 Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I'm Aaron Powell. And I'm Trevor Burris. Joining us today is Dr. Thomas Sowell, who's a senior fellow at the Hoover Institution at Stanford University. He's the author of a great many books. His newest is Wealth, Poverty and Politics, revised and enlarged edition. And incidentally, it is unlikely that either Aaron or I would be working at the Cato Institute if it wasn't for Dr. Sowell's work. So this is a particular pleasure for us, so welcome to Free Thoughts, Dr. Sowell. Thank you. Let's start with what the central question you're setting out to answer in this book is. I guess the central question could be said to be disparities in income and wealth within nations and between nations. But really the more fundamental question to me is why people ever thought that there was any realistic possibility of even approximate equality given all the things that go into the production of wealth, and how all of those things vary enormously from one group to another, from one country to another, from one geographic setting to another. And much of the book is going into these kinds of things. And then only in the last section do I turn to questions of internal differences in what a country and income and wealth. That's the political implications of the book, which is interesting because there are many books about wealth, the wealth and poverty of nations, but some people who would read the books say the first part books like Jared Diamonds, Guns, Germs and Steel, for example, say, talk about some similar type of issues. But you think that the political implications of this are particularly important for many debates that we have today? Oh, absolutely. No, nowhere, more so than in the so-called debate that took place yesterday. One of the things that you mentioned several times in the book that I thought was interesting and was worth unpacking is this. We tend to, when people are talking about income inequality or inequality between countries, they tend to say, here's a possible difference, a correlation, but then it bleeds into causation. So if employers are paying one group less than another group, that must be the cause of the one group having less income than the other. And so I'm curious about, you say that these factors, and you list a lot of them, are maybe real but not determinative. Yes, I guess the crucial fallacy is in believing that the inequality existed wherever you happen to have kept collecting the statistics. It's really a very simple fallacy. For example, after discovering that children are raised differently in different groups, there are fewer and more or greater numbers of books and homes in different groups. Everything that you can measure is measurably different. And there have been years prior to the time of birth, to the time that the person applies to a job at a particular employer, there have been all kinds of differences. And now if the employer treats everyone exactly alike and promotes them or demotes them according to the same standards, they will nevertheless be very different outcomes if the employer, for reasons that originated years before they ever saw the employer. It's interesting because a bunch of my progressive friends, your thesis is obviously important to take account of, for example, the number of words that someone has heard before they're five years old, which is a pretty profound difference. But I have progressive friends who understand this and therefore they advocate for extreme progressive policies that get into the home. They understand that the differences go back before the point you measure them or before someone is employed. So they think that the government should actually get involved in those places beforehand, it seems to be accepting your thesis but going to a place of big government that is probably undesirable. It is fascinating that it doesn't bother them. They don't bother to check what has been the effect of previous government interventions, socially, economically and otherwise, which would not make that most obvious way you would think of curing a problem. So a progressive or at least someone who's more a fan of government intervention to address these problems. But they make the following sort of argument though that you said, okay, so let's take the example of disparities in pay between workers either within a firm or between firms. And so that's the point that we choose to measure the inequality, maybe because it's easier to measure it there than it is elsewhere. But it might be because we think that's the A, the most important inequality at the given time, that the inequality of how much people make has then profound repercussions for what they can do going forward. But also because we could say that the causal change, there might be a cause for why they're getting paid less as at some point in the past, like they had access to worse education or different styles of upbringing. But the causation also goes forward into the future, that yes, we can't go back and fix the fact that some people had a worse upbringing in different ways than others. But right now we could say, here's an inequality and if we address this inequality not only to address it now, but we will address it going forward because then those people will be capable of providing the kind of upbringing for their children that will keep them out of these troubles in the future. I'm always impressed by the ingenuity they can go into these arguments. If it's just a matter of income, that might make some sense, but when it's a whole constellation of causes behind the existing inequalities in ability to earn income, I don't know why anyone would think that just by changing one factor, namely income, you would then cure all these other problems