Economic discrimination
Encyclopedia
Economic discrimination is a term that describes a form of discrimination based on economic factors. These factors can include job availability, wages, the prices and/or availability of goods and services
, and the amount of capital investment
funding available to minorities for business. The term is broadly used in economic research, and includes discrimination against workers, consumers, and minority-owned businesses.
It is not the same as price discrimination
, the practice by which monopolists
(and to a lesser extent oligopolists
and monopolistic competitors
) charge different buyers different prices based on their willingness to pay
.
law
, specifically the British Railway Clauses Consolidation Act
of 1845, which prohibited a common carrier
from charging one person more for carrying freight than was charged to another customer for the same service. In 19th century English and American common law
, discrimination was meant to indicate improper distinctions in economic transactions. For example, discrimination occurred if a hotelier refused to give rooms to a patron, or the distinction indicated by the British Railway Clauses. Most 19th century economic discrimination was by Protestants against Catholics, or by Christians against Jews
, and usually could be referred to as economic discrimination against consumers.
By the early 20th century, discrimination also included biased or unequal terms against other companies or competing companies. The Robinson-Patman Act
(1936), which prevents sellers of commodities in interstate commerce
from discriminating in price between purchasers of goods of like grade and quality, was designed to prevent vertically integrated
trusts from driving smaller competitors out of the market through economies of scale
.
It was not until 1941, when President Franklin D. Roosevelt
issued an executive order forbidding discrimination in employment by a company working under a government defense contract, that economic discrimination took on the overtones it has today, which is discrimination against minorities. By 1960 anti-trust
laws and interstate commerce laws had effectively regulated inter-corporate discrimination so problematic in the late 19th century and early 20th century, but the problem of discrimination on an economic basis against minorities had become widespread.
, but rather is due to what has been called a "cynical realization that minorities are not always your best customers". There are three main causes that most economic theorists agree are likely root causes.
, ageism
, and dislike for another's religion, ethnicity or nationality
has always been a component of economic discrimination, much like all other forms of discrimination.
Most discrimination in the US and Europe is claimed to be in terms of racial and ethnic discrimination -- blacks and Hispanics in the USA, Muslims in Europe. In most parts of the world, women are held to lower positions, lower pay, and restricted opportunities of land ownership
or economic incentive to enter businesses or start them.
This form of economic discrimination is usually leveled at whatever groups are held to be "in power" at the time. For example, in America, discrimination is often considered to be the province of Caucasians, while in Saudi Arabia
, it's men who are considered discriminatory. One study suggests that the increase in equal opportunity
lawsuits has reduced this kind of discrimination in America by a large amount.
in dealing with some minorities, particularly in highly divided nations or nations where discrimination is tolerated. In fundamentalist Islamic societies, some adherents of sharia
law feel it's inappropriate for women to work. Companies that employ them might lose the business of offended men, or might suffer boycotts or even violence from extremists.
A second common reason for this kind of discrimination is when the worker or consumer is not cost-efficient. For example, some stores in the US Northwest do not stock ethnic foods, despite requests for such, since they feel the cost is too high for too low a return.
Additionally, the illegal immigration
debate in the US has resulted in some businesses refusing to hire such workers based on the likelihood that they would be fined and litigated against.
The Equal Opportunity Employment act
in the US has almost reduced this sort of rationale for discrimination to nothing, according to recent studies.
The relations between economic theory, efficiency and discrimination, or "discriminatory tastes" are much more problematic.
s, including Black men and women, Hispanic men and women, and white women, suffer from decreased wage earning for the same job with the same performance levels and responsibilities as white males. Numbers vary wildly from study to study, but most indicate a gap from 5 to 15% lower earnings on average, between a white male worker and a black or Hispanic man or a woman of any race with equivalent educational background and qualifications.
A recent study indicated that black wages in the US have fluctuated between 70% and 80% of white wages for the entire period from 1954–1999, and that wage increases for that period of time for blacks and white women increased at half the rate of that of white males. Other studies show similar patterns for Hispanics. Studies involving women found similar or even worse rates.
Overseas, another study indicated that Muslims earned almost 25% less on average than whites in France, Germany, and England, while in South America
, mixed-race
blacks earned half of what Hispanics did in Brazil.
