The Myths of Economic Inequality

Thank you.

Yes.

Well, I guess I first was very puzzled. There's one little correction I would make. At age 16, I was a high school dropout, and I went to work full time as a Western Union messenger, delivering telegrams. I worked in the area of Manhattan called the Chelsea District, around 23rd Street, 9th Avenue. And at the end of the day, I had several ways of getting back home. The easiest and fastest way was the subway, which was a nickel in those days. When I was feeling flush, I might go for a bus, for a dime. And then when I was really getting reckless, I would take the Fifth Avenue bus, which was the elite of the buses. Fifth was 15 cents. And it would take me up through all the glamorous parts of Fifth Avenue, past the Empire State Building, past the great stores. On 57th Street it would turn, past Carnegie Hall, Columbus Circle, there was no Trump Tower at that time, and on up to about 72nd Street, out to Riverside Drive, another elite area. So for miles you'd have all these luxury apartment buildings. And finally, around 129th or 130th Street, it would go on a long viaduct and do a right turn back into the occupied area, and there you'd see the tenements. And I would wonder, "Why is this? Why this huge disparity?" And there was no other explanation around. There was nothing there other than Marxism. I stumbled across it. I had not read Marx. I bought a secondhand set of encyclopedias, small set, for some ridiculously low price, and I looked up Karl Marx. I'd heard the name. And the stuff that he said seemed to make sense. The argument was that the rich had gotten rich by taking from the poor. That was one explanation. But what is interesting, there was no other explanation out there, really, and that's true largely in our colleges and universities today.

Some people are just stubborn. But what really changed me was not the University of Chicago. It was my first job working in a professional capacity for the government. I was a summer intern, while I was still a graduate student. I worked in the US Department of Labor, and I began to realize that the government is not simply the personification of the general will like Rousseau or others said. The government institutions have their own institutional interests. One involved the minimum wage law. I was a big supporter of that, but I also knew there was an argument that minimum wage laws simply price low-wage workers out of a job. My first assignment dealt with minimum wages in Puerto Rico, and as I looked at the numbers, I would see as they jacked up the minimum wage, the number of jobs would go down. But there were two explanations. One was the economist's, that you price people out of a job. The other was that there were hurricanes that had come through Puerto Rico during the sugar harvesting, I was studying the sugar industry, and it destroyed a lot of the crop, so you wouldn't hire as many workers. Now, in Chicago I'd been taught that if there are two different theories, there should be some empirical evidence in principle that could distinguish them. So I wrestled with that most of the summer, and one morning I came in and said, "I got it. What we need are data on the amount of sugar cane standing in the fields before the hurricanes struck." And as I waited for the congratulations, I could see stricken looks around the room, like, "This guy has stumbled on something that will ruin us all." And they said, "Well, we don't have those data." I said, "Oh, I'll bet the Department of Agriculture has it." He said, "That doesn't mean we have it. You'd have to have a request go up the chain of command to the Secretary of Labor. He would confer with the Secretary of Agriculture. It would come down the chain of command." I said, "Good. A journey of a thousand miles begins with a single step, so I will now submit my request to the Secretary of Labor," which I did. And I am still patiently awaiting this reply.

The US Department of Labor administers the minimum wage law. The money and the careers of perhaps a third of the Labor Department's resources come from administering the minimum wage law. One of the real farces is that the law itself, Section 4D, requires the Labor Department to study the employment effects of minimum wages, and those studies are absolutely a farce. Some years after I left, I did an article saying why those studies were a farce. And when I came back later to do some research, one of the older librarians who remembered me turned to the younger librarian and said, "This is the man who wrote that article that has everybody up in arms."

And of government in general, because the government is not the personification of the national interest. They have their own interests, and the Labor Department's was clearly an interest in keeping the minimum wage, because that's their jobs and careers and power.

Yes. In other words, they cannot proceed, as so many do, that good things happen automatically but bad things are somebody's fault.

