Politicians love to raise the income inequality banner. “Wealth and income inequality is the greatest economic, political and moral issue of our time,” tweeted Senator Bernie Sanders during his bid to become the Democratic presidential nominee. Indeed others, such as New York City mayor Bill de Blasio and Massachusetts senator Elizabeth Warren, have traveled the country advancing the cause.
Thomas Sowell, a senior fellow at the Hoover Institution at Stanford University, argues this is a fool’s errand. His recent book Wealth, Poverty and Politics suggests that the roots of wealth inequality are more complex than politicians realize. Sowell dismantles many widely held progressive dogmas with a surgeon’s precision. Although brief, the book is thorough and broad in scope.
“Vast disparities in wealth, and in wealth creating capacity, have been common for millennia,” Sowell writes. These disparities, he stresses, are not permanent. While the ancient Greeks thrived, making significant advances in philosophy and the sciences, Britain was full of illiterate tribal people. But it would later dominate the world in the industrial age. The ancient Chinese, similarly, basked in prosperity compared with their European counterparts, inventing the compass and producing chinaware. During the 15th century, however, the emperors in the Ming dynasty cut off ties from the world. China no longer prospered, and it fell behind in the sciences and technology.
This ebb and flow of wealth occurs in today’s world and America as well. Studies by both the University of Michigan and the Internal Revenue Service show the extent to which wealth changes hands. The IRS, for example, found that of the people who filed tax returns from 1996 to 2005, those in the bottom 20 percent saw their incomes rise by 91 percent, while the incomes of those in the often-discussed “one percent” fell by 26 percent Sowell also finds that 56 percent of American households will be in the top decile, or ten percent, at some point in their lives. Much of this correlates with age.
He dismisses victim ideology, emphasizing cultural differences, which influence income disparities. “Cultures include skills and talents that more directly affect economic outcomes,” Sowell writes. Groups such as the Chinese, the Lebanese, and Jews escaping Nazi Germany all faced poverty and hardship, including language barriers.
They also came from cultures that valued education. It is no coincidence that Jews in 19th and 20th century Germany were overrepresented in universities relative to their population. “The Jewish immigrants then pushed their children on to educational achievements.” Sowell jokes that the first word of English learned by Fujianese Chinese was “Harvard.” The Lebanese introduced their children to family businesses from an early age. None of these groups prospered because of any kind of “privilege” or “rigged system.”
Geographic factors also play a role, Sowell argues. Geography is not egalitarian. In tropical Africa, for example, the crop yields per acre are a fraction of those in the United States and China. One geographical production factor is that areas with mountains and few waterways isolate people from commerce and foreign language acquisition.
Finally, Sowell asks whether politicians should reduce productivity, wealth creation, and improvements in living standards in order to make incomes more equal. The fortunes made by Ford, Bezos, Buffett, and others are by-products of many consensual economic transactions, which have raised people’s standards of living. Consider that before Ford mass-produced relatively inexpensive cars, “most Americans lived out their entire lives and died within a fifty mile radius of where they were born.” After making this point, Sowell laments: “Why third parties should imagine themselves entitled to intervene in such processes [as Ford’s], to which they contributed nothing, and to preempt the decisions of others, is one of the many mysteries of our time.” He acknowledges that the market has imperfections, but stresses that the alternative⎯state control of a nation’s resources ⎯shows a sobering record of misery. Major examples are Maoist China and the Soviet Union.
Dr. Sowell frames the income inequality issue in historical, sociological, and cultural terms, while others too often don’t. As in his other books, he examines causal arguments instead of moral ones, and points out that people often are unaware of the unintended consequences of their decisions. Regardless of whether one agrees with his conclusions, one will learn about economic history from reading the book.
Alleviating poverty and improving economic opportunity are noble goals. Politicians, however, exploit the reality of income disparities to amass more power. This is foolhardy and dangerous.