Most wage discrimination
is masked by the fact that it tends to occur in lower-paying positions and involves minorities who may not feel empowered to file a discrimination lawsuit or complain.
Even so, studies have shown that it is easier for a white male to get a job than it is for an equally qualified man of color or woman of any race. Many positions are cycled, where a company fills a position with a worker and then lays them off and hires a new person, repeating until they find someone they feel is "suitable" -- which is often not a minority.
While hiring discrimination is the most highly visible aspect of economic discrimination, it is often the most uncommon. Increasingly strong measures against discrimination have made hiring discrimination much more difficult for employers to engage in. However this is only the case in formal hiring arrangements, with corporations or others subject to public scrutiny and overview. Private hiring, such as apprenticeships of electrician
s, plumbers, carpenters, and other trades
is almost entirely broken down along racial lines, with almost no women in these fields and most minorities training those of their own race.
. This includes but is not limited to:
Most charges of price discrimination are difficult to verify, without significant documentation. Studies indicate that less than 10% of all price discrimination is actually reported to any authority or regulatory body, and much of this is through class-action lawsuits. Furthermore, while a number of monitoring services and consumer interest groups take an interest in this form of discrimination, there is very little they can do to change it. Most discrimination based on price occurs in situations without a standardized price list that can be compared against. In the cases of per diem charges, this is easily concealed as few consumers can exchange estimates and work rates, and even if they do the business in question can claim that the services provided had different baseline costs, conditions, etc.
Discrimination based on price in areas where special sales and deals simply are not offered can be justified by limiting them to those with strong credit rating
s or those with past business with the company in question.
benefits from having minority-owned businesses, so most instances of this occur outside of the United States.
Women of color are starting businesses at rates three to five times faster than all other businesses, according to an article from Babson college
on However, once in business, their growth lags behind all other firms, according to the results of a multi-year study conducted by the Center for Women's Business Research in partnership with Babson College exploring the impact of race and gender on the growth of businesses owned by women who are African-American
, Asian, Latina and other ethnicities.
the business on purchases and resupply orders.
for inner-city
minority owned businesses. Most research indicates that the banking industry as a whole is systemic in its abuse of the legal system in avoidance of "high risk" loans to minorities, pointing out that banks cannot provide facts backing up their assertions that they deny such loans to a high failure rate
.
On the other hand, most financial institution
s and some economists feel that all too often, banks are accused unfairly of discrimination against minority owned businesses when said business is simply not worth such a credit risk
, and that no one would find such a decision discriminatory if the business were not minority owned. These charges of reverse racism or prejudicial analysis are a longstanding source of controversy in the study of economic discrimination.
theorists have suggested that economic discrimination goes far beyond the bounds of individuals or businesses. The largest scale forms of economic discrimination, and the widest ranging, affect entire nations or global regions. Many consider that an open world economic system
(globalization
), which includes world bodies such as the International Monetary Fund
(IMF), World Bank
, and International Bank for Reconstruction and Development
(IBRD), places countries at risk by practicing explicitly discriminatory techniques such as bilateral and regional bargaining, as well as asymmetrical trade balances and the maintaining of cheap force labor. Trade policies like the North American Free Trade Agreement
(NAFTA) and General Agreement on Tariffs and Trade
(GATT) are often regarded as financial measures serving only to economically oppress third world
nations.
This could include:
Goods and services
In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility. It is often used when referring to a Goods and Services Tax....
, and the amount of capital investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
funding available to minorities for business. The term is broadly used in economic research, and includes discrimination against workers, consumers, and minority-owned businesses.
It is not the same as price discrimination
Price discrimination
Price discrimination or price differentiation exists when sales of identical goods or services are transacted at different prices from the same provider...
, the practice by which monopolists
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
(and to a lesser extent oligopolists
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...
and monopolistic competitors
Monopolistic competition
Monopolistic competition is imperfect competition where many competing producers sell products that are differentiated from one another...
) charge different buyers different prices based on their willingness to pay
Willingness to pay
In economics, the willingness to pay is the maximum amount a person would be willing to pay, sacrifice or exchange in order to receive a good or to avoid something undesired, such as pollution...
.
