On August 18, 1900, The New York Times published an article, titled “Negro Finds Way to Wealth,” that described a black man who got rich by exploiting the racist sentiments of neighbors.
J. Dallas Bowser, a teacher, poet, and newspaper publisher, acquired homes next to white people in wealthy neighborhoods and moved in. Homeowners in the neighborhood were so outraged by his presence that they were willing to purchase his home at an above-market price just to kick him out. This resulted in Bowser earning an “exorbitant profit.”
According to The Times, attorneys Joseph Rust and Ross Latchaw pressed ridiculous charges against the man before the Board of Education, causing Bowser to stand trial.
How did Bowser defend himself? From the Times:
“Bowser read a long paper in his own defense, standing on his right as a free-born American citizen to live where he pleases and to sell his property at whatever price he can find a purchaser willing to pay.”
In basic economics, there is something called the “racist premium.” This means customers will pay more and receive less for their racial prejudice and business owners will lose money for either being racist or caving into the demands of their racist customers.
After an apartment building located on an all-white Harlem block rented to black tenants, a lot of white people fled the neighborhood, resulting in scores of vacancies. Philip Payton Jr., known as “the father of Harlem”, and a team of investors purchased these buildings on 99th Street at a discount and rented to blacks.
Payton ultimately believed that property owners who maintain racial covenants would pay the racist premium in a competitive rental market. He argued that even the most bigoted of landlords would realize that profit was far more important than their prejudice, writing:
“Race prejudice is a luxury, and like all other luxuries, can be made very expensive in New York City. The fight that I am making has got to be made sooner or later and I see no better time than now. A respectable, law-abiding negro will find conditions so changed that he will be able to rent wherever his means will permit him to live.”
To resist this effort, holding companies were formed to acquire properties “to get rid of colored people” and to “prevent negroes from coming to Harlem to live.”
In response, Payton founded the Afro-American Realty Company, raised nearly $10 million in today’s money by issuing 50,000 shares at $10 each, and bought and leased complexes and houses to black tenants. Gaining support from the press, the church, and influential figures, black people were urged to live in Harlem to drive out the racists.
Free markets have done more for race relations than any government mandate ever did — and will.
Baseball team owners wanted to win ballgames, so they put in Jackie Robinson and Willie Mays. Big bands wanted to attract ears to their music, so white band leaders tapped the remarkable talents of Billie Holiday, Teddy Wilson, and Lionel Hampton. Celebrities appreciated the skills of Ella Fitzgerald and Sammy Davis Jr., so they pressured many hotels and venues to abolish silly white-only rules.
J. Dallas Bowser and Philip Payton Jr., despite enduring the peak of racial bigotry, ultimately understood basic economics–you never really get something for nothing.
They showed you can never abolish real racism, but you can punish archaic and reprehensible behavior through the free market. Bowser and Payton did that and got very rich in the process. They also improved the living standards of so many other people.
Bowser and Payton realized that capitalism is the least racist structure in the world. The free-enterprise system is indifferent to your skin color; it only cares about your money.