Feminism and Free Markets: Friends or Foes?

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Feminism and Free Markets: Friends or Foes?

March 29, 1993 18 min read Download Report
Executive Vice President
Kim R. Holmes is the Executive Vice President at The Heritage Foundation.

(Archived document, may contain errors)


Feminism and Free Markets: Friends or Foes?

By Deborah Walker The term feminism often conjures up images of angry women bashing men, criticizing capital- ism, and turning to the state for answers. Indeed, as I researched this topic I found that capitalism was often attacked not only by radical Marx i st feminists, but also by the more mainstream feminists like Gloria Steinemi -Susan Faludii.-and-Naomi Wolf-, who-have-found- themselves on best-seller lists. As an economist, my study of the -market has led me to a deep.apprepiati.Qn of economic freedom. To me markets and prices are beautiful and wonderful. To understand how free markets work is to marvel at their ability to create wealth for a society that allows people like me to sit and think about such matters as feminism. So although my main interest in feminism is economic in nature, it does not stop there. I am not only an economist, I am a woman. There is a moral dimension to feminism that cannot be ignored. In his recent book Forbidden Grounds: The Case Against Employment Discrimination Laws, Rich a rd Epstein writes, "In my judgment, feminism is the single most powerful social movement of our time, one that addresses every aspect of human and social life." The feminist movement ques- tions not only our economic order, but also the legal order upon w h ich the economic order rests. And it also questions our moral order, upon which the legal order rests or should rest, in my opin- ion. In essence, feminism questions some of the basic cultural norms by which we live our lives. Is this questioning wrong? N o , not necessarily. However, I disagree with how many people ask the questions. Moreover, I will argue that they give the wrong answers which, in turn, produce undesir- able social and economic consequences. - Politically Correct? Not! Let me begin by tell i ng you what I am not. First and foremost, I am not a politically correct academic feminist. What does this mean? For those of you who are not in the academy, it means that I do not believe capitalism is bad for women. I do not believe men have de- liberat e ly designed every institution in history to enable men to dominate women. And I do not be- lieve that there is only one research agenda for feminists. Most academic feminists today will not listen to alternative views of feminism. Ask, for example, Camill e Paglia or Christina Sommers about feminist reactions to their alternative views. Most academic feminists today are anti-capitalist statists. They are inconsistent, elitist, and, in my opinion, very anti-woman. They will say, for example, that men have de l iberately designed insti- tutions (capitalism for one) to dominate women. To quote one of the leading theorists in feminist legal theory, Catherine MacKinnon, "Here, on the first day that matters, dominance was achieved, probably by force. By the second d a y, division along the same lines had to be relatively firmly in place. On the third day, if not sooner, differences were demarcated, together with social systems to exaggerate them in perception and in fact, because the systematically differential deliver y of bene- fits and deprivations required making no mistake about who was who." MacKinnon is saying that most of our institutions-private property rights, marriage, and ex- change, for instance-were deliberately and consciously designed by men and that wom en through- out history have been passive agents. I believe this is insulting to women and gives undeserved credit to men. Genuine institutions are not deliberately designed by anyone; they evolve spontane-

DeborahWalker is a Bradley Resident Scholar at The Heritage Foundation. She spoke at Ile Heritage Foundation on November 19, 1992. ISSN 0272-1155.01993 by 'Me Heritage Foundation.

