Did American businesses profit from racial segregation?

Factual Questions
1

I wish I could come up with a more concise subject line for this general question.

Let’s go back to some generic small city in Alabama, circa 1960. There’s restaurants that will only serve whites, bars that will only serve blacks, lunch counters where the races are asked to sit on opposite ends, and so on.

I’m aware of Jim Crow laws, but I’m wondering how much of this segregation was required by some state law, versus what was voluntarily imposed by a business. If a restaurant decided that whites had to eat to the right, and blacks on the left … well, what did they get out of it? Was there a profit motive involved for such racially segregated services? Would a Woolworth’s in downtown Macon, Georgia, circa 1955, make less money than they could have if they had integrated seating at the lunch counter?

2

Rather difficult to believe that profit had much to do with it.

But certainily, if Woolworths unilaterally allowed blacks to sit at the white lunch counter, then you can bet that a decent percentage of whites would have boycotted that store within a short time.

“Whites would have boycotted…” Sounds kind of ironic, don’t it?

3

Actually, such an establishment probably would have been burned/bombed.

anyway:

As I heard, Firestone was nailed for the following:

it had a purchase contract (time payment plan) printed on a rather curious paper - it was white on one side, and yellow on the other. Both sides contained pre-printed contracts.
The interest rate printed on the white side was substantially lower than that printed on the yellow side.

The rule was simple:

Whites were presented the form white-side-up.

All others got it yellow-side-up.

Yes, there will always be scumbags looking to make a buck…

4

An interesting and difficult question. I’ll answer the easy bit: yes it is possible that segration was profitable, and you don’t have to assume anything about boycotts or indeed bigotry.

If two groups of people have different demand elasticities, it is profitable to separate markets and charge different prices if you can do it.

5

I would think that the most businesses that profited from Blacks would have been the agricultural ones. It was well known that Black labor in the groves and fields were paid low wages for grueling labor, without any of the amenities given to migrant workers today. Often, Blacks would be paid in check form, but knowing that most did not have a bank account, a check casher would be at hand. He would charge about 10% of the workers check to cash it for him. Blacks could also be charged for equipment usage and the old style way of weighing in or counting what each person harvested was unreliable.

Most farmers, and especially grove owners, provided the minimal amount of equipment for the workers, like fresh water and transportation. There were no breaks, except for lunch, no bathroom facilities and, in Florida, no place to escape the searing heat and humidity, nor the great grove spiders that often took up residence in the trees. A lot of the workers, too poor to bring lunches daily, ate the citrus they picked, often without the ability to wash off the pesticides that probably had been sprayed on them a day before.

The days were long, starting early in the morning and ending late in the afternoon. Minimum wage laws were probably a step up for the pickers. In many groves, the worker got a flat rate for picking the fruit all day long. Blacks were almost exclusively hired in Florida for years to harvest the citrus crops and to work in the groves.

The sugar cane fields were even worse to work in, with low pay and dangerous working conditions and almost forced labor that went even up into the late 1970s and early 80s.

6

It was not only blacks that suffered in the fields. It also did not happen mainly in the agricultural arena. The advent of the industrial revolution brought about all types of labor problems, which then brought about laws concerning child labor, wage laws, etc. It was not out in the fields that labor unions started and it was not just in the south that mill towns benefited from captive labor. The mines were in northern states, border states and southern states and the labor conditions in those mines were equally cruel in all areas. I point this out because I believe that Paxil30 touched on deplorable conditions that existed, but were not necessarily confined to the subject of the OP.

I was in high school in a suburb of Atlanta, when the case of Brown vs Board of Education was handed down. That means that for a portion of my life I lived under Jim Crow conditions. I have no doubt that whites took advantage of blacks economically but for the average person that had little to do with it. It was just understood that there were things that you didn’t do. Woolworths would have probably have been burned down if they had served blacks at the counter, but not by persons that had any economic reasons to do so.

I remember when I was in the seventh or eighth grade three of us would ride the bus to downtown Atlanta on Saturday to mess around and go to a movie. One evening on the way home the bus was crowded and we were standing towards the back of the bus. The blacks on the bus had gotten on first and were all seated in the back and there was one empty seat next to a black man. I decided to sit down in that seat, which was a mistake. All eyes on the bus turned to me and I was too stubborn to take the hint and get up. Nothing happened, but if it had I now realize that it would have been my fault, although I might not have been the one to suffer. In other words I had done something *“that you just didn’t do.” *

Even before Brown vs. Board of Education some things were happening that helped at least my age group accept the change. Beginning in the late 40’s R&B music became popular in the south with the teenagers. In Atlanta there was a black radio station that alternated between R&B and Gospel music (WAOK). We would not listen to the Gospel music, but every teenagers radio was tuned to WAOK when the R&B was on. There were concerts that featured people like BB King, Ray Charles, Fats Domino, Ruth Brown, etc. At these concerts there was a section set aside for the whites on a more separate but equal basis than any other example of segregation. This was because it was the blacks allowing whites to attend and perhaps there was an economical motive involved. It did not always go smoothly, since Nat King Cole was shot in Birmingham because of his appearance in one of these concerts. Again I doubt that the person that did this was economically inspired.

I am not defending Jim Crow nor am I denying that it was a horrible system. I have no doubt that what Hawthorne said has merit, but again for the average person it was not economics that kept the system going. A lot of it had to do with fear, if nothing else the fear of change.