that led to the initial inequality that you're concerned about. For example, I mentioned in the book, there are people who are quite prosperous, who have very few books in their home, and in this very systematic way, you can go back through history when Olmstead was making his trips through the Antebellum South. He noticed that there were plantation owners who seldom had many books in their home. It wasn't that they couldn't afford books. That was not part of what their culture led them to do. Meanwhile, in Scotland, 100 years earlier, ordinary people, working people, had books, and those who couldn't afford books, there were lending libraries all over Scotland so that you could go in for a few pennies, a borrow a book, and read it, and so on. The question is, do you want the books, do you see the importance of books? And if you don't, you can be a millionaire and remain an Ignorantist. Now, aside from books, your chapters or your sections are divided into different factors that contribute to this inequality that we've been talking about of why it would be absurd to expect equal performance amongst these groups. So let's talk about the first one of those that you discuss. You call it geographical factors. What are some of the geographical factors? Do you look at world history that make people have unequal outcomes now? Oh, my gosh, there's so many. I don't know where to start. One of the big factors is that navigable waterways cut the cost of transportation drastically. That is, land transport has always been much more expensive than water transport. And for that reason, cities are all around the world. Any major, almost every major city in the world is located on a navigable waterway. Yeah, the navigable waterways, so if your culture grew up, say, in the mountains, which you discussed, the kind of mountain people, then you have a detriment that could run forward several centuries in terms of the performance of your culture just based on access to these kind of waterways. Absolutely. There's a wonderful book about a mountain man who came down and went on to Gale and became a lawyer. And the struggles he had all along the way, just from the fact that he came from a culture that was not designed to produce that kind of career. And he has so many problems that a person born on the flat lands would never have had. And of course, yeah, so the world is different in a lot of different places, I said. The Mountain Man, I had read the JD Van's book, too, about mountain people. And of course, that's across the world. One thing you bring up that's particularly interesting is that they're prone to feuding not just in the Hatfields and the McCoys, but in other places, too. Yes, Thailand, Tibet, Afghanistan, you name it. So obviously, the geographical factors influence the cultural factors. But are there more cultural factors besides, say, just a propensity for knowledge acquisition or actually using large libraries that can influence wealth? Oh, many of them. One of them that people seldom give any thought to is honesty. That in a society where there is widespread dishonesty, corruption, they can have wonderful natural resources, can have highly intelligent people, and yet they can be poor and backward for centuries. Because the high cost of trying to do any kind of business in a country with widespread dishonesty. One of the things I quote in just one example of differences is there have been experiments done where some organization will go out and leave a dozen wallets with money in them and identification in them in various places around the city. And then they will wait and see how many of those wallets come back with the money still in Oslo, for example, 100% of them came back with all the money intact. And Lisbon, only one out of 12 came back. And that one was brought in by a visitor from the Netherlands. So you see there are other ways of measuring it. They measure which UN diplomats in New York pay their walking tickets, since all of them are immune to prosecution. Well, over a five-year period, the 24 UN diplomats from Egypt ran up thousands of unpaid walking tickets. Canada, with the same number of diplomats, had no unpaid walking tickets over those whole five-year period. However you look at any of these things, we find these enormous differences. And that means there's a great difference in the viability of investment in any of these countries, because you're likely to have your investment stolen from you in some of these places, but not in others. Some people might wonder, though, how persistent culture is, because I mean, is it really the case that if Egyptians, I mean, it is a pretty astounding, because these are all parking tickets that they didn't even have to pay, right? They were just paying. So Canadians do seem pretty nice in this equation, but these are actually Canadian nationals who are working for the UN. Is there any reason to believe that Canadians moving to America or people from the Norwegians moving to America three generations later will be more honest? Well, that's an interesting question, but what's even more interesting is that that question is never asked when discussing immigration policies. People talk about immigrants in the abstract as if there are no differences. You mentioned about how long this goes on. Back in the middle of the 19th century, John Stuart Mill pointed out the widespread corruption in Russia and said that this would be an enormous handicap in the economic development of that country. 