Racism Pays: How Racial Exploitation Gets Innovation Off the Ground

Abstract

Recent work on the history of capitalism documents the key role that racial exploitation played in the launch of the global cotton economy and the construction of the transcontinental railroad. But racial exploitation is not a thing of the past. Drawing on three case studies, this Paper argues that some of our most celebrated innovations in the digital economy have gotten off the ground by racially exploiting workers of color, paying them less than the marginal revenue product of their labor for their essential contributions. Innovators like Apple and Uber have been able to racially exploit workers of color because they have monopsony power to do so. Workers of color have far fewer outside options than white workers, owing to intentional and structural discrimination against workers on the basis of their race. In the emerging digital economy, racial exploitation has paid off by giving innovators a workforce that is cheap, easy to scale, flexible, and productive—the kind of workforce that is especially useful in digital markets, where a first-mover advantage often translates to winner-take-all. This Paper argues that these workers should be paid the marginal revenue product of their labor, and it proposes a number of potential ways to do so: by increasing worker compensation or worker power. More generally, I argue that we should value the essential contributions of workers of color and immigrant workers who make innovation possible.