ously out of the social interactions of men and women. To view free trade or market exchange, which is capitalism, as a del iberately designed method of domination is to be ignorant of why trade occurs and why private property rights emerge in civilization. Second, when the great majority of women say that academic feminists do not speak for them, feminists reply that women do not know what they really want. Only the academic elite know. This argument suggests that women have been duped to believe they want what they do not want. Femi- nists typically fall back on this argument time and again. How insulting to women! How is it t hat men are so clever as to have'brainwashed all of us? Furthermore, how is it that the academic elite has escaped brainwashing? The -answer is -usually @khrough educatiomU.1-have three graduate de- grees. Following their argument, I should be entitled to tell every woman in this room what she re- ally wants! No Conservative. What else am I not? I am not a conservative. Let me explain how I use the term "conservative." I am not a conservative for the same reasons Friedrich Hayek gave in his essay, "Why I a m Not a Conservative." Professor Hayek explained that a true classical liberal is not afraid of the changes that personal and economic liberty brings, even when he or she is not sure what the changes will be. I think many conservatives have made the mistak e of the academic feminists. They have, at times, lumped all women into a group. They have assumed all women want the same thing or, worse, think all women belong in a particular place! I do not think we should try to guess how many women would work inside the home if they could freely choose to do so. Just as it is wrong to assume there should be a certain number of female CEO's, it is as wrong to assume there should be a certain num- ber of homemakers. Feminism and Freedom. There are natural differences b e tween men and women and they mani- fest themselves in different ways. But I would argue that capitalism is responsible for technological advances which have changed the economic order from one in which physical strength and stamina are necessary for the p r oduction of goods to one in which they are no longer prerequisites for finan- cial success. Women can now enter fields they could not enter earlier-remember, this is because capitalism has made possible technological progress. As a result, I am not afraid of how cultural norms may change in a free society as women make non-conventional choices. I am as opposed to social planning to preserve particular cultural norms as I am to economic planning. Both suffer from the same fallacy: the belief that there is- a person or group able to know the subjective values and de- sires of others and the individual circumstances of their lives. I think free markets and a fire society are compatible with feminism. Let me define feminism and the principles to which I subscri b e. I believe women have been treated as second class citizens, for lack of a better phrase, in one form or another throughout history. In the United States this has mani- fested itself in such laws as those which did not allow women to own property, to su e , to enter into contracts, to enter certain occupations, or to vote. Women have been governed-and in some cases still are governed-according to cultural norms which tell them that only certain types of behavior are appropriate. For example, what I am doin g now, speaking in a public place to a mixed audience of men and women, was considered inappropriate 150 years ago. In essence, feminism as I under- stand it asks for equality under the law, but it also asks that women command the same respect as complete h uman beings as men. Free markets not only support but promote this brand of feminism. To make my position clearer I want to quote Ludwig von Nfises. This is from his book Socialism: "So far as Feminism seeks to adjust the legal position of woman to that o f man, so far as it seeks to offer her legal and economic freedom to develop and act in accordance with her inclinations, de- sires, and economic circumstances, so far it is nothing more than a branch of the great liberal move- ment which advocates peacefu l and free evolution."



Peaceful and fire evolution. I cannot say it any better than that. Professor Mises describes how man is dominant over woman in violent societies and in violent times. He explains that this domina- tion breaks down in a free soc iety, in the absence of violence, and that it is not in the interest of men to dominate women, even within the household. Societies that are based on the premises of social- ism, on violence, on the premise that might makes right, or on the premise of equ a lity of outcome will not be societies conducive to feminism. Feminism and Statism. Unfortunately, what most feminists call for today are socialist, statist pol- icies. These policies include affirma'tive'ac'tion legislation, government-supported child car e , man- dated employment benefits- such as-fimily lei@e;-and,-worst-of all-i comparable pay for comparable worth. These policies undermine the workings of free markets. But do these policies work? What are they designed to do? These policies are supposed t o de- crease discrimination in hiring and salary decisions by employers. They are supposed to increase the ease by which working mothers and fathers can enter the workforce by turning over the responsibil- ity of raising children to the state, or by forcin g employers to take on that responsibility and, in so doing, hasten cultural change. In short, the principles of a free society, or what Professor Hayek terms its general rules, have been betrayed, and expediency has become the order of the day. These spec i fic commands, the policies I have mentioned, undermine and contradict the general rules of a fire society in several ways. They take day-to-day decision-making from individual hands and put it in the hands of legislators. They destroy freedom of contract a nd undermine private property rights. What are the consequences? Do these specific commands accomplish what is intended? Do they de- crease discrimination? I argue that they do not. Actually, they do just the opposite. Let me explain. Susan Faludi Is Righ t . There is a backlash against women in our society. But it was not created by the press as Faludi claims. The backlash stems from the fact that employers do not like to be told who they can and cannot hire, and men do not like to be overlooked foriobs or p romotions for which they are qualified simply because they are men. Unfortunately, this backlash (or increase in discrimination) is directed toward women. It should be directed instead toward the real cause of dis- crimination-the state. Discrimination in c reases when government mandates, e.g., child care or family leave policies, in- crease the costs of hiring women over men. True, there are individual women who have jobs they would not otherwise have because of these specific commands. But that does not m e an discrimina- tion has decreased or that we are better off as a society. On the contrary-, many people are out of a job or are underemployed because of these specific commands. Undermining the general rules of a free economy decreases the efficiency of t h e economy. Jobs are created when resources are put to productive or more productive uses. This can only come about if resources, including human resources, are moved in directions that entrepreneurs freely choose. Entrepreneurs have their pocketbooks on t h e line and are closest to the problems at hand. They do not always make the right decisions, but even their failures provide vital information to future entre- preneurs, and certainly no government agency can do a better job. My point is that specific com - mands hinder the entrepreneurial process. - Resources are used less productively, and new jobs are not created. Unfortunately, no one can point to a specific unemployed person and say he or she is out of a job because of affirmative action legislation or family leave legislation. But any good econ- omist can explain the relation of cause and effect. Br6king the Rules. OK, you may say, but at least these specific commands have created social and cultural change. Oh, yes, change which has increased tension b etween the sexes and which, to some degree, is partly responsible for the breakdown of marriages. Domestic violence is with us in full force. These are the kinds of consequences that arise from favoring expediency over principle, from breaking down the ge neral rules of a free society.