100 years later, all the data indicate that that is absolutely so. One study showed that an oil company in Russia would stock from an oil country company in Russia would be worth some small fraction of what the same oil company would be worth in America because the market assumes that the people who run that oil company will loot it from the inside in Russia. So, there's a huge difference in where you're willing to invest because of that. Well, the interesting there, there's a touchiness to the cultural discussions, which I think is fascinating. You quote David Landis in the beginning of one of the chapters that says that culture in the sense of inner values and attitudes that guide a population frightens scholars. Some people might be feeling uneasy because it sounds like we're saying that Russians are corrupt and maybe we're criticizing Russians as a people and this seems to make people uneasy. Is that, it does make people uneasy, but should we not feel that way? Well, I suppose the question is whether you want to be polite or truthful. Is there a, can we tease out a causal direction for something like, let's call it cultural dishonesty that, so is it the dishonesty that is causing then the inequality or do we know if it's the inequality that goes on to cause the dishonesty, that if you grow up without a lot of security, you grow up without a lot of resources, you're going to be much more willing to steal and otherwise bend the rules than someone who's a bit more secure? Well, that's an interesting thesis. I don't know of a speck of evidence in favor of it and I know of many pieces of evidence from around the world, but the other way that, for example, when the Japanese were working in California as domestic servants and as, oh, the gardeners, the Japanese gardeners, once an institution in California, and they had access to people's homes. They either, they or people they know could have burglarized those homes and so forth, they didn't do it. You could run a long list of other people who didn't do those things. This notion that you can reduce all bad actions to bad things that other people have done to those who committed those actions just doesn't stand up. I grew up in Harlem in the 1940s and 1950s and I never heard a gunshot in all that time. And I have relatives who grew up in similar low income black neighborhoods in Washington and I've asked them, did you ever hear a gunshot when you were growing up? And the answer was no. Other relatives in North Carolina posed the same question, got the same answer. So it's no, no, there was not a predestination to poverty that leads to bad actions. Because if that was true, things would have been far worse in terms of violence in places like Harlem in the 40s and 50s than they are today, when in fact just the opposite is the case. Well, we're discussing, that's an interesting segue into your discussions of African American culture, which is discussed a lot in different ways. You make a good case that there's been, and you've made in many of your books, that there's been a pronounced change in African American culture that cannot be attributed to the legacy of slavery, most likely to the welfare state. But then of course, now that's a very uneasy thesis for a lot of people to make. And for a while, because it seems like where everyone says blaming the victim is the problem here. And of course, we also have the issue that there are some bonafide racists who might cover up their bonafide racism by blaming black culture. Is that the kind of thing that we should be concerned about when we discuss issues in African American culture, especially in the poverty of African American cities or neighborhoods? Well, we know that there are races now. But we also should know that there are a lot more of them in the past. And that black communities did not have the crime rate, and especially not the murder rate that they have today. So there are races, they are not omnipotent. Out of curiosity, the other thing that happened in the late 60s was the war on drugs, the ramping up of the war on drugs. So can we draw a link between the crime that happens in poor communities and because so much of it is drug related? Oh, I suppose one could try that. Incidentally, one of the big complaints about the drug laws is that they distinguish between crack cocaine, which is more common in black communities, and the other forms, and that their laws prescribe tougher sentences for crack cocaine. Again, the facts go completely against the narrative. It was black communities, black members of Congress, black leaders of all sorts, who insisted in time fast that there be stronger sentences for crack cocaine than for other cocaine, and yet many of those same leaders and spokesmen, et cetera, are saying now that's white racism. It's a matter of record that the black leaders demanded that rightly and wrong. The other factor that people might get uneasy about when we talk about culture, whether it's with African-Americans or Tamils and Sri Lanka or overseas Chinese, as you've written about, is whether or not you're bringing up IQ and mental capabilities as you title it, which is of course a huge third-weight rail that people do not like to touch. You have a very good explanation for why the IQ question is a little bit more muddy than just saying that these cultures have higher IQs. Well, yes. The argument that when genetic determinism is weak, it's the argument for other kinds of determinism. For example, there's one genetic determinist who has calculated the IQs, that's the pinches around the world, median IQ, and the per capita GDP. And he's found that there's a correlation. Well, yes, fine. But correlation is not causation. And if you say that it's due to the race, then you're left with to answer the question, why is it that the same race, in this case the Chinese, were world leaders for centuries on end and then declined into third-world countries, also for centuries on end? There was some genetic change that swept over the Chinese. And when this turnaround came, what we know