Wealth, Poverty, and Politics

Good being here.

Well, I think there are a lot of people who regard, so-called disparities and, inequities in income, as something that requires some great, explanation, seem to assume that, in the absence of some intervention, everyone would have something roughly equal, income. virtually everything that goes into the production of income varies enormously between groups, between nations, between people on the, on the flatlands and the people in the mountains. You name it varies.

Yes.

Well, good heavens, yeah, and especially if you look back through time. really it's o- it's only within the last five or 10% of the existence of human beings that there's been agriculture. I mean, think what that means, that people had to f- feed themselves huntering, hunting and gathering, fishing, herding animals. But... And of course, that meant that you couldn't have cities, because, you, for all those other ways of living, you'd need an enormous amount of land per person. Right. if you were to c- one Manhattan would probably be enough, you know, to sp- spread famine throughout the world. so that I start with geography because that's the most, implacable, obstacle. And, geography is nowhere, anywhere close to being normal. For example, just geographic, phenomena. and the great majority of all the tornadoes in the entire world occur in the middle of the United States. You don't hear about tornadoes in London or Paris or Beijing. and you don't hear about them in New York or San Francisco, for that matter, that just in one little place in the world, all the conditions are there for a tornado alley. as true with so many other things, nothing is evenly spread out. The, the, there are rivers on every continent, but the rivers aren't the same. -

Yes.

Well, the, the, rivers in Eastern Europe tend to flow, into s- into lakes and inland seas. And so when you, when you get to the end of the Danube or the Don, you are not out in the open ocean. you know, y- your, y- You're in the Black Sea or the Caspian. Ca- That's right. Right. And then if you wanna get to the Atlantic, you have to go the entire length of the He- Mediterranean to get out there. the rivers in Russia, most of those empty into the Arctic Ocean, which is not quite as convenient as the Atlantic or the Pacific. and what that means is that you can't have the commerce, you can't have industry and whatnot to the same extent that you have. More importantly, you're not connected with the rest of the human race to the same extent. And one of the, one of the major findings I, throughout the book is that isolation almost invariably means poverty and backwardness.

Yes.

Oh, sure. Well, certainly in terms of not just sheer knowledge, you don't have the same knowledge, but more than that, you're not aware of what, how the ve- basic things of life are done differently in other parts of the world. And so people who are isolated will keep doing things for centuries or thousands of years. So for example, when, when the British landed in Australia, they find the Australian Aborigines are living really at a Stone Age level. Similarly, when, people from Europe, got, came to the Canary Islands, the same thing. They had no idea of iron. in Australia, they had no idea of iron. It's one of the great sources of iron ore in the world.

Yes.

Yes. As, as one, economic historian s- said, you know, "The world has never been a level playing field."

Partly, that would be simply the, n- knowledge of how to use things. as I mention in the, in the book, the main difference between us and the caveman is simply human capital. Don't forget, the caveman had all the, all the natural resources we have today, and he had them in greater abundance because none of it had ever been used up. But he didn't have what, the knowledge that it would take to turn those to his own purposes.

Yeah.

Yes.

Oh my goodness, the overseas Chinese are settled largely in Southeast Asia. Many of them came there with little more than the, the clothes on their backs. there was one, Chinese millionaire in one, in one of the countries who had in the, in the, the foyer to his, mansion this, stick with a, with a little, cloth thing tied to it 'cause he walked into, into this place with that stick, all his belongings in this little cloth thing tied to his- Wow like, stick over his shoulder, and he took off from there.

Oh my heaven, that's been in so many places. my gosh, the, the Lower East Side of New York, one of the most terrible places when the Jews landed. the, poverty and, squalor is just unbelievable. in fact, even as late as when, as, the 19, late 1940s when I went to school on the Lower East Side, I'd always heard that all Jews were rich. And when I saw the Lower East Side, I was like, "Why are these rich people living like this?" The, the, the buildings on the Lower East Side were older and in worse conditions than the buildings in Harlem where I lived.

No, -

Yes. and it went by generation. The generation that was there first, even when they rose up where, to where they could have moved, they didn't because many of them, were not fluent in English and so on. Right. And so you could live on the Lower East Side knowing only Yiddish- Right... and find doctors, lawyers, anything you wanted, go into stores and so forth. and if you moved up to, upscale places like Harlem, which was once Jewish, or to the Bronx, which at another time it w- became Jewish, you would lose that. The more acculturated people, the next generation who spoke English and were more familiar with American society, they lived in those kinds of places.