Women have made progress. However, that progress is the result of a cultural revolution that came about in spite of much governmeht legislation. It began when the early feminists demanded equality under the law. Once wo men were on the same playing field as men, were allowed to play by the same rules, we began to make progress. It is those general rules andfree markets that have created the kinds of cultural change favoring, in Professor Mises' words, "peaceful andfree e v olu- tion.99 So now we come to specifics. How do free markets break down discriminatory barriers for women and promot6'peaceful culturil change? The Cost of Discrimination. First, discrimination against women in labor markets will decrease when it is in a n entrepreneur's best interest. Discrimination on the basis of sex can be costly. Con- sider an instance of sexism in its purest form, i.e., as economist Thomas Sowell explains, "where people are treated differently because of group membership as such." If a firni decides that it will only hire men, for example, the firni must spend more time searching for qualified applicants who also must be men. The added search for men can be very costly, especially if there are very few qual- ified people in the releva n t labor market. The discriminating firni can then face additional costs. In order to attract the few qualified persons to the firm who are men, it must pay them relatively higher wages. If other firms do not discriminaie on the basis of sex, their labor p o ols are larger. They will not have to offer such high wages in order to attract qualified persons to their firms. Consequently, the discriminating employer faces higher costs in two ways: through longer and more extensive searches, the costs of which also include lost productivity, and through effectively decreasing the available (i.e., acceptable) labor supply, driving up the wages that the employer must pay. Since firms only survive in markets if they make monetary profits, discriminating firms with high e r costs will be at a competitive disadvantage and will have either to stop the discriminating be- havior to remain competitive or lose profitability and perhaps even close their doors. In this way, competition in markets can, at times, decrease pure discr i mination. However, the less competitive a market is, the more likely a discriminating employer will be able to bear the costs of discrimination. For instance, in industries where there are legal restrictions to entry or in government-operated firms and no n profit organizations, discrimination is more likely to persist. Nonprofit or government- operated firms are not subject to competitive forces in the sense that they do not have to make a profit to survive. In essence, in many cases they can afford to disc r iminate when firms faced with more productive competitors cannot. Third Party Discrimination. In some cases, third parties can be the real cause of employer dis- crimination. For example, customers or existing employees can insist that certain categories o f po- tential employee be eliminated from consideration. In some cases, it can be economically desirable to discriminate. However, the market in some instances can also diminish third party discrimination. Customer discrimination, for example, can be redu c ed if customers do not have direct contact with all employees. Customers cannot push their preferences on an entire firm without assuming consid- erable costs. When one buys a loaf of bread, one does not usually ask the cashier if a woman or man baked it. Discrimination Perceived As Cost-Reducing. Turn now to a case where an employer may dis- criminate on the basis of a group characteristic. This is sometimes known as statistical discrimina- tion. For example, women may be seen as less productive than men b ecause, on average, they have higher turnover rates and are more likely to take leaves of absence than are men. Therefore, an em- ployer may refuse to hire specific women because all women are perceived to be, on average, less productive. Whether the char acteristics are real or falsely perceived is important. As I have argued, if the per- ception regarding the group average is incorrect, competitive forces will tend to punish discriminat-



