We recently commemorated Dr. Martin Luther King’s birthday. What is the connection between his work and that of investors?
Dr. King campaigned to use non-violent methods to improve the civil rights of minorities. The dilemma of a minority group seeking to get legislative changes to obtain civil rights was that they would need to persuade the majority to grant them rights. It seemed like a hopeless task at first. Rhetorically speaking in the 1950’s one might ask why should the white majority use the power of democracy to provide civil rights to a minority group? Yet, despite all odds the rights were obtained. Part of it was that political office holders took action without necessarily getting the approval of the masses of people. Part of it was court decisions that don’t require voter approval. But ultimately the majority accepted it.
The protection of the right to freedom of speech, religion, property, etc. in 1776 in the Declaration of Independence and 1789 in the Constitution was crucial to establishing a firm foundation on which free enterprise could flourish. Yet affluent people and business owners are a minority. How could they, as a minority, manage to obtain rights from the majority if they were outnumbered in elections and not allowed to vote in some states? It was because of well-established customs and laws dating back to the Magna Carta in Britain helped to protect civil rights. The analogy is that by establishing rights for minorities this may indirectly shore up the foundations of free enterprise which is dependent on property rights to protect a minority group of business owners and affluent people.
The next time you think of an impossible to solve problem just think how Dr. King made progress even though his followers were not the majority and it looked unlikely they could persuade the majority to cooperate.
The development of a better quality of racial harmony in the U.S. (thanks to Dr. King) compared to other developed countries is something that makes our country more stable, safe and reliable for everyone including businesses. This lowers the cost of capital (which is heavily influenced by a hypothetical “risk premium”) thus creating the foundations for a business boom.
I have written an article “Catalyst for recovery”. The question economists and investors should ask is what will be the next catalyst for growth? It may seem difficult to imagine but somehow the economy will find a catalyst and grow just Dr. King overcame the dilemma of a minority trying to obtain rights from the majority.
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