You might consider this alternative perspective:

“Indeed, what is acceptable for white people to call African Americans and for black people to call themselves has evolved over the last century. The standard term has shifted from “colored” to “Negro” to “black” to “African American” as people sought to redefine themselves and their place in America.

Now, in 2020, “people of color” often is used to refer to the collective group of non-white Americans. It is offensive to single blacks out as “colored.” That, in part, is because of the painful segregationist history associated with the term prior to the mid-1960s. “Colored-only” restrooms and water fountains are examples of harmful relics of the Jim Crow South that black people had to fight, and die, to remove from American culture.”

https://www.chicagotribune.com/columns/dahleen-glanton/ct-da...

The question is why “people of color” isn’t an equally harmful relic, which the article doesn’t really seem to explain.

It also doesn't explain why "black" was preferred for a time, then it was verboten, and now it's preferred but you have to capitalize it. Nor does it explain why "African-American" was required for a time even though many Black people don't identify as African, and it's obviously completely inappropriate to apply to a Black person who has never left the UK, but that's what was required nonetheless.

Scott Alexander's hypothesis explains all of that. Constant change is what makes fashion fashion, and fashion is a very effective way to discriminate between the in-group and the out-group.

Jesse Jackson took initiative in the absence of other civil rights leaders and chose a term, African American. It’s really not that complicated. Just like people can acknowledge that BLM would be shitty branding and exists in the absence of other civil rights leaders, there is no committee and now its just about correcting people.

Do you have any thoughts on the cause of "the absence of other civil rights leaders"?

Scott Alexander is condemning woke culture in the essay you quote but the specific reason woke culture cycles through words is the euphemism treadmill.