History
The term economic discrimination has been in usage for over 150 years, but its meaning has changed significantly since it was coined. The term was first used in BritishUnited Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, specifically the British Railway Clauses Consolidation Act
Consolidation Act
The Consolidation Act was an act of the parliament of Great Britain passed in 1749 to reorganize the Royal Navy....
of 1845, which prohibited a common carrier
Common carrier
A common carrier in common-law countries is a person or company that transports goods or people for any person or company and that is responsible for any possible loss of the goods during transport...
from charging one person more for carrying freight than was charged to another customer for the same service. In 19th century English and American common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
, discrimination was meant to indicate improper distinctions in economic transactions. For example, discrimination occurred if a hotelier refused to give rooms to a patron, or the distinction indicated by the British Railway Clauses. Most 19th century economic discrimination was by Protestants against Catholics, or by Christians against Jews
Jews
The Jews , also known as the Jewish people, are a nation and ethnoreligious group originating in the Israelites or Hebrews of the Ancient Near East. The Jewish ethnicity, nationality, and religion are strongly interrelated, as Judaism is the traditional faith of the Jewish nation...
, and usually could be referred to as economic discrimination against consumers.
By the early 20th century, discrimination also included biased or unequal terms against other companies or competing companies. The Robinson-Patman Act
Robinson-Patman Act
The Robinson–Patman Act of 1936 is a United States federal law that prohibits anticompetitive practices by producers, specifically price discrimination. It grew out of practices in which chain stores were allowed to purchase goods at lower prices than other retailers...
(1936), which prevents sellers of commodities in interstate commerce
Commerce Clause
The Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...
from discriminating in price between purchasers of goods of like grade and quality, was designed to prevent vertically integrated
Vertical integration
In microeconomics and management, the term vertical integration describes a style of management control. Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product or service, and the products combine to...
trusts from driving smaller competitors out of the market through economies of scale
Returns to scale
In economics, returns to scale and economies of scale are related terms that describe what happens as the scale of production increases in the long run, when all input levels including physical capital usage are variable...
.
It was not until 1941, when President Franklin D. Roosevelt
Franklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...
issued an executive order forbidding discrimination in employment by a company working under a government defense contract, that economic discrimination took on the overtones it has today, which is discrimination against minorities. By 1960 anti-trust
Antitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
laws and interstate commerce laws had effectively regulated inter-corporate discrimination so problematic in the late 19th century and early 20th century, but the problem of discrimination on an economic basis against minorities had become widespread.
Causes
There is a wide range of theory concerned with the root causes of economic discrimination. Economic discrimination is unique from most other kinds of discrimination because only a small portion of it is due to racismRacism
Racism is the belief that inherent different traits in human racial groups justify discrimination. In the modern English language, the term "racism" is used predominantly as a pejorative epithet. It is applied especially to the practice or advocacy of racial discrimination of a pernicious nature...
, but rather is due to what has been called a "cynical realization that minorities are not always your best customers". There are three main causes that most economic theorists agree are likely root causes.
Animosity
Racism, sexismSexism
Sexism, also known as gender discrimination or sex discrimination, is the application of the belief or attitude that there are characteristics implicit to one's gender that indirectly affect one's abilities in unrelated areas...
, ageism
Ageism
Ageism, also called age discrimination is stereotyping of and discrimination against individuals or groups because of their age. It is a set of beliefs, attitudes, norms, and values used to justify age based prejudice, discrimination, and subordination...
, and dislike for another's religion, ethnicity or nationality
Nationality
Nationality is membership of a nation or sovereign state, usually determined by their citizenship, but sometimes by ethnicity or place of residence, or based on their sense of national identity....
has always been a component of economic discrimination, much like all other forms of discrimination.
Most discrimination in the US and Europe is claimed to be in terms of racial and ethnic discrimination -- blacks and Hispanics in the USA, Muslims in Europe. In most parts of the world, women are held to lower positions, lower pay, and restricted opportunities of land ownership
Landed property
Landed property or landed estates is a real estate term that usually refers to a property that generates income for the owner without the owner having to do the actual work of the estate. In Europe, agrarian landed property typically consisted of a manor, several tenant farms, and some privileged...
or economic incentive to enter businesses or start them.