ing employers. However, if the perception is correct, women wh o fall in the upper range of the scale, i.e., those who are more productive than the average woman, will be punished because of their sex. Employers may decide to discriminate because the costs of screening individual women to discover if they fall in the upper range of the distribution will outweigh the estimated benefits of finding them. On the other hand, most employers would rather screen individual employees and hire the most productive in any group. In essence, then, employers face a knowledge proble m regarding which employees to hire. They must tradd"off 'the'dost of -scrieeitfling-Individdial'ei mipldydes against the cost of missing out on-hiring very-productive.-workers.-.T-his-iswhy firms-i-indeed market forces, have come up with different ways to screen 6mployees at lower costs. Employers use employment agen- cies, interviews, references, a variety of tests such as aptitude or skill level tests, and they look for brand names in the educational and vocational institutions which potential employees a ttended. All these devices decrease screening costs for employers and thereby increase the likelihood that poten- tial employees will be hired on the basis of their individual attributes rather than on the basis of their group membership. Employment Tests . Anything which increases the flow of information about individual employ- ees will lead to a decrease in employer discrimination based on group membership. To the extent that the flow of information is interrupted, employers' screening costs remain high a nd they resort to hiring on the basis of statistical averages. As a consequence, legislation that prohibits the use of employment tests or prohibits the asking of particular questions in employment interviews will actu- ally decrease the likelihood that i n dividual women can set themselves apart from the group and be hired on the basis of individual merit. As economists Thomas Sowell and Walter Williams have noted, the knowledge problem that em- ployers face can be a source of opportunity forfemale employer s . As women, they will sometimes have more knowledge about the true characteristics of individual women and will therefore be at an information advantage over other employers. Employment Contracts. Lastly, the employment contract itself is an important sou r ce of infor- mation for employers who are willing to hire from any group of employees, as long as they can in some way determine individual merit prior to employment. This can be especially important for women, who may be seen as less productive than men b ecause of their biological ability to give birth. Through individual contract terms a woman can assure an employer that she will not leave the job within a specific period of time, will not ask for an extended leave if she does choose to have a child, and so on. In other words, she can legally promise the employer that she will take full respon- sibility for her personal choices and will not expect the employer's costs to increase because of those choices. In this way, women who have chosen to make their m a rket career their top priority can signal that fact to employers and be judged on their individual merits. The freedom to make cre- ative, individualized employment contracts can be a very important source of information to em- ployers and it can thereby d ecrease discrimination. When I once explained this theory to a reporter, her reply was, "But doesn't this put a lot of re- sponsibility upon women?" And the answer is yes. If women want cultural change, they have to be the driving force behind it, they ha v e to: st6pluming to the state, and they have to stop trying to force men to change. Freedom calls for individual responsibility. I am in complete agreement with Camille Paglia here. As she says, "This is my belief, that feminism begins at home. It begins w ith every single woman drawing the line." Self-Correcting Discrimination. I do want to note that there are other ways discrimination can be overcome in free markets. When wages are free to vary as the market sees fit, discriminatory practices can be broke n down. If an employer is faced with hiring a highly skilled male employee or