7

In the period leading up to the US Civil War, advanced sections of the labor movement realized that free labor would soon be directly competing against slave labor as a national rail system developed and the South industrialized and that their wages would soon be in the toilet.

Whenever there are people forced to endure conditions worst than the rest of us, our wages and salaries are held hostage and living standards tend to fall. True in the Antebellum period and true today.

8

Just a thought…
It would be unprofitable for a business to be entirely segregated. If the resturaunt has two entirely separate eating areas, food prep areas, and even food suppliers, then the resturaunt iisn’t enjoying the benefits of economies of scale. If it is literally just two separate areas, the problem still exists, but to a lesser degree.

The only way it would be more profitable would be if segregation attracted more customers- which it might if the town was really racist and people picked their eating establishments based on how segregated the dining areas are, then it could be profitable.

9

I don’t know whether anyone ever did an economic analysis to determine whether segregation was good or bad for business.

I CAN tell you that in Dallas, TX, city business leaders controlled city government directly for many years. And well before segregation was outlawed, Dallas’ major businessmen and retailers (most notably Stanley Marcus, of Neiman Marcus fame)got together, agreed that segregation was ultimately doomed and no longer profitable, and essentially made a handshake agreement to integrate Dallas immediately.

Oddly enough, some black activists in the Dallas area regret that Dallas’ white businessmen made this decision on their own, based purely on their own economic self-interest. By doing that, Dallas businessmen made it unnecessary for black Dallasites to organize politically, as they did in other Southernb cities. And as a result, even now, blacks in Dallas lack the political clout you’d think their sheer numbers would warrant.

10

The folks in the back were black so those areas are common. The front part was segregated because that’s the way the white customers wanted it. The businesses stayed segregated to keep from losing customers, not becuase it made them more money. As you point out, a single area would make them more money, if they could keep their customers.

11

I know “American Business” it is to be read “white business”.

However, there were black business that benefited by catering to a niche that was destroyed by the repeal of Jim Crow (which no one in the right mind longs for).*

But “of black”/“for black” biz took a beating afterward. They had less access to credit, were often less educated than white competitors, there was a feeling (even in the black community) that the white grocery, department and other stores were “better”… these were all reasons some of the black biz were hurt upon desegregation.

*NB those black businesses with an equal and fair shot at white customers might well have prospered. i.e. they were not nec. inferior) just prejudice saw them so …

12

Economists HAVE addressed this, but not directly, AFAIK. It takes two steps to explain what little I know about it.

I. Of the several different market structures, the best, from a consumer’s point of view, is perfect competition between businesses. This involves a whole set of market characteristics, but the relevant ones here are that the businesses are indistinguishable to the customer - products are of identical perceived quality, same price (which in perfect competition is forced to be as low as possible while still supporting the business), and are equally accessible to the buyer.

II. Curiously, you can turn around the market relationships and similar principles hold. That is, from a business’ point of view, the ideal situation is a perfect market in customers. Where above businesses were thought of as competing for customers, here customers are thoguht of as competing for the attention of businesses. The new situation is symmetric with the old: economics most favor profits when the clientelle is undistinguishable, and analogous relationships to the above hold for this reverse relationship. The buyers should behave the same ways, be willing to pay the same prices under the same conditions, and be equally accessible. Economists have done a reasonable amount of work on this sort of thing.
The reason for these relationships is best understood in terms of bargaining power. If you, as a consumer, can go elsewhere for what you want to buy, you have bargaining power, which can be used to get a better price; or, in the case of a business, you have bargaining power and can charge a higher price if you can always go to different customers. That’s a bit simplistic, obviously, but it captures the general concept.
The worst case for the consumer, best for business (at least from a price point of view) is when a monopolistic business sells to a mass of interchangeable customers.
The best case for the consumer, worst for business, is if they are the only buyer (like, say, the government often is for defense contractors) and they are buying from a large pool of identical companies (perfect competition - NOT the case for defense contractors, which is why they’re still in business).
This is a fascinating subject, but I’m no economist, so I’ll let you pursue it further for yourself if you’re interested.
Bottom line: there were (and still are) certainly financial costs to American businesses that stem from the heterogeneity of consumers. The more heterogeneous the customers, the more true this is, so the Jim Crow laws created a less profitable situation for businesses than equality would have. Since equality was not the situation they were faced with, businesses adapted and kept blacks and whites separate, simply bearing the costs.

[You realize I’m speaking not as if businesses make these decisions consciously, but in the faith that they respond to market forces. I doubt white business owners realized, individually, the costs associated with Jim Crow, but if the social attitudes had been less restrictive I’m sure that over time the less segregated businesses would have had competitive advantage over the more segregated ones.]

13

An excellent, insightful OP question. Consider this:

Proponents of the Civil Rights Act of 1964 had concluded that their best hope of passing a bill that would survive a court challenge lay in grounding the act on the congressional power to regulate “interstate commerce” rather than on the Fourteenth Amendment. The argument made in the Civil Rights Act’s legislative history was that discrimination was bad for business — it made traveling, eating in restaurants, buying gasoline, and so on more difficult and dangerous for black Americans. While clearly true, this was a far less noble basis for a civil-rights law than a moral commitment to human equality.

See To an Unknown God: Religious Freedom on Trial by Garrett Epps, p. 232.