My younger sister called me yesterday and told me a memory she hasn’t shared in years. In the 1980s, when Jesse Jackson was running for president, he visited my small, insignificant high school in Penns Grove in southern New Jersey. My sister was on the student salutation committee. When Jackson walked into that classroom, shook her hand and looked into her eyes, she felt something she still can’t name forty years later. “He was a force,” she told me simply.
I turned that word around for the rest of the day. power. Because the other force I keep coming back to in the weeks since Jackson’s death is one you never expected to find in the same sentence with a progressive preacher from Chicago: Milton Friedman, the liberal economist who believed that markets, not movements, were the cure for America’s ills.
They seem like opposites. In many ways they were. But under the preacher’s collar and the professor’s chalkboard, they were fighting for the same thing: fairness of opportunity as the non-negotiable foundation of American capitalism. I know this not only from their speeches and books, but from a room I once sat in on Wall Street.
In 1986, I joined the Mergers and Acquisitions group at First Boston. It was one of the most iconic rooms in the world of American finance – home to Bruce Wasserstein, Joe Perrella, Larry Fink, Douglas Brownstein, Raymond McGuire, and Adebayo Ogunlesi, who went on to build Global Infrastructure Partners into the most successful infrastructure private equity firm in the world. Myths. People who shaped American capitalism for a generation.
In that entire group, there were exactly two black people: McGuire, who today is the president of Lazard, and me. two. Not because there was no talent. Because that’s what it was like.
Friedman could have had a theory about this. in Capitalism and freedomHe said that the appropriate role of the government is to set and implement neutral rules and then step down. He thought a fair rule book would take care of the rest. Discrimination is costly, capital flows worth it, and institutional bias ultimately loses the organization of the excluded.
Jackson might have had a different word: The game was written that way. for him Wall Street Projectnow part of the Rainbow PUSH coalition in New York, did something bold: she walked into America’s most powerful financial institutions and named what everyone already knew but no one had said out loud. White men dominated Wall Street, not because white men were better at finance, but because the rules were stacked. Jackson convinced the CEOs to admit this publicly. He used the language of capitalism itself – contracts, procurement, access to capital – to demand inclusion.
In doing so, Jackson was making an argument along the lines of Friedman’s. Fix the rules of the game, and the market will do the rest. Friedman insisted on fair rules. Jackson insisted the rules were not yet fair. They were closer than either of them would admit.
in Economics of discriminationGary Becker of the University of Chicago coined racism as a “taste” for which people willingly pay. Employers with a strong aversion to hiring black workers would accept lower profits to indulge this preference. A biased business can survive and even thrive if enough biased customers are willing to pay the premium. Markets can transmit and entrench discrimination just as easily as they can punish it.
Raymond McGuire and I arrived at that room at First Boston. But we were in a sea of future myths, a market that tolerates structural failure because the people who run it can. A referee who refuses to blow the whistle on systemic cheating is not impartial. He is complicit.
Now think about what Friedman and Jackson could make of a different story. Goldman Sachs was founded in 1869 by Marcus Goldman, a Jewish immigrant You can’t get through doors One of the Protestant establishment companies that controlled American finance. It was Wachtel, Lipton, Rosen, and Katz Founded in 1965 By Jewish lawyers who could not partner in the white shoe firms of that era. Both institutions, born from lockdown, continue to define the same industry that rejected their founders.
Friedman would have called this “the market working as intended” – a project of the excluded that triumphs over the bias of incumbents. He could have been partly right. But Jackson would have seen something else: that the incumbents were not reforming, but were being surrounded. The excluded had to build Completely new institutions To achieve success. For every Goldman Sachs bank built, how many were never built at all? How many founders have given up, never tried, or been crushed before they even got to the starting line? Friedman’s self-correction theory cannot take into account talent who has never entered the room.
The analogy is imperfect, but the distinction is important. Excluding Jews from white shoe companies does not constitute harm equivalent to the centuries of slavery, legal terror, and targeted economic devastation inflicted on black Americans. One of them is the story of the door that was closed. The other is the story of a door that was closed, the house that was built burned down and the land was taken over. They are both American stories, but they are not the same.
I return to Friedman again and again in this column because no thinker of modern American capitalism has been quoted more selectively or misused more comprehensively. The intellectual tradition that produced his insistence on fair rules of the game, his defense of a negative income tax and his comfort with tax rates more than double current rates has been stripped of the mining to justify the extractive behavior he argued against. This is something that deserves to be named and corrected.
Friedman was clear that racism is morally wrong. He condemned Jim Crow, opposed state-mandated segregation, and argued that the government should not classify citizens by race. But when it comes to discrimination in the private sector — about who gets hired, who gets a mortgage, who gets into the mergers and acquisitions pool — he has drawn a line that, from this point of view, looks like a retreat. in Capitalism and freedomHe said the government should not require or prohibit racial discrimination by private actors. He claimed that discrimination in a competitive marketplace was costly, and over time the pressure of profit and loss would erode racist behavior itself.
Modern economics understood what Jackson’s ministry intuitively understood. in Why do nations fail?Daron Acemoglu and James Robinson argue that countries thrive when they build inclusive institutions. Countries have rules that protect property, uphold law, enable broad participation and provide real access to education, markets and credit. Societies that concentrate power in the hands of a narrow elite end up becoming poorer, more unequal, and less stable.
Since Jackson’s Rainbow PUSH coalition, Wall Street has become Exhibit A. The industry is becoming more diverse, more innovative, more global and vastly more profitable. The systematically eliminated talent did not drag the party down, but rather expanded the guest list and Make the party better. This is Acemoglu’s thesis being applied in real time, with broader participation making the economy more dynamic, not less.
What I take away from all this is something simpler than just a political agenda. Friedman and Jackson were unlikely to be mates because they shared a conviction that neither of them would have put it this way: You can’t have legitimate markets or credible democracy if large groups of people are structurally blocked. What they differed in was that Jackson understood that the lock does not open on its own. Someone has to walk into the room and say out loud what everyone already knows.
As a patriotic capitalist, I believe that strong enforcement of civil rights does not constitute a deviation from the rule of law. He – she He is The rule of law, the same argument Friedman made for all the other forms of market-corrupting fraud, which he applied with a consistency that he himself failed to maintain. If you truly believe in the rules of the fair game, structural racism is not a marginal concern. It is a direct attack on the legitimacy of both markets and democracy.
My sister felt strongly in that classroom at Penn’s Grove forty years ago. I felt his absence every morning as I pulled my shoulders up to the 42nd floor of Park Avenue Plaza. Jesse Jackson spent his life trying to bridge these two experiences. This seems to me to be as patriotic as capitalism gets.