a less skilled female employee, an employer can be induced to hire the less skilled woman if the dif- ference in the wage rates between the two workers justifies the difference in productivity. Two im- portant points must follow. First, if the @erception r egarding the sldll or productivity level is correct, then hiring the less skilled woman enables her to gain valuable experience and skills, increasing her market value and wage rate over time. Second, if the perception of productivity is incorrect, hiring a woman over an equally productive male at a relatively lower wage rate allows the woman to obtain the job and prove her productivity, thereby also allowing her to increase her wage over time-some- times almost immediately-upon.discovery.-that the-employe r -'s perception. was incorrect. Why Unwarranted Discrimination-Persists. -Although-the. arguments I have summarized demonstrate how competitive markets can decrease discrimination, there are several reasons why discrimination will persist in many cases. Fi r st, markets are not static and the information contained within them is dispersed and constantly changing. While employers attempt to hire the most produc- tive employees, their inability to obtain information on individual applicants may cause them to co n - tinue using statistical averages. Furthermore, because markets are dynamic and information is never perfect, markets are never perfectly competitive and monetary profits are never fully maximized. In fact, it is impossible for a firm to know if its prof i ts are maximized. In reality employers try to make enough monetary profit to satisfy themselves such that they will not move the firm's resources elsewhere. It may be the case that some employers are able to trade off monetary profit for personal satisfac t ion. In other words, because markets are not perfect, some discrimination may persist because employers would rather discriminate than make more money. As I have mentioned, government barriers to entry, protective tariffs, and the like are also import- an t reasons why discrimination remains in markets. These policies make markets less competitive, thereby allowing discriminatory behavior to persist. Desirable Discrimination. In some cases discrimination will persist because it can be profitable and desirab l e. For example, let's return to the case where current employees, not the employer, pre- fer working with men rather than women. The employer may find it profitable to accept these prefer- ences simply because it will decrease costs within the firm. When e mployees are diverse, the 66governing costs" of reaching a consensus regarding rules within the firm can be very high. On the other hand, when employees are similar, they are more likely to easily and efficiently agree to rules, both formal and informal, t hat govern the work environment. In some cases, women may prefer to work with other women because, for instance, being more sympathetic to short-term periods of ab- sence because of child care responsibili,ties, they are more likely to "cover" for their f e llow female employees. A firm must therefore weigh these governing costs against the potential benefits of hav- ing a more diverse workplace. For example, if a firm's customers are primarily women, the firm may want to hire women who have special knowledg e regarding how their products should be de- signed and marketed. Discrimination as Self-Selection. To minimize conflict, groups may have a tendency to self-se- lect. When the process of self-selection is unhindered, worker satisfaction will increase and, a s Rich- ard Epstein argues, the income of all workers may also increase. If, for instance, male chauvinists tefid to group together in particular firms, then the rest of the workforce will not have to deal with them. As a consequence, although job opening s in a particular firm may be reduced for any particu- lar group of women, all other job opportunities for women will increase. Because the chauvinists are drawn to each other, women will find less discrimination against them in all other firms in the labo r market. Markets and Families. Besides decreasing undesirable discrimination over time, there is a sec- ond way free markets produce positive change. As I have argued, free markets lead to real job cre-



ation and a strong economy in general. And a s trong economy translates into more choices, includ- ing the choice not to enter the workforce when support of the family requires only one working spouse. So, for those of you who think I have forgotten the women and men who do the most diffi- cult work i n the world-building a loving home and raising decent children-I have not. Free mar- kets are good for all women and men because they allow greater choice. This is what feminism is all about. Feminism should not only address choices in the workforce, it sh o uld address choices about lifestyles. In this way, free markets are good for men and children too. I am convinced that if left alone, the creative. forces.of-the.market-would-generate a-variety.of.positive responses enabling men and women to juggle career s and child-rearing. Markets and Culture. And finally, free markets create positive cultural change, change which takes place slowly and from inside the social system. Markets create change through the free choices and mutual give-and-take occurring betwee n men and women. Markets do not claim that there is one place for women and one place for men. Free cultural evolution asks for marginal changes from women and men, but it does not force change on anyone. Change occurs because insti- tutions-including the p olicies of business firms-and, most importantly, cultural norms reflect new choices made by men and women. We cannot go back to the 1950s, and 1, for one, do not want to. We have to move forward. We are in difficult times of cultural change, but the diffi c ulty has been made worse by the coercive hand of government. Above all, any cultural movement, feminism or otherwise, must be based upon principles: the principles of self-ownership, private property rights, and individual liberty. These principles alone will produce a social order where women are granted the respect they deserve, as entrepreneurs, as chief executive officers, as secretaries, as truck drivers, as economists, and as full-time homemakers and mothers.




Kim Holmes

Executive Vice President