Discrimination of any kind, whether on the grounds of race, gender, religion or nationality, is unjust. It violates the person’s fundamental human rights. But it is also economically irrational. Non-discrimination and recognition of the value of diversity not only benefits society, but also the economy. Greater integration increases competitiveness. This is the message of Gary S. Becker, winner of the Nobel Prize for Economics in 1992, “for having extended the domain of microeconomic analysis to a wide range of human behaviour and interaction, including nonmarket behaviour”. Becker was the first to try and really analyze and explain the value of human capital.
We would do well to remember Becker, who died recently (3 May 2014) at a time when Europe— following elections to the new European Parliament—the USA and other major democratic, advanced economies are looking around for radical new ideas and rules to put the crisis behind us and achieve lasting economic growth based on a more balanced, environmentally sustainable society that can generate widespread wellbeing, jobs and prosperity.
In other works, better development. How is this to be done? Partly by building a “generous society” (the title of a fine book by Pier Mario Vello and Martina Reolon for Feltrinelli-Life, on an economy focused on “living together”, and a form of benevolent competition that is faithful to the Latin root cum petere – to strive together). A society based on inclusiveness and not on discrimination, and a virtuous relationship between identity and difference. As Luigi Ruggio and Francesco Mora point out in Identità, differenze, conflitti, Mimesis, 2007: “The relationship between identity and difference is absolutely central to the life of peoples and individuals… Without identity there can be no community, but without difference, identity is hollow.”
Which this bring us back to the lesson of Becker. A liberal scholar mindful of the moral philosophy of Adam Smith (“mutual sympathy”) and the teachings of John Maynard Keynes, Becker explored the connections between enterprise, work, rights and economic growth, recognizing Smith’s “utility” as indispensable to the workings of the market economy, combined with a profoundly moral view of a more just society.
Becker’s early Ph.D. thesis examined discrimination as a cost to the perpetrator (Luigi Zingales in IlSole24Ore – 6 May). This was a highly original and provocative point of view. We are all aware of the burden of discrimination on the victim (little or no work, low wages, bad working conditions, poor career prospects). But Becker was interested in trying to explain to those whose lives, work and investments are guided by the pursuit of profit, that discrimination doesn’t pay. On the contrary, discrimination prevents firms from hiring the best resources, stifles human capital, and hinders competitiveness. If firms which discriminate suffer no cost, adds Becker, there is no economic limit to discrimination. But this only happens in an absence of competition. Instead the market (open and well regulated, of course, not a monopoly or an oligopoly or economies with a high degree of protectionism) is competitive. And the most successful are those companies which do not discriminate (e.g. against blacks, women, etc.) but choose and develop the best. Firms which discriminate, in a market economy, fail to act in their own best interests.
Of course Becker’s insight is backed up with scientific evidence and data, hence the Nobel Prize. And experience and later studies have shown that the opening up of the U.S. banking industry to competition has increased the quota of women in top jobs, with salaries closer to those of men, to the benefit of all. “If discrimination against women is still so widespread in Italy, it is because our markets are uncompetitive,” argues Zingales, echoing Becker’s moral and economic teachings.
We should bear this in mind in Europe and in Italy, where the presence of women in influential positions in business and politics is on the rise but has not yet reached an equitable level. This above all at a time when we still haven’t solved the serious questions of integration and discrimination, evidenced by the sporadic winds of xenophobia that still blow through Europe. Discrimination is unjust. What’s more it doesn’t pay. Development can only be achieved in an open, inclusive society that is able to adopt intelligent and farsighted laws to this end. Firms across the world who pursue dialogue and a healthy integration of diversity are more successful and can lead the way for others. Becker’s teachings are just as relevant today.