But well, for one thing, there's no, there's no particular reason to have expected the indigenous people to have acquired the same skills that the people who came there had. and worse yet, the leaders of these groups are very quick to blame the fact that they are lagging on the other groups who are more advanced. one of the phrases that you often hear that this group took over this whole industry, and in many cases there was no such industry until they came there and built it.

They did not take it over.

Oh, the, the Soviet Union was one of the most, richly supplied, countries with natural resources and probably the most richly surprised, supplied. it was the only industrial nation which has so much petroleum that they export oil.

They have some s- fat... I f- I don't remem- don't remember the fat- the fraction, but they have a substantial part of the world's supply of natural gas, which they're now supplying all over Europe. iron ore, manganese, you name it, they had it. At one time, s- something like half the industrial diamonds in the world came from the Soviet Union. the land was so rich that when Hitler s- sent his army in to invade the, the Soviet Union during World War II, he had plans to have the railroads take back this land, from Russia into Germany because it w- it was that well known for its, extraordinary- You mean

That's right. That's right.

It's one of the most fertile sections of the... And the irony is one of the world's great famines occurred in the Soviet Union.

Mismanagement by the government. And- Milton Friedman once said that if the, if the government took over the Sahara Desert, there would be a shortage of sand, and the s- and the Soviet Union, it was, it was just that way.

hmm.

No, it- What's the- It... You're, you're seldom hiring a whole group or, or, or admitting a whole group to college. What you're doing is, is judging individuals. and the predictive validity is really a totally separate question from the question of genetics versus environment. See, in other words, if the IQ test, does not have a single question about flying an airplane, and you give it to people who want to become pilots, the only real question is, do the scores on those tests correlate with the subsequent performance of people in the air?

But you see, I mean, it's, it sounds so simple when you say it that way. But the Supreme Court of the United States had a totally different take, that the, employer must validate, a test, that is, that is not job related. And so what they're saying is, it's a question of whether this test seems plausible to third parties who have neither expertise nor experience on the job, and that would be the criterion for whether it's a good test.

Well, i- it's that for, th- diversity really doesn't do anything for you. there are many cultural th- Doesn't

As a society or, or the people in whose interest you're, you're promoting diversity. In other words, when Black, Hispanic kids go to schools other than those three, they get a load of diversity. it doesn't do them any good. For example, as of about, 2012 or 2014, I forget the exact one, the percentage of Blacks at Stuyvesant High School was 1/10 of what it was 33 years earlier. So there's been a major retrogression. And so while they're being tau- being f- their heads full of, diversity, the Asian students are learning math and science Plus, the, the schools are also, another, point against diversity is that in years past, those schools were so heavily Jewish that Stuyvesant was referred to once as a, what is it? A free, a free prep school for Jews. Well, they weren't diverse, but it was very successful. And now, Asian Americans outnumber whites by more than two to one in all three of those schools. It's still not diverse, but they're turning out people who do marvelous things, and that's what they're there for, to benefit the society, not to present this tableau that will please a handful of people.

Well, as of 1940, 87% of Black households were in poverty. Over the next 20 years, that declined to 47%. This is all prior to the civil rights laws, prior to the social welfare policies of the Johnson administration. Over the next 20 years, it fell an additional 18 points. But that was not, that was just the same trend continuing at a reduced rate affirmative action's even worse because as I remember, the pers- I, oh, I'm trying to think now, the numbers. I think it was something like, poverty rate was something like 30% among Black pr- households before affirmative action, and a decade after affirmative action, it was 29%. This is not the same as the 40% decline that occurred before there were any civil rights laws and before there was any social welfare state.

It was that, but it was that, but it was also the massive, migration of Blacks out of the South.

That's right.

Yes.

Well, yeah, but when they, when they talk about things like this, they talk about the legacy of slavery.

Right. And, and, and I argue, well, empirically it's not that, it's the legacy of the welfare state. Because as of 1960, which is almost 100 years after slavery's ended, the majority of Black kids were being raised in two-parent households. But within one generation after the welfare state, that had dropped down to a minority, so that the majority of Black kids today are b- are raised in one-parent households. When you think about it, I mean, centuries of slavery and generations of Jim Crow did not destroy the Black family, but one generation of the welfare state did.

Something like that, yeah.

Yes.

well c- certainly this-... curves and economic history... this occurred at a time when the Black income was rising, and so was saying that previous generations of Blacks with lower income and more racial barriers s- stuck to- s- the family stuck together under those conditions. And under the new conditions, which were advertised to make for great progress, in fact created retrogression. And I think many people who were gung ho for the idea this was gonna be progress simply cannot, bring themselves to l- look at the evidence and say, "My God, we made things worse."

