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25 April 2011

Should Businesses Have the Right to Discriminate against Homosexuals?
by Sean Gabb

»Libertarian Theory - General

On Wednesday the 13th April 2011, two men, James Bull and Jonathan Williams, kissed each other in the John Snow public house in Soho. Apparently, they were then asked to leave by a member of staff who called their act "obscene." This alleged incident led to the usual sort of outrage. On the Friday following, several hundred homosexuals gathered in the street outside the pub to kiss each other. The pub closed early. Though its landlord has not so far made any comment to the media, the Metropolitan Police are now on the prowl, to see if he or his staff can be done under the "hate crime" laws.

When I read this story last week, I simply sniffed and moved on. Not long ago, every sentence of the newspaper report would have had people scratching their heads. But modern England is a strange place. The only oddity now is that anyone running a pub in Soho could even notice if two men were kissing, let alone think it good for business to object. I have been drawn back to the story, though, by a news release from Peter Tatchell. Among much else, he declares that "Businesses that provide a service to the public have a duty under the law to not discriminate." While this may be an accurate statement of the law as it stands, removing the words "under the law" makes it a plain statement of what Peter believes. He believes this, and so do many other people. Indeed, among the media and political classes in modern England, it is an almost a self-evident proposition that, if you offer goods or services for sale, you have at least a moral obligation to do business with anyone who has money to spend. Refuse to do business with someone because you dislike the group of which he is a member, and expect to be vilified, where not taken to court.

Now, if it is frequently repeated by those in authority, a proposition may cease to be disputed, or even examined. It does not become true. And this proposition is false. No one has a moral obligation to do business with those whom he dislikes. Any law that compels him to do such business is not a victory for human rights, but a violation of rights. I have much respect for Peter Tatchell. He is more excitable than most of my friends. On the other hand, he has, over the past thirty years, played an honourable and perhaps decisive role in striking down the various legal persecutions of homosexuals. He also takes a straightforward line on freedom of speech that is nowadays rare among socialists. But he is, in his view of anti-discrimination laws, both wrong and even dangerously wrong. I hope that he will regard what I have to say on this issue as entirely friendly criticism.

Personal and Economic Freedom: A False Dichotomy

I read John Stuart Mill's essay On Liberty when I was seventeen, and was immediately smitten by it. Reading the essay marks my final transition from liberal conservative to libertarian. Even at the time, though, I found my eyes opening at this claim, in Chapter V:

...[T]rade is a social act. Whoever undertakes to sell any description of goods to the public, does what affects the interest of other persons, and of society in general; and thus his conduct, in principle, comes within the jurisdiction of society.... [T]he so-called doctrine of Free Trade... rests on grounds different from, though equally solid with, the principle of individual liberty asserted in this Essay.

Mill is wrong here. Freedom is the right to do whatever we please with our own lives and property. The right is limited only by an obligation to refrain from force or fraud in dealing with others. The introduction of money into one man's association with another makes no difference in itself. For example, a man may want to sleep only with other men. That is his business. He may choose to hold a sex party in his house, and to invite only men. That also is his business. It is his body, to with as he pleases. It is his property, to do with as he pleases - so long, of course, as he does not make a nuisance of himself, as reasonably conceived, to his neighbours. To make a law compelling him to sleep with women as well is make him into a slave. To make a law compelling him to admit women to his party, and men who want to sleep with women, is also to make him into a slave. He has bought or rented his house with his earnings, and telling him how to spend his earnings is as much a form of slavery and telling him what to do directly with his body. What makes the case any different if he offers himself to men as a prostitute, or charges for admission to his sex parties? Why should he be forced by an anti-discrimination law to sell his body to some woman who may desire him - or to take admission money from heterosexuals?