It doesn't ignore government. Even for the market to work, you have to have a government, as Europe discovered when the Roman Empire collapsed and the economies collapsed also. But one of the reasons would be that with the government, you have surrogate decision-makers, and they cannot possibly know as much as the individuals whose personal decisions have been preempted.

He has the notion that good things happen naturally, and if there are bad things, it's because institutions, including civilization itself, have made these bad things happen. That's really the implicit assumption behind a lot of things said on the left today. That's why in my most recent book I go to a lot of trouble to show that in nature there's nothing resembling equal opportunity. Wherever you look around the world, you find people who live up in the mountains poor and backwards, even in the richest countries, including the United States. I believe the poorest county in the United States was a mountain community which was almost 100% white. And the men in that county had a life expectancy 10 years less than men in a county in Virginia.

Yes.

No, that is not a book meant to show one vision is better than the other. It's there to show you what they are and what you're assuming if you go one direction or another. It's to encourage people to understand the implicit assumptions, without which you're just at loose ends.

Oh, yes.

Yes. Part of a vanishing breed.

Even when I was a Marxist, I had the same intellectual standards. And that's what eventually led me away from it. I hadn't done all the research. I hadn't gone around the world looking for evidence. Socialism is a great idea. That does not mean it's a great reality. One of the things that disturbs me tremendously is this enthusiasm for Bernie Sanders and socialism at a time when people are literally starving in Venezuela, an oil-rich country. They're breaking into grocery stores to try to get food, fleeing to neighboring countries, most of which are not all that prosperous themselves. And none of that makes a bit of difference. I don't think most of these people cheering for Bernie Sanders have given a thought to Venezuela.

Oh, I have more. In Discrimination and Disparities I point out this is a pattern not peculiar to Blacks or even to the United States. You see the same thing in England and any number of other countries. The poor were much worse off economically in the first half of the 20th century, and yet in terms of their own behavior they had far more decent societies. Afterwards, after this welfare state that's supposed to make them better human beings, that's when the crime rate skyrocketed on both sides of the Atlantic. The British were famous for being perhaps the most polite society in the world prior to that. After that, you get things like the 2011 riots in London and Manchester. They anticipated Ferguson and Baltimore by a few years, the burning of buildings, the gasoline bombs at police, the whole schmear. And none of those people were descendants of slaves.

Yes. They're better off economically because of what's been given. But I got the first inkling of this years back when I was at some school in Harlem doing research. I looked out the window and mentioned that when I was a little kid I used to walk my dog in that park, and looks of horror came over the students' faces. Nobody in his right mind would have a child go into that park. The principal was warning these students not to cross this park, about a block and a half wide, even in groups of six. And when I told them how on hot summer nights I would sleep out on the fire escapes in Harlem, they looked at me like I was a man from Mars. People were doing that all over New York, Philadelphia, Washington. We didn't have the money for air conditioning. You slept out on the fire escape or in the parks. Walter Williams grew up in a housing project in Philadelphia, on hot summer nights people would sleep on the balconies, and the ones on the first floor who didn't have balconies would sleep out in the yard. Old men would sit outdoors into the wee hours playing cards or checkers. It was a different world. It was a safe world. Infinitely safer.

Again, you find the same thing in Britain, France, Norway, the Western world. There are any number of Western nations where 40% of the children are raised with only one parent. At the extremes, in Iceland two out of three children are raised in a single-parent home. In South Korea it's one out of 66. You're creating a situation where if the man stays there, the government will not give the woman welfare, and if he leaves, it will. When you pay people not to get married, more people don't get married.

A lot better. You would not have the same rates of crime. You can't have a welfare state in a democratic country unless you first have a welfare state vision, and when you buy all the assumptions of that vision, you're buying a lot of trouble. One episode epitomized it, in France: there were knife attacks by various people from North Africa against Chinese people in some suburb of Paris. And when asked why, it wasn't because of anything the Chinese had done. They said, "They have nice clothes and big cars. That's not fair." Egalitarianism as a philosophy is one thing, but the actual consequences are mean things like resenting other people's good fortune.