from history is that the Chinese government changed its policies in order to isolate China from the west of the world. And one of the themes of the book, isolation is highly correlated with poverty. No matter where it is, whether it's isolation in the mountains, social isolation, political isolation, whatever, it's highly correlated with the backwardries. And so people who were world leaders in scientific and technological things for centuries descended after they were isolated to become third-world countries and prey to other countries that took advantage of it. Does this mean that we can be more optimistic going forward with the growth of technologies that allow us to be in constant contact with each other and with people all over the world? I mean, the internet, social media, all of that. Will that cut back on this problem of isolation? Well, it might, but it also, I'm not optimistic about panaceas. There have been too many of them. The internal culture of a group depends upon what they do with the social media. If they spend their time watching pornography or organizing riots, then that's one thing. But people are not the same. They're not going to look at the same opportunities the same way. So we look at all these factors, and in the book, you do a very good job of explaining in many different contexts how all these factors play together. But then when we talk about the political implications of it, that's when we really see the sort of relevance of people like, oh, are we talking about all this history and rivers because it's very important, as we mentioned. There's a cliche that you bring up, which I've heard a lot of my progressive friends say, which is the paradox of poverty in an affluent society. Essentially, the idea that why are there even poor people here in America or other affluent societies? What's wrong with that complaint? Oh, my gosh, almost everything. The fact that you are physically present where other people are productive does not mean that you are productive. And if you say that that can be cured by simply taking some of what they produce and giving it to you, that's been tried too, and it doesn't work. Because what really matters is the human capital, and you cannot confiscate human capital. What you can do is try to spread human capital, and it's one of the few things that you can give to others without having any less of it for yourself. So it's a wonderful thing insofar as people take the presence of groups that do have a lot of human capital and use that as an example to follow. That almost never happens. The political incentives are to promote resentment of those people who are more productive, who have more human capital. And this is around the world on every inhabited continent. So this is not peculiar to the United States or any other particular country. And so long as the politicians have incentives to do that and people have desires to believe such things, that going that route is not going to get you anywhere. Isn't this all a bit fatalistic? So you've said that geography matters and can have an impact on culture. And culture, so even then if people, even if they move, they may still bring their culture with them if they have access to technology, whether they use it to better themselves or not is going to be influenced by the behaviors that they learned, that we can't really fix it after the fact by say redistribution. What does this do for us as far as addressing? Because we all want to see a decrease or in an ideal world an eradication of poverty. And you seem to be saying that those of us who are in a position to give resources, make programs, institute policies are not in any way the cause, either the initial cause or the ongoing cause of the poverty of various groups or individuals. So where do we go from there? Do we just say, well, the poor are there, the poor are poor, and it's their fault and they need to figure it out. And are they capable of figuring out if it's all ingrained culture that they learned from an early age? No, the short answer is no. The idea that third parties, there's a limit to what third parties can do. One of the things they can do is stop making things worse. We look at the case of blocks. Heaven says blocks were freed in the 1860s. By 1900, most blocks were literate. That doesn't sound like much of an impressive record, unless you realize that people in Romania were not, most people in Romania were not literate decades later. And most people in India were not literate until half a century after the people in Romania were literate. So it's not inevitable. A lot of progress took place. For example, in the 1940s, the homicide rate among black males declined by 18%. And in the 1950s, it declined by another 22%. So the notion that there's no progress possible. But it's in the 1960s, when these terribly bright ideas were all the rage and were put into effect, that's when the downward movement and the murder rate reversed itself, skyrocketed by 89%, wiping out all the progress of the 40s and 50s. So the first thing that should be, I guess let's go the way back to Greek times, do no harm. If the people on the left would just stop doing harm, it's amazing how much other people can do. In education, most of the great ideas that came, the supposedly great ideas that came in in the 60s have made the education situation worse. But right now, and many of the charter schools, the black kids are scoring at levels that other people score in in the affluent suburbs, while the kids in the regular public schools are scoring below the 10th percentile. And in many cases, the charter school and the public school are physically located in the same building. They don't go around building a lot of separate schools for charter schools. And so you have kids from