The right of one man to sleep with another is nothing more than an instance of the right to freedom of association. Freedom of association also includes freedom of trade. Denying any one instance of this freedom is to set a precedent for others to be denied. Regardless of payment, consenting adults should be free to associate as they please. Moreover, freedom of association necessarily involves the right not to associate. No one has a right to be included. No one has a right not to be shunned. Though they currently favour sexual and racial minorities, anti-discrimination laws in business matters are an attack on the right of these minorities to be left alone.

It may be very hurtful to see notices outside hotels that say things like "Wogs and queers not welcome." It may be very hurtful to be told "We don't employ your sort in this company." But it is not our hotel, and it is not our company. We have no moral right to share in the profits of these businesses, or to cover their losses. Equally, we have no moral right to dictate how they should be run.

Of course, while it should have every right to throw demonstrative homosexuals into the street, no one is obliged to drink at the John Snow public house; and the demonstration outside a few days later was entirely legitimate. As said, it is bizarre that anyone on Soho could regard this sort of discrimination as other than catastrophic for business. It may have come already, but I do expect a grovelling apology from the owners of the public house. And it is worth noting that, while homosexuals are not as generally loved as the media would have us believe, there is very little active dislike. Even without anti-discrimination laws, I do not think modern England is a place where discrimination is welcomed.

Free Markets v Actually Existing Markets

That is my answer to Peter Tatchell. However, this defence of the right to freedom of trade brings me to a matter that is presently controversial within the libertarian movement. Kevin Carson has denounced "vulgar libertarianism." In more formal terms, Roderick Long has drawn attention to what he calls "right conflationism." This is the tendency of many libertarians to defend the outcomes of an actually existing market as if they were the outcomes of a free market. It is a pervasive tendency, and I regret that I have often fallen victim to it myself. But it is something that must be identified and avoided.

For we do not live in anything approaching a world of free markets. Wherever we look, there is a relationship between government and big business so close that the two may often be taken, at the top, as one and the same thing - a system almost consciously designed to suck wealth upwards into the hands of the ruling class. We have limited liability laws that allow those in charge of a business to minimise their exposure to tort actions, and to attract large amounts of investment capital, and to give long enough existence for the business to grow far beyond what would otherwise be normal. We have transport and communication subsidies that allow big businesses to benefit from economies of scale, while externalising their diseconomies. We have tax and regulatory burdens that press harder on small businesses. We have intellectual property laws that - even if justified in principle - are practical subsidies on size. The outcome of all this is that England and America, and every other civilised country, are thoroughly corporatised and cartellised.

It is probably not a free market outcome that a quarter of all spending on food in this county goes through Tesco. It is probably not a free market outcome that we are all dependent for our energy needs on gigantic organisations, owned or regulated by the State, that extract their raw materials from the some of the most politically unstable regions on the planet, and that need continual state involvement to keep their lines of distribution open. It is hard to say what a genuinely libertarian society would look like. But it would probably not be "Tesco minus the State." It would probably be a a place of small craftsmen and farmers and traders, of artists and of unlicensed doctors and lawyers, and of others needed if individuals and free associations of individuals are to live well. I do not think there would be no large enterprises, or that the wage system would disappear. But these would be far less important features than they presently are.

Primary and Secondary Regulation

This being so, we cannot simply announce that whatever some big business does is not our concern. We cannot apply the libertarian defence of free markets to the state capitalism that we presently have. There are, for example, about a dozen commercial banks in this country. Suppose they all - possibly with a nod and wink from the Government - decide not to open an account for some disapproved political party. Do we say that the banks have no obligation to do business with anyone who presents himself at their counters? Or do we bear in mind that political parties are required by law to have a bank account, and that the banks are all licensed and regulated into what amounts to a cartel, and that the banks should therefore be required to take whatever customers seem likely to run their accounts in a reasonable manner? The first is a valid answer for a free market. When the market is not free, does the second become a valid answer?

Again, let us look again at Tesco. Bearing in mind its great power within a pretty unfree market, is it so outrageous that there should be controls on its further expansion, and on how it treats its suppliers and customers? Should there be laws to punish any collusive agreements it may make with suppliers or competitors?