Well, that wasn't quite how I described it when I was there.

There are various laws and policies that benefit one group at the expense of another. But affirmative action has the distinction of being one that harms everybody, though in different ways. There's a lot of evidence that there are Black kids who have all the qualifications to be successes in college, who nevertheless are failures because they are systematically mismatched with institutions whose standards they don't meet, even though they may meet the standards of 80 or 90% of the colleges in America. I first became aware of this when I was teaching at Cornell, and I found that half the Black students at Cornell were on some kind of academic probation. I went to the administration building and looked up their SATs. The average Black student at Cornell at that time scored at the 75th percentile.

Yes. At most colleges in this country they would have no trouble, and many would be on the dean's list. But at Cornell, the average liberal arts student at that time was in the 99th percentile. When you're teaching students like that, you teach at a pace that most people of any race cannot keep up with. It was always complained that I was assigning all kinds of reading, but I'm teaching kids in the top 1%. They can keep up.

Yes. And succeeding at that.

No, but it's a universal thing to do. I wrote a book, Affirmative Action Around the World, and made a couple of international trips at the expense of the Hoover Institution to check on it. This is one of the most common arguments that is absolutely fallacious time and again. Like so much in the unconstrained vision, it assumes we have a power we do not have, cannot have, and never have had. In many countries these programs were set up with an actual cutoff date. In Malaysia, around 1990. In Pakistan, it was supposed to go for 10 years. None of those cutoff dates has meant a thing. These programs not only continue, they increase and spread. In Pakistan, the East Pakistanis were way behind the West Pakistanis, so there were preferences for the East Pakistanis. Before time for it to expire, the East Pakistanis seceded and formed Bangladesh. And the preferences continued right on, because other groups had been added, and once you get the constituency, you can't say no to them.

Yes. It's not the marriage as such or the library cards as such. It's that there are lifestyle choices that have been made. The comparison I made: if you look at the poverty rate among Blacks it was 22%, among whites 11%, but among Black married couples it was 7.5%. They not only do better than Blacks as a whole, they do better than whites as a whole. Similarly with the results in some of the more successful charter schools, you have these kids not only meeting but exceeding the national standards in places like Harlem, Bedstuy, the South Bronx. And these are not kids skimming the cream. They're chosen by lottery. They don't test them for ability. They take them into the schools, and they have hard work, they make it clear at the outset, and they don't tolerate a lot of nonsensical behavior. And these kids are doing incredibly.

That's gonna be re-conquering the same ground, which is very tough to do. But it can be done. I was so lucky. I left home in 1948. Many decades later I learned that the unemployment rate among Black teenagers in 1948, 16- and 17-year-olds, was 9.4%. Among whites of the same age it was 10.2%. So both had only a fraction of the unemployment they have today. And the jobs were there for you. This is because of a fluke. The minimum wage law, the Fair Labor Standards Act of 1938, was passed with specified rates of pay. Almost immediately inflation took off during the 1940s. So by 1948 those numbers in the law were meaningless. When I started as a Western Union messenger, the minimum wage was 40 cents an hour. I started at the bottom at 65 cents an hour. So it was the same as if there was no minimum wage. Now a Black kid 20 years later comes in. People have become compassionate. They've raised the minimum wage so he can't get a job. And I don't think it does any community any good to have a whole lot of teenage males hanging around on the streets with no job and nothing to do.

It would be nice to know his evidence for what he said, just to be old-fashioned about it. It was a rotten system, but I don't know how we get from that to reparations. What we see in the United States in terms of the bad things, you see all around the world. If you were to give reparations to everyone whose ancestors had been slaves, I suspect you'd have to give reparations to more than half the entire population of the globe. Slavery was not confined to one set of races. I suspect most of the people who were either slaves or slave owners around the world were neither white nor Black. This was a universal curse of the human species, and it continued elsewhere long after it was abolished in the Western countries.

