2020 and the Future of Freedom, Social Peace, and Prosperity

2020 and the Future of Freedom, Social Peace, and Prosperity
Some institutions of higher learning and private sector employers use quotas to select employees and students in a misguided effort to eliminate discrimination. (The Canadian Press/Darryl Dyck)
Herbert Grubel

This is not an exercise in hindsight—discussing what we could or should have done differently in 2020—but an examination of that year’s political trends, which represent a growing threat to freedom, social peace, and economic prosperity in Canada.

The trends that pose this threat were driven by leaders in the world of academia, media, and politics who find their inspiration in the manifesto of the prophet Karl Marx that was dictated to him by the God of Fairness. In 2020, they accelerated the shift from arguing that income inequality is caused by capitalists who exploit workers to arguing that inequalities are caused by the systemic discrimination of females, indigenous, racial, and other minorities taking place in rigged capitalist markets.

Under the traditional strategy, the advocates for greater income equality made much of the decadent life of the world’s billionaires and other super-rich people. The complementary part of the traditional strategy was to give much exposure to accounts of the sufferings of low-income families and their children that we encounter in the media every day.

Past efforts using this strategy have led to the creation of Canada’s welfare state. We now have a social security net that provides financial support to the physically and mentally handicapped, the retired poor, and the unemployed. It provides access to free medical services and basic education to all. The spending programs are backed by a progressive tax regime under which low-income earners pay no tax and the top 10 percent pay one half of all personal income taxes. This welfare state is supplemented by the efforts of food banks and many private charities.

However, more recent efforts to expand the welfare state have not succeeded. Gini coefficients—which are one if inequality is total, and zero if income equality is perfect—during the years 1999 to 2018 averaged .44 for families before tax and .31 after tax, without any trend and with annual values always within one percentage point around the average.

The recent failure to create enough voter support for the expansion of the welfare state to make the distribution of income fairer undoubtedly has contributed to the decision to switch to the new strategy with its focus on the role systemic discrimination plays in the economic and social suffering of demographic minorities. This strategy appeals to people who are unhappy with their income, wealth, or social status and makes them ready to vote for politicians who promise to end systemic discrimination and raise their incomes.

Finance Minister Chrystia Freeland’s 2020 fiscal update promised that her government would revamp social institutions and laws. This will almost certainly require changes to policies and institutions that are blamed for the discrimination suffered by several important groups of Canadians, but which have made Canada one of the freest and richest democracies in the world.

The first of these changes already has led to significant reductions in the freedom of speech, which arguably is the most fundamental safeguard of democracy. It was lost when universities in recent years have prevented in increasing numbers visits by speakers who defend existing institutions. Publishers of such views in public media are regularly shamed and some lose their jobs. More important is the restrictions on free speech caused by hate-crime legislation, which requires some state-appointed individuals to decide whether an author should be fined or jailed for voicing an opinion they consider incites hate.

The new strategy also envisions chipping away at the traditional methods used to hire employees or admit students on the grounds that they are a root cause of systemic discrimination. Thus, under the threat of legal action, some institutions of higher learning and private sector employers have been pressured into using quotas to select employees and students.

Harvard University and the University of California are high-profile examples of institutions that have used such quotas, though they are also used in Canadian universities. The use of quotas in the United States created much opposition from parents of students who had collected evidence that their children had superior academic qualifications than some members of minorities who had been admitted. Because of the political and legal efforts of these parents, these academic institutions were forced to abandon the use of admissions quotas, but not after their use had created much social conflict and division.

Private companies also are increasingly pressured to use quotas when selecting board members. It’s reasonable for business owners to appoint board members with the best qualifications needed to contribute to the health of the company, but the quota system forces them to employ less-qualified individuals and reduces their income and property rights. Canada’s national income and prosperity thus suffer.

The use of quotas to eliminate systemic discrimination and reduce income inequality is wrong-headed because it rests on the false premise that discrimination leads to and is evidenced by differences in the proportion of minorities employed in specific occupations and the proportion they represent in the entire population. The basic fact is that no one can really know why such over- or under-representation of minority groups exist in any occupation.

The problem with using differences in the proportion of demographic groups in specific firms or industries as evidence of discrimination is glaringly obvious when we consider that blacks make up 13.4 percent of the U.S. population but are 81.1 percent of the players on professional basketball teams. Athletic abilities and personal preferences rather than discrimination explain the over-representation of blacks in this sport, just as they do in the rest of the economy.

Quotas are not a productive way to eliminate discrimination, so what can be done to discover where discrimination exists and how it can be dealt with? In his book “The Economics of Discrimination,” Nobel laureate economist Gary Becker has provided the answer: Encourage and enable employers to maximize profits by hiring the most qualified workers regardless of their gender or ethnic backgrounds. Employers who follow this rule increase their business at the expense of those who do not and ultimately go under. Basketball teams that discriminate against hiring blacks no longer exist.

This model for the creation of a world without discrimination has room for government policies. Public education about the evils of discrimination is one such policy, but more important is the elimination of obstacles to the efficient operation of labour markets created by unions and government regulations, which in the past prevented women from becoming firefighters, soldiers, medical doctors, and workers in many types of occupations.

The removal of such restrictions will take time, as will the growth in the number of employers who realize that discrimination is not in their interest. But relying on markets will cost less and will be more fair than relying on quotas to eliminate systemic or any other type of discrimination.

Herbert G. Grubel is professor of economics (emeritus) at Simon Fraser University and a senior fellow at the Fraser Institute in Vancouver.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
Herbert G. Grubel is professor of economics (emeritus) at Simon Fraser University and a senior fellow at the Fraser Institute in Vancouver.
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