Or, to come now to the first point of this article, should pubs be at liberty to turn away customers who are not committing any breach of the peace, but whose conduct is offensive to the management or staff? Pubs are licensed. Some of their profit is gained from the limiting of competition. Should they be treated as if they were operating in a free market? Or should they be required to serve any customer?

For many left libertarians, the answer to this last question is "yes." In Chapter 13 of his Organization Theory, Kevin Carson gives us the analogy of a pharmacist who refuses on religious grounds to dispense birth control pills. For a "vulgar libertarian," he says, the reflexive answer is "Yes, of course.... Anyone participating in the market should have the right to buy and sell, or not buy and sell, as he sees fit." But this answer is based on the implicit assumption that we live in a society that is entirely free. Mr Carson says:

But in fact, pharmacists are direct beneficiaries of compulsory occupational licensing, a statist racket whose central purpose is to restrict competition and enable them to charge a monopoly price for their services.

The pharmacist should, therefore, be compelled to dispense whatever is lawfully demanded.

The Welfare Economics Trick

I must say, however, that this application of the principle disturbs me. I agree that many controls on business have been laid on to mitigate the less welcome consequences of other controls, and that libertarians should bear this in mind when denouncing any particular control. Even so, as applied in this case, what may be a true principle leads us straight into a socialist police state. It allows the same intellectual trick as welfare economics. This begins with a pious explanation of how "social welfare" is maximised when perfectly rational consumers buy goods and services in a perfectly competitive market. It then observes that there are no perfectly rational consumers or perfectly competitive markets, and concludes that government action is needed to correct "market failure." I spoke some years ago with Henri Lepage, who was working at the time for the European Commission. He told me that this trick was played in almost every policy document brought out by the Commission. These begin with lavish praise of the benefits of free competition, and end by recommending laws on the minimum diameter of apples and the maximum curvature of cucumbers.

In the same way, the principle of accepting some controls that mitigate other controls can be used to justify any degree of regulation. I am qualified to teach in both schools and universities. As such, I am privileged. Does this mean that I have no right to complain if I am told by law whom to teach, what to teach, and how to teach? My local newsagent is privileged, so far as he is allowed by the local authority to sell cigarettes. Does this mean he has no right to discriminate against schoolchildren by insisting that no more than three of them at a time should come into his shop? We live in a society where almost every activity is regulated, and - looking only at the benefits rather than the costs of regulation - is privileged. As with welfare economics, belief in the value of freedom can be made, without any particular effort, into acceptance of state socialism. There is no doubt that primary regulations are demanded by an intelligent ruling class that expects to benefit from them. But there is equally no doubt that there are special interest groups - and these may be partly autonomous of the ruling class - that benefit from secondary controls.

Speaking up for State Welfare

My own view is that, while the arguments put forward by Roderick Long and Kevin Carson, among others, cannot be dismissed out of hand, we should be very cautious in applying these arguments. Where state welfare is concerned, I, for one, will accept their aguments. We have a ruling class that has pretty well monopolised the means of production. Welfare is a drug - paid for by those outside the ruling class and with incomes worth taxing - to antototto anaesthetise those at the bottom to what they have lost. There are libertarians who can sit looking though a plate glass wiindow in the Kings Road and announce very grandly that there are always jobs available for those willing to work. Really, though, the choice for many is state welfare or taking a job on minimum wage that works out to a net gain, after tax and job expenses, of ?10 or ?20 a week. It may be in someone's long term interest to take the job. On the other hand, the long term can be a long time in coming. At the same time, it is difficult to go off welfare and then, if the job folds, go straight back on at the old level of benefit. It may be a rational decision to avoid the risk. It is not an unreasonable decision. I say then that we should privatise first and cut welfare afterwards.