This form of economic discrimination is usually leveled at whatever groups are held to be "in power" at the time. For example, in America, discrimination is often considered to be the province of Caucasians, while in Saudi Arabia
Saudi Arabia
The Kingdom of Saudi Arabia , commonly known in British English as Saudi Arabia and in Arabic as as-Sa‘ūdiyyah , is the largest state in Western Asia by land area, constituting the bulk of the Arabian Peninsula, and the second-largest in the Arab World...
, it's men who are considered discriminatory. One study suggests that the increase in equal opportunity
Equal opportunity
Equal opportunity, or equality of opportunity, is a controversial political concept; and an important informal decision-making standard without a precise definition involving fair choices within the public sphere...
lawsuits has reduced this kind of discrimination in America by a large amount.
Cost/revenue
There is a certain opportunity costOpportunity cost
Opportunity cost is the cost of any activity measured in terms of the value of the best alternative that is not chosen . It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices. The opportunity cost is also the...
in dealing with some minorities, particularly in highly divided nations or nations where discrimination is tolerated. In fundamentalist Islamic societies, some adherents of sharia
Sharia
Sharia law, is the moral code and religious law of Islam. Sharia is derived from two primary sources of Islamic law: the precepts set forth in the Quran, and the example set by the Islamic prophet Muhammad in the Sunnah. Fiqh jurisprudence interprets and extends the application of sharia to...
law feel it's inappropriate for women to work. Companies that employ them might lose the business of offended men, or might suffer boycotts or even violence from extremists.
A second common reason for this kind of discrimination is when the worker or consumer is not cost-efficient. For example, some stores in the US Northwest do not stock ethnic foods, despite requests for such, since they feel the cost is too high for too low a return.
Additionally, the illegal immigration
Illegal immigration
Illegal immigration is the migration into a nation in violation of the immigration laws of that jurisdiction. Illegal immigration raises many political, economical and social issues and has become a source of major controversy in developed countries and the more successful developing countries.In...
debate in the US has resulted in some businesses refusing to hire such workers based on the likelihood that they would be fined and litigated against.
Efficiency
In some cases, minorities are discriminated against simply because it is inefficient to make a concerted effort at a fair allocation. For example, in countries where minorities make up a very small part of the population, or are on average less educated than the population average, there is rarely an attempt to focus on employment of minorities.The Equal Opportunity Employment act
Employment Act
The Employment Act of 1946 ch. 33, section 2, 60 Stat. 23, codified as , is a United States federal law. Its main purpose was to lay the responsibility of economic stability of inflation and unemployment onto the federal government...
in the US has almost reduced this sort of rationale for discrimination to nothing, according to recent studies.
The relations between economic theory, efficiency and discrimination, or "discriminatory tastes" are much more problematic.
Forms of economic discrimination
There are several forms of economic discrimination. The most common form of discrimination is wage inequality, followed by unequal hiring practices. But there is also discrimination against minority consumers and minority businesses in a number of areas, and religious or ethnic discrimination in countries outside of the United States.Against workers
Most forms of discrimination against minorities involve lower wages and unequal hiring practices.Wage discrimination
Several studies have shown that several minority groupMinority group
A minority is a sociological group within a demographic. The demographic could be based on many factors from ethnicity, gender, wealth, power, etc. The term extends to numerous situations, and civilizations within history, despite the misnomer of minorities associated with a numerical statistic...
s, including Black men and women, Hispanic men and women, and white women, suffer from decreased wage earning for the same job with the same performance levels and responsibilities as white males. Numbers vary wildly from study to study, but most indicate a gap from 5 to 15% lower earnings on average, between a white male worker and a black or Hispanic man or a woman of any race with equivalent educational background and qualifications.
A recent study indicated that black wages in the US have fluctuated between 70% and 80% of white wages for the entire period from 1954–1999, and that wage increases for that period of time for blacks and white women increased at half the rate of that of white males. Other studies show similar patterns for Hispanics. Studies involving women found similar or even worse rates.
Overseas, another study indicated that Muslims earned almost 25% less on average than whites in France, Germany, and England, while in South America
South America
South America is a continent situated in the Western Hemisphere, mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere. The continent is also considered a subcontinent of the Americas. It is bordered on the west by the Pacific Ocean and on the north and east...
