American Express has embarked on "racial justice" initiatives including woke employee training programs. Sadly, the remedies advocated in these sessions ignore basic principles of economics and equality. If AmEx truly embraced them, it would upend its business model and ultimately collapse.
The Manhattan Institute’s Christopher Rufo obtained whistleblower documents about the trainings and has viewed statements made at the company's anti-racism events. His conclusion : AmEx employees and executives are being asked to disregard their real-world experience and virtually everything they’ve been taught about economics. They're also being asked to ignore equal opportunity laws. Instead, employees are urged to base their business actions on a warped definition of "justice."
Rufo describes the remarks of one of the company’s invited speakers, professor Khalil Muhammad, at a recent "anti-racism" event:
"After establishing the company’s participation in racist oppression, Muhammad then encouraged AmEx executives to begin 'the deep redistributive and reparative work…' Muhammad argues further that the company should reduce credit standards for black customers and sacrifice profits in the interest of race-based reparation."
Presumably, AmEx has sought to provide a service that makes credit available on a colorblind basis while also generating revenues to pay its workers and give shareholders a reasonable return on their investment.
The problem for AmEx (and other credit card companies) is that its actions actually do produce "racially unjust" outcomes. For example, only 72% of black people hold credit cards, compared to 87% of white people.
Moreover, AmEx is almost certainly charging black people higher prices for the exact same service. The company’s annual percentage rate, or APR, ranges from 13.99% to 29.99%, and lower credit scores translate into higher interest rates. The average credit score among white people is 725, compared to 612 among black people. If two cardholders each charge a $5,000 car repair to a credit card and the white cardholder with a better credit score pays a 15% APR while the black cardholder pays 20%, the latter winds up paying $250 more in interest.
Is this done with a racist intent? Almost certainly not. But the result definitely has a "disparate impact." If AmEx follows Muhammad’s advice, it wouldn’t base prices on individuals' creditworthiness but rather on a subjectively assigned level of "privilege" or "oppression" based on factors such as race, sex, and gender identity.
Set aside the fact that what Muhammad proposes is almost certainly illegal under the Equal Credit Opportunity Act, which prohibits creditors from regarding race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract) when allocating credit.
The problem with putting "social justice" above profits is that it would quickly cause AmEx to go out of business. The only customers left would be those that cost the company money. Ultimately, not caring about your bottom line means not caring about your existence or the ultimate welfare of your employees or the customers and businesses you serve.
Proponents of critical race theory and "anti-racism" claim their teachings will create a more "just" society, but how does manufactured oppression, by tearing down facets of society that contain unequal outcomes, leave anyone better off?
This is where many racial justice advocates have failed to see past the immediate consequences of their calls to action. The good news is that the free market isn’t a fan of discrimination, so if companies such as AmEx choose to pursue discriminatory practices, other companies come out ahead.
This piece originally appeared in the Washington Examiner