Oh, and when I talk of "privatisation," I do not mean the Thatcherite switch from a less to a more efficient mode of rent seeking. I mean a radical attack on the sources of corporate privilege. Welfare is bad for all manner of reasons. It is a heavy burden on the middle classes. It pauperises the lower classes. The only real beneficiaries are a ruling class that has bought the quiescence of those who might otherwise turn into a screaming mob. But it really is one of those secondary controls to mitigate the working of primary controls.

The Necessary Coincidence of Principle and Pragmatism

This being said, I do not accept the wider applications of the arguments. Just because someone is regulated does not make him a net beneficiary of state privilege. Just because he is regulated does not mean that he has consented to the regulation. Just because he is regulated does not make further regulation legitimate.

The John Snow public house has a licence to sell alcohol. This may make it a net beneficiary - though it may not. Certainly, however, its licence does not give it a monopoly privilege. There is no shortage of other pubs in Soho. Because no one who wants to drink is obliged to drink there, the pub should not be prevented from discriminating. The John Snow public house does not operate in a free market. But it does operate in a market sufficiently free for the usual libertarian defence to apply. If the licensing laws were so strict that it was the only public house within a ten mile radius, the case would be different. But there is competition.

In the same way, I should not be subject to regulation in my teaching methods - subject, of course, to whatever my employers and customers might demand. In the same way, I think the example of the pharmacist is wrongly argued. There are very few places - at least in England - where there is no choice of pharmacists. We should argue against all occupational licensing, but also be prepared to defend the right of the licensed to run their businesses as they please.

Very big companies like Tesco may be an exception to this rule. On the other hand, we are talking about corporatism, not state socialism. In the Soviet Empire, entrepreneurship did exist, but was confined to the margins of a system where production and pricing decisions were made and enforced at gunpoint. In England and America, most large companies are state-privileged trading bodies. But they also survive and flourish in part because they make the right entrepreneurial decisions. If Tesco is allowed to externalise many of its costs, it is also a success because it gives us what we want. If it makes mistakes - as, for example, in its American venture - it has to bear the costs of failure. It is part of a state-privileged cartel, but is also in fierce competition with the other supermarket chains.

Dirty Markets Better than Dirtier Markets

Now, I readily accept that the left libertarians know as much about Austrian economics as I do. But I will make the point that the real problem of economics is not to know what equilibrium looks like once it has emerged, but to understand the process by which it is continually approached, and the value of that process. Markets are valuable not so far as they result in some neoclassical equilibrium, but as a discovery process, in which particles of knowledge dispersed among billions of individuals - knowledge about wants and costs and techniques, knowledge that would otherwise remain dispersed - are brought together into a rational structure of opportunities for exchange. Markets allow people to blunder around, or make intelligent guesses, and every so often to light on some previously unimagined way of making the world a better place. And the players in a market need not be entirely unregulated sole traders. They can be state-privileged trading bodies.

Real market outcomes will not necessarily look anything like a perfectly competitive equilibrium. There may be a single supplier in a market, which may earn very high profits in the short and long term. Or there may be general collusion among suppliers to fix prices. But, so long as there is no use of overt government force to close the market - as is the case with the British Post Office - this must be taken as an acceptable outcome for the time that it endures. If an outcome is not efficient - if there are ways for someone else to come into a market and cut prices or raise quality while still making a profit - any position, no matter how incidentally privileged, will eventually crumble.

I agree that the scales are systematically tipped in favour of big business. But I do not agree that this justifies the kind of regulation that is often accepted by the left libertarians. Actually existing markets do produce obvious dynamic efficiencies that would only be reduced by further regulation. Moreover, these further regulations only raise up oppressive bureaucracies that result in a less libertarian outcome than simply putting up with the facts of privilege.

But this takes me far beyond a mere discussion of whether the John Snow public house should be allowed to exclude demonstrative homosexuals. It is enough for me to say that its management and staff should be allowed to exclude anyone they please - and to bear whatever consequences may come about.


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