, mixed-race
Multiracial
The terms multiracial and mixed-race describe people whose ancestries come from multiple races. Unlike the term biracial, which often is only used to refer to having parents or grandparents of two different races, the term multiracial may encompass biracial people but can also include people with...
blacks earned half of what Hispanics did in Brazil.
Most wage discrimination
Price discrimination
Price discrimination or price differentiation exists when sales of identical goods or services are transacted at different prices from the same provider...
is masked by the fact that it tends to occur in lower-paying positions and involves minorities who may not feel empowered to file a discrimination lawsuit or complain.
Hiring discrimination
Hiring discrimination is similar to wage discrimination in its pattern. It typically consists of employers choosing to hire a white candidate over a minority candidate, or a male candidate over a female candidate, to fill a position. A study of employment patterns in the US indicated that the number of hiring discrimination cases has increased fivefold in the past 20 years. However, their percentage as a whole fraction of the workforce hirings has decreased almost as drastically. With the stiff laws against discrimination in hiring, companies are very careful in who they hire and do not hire.Even so, studies have shown that it is easier for a white male to get a job than it is for an equally qualified man of color or woman of any race. Many positions are cycled, where a company fills a position with a worker and then lays them off and hires a new person, repeating until they find someone they feel is "suitable" -- which is often not a minority.
While hiring discrimination is the most highly visible aspect of economic discrimination, it is often the most uncommon. Increasingly strong measures against discrimination have made hiring discrimination much more difficult for employers to engage in. However this is only the case in formal hiring arrangements, with corporations or others subject to public scrutiny and overview. Private hiring, such as apprenticeships of electrician
Electrician
An electrician is a tradesman specializing in electrical wiring of buildings, stationary machines and related equipment. Electricians may be employed in the installation of new electrical components or the maintenance and repair of existing electrical infrastructure. Electricians may also...
s, plumbers, carpenters, and other trades
Trades
Trades is a commune in the Rhône department in eastern France....
is almost entirely broken down along racial lines, with almost no women in these fields and most minorities training those of their own race.
Against consumers
Most discrimination against consumers has been decreased due to stiffer laws against such practices, but still continues, both in the US and in Europe. The most common forms of such discrimination are price and service discrimination.Discrimination based on price
Discrimination based on price is charging different prices for goods and services to different people based on their race, ethnicity, religion, or sex. It should not be confused with the separate economic concept of price discriminationPrice discrimination
Price discrimination or price differentiation exists when sales of identical goods or services are transacted at different prices from the same provider...
. This includes but is not limited to:
- increased costs for basic services (health care, repair, etc.)
- increased costs for per diem charges (such as charging one person $40 while charging another person $100 for exactly the same service provided)
- not offering deals, sales, rebates, etc. to minorities
- higher rates for insurance for minorities
Most charges of price discrimination are difficult to verify, without significant documentation. Studies indicate that less than 10% of all price discrimination is actually reported to any authority or regulatory body, and much of this is through class-action lawsuits. Furthermore, while a number of monitoring services and consumer interest groups take an interest in this form of discrimination, there is very little they can do to change it. Most discrimination based on price occurs in situations without a standardized price list that can be compared against. In the cases of per diem charges, this is easily concealed as few consumers can exchange estimates and work rates, and even if they do the business in question can claim that the services provided had different baseline costs, conditions, etc.
Discrimination based on price in areas where special sales and deals simply are not offered can be justified by limiting them to those with strong credit rating
Credit rating
A credit rating evaluates the credit worthiness of an issuer of specific types of debt, specifically, debt issued by a business enterprise such as a corporation or a government. It is an evaluation made by a credit rating agency of the debt issuers likelihood of default. Credit ratings are...
s or those with past business with the company in question.
Services discrimination
Although price discrimination mentions services, service discrimination is when certain services are not offered at all to minorities, or are offered only inferior versions. According to at least one study, most consumer discrimination falls into this category, since it is more difficult to verify and prove. Some assertions of discrimination have included:- offering only high-cost plans for insurance or refusal to cover minorities
- refusing to offer financing to minorities
- denial of service
Against businesses
Minority owned businesses can also experience discrimination, both from suppliers and from banks and other sources of capital financing. In the US, there are tax benefits and even public relationsPublic relations
Public relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
benefits from having minority-owned businesses, so most instances of this occur outside of the United States.
