Mar 19, 2021 | OPINION | By Andrew Hoffman | Illustration by Patil Khakhamian

One of the most influential events of 2020 was the death of George Floyd at the hands of Derek Chauvin, J. Alexander Kueng, Thomas Lane, and Tou Thao. Sparking nationwide protests, these events served as a stark reminder for the majority of Americans that the implicit racism that has always been intertwined with American society, and by extension its government, is very much alive.

With that being said, despite several months of protests and several criminal justice reform bills being passed (at a painstakingly slow pace with the issue being far from solved), the general public has seemed to once again have set the systemic racism issue onto the backburner.

Perhaps with the start of jury selection for the primary killer of Mr. Floyd, Derek Chauvin, however, the issue of American systemic racism will once again be recognized by the American government as the major threat to the American public that it is.

Unfortunately, with headlines such as “Derek Chauvin murder trial delayed for decision on extra charge” (The Guardian), and “Derek Chauvin Trial May Be Delayed Over Court Ruling on Third-Degree Murder” (The New York Times), it does not appear that the American criminal justice system has recognized the severity of systemic racism.

So why has this happened? It is almost universally agreed upon that racism is morally detestable, so why is our government so slow to act? Well, I, and probably many other fellow cynics, would argue that in our current society, money speaks louder than morals.

This assumption can be supported by the numerous cases of markets and governments becoming hopelessly intertwined. The post-2008 $700 billion bailouts of the banks are a perfect example of this.

While generally agreed upon (in moral terms) that the massive banks that caused the crisis should not be bailed out at the expense of the lower and middle classes, the size and power of these banks made it so that unless one wanted to see an economic collapse comparable to the Great Depression, a bailout was necessary to maintain relative economic well-being.

While the nature of the post-2008 world is an entire essay in it of itself, I hope that my brief examination of this topic has illustrated the relevance of my earlier assertion that in our current society money overpowers ideals.

This assertion is necessary for understanding the relevance of the rest of this article, as from this point onward I wish to address the issue of systemic racism. I wish to address it, not from a moral standpoint but rather from an economic standpoint.

Using basic economic theory (and several empirical cases to highlight my hypothesis), I hope to illustrate that a continued government failure to address the systemic racism issue is a real threat in the economic terms that our current political-economic system seems to value.

The idea that systemic racism is an economic threat is hardly a new concept to contemporary American politics. With the aforementioned Black Lives Matter protests in mind, the economic effects of structural racism against Black Americans are easy to find and distinct. A 2013 United States Department of Housing and Urban Development study concluded that prospective Black homeowners are shown 17.7% fewer homes compared to comparable white prospective homeowners.

Similarly, in 2011, Bank of America settled a $335 million lawsuit after acquiring Countrywide, amid accusations of charging 200,000 Black and Hispanic borrowers higher fees on the basis of race. Yet, while all these issues are incredibly problematic, they are also reflective a specific type of economic racism: supplier-based discrimination.

Supplier-based discrimination, as the name suggests, is discrimination on the part of the seller. While it is definitely problematic, according to market-based economic theory, supplier discrimination tends to sort itself out because charging a certain minority group more or hiring that group less invites competing firms to create specific policies that cater to the certain group and reap more of a profit.

In simplest terms, the market “sorts” out supplier-based discrimination in the long run. Now while that theory only applies if we presuppose that all actors in the market are solely profit-driven, (and aren’t influenced by inherent emotional factors like racism), there does appear to be some level of merit to this theory, as a study by Devah Pager provided some empirical support to this claim.

The center for American Progress, however, provided data that suggests that even near full employment, Black unemployment remains 2 to 1, when compared to white unemployment. Nevertheless, due to the ongoing debate over the “effects” of supplier-based discrimination, I believe that the supply side of the racial economic argument is a dead end.

Thus, I want to take another approach in spurring those with power to take decisive action. That approach is the other form of discrimination: consumer-based discrimination. As the name suggests, this is preference-based discrimination done by the consumer, and unlike its supply side counterpart, market economic theory doesn’t argue that the problem will solve itself. The logic is relatively easy to follow: if consumers don’t want to see or interact with a certain minority group then it is in each supplier’s best interest to enforce discriminatory policies. So, is this an issue? Is general American society really that racist?

While it is incredibly difficult to quantify a given society as more or less racist, I would argue the metrics we do have suggest that consumer-based racism can be a real problem. Harvard Implicit Bias tests suggest that about 68% of its correspondents have some level of subconscious preference for white-presenting individuals over Black-presenting individuals.

When we consider that notion with other general observations such as white supremacists hijacking Black Lives Matter protests and the continued existence of “sundown towns,” the conclusion that large sectors of our population might have an unconscious bias against Black Americans seems less and less outlandish. Now obviously this is a moral crisis, but if you remember at the beginning of this piece, I promised I would highlight how this is an economic crisis.

When minority inventors or future entrepreneurs face a heightened aberrance from consumers, they are naturally less likely to succeed and/or feel confident in their future economic prospects. Furthermore, when we consider that Black Americans face heightened resistance from our criminal justice system (according to a 2017 U.S. Sentencing Commission Study) it is easy to imagine that faith in these institutions begins to falter.

When faith in a society’s abilities to enforce and protect property rights begins to falter for a minority group, economic development suffers a hit as well. In more clear-cut terms, if you think you will become a target for racism by opening a business, or you do not trust the government to settle matters if your store is robbed, why would you ever open a business in the first place?

More importantly, the implications of this concept have devastating consequences. Lisa Cook, a researcher who studied the effects of racism on Black patent holders between 1870 and 1940, found that the wealth that America lost due to Black inventors being discouraged to innovate due to racism is equivalent to about a medium-sized European nation at the time. In other words, the American government’s general apathy to addressing societal racism, and reforming and increasing trust in our criminal justice system, heavily limits our GDP growth rates.

Now the conclusion I reached throughout this article might seem initially bland. I essentially concluded that racism is bad, a take that really isn’t that controversial. So why even take the time (and the length) to spell this argument out, and how exactly is it relevant to the Derek Chauvin trial?

To answer those questions I want to once again point to the concepts I laid out earlier. While it may appear cynical, we live in a world where money speaks louder than ideals. So rather it is not the “what” that I concluded but the “how” that I concluded that matters.

I truly believe that an argument that outlines why systemic racism has real tangible detrimental effects, not only for Black Americans but also for the rich and powerful, is thousands of times more effective than a simplistic moral “ought” claim. It quite literally sets a tangible basis for reparations and restoring what was stolen.

So, for the upcoming Derek Chauvin trial America is faced with a choice: will it continue to shoot itself in its own foot and turn its back on its citizens? Or will it finally take the first steps in restoring faith in a broken criminal justice system and repair the economic ruin that it has left far too long in its own wake?

With cases such as Laquan McDonald’s and Breonna Taylor’s in mind, I cannot say that I am hopeful, but I know for certain that this April I will be watching and demanding a long-overdue step in the right direction.

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