I mean, that what we define as poverty today, there was a, there's a Latin American scholar, a scholar of Latin America, he's not a Latin American himself, was saying that what we define as poverty here is the upper middle class in Mexico. most Americans' families in poverty as defined by the statisticians in Washington, and that's the thing I try to bring out, regardless of what we think of when we think of poverty, what it really means is whatever those statisticians say it means. And it, a- and that includes, the great majority of people who are in poverty in the United States by that definition. they have microwave ovens. They have, they have central air conditioning. I mean, I was in my 40s before I had a window air conditioner, you know? but the idea of central air conditioning. most own an automo- a, an au- a, one motor vehicle or more, and 14% own two or more mot- motor vehicles. they have like-

Yeah, no. the, in the, in the old days, particularly I'm thinking about the Lower East Side when the Jews lived there, you know, that the pop- the people were squeezed together in these tiny places. today, the average American in poverty has more p- space per person than the average European, not the average poor European, the average European period. And so all those things by which we've spoken of poverty in the past, those things have long since gone. But the other part of the story is that doesn't mean they've got it made. On the contrary, they have catastrophic problems because the same mindset that has created the welfare state, the same non-judgmental philosophy, has also led to a great le- deal of leniency toward criminals, and so you have runaway crime, and people are living in fear. I'm sure that when I was growing up that we n- we never had any of, any of the stuff that, people in, on welfare have today. but, you know, I could speak- You,

Yes.

Oh my God, no.

Had... We thought we th- we were a big deal we had radio.

Oh my g- the thought never crossed my mind

I don't know. Okay. I only wore one at a time, so...

Oh. They were not. They must have overlooked me somehow.

Well, let me, -

Yes. But, you know, you mentioned about L.L.Bean. My sister was visiting me from, the East Coast once. Was- said, "You know, the people in the ghetto would not right- wear the kind of khakis you wear." I said, "What's, what's wrong? I got these, Dockers and, what's wrong with them?" No, they want designer, things. I hear about the, t- tennis shoes that are bought there. I mean, I wouldn't pay that kind of money for regular shoes. You know, you know, and-

No. but fortunately I lived across the street from a public library. but other, but other than that, I c- I don't know if I ever bought a book when I was growing up.

Newspapers. -

Called acting white.

Nobody ever said it.

But, but of course-... teasing you... I ha- I had, I had a sense of security that you simply cannot have. And if you look particularly at the public housing, project-

Yes.

I mean, I w- I can remember more than once waking up at midnight and deciding I will go out and buy a newspaper to see how the baseball, the baseball scores are. And so I... And the, and the guy who was, who was selling them was a very small, elderly white man, down at the end of the block.

Today, both of us would be taken into custody and sent in for mental observation for being out there in the middle of the night.

It's, it's squality of, squalor of behavior.

Thus far it hasn't been. one of the real problems, and this is, this is not peculiar to the United States or to any group in America. ethnic leaders, particularly leaders of groups that are lagging, are a major obstacle to advancement because their self-interest, is in keeping their group isolated. And they... And, and isolation has been tied in with poverty for all kinds of groups and all kinds of settings around the world.

Yes.

But un- yes. But unfortunately, Al, the Al Sharpton types, have pr- have been the rule rather than the exception for groups around the world. Back in, 19th century, Bohemia, where the Germans, again, for a whole lot of, -

Because of my research assistants.

the Germans had all kinds of advantages that came out of history, which we could go into if you felt like it. but for example, if you were in ear- in the fr- in the early 19th century Bohemia and you wanted to, go to high school and, and you were a Czech You would have to learn German 'cause there were no high schools in the Czech language until 1848. And so that, but that was a condition common throughout Eastern Europe, that the Slavic languages became literate centuries after the German language did. And therefore, there was a huge buildup of knowledge in the German language that was not equally available in Slavic languages at that time. Nice. And so if anyone who wanted to become an educated person and go into the professions, they had to learn German. Now, you would think that then, that the, leaders, if they were looking out for the best interests of their followers, would say, "For heaven's sake, learn German and move on up." No. They would've, they would, they fought tooth and nail against it.

Well, it, it's, it's hard to know where to begin when someone misses the whole point of the whole book. of course you... The big confusion among the redistributionists is between opportunity and outcomes. And one of the examples I used in a recent column was that, you know, when I, when I was a, a kid, I briefly tried to play basketball. And, I mean, I was lucky to hit the backboard, never mind the basket, you know. But I had ex- just as much opportunity to play basketball as Michael Jordan had. You cannot measure opportunity by outcomes, and that's what the redistributionists insist on doing. They say, "This group obviously d- didn't, didn't have equal opportunity because they were turned down for loans more so than that group." Yes, if you have lower credit scores, you'll be turned down for loans more so than people with high credit scores.

