https://thefederalist.com/2018/12/07/thomas-sowell-explains-...

It still has to do with economic circumstance, but here, according to Sowell it's about the cost of employing empirical discrimination (judging each specific case through complete knowledge of the individual) instead of a proxy for empirical discrimination (like likelihoods based on a non-arbitrary characteristic such as income or neighborhood).

The solutions that follow from that conclusion are to find ways to make empiricism less costly, or to change the stereotype (such as people from a poor neighborhood are likely to be a bad risk for a loan).

Systemic racism tends to apply so much economic drag to the system that any form of capitalism won't allow it to stand. Apartheid in South Africa was systemic racism, and businesses were violating those laws long before they were abolished just out of profit-motive. It became obvious and common-sense for the system to be ended. Thomas Sowell, in that same work, points out that Type II discrimination (discrimination based on arbitrary characteristics like race, ethnicity, belief... etc.) always ends up being economically unfeasible.

> any form of capitalism won't allow it to stand

You raise an interesting point but I think that's an overly broad claim. Groups with strong internal adhesion and sufficiently high trust can remain xenophobic indefinitely.

It's also wrong on some level to refer to these things as arbitrary characteristics. They might be seemingly unrelated, but in a broader social context they are often far from arbitrary. Particularly when it comes to belief systems they can have direct and tangible impacts.