the mid-1960s, about half of the states had Fair Employment Practices Commissions (FEPC) meant to enforce non-discrimination in the workplace. These commissions were beset with problems that indicated that too often they were underfunded, given minimal enforcement power, and generally moribund. It was time, Hill argued, to make the nation’s commitment to fair employment a reality:

Given the significant developments in the American economy during the last twenty years together with the current status of the Negro wage-earner in states with FEPC laws we must conclude on the basis of the evidence that state FEPC laws have failed. They have failed because their potential was in fact never realized. The time has now come to insist upon a fundamentally new approach in the operation of state fair employment commissions and for the adoption of a strong federal fair employment practices law that operates with new standards and enforcement procedures. For the Negro wage-earner the limited and inadequate state FEP commissions are no substitute for broad federal actions to eliminate the deeply entrenched patterns of employment discrimination. If this is not done very soon even the limited gains of the past will be destroyed and the entire Negro community will be in a permanent condition of crisis. Negro wage-earners in vast numbers will either be the working poor or the hard core of the permanently unemployed

 

It is a sign of how out of step Friedman was with those fighting for social justice that he argued the exact opposite position: rather than putting teeth in fair employment measures, he recommended they be eliminated completely.

Fair Employment Practices

Sign reading: "The Fair Minded People"

In his analysis of unions, one version of “employee discrimination,” Becker magically whisks away the notion that it was possible that employers and employees both discriminate. When he turns to unions, “It is assumed that employers and consumers do not discriminate” (p, 54) which he treats elsewhere. That the unions were simply doing the dirty work on behalf of employers was something that the NAACP’s Herbert Hill could not overlook. Consider the Citizen Councils, the segregationist organization made up of white-collar businessmen that formed after the Brown case. Hill noted that:

The White Citizen Councils began taking control of some local AFL-CIO affilates soon after the Supreme Court decision of 1954 in the school segregation cases…the Ku Klux Klan and White Citizen Council forces, especially in Alabama, have moved into many local unions and made them, in effect, virtual extensions of segregationist organizations.(p. 110)

Clearly union leadership was guilty of racial discrimination, but it may well be that employers, no less than unions, would racially discriminate as well. What did Friedman have to say about that? He recommended a repeal of all Fair Employment Practices Commissions (FEPC) which were established to eliminate discrimination in employment.

Does Friedman’s recommendation of eliminating FEPC follow from Becker’s analysis? Becker claimed that, since discrimination interfered with market mechanisms it laid a cost on employers. Thus, conceivably, the market would (eventually? someday?) eliminate discrimination. The FEPC would interfere with the free operations of the market. Fair Employment legislation, Friedman wrote:

clearly involves interference with the freedom of individuals to enter into voluntary contracts with one another. It subjects any such contract to approval or disapproval by the state. Thus it is directly an interference with freedom of the kind that we would object to in most other contexts. (p. 116)

Granting for a moment that FEPC interferes with “freedom” in this way, does it follow that such interference would increase discrimination as Becker defined it? It is not clear at all that this is the case. Becker does not discuss FEPC laws in the 1957 book at all, thus raising the likelihood that Friedman has once again wandered away from Becker’s book.  Becker does suggest in the 1971 introduction to the subsequent edition of his book that:

Minorities can often use the government to protect themselves and even to further their own interests. Witness the passage of local, state, and federal fair-employment laws in recent years,  the open-admissions policies of various public colleges, or the government-imposed “Philadelphia Plan” to increase the employment of minorities in the building industry. (p, 7)

Becker cites a study in a footnote to this passage that state FEPC laws “apparently have raised both the earnings and the unemployment of non-whites” which was a mixed endorsement, but far from Friedman’s blanket condemnation of such measures. Later applications of Becker’s model to FEPC laws found that his model would recommend, not condemn Fair Employment laws:

In a basic Becker (1957) model of employer discrimination, black workers obtain employment by offering their services at a lower wage rate than equally productive whites in order to compensate the employer for the psychic costs presumed to accompany blacks’ employment. Unless or until non-discriminatory employers drive discriminatory ones out of the market, the labor market equilibrium entails a wage gap between equally productive black and white workers. If blacks and whites have a similar distribution of reservation wages, the wage gap may also imply a gap in employment rates. Therefore, in this context, an effectively enforced fair employment law barring discrimination in hiring, promotion, and wages would tend to diminish the observed wage gap as well as any existing gap in employment rates. (p. 247)

