23 Things They Don't Tell You About Capitalism

China, being the birthplace of Confucianism, had the confidence to take a more pragmatic approach in interpreting the classical doctrines and allowed people from merchant and artisanal classes to sit for the civil service examination. Korea – being more Confucian than Confucius – adamantly stuck to this doctrine and refused to hire talented people simply because they were born to the ‘wrong’ parents. It was only after our liberation from Japanese colonial rule (1910–45) that the traditional caste system was fully abolished and Korea became a country where birth does not set a ceiling to individual achievement (although the prejudice against artisans – engineers in modern terms – and merchants – business managers in modern terms – lingered on for another few decades until economic development made these attractive professions).

Obviously feudal Korea was not alone in refusing to give people equality of opportunity. European feudal societies operated with similar systems, and in India the caste system still operates, albeit informally. Nor was it only along the caste lines that people were refused equality of opportunity. Until the Second World War, most societies refused to let women be elected to public office; in fact they were refused political citizenship altogether and not even allowed to vote. Until recently, many countries used to restrict people’s access to education and jobs along racial lines. In the late nineteenth and the early twentieth centuries, the USA prohibited the immigration of ‘undesirable’ races, especially Asians. South Africa, during the apartheid regime, had separate universities for whites and for the rest (the ‘coloureds’ and the blacks), which were very poorly funded.

So it has not been long since the majority of the world emerged from a situation where people were banned from self-advancement due to their race, gender or caste. Equality of opportunity is something to be highly cherished.

Markets liberate?

Many of the formal rules restricting equality of opportunity have been abolished in the last few generations. This was in large part because of political struggles by the discriminated against – such as the Chartist demand for universal (male) suffrage in Britain in the mid nineteenth century, the Civil Rights movement by blacks in the US in the 1960s, the anti-apartheid struggle in South Africa in the second half of the twentieth century and the fight by low caste people in India today. Without these and countless other campaigns by women, oppressed races and lower caste people, we would still be living in a world where restricting people’s rights according to ‘birth lottery’ would be considered natural.

In this struggle against inequality of opportunity, the market has been a great help. When only efficiency ensures survival, free-market economists point out, there is no room for racial or political prejudices to creep into market transactions. Milton Friedman put it succinctly in his Capitalism and Freedom: ‘No one who buys bread knows whether the wheat from which it was made was grown by a Communist or a Republican … by a Negro or a white.’ Therefore, Friedman argued, the market will eventually drive racism out, or at least reduce it significantly, because those racist employers insisting on employing only white people would be driven out by more open-minded ones who hire the best available talents, regardless of race.

This point is powerfully illustrated by the fact that even the notoriously racist apartheid regime in South Africa had to designate the Japanese ‘honorary whites’. There was no way the Japanese executives running the local Toyota and Nissan factories could go and live in townships like Soweto, where non-whites were forced to live under apartheid law. Therefore, the white-supremacist South Africans had to swallow their pride and pretend that the Japanese were whites, if they wanted to drive around in Japanese cars. That is the power of the market.

The power of the market as a ‘leveller’ is more widespread than we think. As the British writer Alan Bennett’s play-turned-movie, History Boys, so poignantly shows, students from disadvantaged groups tend to lack intellectual and social confidence and are thus disadvantaged in getting into elite universities – and by extension, better-paying jobs. Obviously, universities do not have to respond to market pressures as quickly as firms have to. However, if some university consistently discriminated against ethnic minorities or working-class kids and took in only people from the ‘right’ backgrounds despite their inferior quality, potential employers would come to prefer the graduates from non-racist universities. The narrow-minded university, if it is to recruit the best possible students, would have to abandon its prejudices sooner or later.