Women of color are starting businesses at rates three to five times faster than all other businesses, according to an article from Babson college
Babson College
Babson College is a private business school located in Wellesley, Massachusetts near Boston.- History :Babson College was founded by Roger Babson on September 3, 1919, as the Babson Institute. It was renamed "Babson College" in 1969...
on However, once in business, their growth lags behind all other firms, according to the results of a multi-year study conducted by the Center for Women's Business Research in partnership with Babson College exploring the impact of race and gender on the growth of businesses owned by women who are African-American
African American
African Americans are citizens or residents of the United States who have at least partial ancestry from any of the native populations of Sub-Saharan Africa and are the direct descendants of enslaved Africans within the boundaries of the present United States...
, Asian, Latina and other ethnicities.
Discrete usage discrimination
This form of discrimination covers suppliers providing substandard goods to a business, or price gougingPrice gouging
Price gouging is a pejorative term referring to a situation in which a seller prices goods or commodities much higher than is considered reasonable or fair. In precise, legal usage, it is the name of a crime that applies in some of the United States during civil emergencies...
the business on purchases and resupply orders.
Capital investment discrimination
A more significant source of perceived discrimination is in capital investment markets. Banks are often accused of not providing loans and other financial instrumentsFinancial instruments
A financial instrument is a tradable asset of any kind, either cash; evidence of an ownership interest in an entity; or a contractual right to receive, or deliver, cash or another financial instrument....
for inner-city
Inner city
The inner city is the central area of a major city or metropolis. In the United States, Canada, United Kingdom and Ireland, the term is often applied to the lower-income residential districts in the city centre and nearby areas...
minority owned businesses. Most research indicates that the banking industry as a whole is systemic in its abuse of the legal system in avoidance of "high risk" loans to minorities, pointing out that banks cannot provide facts backing up their assertions that they deny such loans to a high failure rate
Failure rate
Failure rate is the frequency with which an engineered system or component fails, expressed for example in failures per hour. It is often denoted by the Greek letter λ and is important in reliability engineering....
.
On the other hand, most financial institution
Financial institution
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s and some economists feel that all too often, banks are accused unfairly of discrimination against minority owned businesses when said business is simply not worth such a credit risk
Credit risk
Credit risk is an investor's risk of loss arising from a borrower who does not make payments as promised. Such an event is called a default. Other terms for credit risk are default risk and counterparty risk....
, and that no one would find such a decision discriminatory if the business were not minority owned. These charges of reverse racism or prejudicial analysis are a longstanding source of controversy in the study of economic discrimination.
Global economic discrimination
An increasing number of economists and international commerceCommerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...
theorists have suggested that economic discrimination goes far beyond the bounds of individuals or businesses. The largest scale forms of economic discrimination, and the widest ranging, affect entire nations or global regions. Many consider that an open world economic system
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...
(globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...
), which includes world bodies such as the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
(IMF), World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
, and International Bank for Reconstruction and Development
International Bank for Reconstruction and Development
The International Bank for Reconstruction and Development is one of five institutions that compose the World Bank Group. The IBRD is an international organization whose original mission was to finance the reconstruction of nations devastated by World War II. Now, its mission has expanded to fight...
(IBRD), places countries at risk by practicing explicitly discriminatory techniques such as bilateral and regional bargaining, as well as asymmetrical trade balances and the maintaining of cheap force labor. Trade policies like the North American Free Trade Agreement
North American Free Trade Agreement
The North American Free Trade Agreement or NAFTA is an agreement signed by the governments of Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994. It superseded the Canada – United States Free Trade Agreement...
(NAFTA) and General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...
(GATT) are often regarded as financial measures serving only to economically oppress third world
Third World
The term Third World arose during the Cold War to define countries that remained non-aligned with either capitalism and NATO , or communism and the Soviet Union...
nations.
This could include:
- Unfavorable terms for monetary support from world banking institutions
- Coercive diplomacy to supplant local, regional or national leaders in favor of those who will act as demanded by foreign investors
- Increased prices for suppling basic medical supplies to nations based on ethnic or religious basis
- Refusal of trade agreements
- Restrictive trade agreements