the same ghetto neighborhood being educated in the same building. And one set of them, scoring near the top and the other set, scoring down at the bottom. And it's not because the people of the kids who are in the charter schools were cherry-picked. They were selected by lottery, who has a pure chance who the charter schools get. And so there are things that are working, but those things that are working are not involved. They don't minister to the political or ideological satisfaction of people who are involved in these kinds of things. And therefore, many people who think that they're friends of blacks are opposed to charter schools, for example, along with many other things that are helpful that they're opposed to. Your book seems to have immense ramifications for a word that has become pretty common, at least particularly recently. And you write about in the book, which is the word privilege. Check your privilege. Are you a privileged minority? Are you a privileged individual? What does the word privilege mean to you and why is it being misused? Well, the root of it is that it's a private law that you have your own different set of laws by which you are allowed to play. But the main thing to me is that a privilege exists, ex-ante, it exists at the beginning as a precondition for what comes afterwards. But an achievement is what is actually done afterwards. They're fundamentally different concepts. And therefore, does this affect how we should think about inequality? There are people who achieve, and a lot of people would say, okay, so people who have achieved will often say that it's my hard work that made me achieve, which tend to be the story you tell yourself. But why should we treat achievement then different than understanding that they came from a place that might have been ahead of other people to begin with? Of course, one thing about achievement, especially in a market economy, is not simply a benefit to the person who achieved. If someone becomes a surgeon, yes, that will raise his income, but he will save lives over the course of his career. And so it's not just a question of him versus somebody else. Society is better off when it has more people who can become surgeons, and fewer people who become criminals. Or even fewer, I mean, a lot of surgeons would be good in general, fewer people who, as productivity grows, which you really focus on the idea that productivity is really what we're talking about in terms of getting people into careers that give back. You can't be productive. There's a great line when you say people always blame greed, but just the fact of wanting money doesn't mean that people will give you money, you have to give back to get it. That's right. Among the people that drive me crazy are people on college admissions boys who are talking about how we must be fair to this applicant. Because applicant A, you see, at all the privileges, applicant B didn't have them, and therefore we must make adjustments as if we were God on judgment day. No, educational institutions do not exist simply to provide benefits to the people who pass through those institutions. Society creates these institutions so that people will come out of them and create benefits for the society at large. I mean, when someone like Jonas Salt went to a selected public school in New York, free obviously, and then on to a selected public college that was also free in those days, he created a polio vaccine that benefited everybody of every race, color, creed, income level, nationality all around the world. That's what the educational institutions supposed to produce, people who produce benefits for others, not simply make higher and have higher incomes for themselves. Let me try to push back or at least defend this particular use of privilege from the perspective of the political left, because I think a lot of them would say, well, no, we recognize the person who becomes a surgeon will become fairly wealthy and does that by saving lives. We're not upset about the professional athletes who get paid a lot. What we're upset about is exactly the kind of corruption that you were just talking about, is the non-productive. I think it's two out of three or seven out of the 10 richest zip codes in the country are located within commuting distance of Washington, D.C. It's unlikely that those people are getting that money by being productive. They're in fact privileged in exactly the way that you define privilege, which is they're taking advantage of laws in the system. Likewise, the Occupy Wall Street kids were not mad at Steve Jobs. They were mad at Wall Street bankers who were colluding with government to rig the game in their favor. Maybe what's instead going on is they're seeing the inequality as symptomatic of corruption. What game in what way? It's so easy to throw these phrases around. What game did they rig and in what way, the Wall Street people? I think the theory is they got Goldman Sachs got special privileges. There are a lot of exemptions for Goldman Sachs trade in special ways, for example, things like this. The rules of the game aren't equal even for trading entities. That's what lobbyists do, is they try to change the laws to work in their favor. Now, in no society that I know of is there no corruption. And yes, some societies are vastly richer than others. So to say that corruption must be the reason for the wealth, it goes against all the evidence that the corrupt societies, even when they have all kinds of other advantages, rich natural resources and all the rest of it, are seldom prosperous. So it's one thing to say that corruption exists, is another thing to say that it's general and still another thing to say that that is the reason for the disparities that we see. There's a part in the book that I think