If employees, rather than employers, are the repositories of discriminatory attitudes in a Becker model with competitive input and product markets, then racial segregation within or between workplaces results, but not a wage gap. In this context, fair employment legislation might force integration, but there would be no detectable impact on relative wages. However, if there are wage premiums, perhaps associated with unions, in particular a set of occupations, firms, or industries that happen to employ whites disproportionately, then a racial wage gap would exist for otherwise observationally similar workers. By forcing integration, an effective fair employment law would tend to diminish the racial wage gap in this scenario. (p. 248)

So, it seems, once again Friedman is just making stuff up. His recommendations about the FEPC do not seem to arise out of an application of Becker’s model of discrimination. But, importantly, Friedman’s recommendation has nothing at all to do with racial discrimination. It is entirely based on his “principle” that such laws interfere with “freedom.”

One could argue that FEPC laws increase freedom: after all, minorities now have access to jobs previously denied them. Wrong, wrong, wrong! according to Friedman. You see, he explained, a racist boss not hiring a black worker was merely a

negative harm that occurs when two individuals are unable to find mutually acceptable contracts, as when I am unwilling to buy something that someone wants to sell me and therefore make him worse off than he would be if I bought the item.(p. 112)

No, Friedman told us over and over that he finds such behavior morally wrong and subject to his fiercest wagging of his finger and clicking of his tongue (I’m paraphrasing here) but nothing the law should be empowered to stop. For if we made such discrimination illegal we would be inflicting a “positive harm that one individual does another by physical force, or by forcing him to enter into a contract without his consent”(p. 112).

There is a strong case for using government to prevent one person from imposing positive harm, which is to say, to prevent coercion. There is no case whatsoever for using government to avoid the negative kind of “harm.” On the contrary, such government intervention reduces freedom and limits voluntary co-operation.(p. 113)

Once again, Friedman’s recommendations are not supported by Becker, where he supposedly gets them, and are perfectly in line with racists who don’t want to hire or work with racial minorities.  Note that it doesn’t matter at all if FEPC laws are effective or not for Friedman. Either way he’s against them. He’s willing to offer sympathy and tsk tsk the racists, but not willing to do anything at all to help the situation.

If we take Friedman’s position and apply it to our current controversy over Weinstein and sexual harassment, its moral bankruptcy becomes clear. Here is Friedman’s crisp presentation of  his “principle”:

Given competition among employers and employees, there seems no reason why employers should not be free to offer any terms they want to their employees. (p. 115)

And this, at long last, brings us back to the loathsome Harvey Weinstein. You see, there is a possibility that firing him may have violated the terms of his contract. A wise businessman who had been harassing women for three decades seems to have written a contract in such a way as to allow that behavior. These discussions tend to be somewhat abstract so let’s be specific:

The story details abusive behavior — such as Weinstein “badgering” women into giving him naked massages or asking if they would watch him shower — that suggest a man who got off not so much on sex as on dominating women who he suspected were powerless to fight back. That he got away with it for decades, and that he is only being outed now, as his power is fading — slowly, to be sure — suggests he was right.

Friedman, of course, would never approve of such behavior but, beyond tutt-tutting, would have said that the law was powerless to stop it. In fact, Friedman would have been bound by his “principles” to come forward, right at this moment in time, to suggest we repeal such laws, since they were the same thing as hitting Harvey on the head with a blackjack. If employers should be “free to offer any terms they want” then Harvey should be perfectly free to offer a choice movie role in exchange for a blow job. She doesn’t want those terms? There’s the door sweetie, have the secretary send the next one in, would you? Many of our current libertarians still hold the Friedman line on sexual harassment; Ron Paul, for example. Other libertarians speak out against sexual harassment but only are able to do so by abandoning Friedman’s property/contract version of libertarianism. It is a real puzzle for them.

If the freedom to sexually harass, or refuse to hire racial minorities seems like something society should actively fight, then be thankful your morals are not those of Milton Friedman. He had “principles,” after all. It is just that those principles were completely unrelated to the world in which the rest of us live.

 

 

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