Alfredo Ortiz has a message for all of the progressive politicians and activists working to close the economic gap between white and non-white Americans: Please stop.
In his new book The Real Race Revolutionaries (December 2022), Ortiz, a long-time advocate for small business owners and their employees in the US, argues that the government policies that are ostensibly intended to equalize economic outcomes between the white majority and minority groups in America have actually had the opposite effect. Given the growth of government regulation and spending and the relative lack of progress over the last several decades, it’s hard to argue with him.
Ortiz’s argument rests on one especially important insight that will be familiar to fans of market economics but remains stubbornly resistant to being understood by the general public. The laws and regulations that have long been promoted as disciplining businesses and protecting consumers usually end up protecting large established companies and restricting market access to new entrants and outsiders. Those established players are, of course, disproportionately the straight white males we’ve been warned about ( i.e., the ones who control the majority of enterprises and the largest share of wealth in America already). Greater government intervention into the productive sector of the economy therefore ends up actually harming minority workers and entrepreneurs on net, almost by definition.
Every new regulation and tax hike is subtracting something from the bottom line of existing businesses and making it harder for new start-ups to come into existence. As I wrote in 2021 regarding new environmental, social, and governance (ESG) rules, stricter standards and more expensive requirements privilege incumbents over new entrants, larger firms over smaller firms, and firms that already have larger legal, regulatory compliance, and lobbying departments. Because current regulatory frameworks are already biased in favor of larger firms, heightened burdens will only reinforce that effect. As JPMorgan Chase CEO Jamie Dimon noted in a 2013 interview, the regulatory requirements of the 2008 Dodd-Frank Act – sold to the American public as an anti-Wall Street accountability measure – simply helped him build a “bigger moat” for Morgan against its smaller competitors.
More regulation, higher spending, bigger deficits, and higher taxes aren’t the first things most people think of as obstacles to minority success, but they absolutely create economic conditions that disproportionately harm people climbing their way up from the bottom of the socioeconomic ladder. Inflation, which has been at record levels in recent times, will easily kill a low-margin restaurant or store that’s just trying to get off the ground. Sound money and stable economic conditions matter more to small business owners with less capital than to large enterprises with more access to financing options and thus room to maneuver in the long term. My Competitive Enterprise Institute colleagues Iain Murray and Ryan Young made this point back in 2016 when they were countering the then-popular work of French economist Thomas Piketty. They pointed out in their paper “The Rising Tide: Answering the Right Questions in the Inequality Debate” that sound monetary policy would do more to help working Americans than most of the interventionist policies championed by progressive critics of capitalism.
Read the full review on Fee.org.