I thought I was pulling my punches.

I think that's true as an understatement.

Nor is the current president.

Yes.

He has displaced Jimmy Carter from that position.

The worst.

Yes.

Yes.

Richard Nixon did not, after all, put us in danger of nuclear attacks probably within the lifetime of people living today.

Yes.

We're, we're, we're committed to stopping the Israelis from stopping the Iranians from getting a nuclear weapon. That's part of the deal.

Yes.

Yes. I mean, there wa- there was a... When Warren Harding took office in 1921, the, unemployment rate was around 12%. Warren Harding d- did absolutely nothing. As the, as the, government's revenue fell because of the, of the, downturn, he cut government spending. Now, but now both those things are things that the ca- drive the Keynesians crazy.

The following year, unemployment had fallen to about half that level.

Yes. And then a year after that, it fell yet again. pe- you know, there is a history. at the first time the federal government intervened in the economy to get us out of a, of a, re- downturn was in 1930. Now which means that for more than 150 years, the federal government just stood by and twiddled their thumbs while the economy recovered on its own. In all that time, there was never a depression as bad as the 1930s depression, where there was all kinds of intervention, beginning with wh- Herbert Hoover helping helpers, and then amplified by Franklin D. Roosevelt. So in terms of you're looking at the, what happened as a matter of fact, again, there was no, there was no Federal Reserve prior to 1914. the Federal Reserve was created in order to, one, cut back, cut back on bank failures, reduce, inflation, and prevent deflation. All of those things reached historic highs never seen before under the Federal Reserve. So, the, the, the idea was wonderful. It's only the reality that didn't cooperate.

hmm.

That, that's a tough one, because whoever comes in there, he's gotta face the damage that has been done and the further damage that has already been set in motion. And, you know, you don't... One of the reasons we won the Gulf War with far fewer casualties than anyone ever expected, the first Gulf War- The

is that Ronald Reagan bequeathed to George Bush 41 a huge military establishment, so as you could send all this stuff in there and just wipe out the o- opposing army. Whoever inherits this situation is gonna be one where it's just the opposite, where we've had reductions in the armed forces, we've had cutbacks in all kinds of research and so on, and training. So, what is, what, what the next president has to op- to operate with is gonna be, just a very desperate situation.

I guess there's no such thing as, a, as a policy toward immigrants because there's no such thing as just an immigrant. There are immigrants from different places, different kinds of immigrants, and we don't even wanna discuss any of those things. You know, 100 years ago, they were talking about immigration. They have all kinds of data on crime rates, death rates, everything you can think of about immigrants from various countries around the world. We have... No one even dares to ask such questions today.

Oh, absolutely.

Yes.

Yes.

Economic good and presumably, preferably not, not p- plant explosives in various places.

It would take, it would take time, but even the modest, welfare reform under the Clinton administration led to, pe- more people actually going to work, o- once the gravy train wasn't there

Yes.

Yes.

Well, you could put it that way.

I would say read my monograph on trickle-down theory. there is no such theory. It, there,... Some years ago in one of my columns, I defied anybody to name any economist of any school of thought outside of an insane asylum who had ever advanced that theory. I pointed out that, Joseph Schumpeter's 1,260-page book on the history of economic analysis, printed in very small letters, you know, has no mention of any trickle-down. There is no such theory. It's a straw man that's been created, and it's pathetic that someone in the position of the pope would, would spout off about this. I would, I would say to him what I would say to anyone else, "You show me that theory, and I, and, and, you know, I'll, I'll give you $1,000, a down payment on, to- towards some laws-

Well, again, if he, if he has any facts, I'd be delighted to hear them.

It, you know, what is, what is so frustrating to me is that we've gotten away from facts and evidence. Not, some time back, someone pr- did a paper disproving something I said in 1970. Now, no one likes to be, found wrong. I was, I was actually pleased with it. It was one of the few times someone has come up with any facts to even bring into the argument.

No, I titled it Epilogue.

hmm.

It depends what they, what they decide next November.

You- I think, I think any- anyone who has watched the, so-called debates would find it hard to have much faith.

But you mentioned 1977. Things were terrible then. Note how quickly they turned around when Reagan, took office. For example, Iran released our hostages within hours of Reagan's in- inauguration.