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>> 25  Cheating at the Starting Line How White Racial Cartels Gained an Early Unfair Advantage during Jim Crow 2. Cheating at the Starting Line On a cold winter morning in Memphis, in January of 1919, a committee of four white switchmen marched into the office of one Edward Bodamer, superintendent of the Yazoo and Mississippi Valley Railroad. The switchmen were there, they said, to discuss a demand by the area yard workers: fire all black workers, or they would strike. Bodamer threw the switchmen out of his office, warning them as they left that a strike would be illegal. Ignoring the warning, dozens of switchmen and yardmen walked off the job in protest. Over the next five days, the strike spread like wildfire. Work at surrounding railroads and yards ground to a halt, shutting down the region’s transportation network and crippling the railroad’s operations. At its peak, the strike united over 650 white switchmen in racial solidarity , shutting down transportation in the countless small towns that lined the railroad in Tennessee, Mississippi, and Illinois. At the end of the 26 > 27 Following standard economic theory, we could easily describe the Memphis wildcat strike as an irrational preference for exclusion that would eventually be eliminated by market forces. Indulging this preference would have been costly for the railroad—it would have had to pay more for white workers not just because they were a limited pool, but also because, as unionized employees, they earned higher wages. In addition, by excluding black workers, white union members were giving up the opportunity to vastly increase their numbers, and correspondingly their strength, in their labor struggles against employers. Black workers could have supplied (and did eventually come to supply) an important addition to the ranks. Because discrimination cost unions and railroads in terms of competitive advantage, racism should have died out quickly, and if it didn’t, imperfect market competition is to blame. Or so the story goes. But we could tell another story to explain the Memphis strike: a story in which whites’ collective action was more profitable than it was costly. In this story, whites formed “racial cartels” to sidestep market competition and to earn higher wages than their black counterparts. In this story, the cost of discriminating was less than the material benefit to workers. Far from costing them, discrimination paid off, by earning striking workers higher wages. How did white workers earn higher wages from discriminating? Classic collective action explains these wages as a sort of monopoly profit. By forming a union that excluded black workers and by pushing employers to hire whites only, white railroad workers could drive up wages relative to their black and brown counterparts. Employers also profited from discrimination in their fight against unions. By dividing the labor market in two, railroads maintained a ready-made stable of black strikebreakers perpetually on call to undercut the power of the white union. For railroad and workers alike, then, discrimination was win-win. And those benefits came at the expense of black workers, in the same way that cartels displace the costs of their profits onto someone else. This chapter suggests that we can better understand the nature of Jim Crow discrimination if we think of it as cartel conduct. A cartel story 28 > 29 draws of the urn determined the ultimate composition of the urn, those early rounds of economic, social, and political competition among the races were rigged anticompetitively by racial cartels. If the early draws favored whites, it should now come as no surprise that the urn is now mostly white. We are ready now, in this chapter and the next, to describe racial discrimination as cartel conduct, and to understand why early history played a very important role in contemporary racial disparities. Cartels and Collective Action So what is a racial cartel? And how did racial cartels operate to exclude people of color during Jim Crow? A little more economic theory is helpful here. As we learned in Chapter 1, standard neoclassical economic theory teaches that market competition should eliminate racial discrimination because discriminating is more costly than hiring without regard to race. Recall also from that chapter that in the economists’ version of a perfect world, the market should eliminate racial gaps. This is because people with a taste for discrimination will have to pay an extra cost for indulging such a bias, and will thereby compete less effectively than participants without this costly preference. Real estate brokers, for instance, who...

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