Business Finance Media Technology Policy Wealth Insights Interviews

Art Art Fairs Art Market Art Reviews Auctions Galleries Museums Interviews

Lifestyle Nightlife & Dining Style Travel Interviews

Power Index Nightlife & Dining Art A.I. PR

About About Observer Advertise With Us Reprints

Rev. Jesse Jackson and Milton Friedman: The Unlikeliest Bedfellows in American Capitalism

One preached from pulpits, the other from chalkboards, but Jesse Jackson and Milton Friedman shared a conviction that fair rules of the game are the non-negotiable foundation of American democracy.

My youngest sister called me yesterday with a memory she hadn’t shared in years. In the 1980s, when Jesse Jackson was running for president, he visited my tiny and inconsequential Penns Grove High School in southern New Jersey. My sister was on the student greeting committee. When Jackson walked into that classroom, shook her hand and looked her in the eye, she felt something she still cannot quite name forty years later. “He was a force,” she told me simply.

Sign Up For Our Daily Newsletter

Thank you for signing up!

By clicking submit, you agree to our terms of service and acknowledge we may use your information to send you emails, product samples, and promotions on this website and other properties. You can opt out anytime.

I turned that word over for the rest of the day. Force. Because the other force I keep returning to in the weeks since Jackson’s passing is one you would never expect to find in the same sentence with a progressive preacher from Chicago: Milton Friedman, the libertarian economist who believed markets, not movements, were the cure for America’s ills.

They seem like opposites. They were, in many ways. But underneath 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 just 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 The First Boston Corporation. It was one of the most storied rooms in American finance—home to Bruce Wasserstein, Joe Perella, Larry Fink, Douglass Braunstein, Raymond McGuire and Adebayo Ogunlesi, who would go on to build Global Infrastructure Partners into the most successful infrastructure private equity firm in the world. Legends. People who shaped American capitalism for a generation.

In that entire group, there were exactly two Black people: McGuire, who is today the President of Lazard, and me. Two. Not because there wasn’t talent. Because that’s the way it was.

Friedman would have had a theory about this. In Capitalism and Freedom, he argued that the government’s proper role is to set and enforce neutral rules and then step aside. A fair rulebook, he believed, would take care of the rest. Discrimination is costly, capital flows to merit and the prejudice of the establishment eventually loses to the enterprise of the excluded.     

Jackson would have had a different word for it: the game had been written that way. His Wall Street Project, now part of the Rainbow PUSH Coalition New York, did something audacious: it walked into the most powerful financial institutions in America and named what everyone already knew but nobody said out loud. Wall Street was dominated by white men not because white men were better at finance, but because the rules had been stacked. Jackson persuaded CEOs to acknowledge it publicly. He used the language of capitalism itself—contracts, procurement, capital access—to demand inclusion.     

In doing so, Jackson was making a Friedman-style argument. Fix the rules of the game, and the market will do the rest. Friedman insisted on fair rules. Jackson insisted that the rules were not yet fair. They were closer than either might have admitted.

In The Economics of Discrimination, Gary Becker of the University of Chicago modeled racism as a “taste” for which people will willingly pay. Employers with a strong distaste for hiring Black workers will accept lower profits to indulge that preference. A prejudiced business can survive and even thrive if enough prejudiced customers are willing to pay the premium. Markets can transmit and entrench discrimination as easily as they punish it.     

Raymond McGuire and I got into that room at First Boston. But we were two in a sea of future legends, a market tolerating a structural failure because the people running it could afford to. A referee who refuses to blow the whistle on systemic cheating isn’t neutral. He’s complicit.

Now consider what both Friedman and Jackson would make of a different story. Goldman Sachs was founded in 1869 by Marcus Goldman, a Jewish immigrant who could not get through the doors of the Protestant establishment firms that controlled American finance. Wachtell, Lipton, Rosen & Katz was founded in 1965 by Jewish lawyers who could not make partner at the white-shoe firms of the era. Both institutions, born from being shut out, went on to define the very industry that had rejected their founders.

