The Economics of
Martin Luther King, Jr.

We're supposed to venerate Martin Luther King, Jr., but that's not easy for a believer in economic liberty. Time and again, King called on us to "question the capitalistic economy" and "restructure America."

"You see, my friends," said King, "you begin to ask the questions, 'Who owns the oil?' You begin to ask the question, 'Who owns the iron ore?' You begin to ask the question, 'Why is it that people have to pay water bills in a world that is two-thirds water?

Privately owned oil and iron ore mean rational use, whereas government-owned resources, as in the U. S. S. R., mean chaos and poverty.

Although America's water systems – municipalized or regulated – are not exactly free enterprise in action, we have to pay for water for the same reason we have to pay for anything valuable. Fresh, clean water is scarce, and the price system ensures that it will not be squandered, while encouraging further production.

When government intervenes in the price system, as it does to sell water to agriculture at below- market rates, the result is waste, and shortages elsewhere.

When the Soviets invaded Afghanistan, they didn't collectivize agriculture, but they did collectivize agricultural water distribution. Within months, there was no water at all, as centuries-old private distribution channels silted up.

Only a capitalistic water system – with private property rights in water and freely adjusting prices – can ensure that there is enough water for all who want it, instead of allocation through non-price political battles with the most powerful pressure groups winning out.

King had no use for the price system, calling it "violence" responsible for blacks paying "higher consumer prices" than whites. "Do you know," he asked, "that a can of beans almost always costs a few cents more in grocery chain stores located in the Negro ghetto than in a store of that same chain located in the upper-middle-class suburbs?"

This led, said King, to black "disillusionment and bitterness. " But why, unless – as a recent New York Times poll tells us is more and more the case – blacks believe their plight is the result of a white conspiracy?

In a free market, prices are set by consumers when they buy, or don't buy, a particular product. If storeowners set prices too high, even by a few cents, competitors will make a profit by undercutting them.

The ghetto has far too little of the "cutthroat competition" King so often denounced. Non-black businessmen can be greeted with hostility; rampant street crime is a barrier to entry; widespread welfare blunts the desire to work while encouraging a short-term orientation; and government holds sway to a degree found elsewhere in this country only on Indian reservations, which are also poverty stricken.

King, however, believed in government sway, calling capitalism a system "permitting necessities to be taken from the many to give luxuries to the few. " The "profit motive" has "encouraged smallhearted men to become cold and conscienceless."

What was his alternative? The loss motive?

The profit motive means that resources are not systematically wasted, as under the political motive, and that innovation, entrepreneurship, and hard work are rewarded. Surely this, rather than the reverse as under socialism, is the moral system.

King claimed that the "good and just society is neither the thesis of capitalism nor the antithesis of communism, but a socially conscious democracy which reconciles the truths of individualism and collectivism."

In fact, the good society, upon whose back big government sits like a succubus, is composed of cooperative endeavors from the corporation to the church, from the family to the university. Bureaucratic intrusion weakens and destroys these endeavors, whether it's justified in the name of "socially conscious democracy" or any other high-sounding but low-acting construct.

King favored a "higher synthesis" – part individualism, part collectivism – as in Sweden. But one of the least-known aspects of the anti-socialist revolution has been its effect on Sweden, which has been getting poorer and poorer thanks to decades of redistributionism. Today, the people are demanding lower taxes and less government, much to the consternation of the Swedish establishment. As Ludwig von Mises demonstrated, the mixed economy is inherently unstable. It must tend towards either statism or the free market; there is no economically rational way of reconciling the two.

"When machines and computers, profit motives and property rights are considered more important than people, the giant triplets of racism, materialism, and militarism are incapable of being conquered," said King.

Aside from the fact that "The Giant Triplets" sounds like a companion film to "Attack of the Killer Tomatoes," there are enough false dichotomies in that one sentence for a Congressman. Suffice it to say that it is people who build and use machines and computers, which have much im- proved people's lives; that property rights are the most important people's right, with their absence leading to economic fiasco; and that there's nothing wrong with people desiring material improvements in their lives.

Naturally King disliked that engine of capitalism, the entrepreneur, whom he called responsible for "thousands of working people displaced from their jobs with reduced incomes as a result of automation while the profits of the employers remain intact." Automation, he said, is "skimming off unskilled labor from the industrial force. The displaced are flowing into proliferating service occupations."

The "individual capitalists of the West" also invest "huge sums of money in Asia, Africa, and South America, only to take the profits out with no concern for the social betterment of the countries. "

But King was advancing a left-wing myth. Foreign investment in the third world has put bread on the tables of millions impoverished by socialist governments. That is real "social betterment." And automation, i.e., improved technology, raises standards of living.

Electric clothes washers save homemakers much hard labor, and "cost" the jobs of laundry workers, but so what? Homemakers, and society as a whole, are much better off. And so are the laundry workers, who can get better jobs in a more prosperous society.

If automation were evil, we could ban all motorized transportation between New York and Los Angeles, and "create jobs" for drivers of horsedrawn wagons. Does anyone think we'd be better off?

Nor are service jobs less desirable than industrial, although socialists have always been partial to large industrial entities which seem easier to centrally plan, and to unionize.

"The Negroes pressed into these services need union protection, and the union movement needs their membership to maintain its relative strength in the whole society," said King. Yet unions are organized rip-offs, using their priveleges to enrich themselves at the expense of non-union workers and businessmen. By helping bring about a centralized labor market (through minimum wages and closed shops), unions have deliberately injured unskilled workers, many of them black, by shutting them out of the market.

But King had far more in mind than unionism: "If a city has a 30% Negro population, then it is logical to assume that Negroes should have at least 30% of the jobs in any particular company, and jobs in all categories rather than only in menial areas."

To bring this about, he wanted "preferential treatment" - a racial test for hiring and firing, promotion and transfer, and all other personnel decisions. How this squared with his dream of a society based on "the content of a person's character" rather than the "color of their skin," he didn't say.

Whether people were working or not, said King, there should be a government-guaranteed "minimum – and livable – income for every American family" as part of a "radical reconstruction of society itself " Nothing else would cure America's "interrelated flaws of racism, poverty, militarism, and materialism."

What good can come of taking the earnings of some families by force, skimming them in D.C., and bestowing the remainder on other families? As we have seen all too clearly, welfare makes the economy less efficient, the recipients less independent, the taxed less productive, and the government bigger.

King also advocated massive federal compensation for blacks because "for two centuries the Negro was enslaved," although "all of America's wealth today could not adequately compensate its Negroes for his centuries of exploitation and humiliation."

He didn't mention that the people who would be getting the money were not the victims and the people paying it were not the perpetrators.

Race-based public policies create social conflict, and King knew it. But his answer was more government: a "federal program of public works, retraining, and jobs for all."

The received wisdom on the Right these days is that King would have rejected the excesses of the modern civil rights movement. But that clearly isn't the case. Indeed, David Garrow in his Pulitzer Prize-winning biography says that in private gatherings King endorsed "democratic socialism," while making "it clear to close friends that economically speaking he considered himself what he termed a Marxist."

Note: All King quotes are from A Testament of Hope: The Essential Writings of Martin Luther King, Jr., edited by J.M. Washington [San Francisco: Harper and Row, 1986], in particular his "A Time for Hope" (1968), "Where Do We Go From Here?" (1967), and Playboy interview (1968).