is particularly relevant to modern day. Well, there's a really good, in terms of politics in general, but maybe what we're seeing in this election here, you discuss how politicians treat, and you kind of mentioned this before, they treat productive minorities and how they kind of rabble rouse in such a way for productive minorities. And there's a part where he says that sometimes a particular skilled and talented demagogue, you say, can froth up resentment. That's a pretty common pattern. I mean, we might be seeing a particularly skilled demagogue right now. Yes. And it's a worldwide pattern too, is this is something that in terms of trying to find out to get people to focus on their own path in life rather than their belief that other people who are more, quote unquote, privileged took from them in some way, which is important to do, I would say, if you want society to advance. I think that the spread of the Marxism around the world is really an incredible phenomenon matched only by a very few of religions, the speed at which it spread and the further with which it was believed. And it's based on the notion that the rich have gotten rich by exploiting the poor. And if that was so, then you would expect ordinary people in countries run by Marxists to have a higher standard of living than ordinary people in countries run by where there's a capitalist economy. And yet in reality, you see the exact opposite. And nevertheless, this doctrine has persisted for 100 years. Well, one reason it seems that you mentioned this is one of your sort of things that these demagogues can tell the productive minorities or maybe other minorities is that the idea that something is not your fault seems pretty attractive to people, especially if you see yourself as relatively poor. I mean, we see that throughout the world, I would say. Well, I think in a sense, it is not people's fault. People in the mountains is not their fault. They were born in the mountains. They had nothing to say about that. But if you were born in the mountains, the chances of you doing well in the world are reduced enormously. One of the Blue River Fellows, Angelo Kodavir, who was here some years ago, once pointed out that you could draw a map across a line across a map of Europe. And he described how that line would be drawn and that your life is going to be very different if you were born east or west of that line. So in that sense, it's not their fault. When we try to look for fault, we're ignoring causation, which is something entirely different. So this book is, as we said at the beginning, you've written an astonishing number of books in your career. So how does this one fit into that overall project? Do you see yourself as having an overall project in the scope of your work? And then how does this book play into that? I guess I write one book at a time. And a very wise lady told me many years ago, did not assume that everyone who reads your book has already read your previous books. And so this book has grown out of research that some of which have appeared in other books and it's brought together in a different way now. But there are so many things that still at this late date need to be reexamined. I mean, just listening to the presidential debate the other night left me aghast. Within the first 15 minutes, most candidates said repeated fallacies that had been refuted decades ago or in some sense, in some cases a centuries ago. So there's work to be done and I tried to do it. One of the things that we haven't talked about all the income statistics that are thrown around with such utter recklessness. That was my next question actually. So please go ahead and ask at this. Yeah, what is wrong with income inequality statistics because we talk a lot about the fairness and these statistics on free thoughts. So and you do a very good job of explaining this. Well, the biggest problem is they refer to particular income brackets as if they contain the same people and they don't. Most people who stop and think about it is very simple. They start out in entry level jobs and over the years they rise up and to hire paying jobs. They have to have more experience, training and education to hold that. I mean, my first job paid me $2 a day. A fortunately Stanford University does not pay me $2 a day now. You have statistics that are about brackets rather than people. Let me put it differently. The kinds of statistics that are much more rare are the statistics that take a given set of human beings and follow those human beings over time and reach conclusions based on that. The conclusions you reach from those kinds of statistics are the direct opposite of the conclusions that you hear. So much talked about. For example, how the top 10% or 1% or whatever are getting over a period of time are getting virtually all the benefits of the economy. If you follow those people who were initially in the top 10% and you come back at the end of a decade, you will find that they made less of an improvement in income than the people who are in the bottom 20%, let's say. But of course, they're different people. The turnover, most Americans do not stay in the same 20% for more than one decade, much less over a lifetime. And so we're talking about phantom people and we're talking about these various percentage. Is there a type of inequality that matters? With all the discussion of inequality, is there one that matters? Yes, all of them matter. The question is what can you do about it and you can't decide that by arbitrarily assuming things that are demonstratively false. Thank you for listening. If you enjoyed today's show, please take a moment to rate us on iTunes. Free Thoughts is produced by Evan Banks and Mark McDaniel. To learn more, find us on the web at www.libertarianism.org.