Friedman would have called this the market working as intended—the enterprise of the excluded winning out over the prejudice of the incumbents. And he would have been partly right. But Jackson would have seen something else: the incumbents didn’t reform, they were flanked. The excluded had to construct entirely new enterprises to succeed. And for every Goldman Sachs that got built, how many never got built at all? How many founders gave up, or never tried or were ground down before they reached the starting line? Friedman’s self-correction theory cannot account for the talent that never got into the room.

The analogy is imperfect, and the distinction matters. Jewish exclusion from white-shoe firms is not an equivalent injury to the centuries of slavery, legal terror and targeted economic destruction visited on Black Americans. One is a story of a door that was closed. The other is a story of a door that was closed, the house that was built next door burned down and the land seized. Both are American stories, but they are not the same.

I return to Friedman repeatedly in this column because no thinker in modern American capitalism has been more selectively quoted or more thoroughly misused. The intellectual tradition that produced his insistence on fair rules of the game, his advocacy for a negative income tax and his comfort with tax rates more than double today’s has been strip-mined to justify the very extractive behavior he argued against. That is worth naming and correcting.

Friedman was explicit that racism is morally wrong. He condemned Jim Crow, opposed state-mandated segregation and argued that government should not classify citizens by race. But when it came to private discrimination—around who gets hired, who gets a mortgage and who gets into the M&A group—he drew a line that looks, from this vantage point, like a cop-out. In Capitalism and Freedom, he argued that the government should neither require nor forbid racial discrimination by private actors. In a competitive market, he claimed, discrimination is costly, and over time the pressure of profit and loss would erode racist behavior on its own.     

Modern economics has caught up to what Jackson’s ministry understood intuitively. In Why Nations Fail, Daron Acemoglu and James Robinson argue that countries prosper when they build inclusive institutions. Ones with rules that protect property, uphold law, enable broad participation and provide genuine access to education, markets and credit. Societies that concentrate power in a narrow elite end up poorer, more unequal and more unstable.     

Wall Street since Jackson’s Rainbow PUSH Coalition is Exhibit A. The industry became more diverse, more innovative, more global and considerably more profitable. The talent that had been systematically excluded didn’t drag the party down, but rather expanded the guest list and made the party better. That is Acemoglu’s thesis playing out in real time, with broader participation making the economy more dynamic, not less.

What I take from all of this is something simpler than a policy agenda. Friedman and Jackson were unlikely bedfellows because they shared one conviction that neither would have put quite this way: you cannot have legitimate markets or a credible democracy if large groups of people are structurally locked out. Where they diverged is that Jackson understood that the lock doesn’t open by itself. Someone must walk into the room and say out loud what everybody already knows.

As a Patriotic Capitalist, I believe robust civil rights enforcement isn’t a deviation from the rule of law. It is the rule of law, and it’s the same argument Friedman made about every other form of market-corrupting cheating, applied with the consistency he himself failed to maintain. If you genuinely believe in fair rules of the game, structural racism isn’t a peripheral concern. It is a direct attack on the legitimacy of markets and democracy alike.

My sister felt a force in that classroom in Penns Grove forty years ago. I felt its absence every morning when I pulled my shoulders back on the forty-second floor of Park Avenue Plaza. Jesse Jackson spent his life trying to close the distance between those two experiences. That strikes me as about as patriotic as capitalism gets.

SEE ALSO: Why Ford’s Electric F-150 Never Took Off

We noticed you're using an ad blocker.

We get it: you like to have control of your own internet experience. But advertising revenue helps support our journalism. To read our full stories, please turn off your ad blocker.We'd really appreciate it.

How Do I Whitelist Observer?

Below are steps you can take in order to whitelist Observer.com on your browser:

Click the AdBlock button on your browser and select Don't run on pages on this domain.

For Adblock Plus on Google Chrome:

Click the AdBlock Plus button on your browser and select Enabled on this site.

For Adblock Plus on Firefox:

Click the AdBlock Plus button on your browser and select Disable on Observer.com.

© Observer