If you were a slave owner, I don't see a reason why you should feel differently. On the other hand, I can't get over the idea of A apologizing for what B did. Even when they're contemporaries, much less when one is dead and the other's alive. Scalia said he owes no man anything because people who look like him did something to people who look like him.

Yeah.

No, it has not.

I think his policies, by and large, have been far better than those of previous Democratic or Republican administrations. Look, I go by the consequences. He hasn't produced the right rhetoric, but the fact is that unemployment among low-income people, Black and Hispanic included, is at a level far lower than it's been in decades. The economy is booming in a way no one had predicted. People like Paul Krugman were saying that when Trump gets in, the economy's gonna tank. No. The economy hit new highs. But there are so many people among the intelligentsia who are absolutely immune to facts. It's as if they took their anti-fact shots every year, and the facts will just not affect them.

This is the second consecutive president of the United States that I automatically turn off when I'm watching television.

Obama.

Oh, always. No other way.

Yes, and there's even a tendency to falsify the evidence. I think people become attached to a vision, and that really warps the way they see the world. Human beings have an enormous capacity to rationalize.

That really is one of the moral outrages. For many kids who come from a very poor background, a decent education is the one thing they have to have to have a better life. And these schools have been absolutely spectacular. A few years ago, on a New York statewide math test, there was an elementary school in Harlem whose students passed at a higher rate than any fourth-grade kids anywhere in the state of New York, we're talking Scarsdale, Briarcliff. The Success Academy schools as a whole pass both the math and English statewide tests at a higher rate than any school district in the entire state of New York. The vast majority of the kids in the Success Academy schools are either Black or Hispanic. If you look at the five highest-scoring school districts in the state, their average family income ranges from four times to more than nine times the family income of the kids in the Success Academy schools. And yet the mayor of New York is doing his darnedest to put a stop to the expansion of these schools. And this is happening all over the country.

The teachers' unions are the major reason. The money they contribute, the number of votes they contribute. And there's all kinds of chicanery to prevent the charter schools from expanding. That's why you have tens of thousands on the waiting list. It's not that the charter school isn't willing to expand, but every conceivable obstacle is put in their way. Because if you let that go at the natural pace, it would be very hard for the public schools to compete. And one of the things they're doing is imposing the same restrictions on the charter schools that made the public schools so bad, for example, restrictions on being able to get rid of kids who are running amuck and ruining the education of everybody else. The charter schools don't tolerate that.

You don't have to bring back the past, even if you could, because we have it in the present. We have this happening.

Yes. And the Republican establishment stands mute.

I would say get some facts first. Know what you're talking about before you start spouting this kind of stuff. In my new book I suggest a project: in the 1920s the highest tax rate was cut from 73% to 24%, and the argument was, "Oh, this is tax cuts for the rich," that the Secretary of the Treasury did this in support of a trickle-down theory. I suggest a student go read what the Secretary of the Treasury actually said, Andrew Mellon, and then go get the internal revenue official data on who paid how much taxes in the 1920s. And you find that Andrew Mellon said the exact opposite of what is attributed to him in textbooks sold widely for decades. When the tax rate was at 73%, the people making over $100,000 a year, maybe a couple million in today's money, paid 30% of the taxes. After the so-called tax cuts for the rich, they paid 65% of all the taxes. And people with incomes under $5,000 were paying 15% before the tax rate was cut, and after, they paid just under a quarter of 1% of all the taxes. There's all kinds of indignation in scholarly books, not just political propaganda, about how this was a bonanza for the rich. But the facts simply do not matter. They say the word trickle-down, and it's like saying abracadabra, and all the miraculous things follow from that.

"Logic, of course, is not the only test of a theory. Empirical evidence is crucial, and yet social visions have shown a remarkable ability to evade, suppress, or explain away discordant evidence. Historic evasions of evidence are a warning, not a model. Dedication to a cause may legitimately entail sacrifices of personal interests, but not sacrifices of mind or conscience."