Wealth, Poverty and Politics: A must read for understanding group differences

Thomas Sowell’s book, Wealth, Poverty and Politics, provides a thorough explanation as to why nations and groups of peoples developed at different rates, how and why they rise or fall as a group or empire. There are only a few sections which I do not find convincing, such as his arguments on group differences in IQ and his complete rejection of the genetic hypothesis.

To summarize the ideas of the book, Sowell shows that 1) population differences emerged because geography has never been egalitarian, 2) cultural and geographical isolations are great impediments to development, 3) equal opportunity will not create equal outcomes between groups, 4) education is not human capital and has sometimes caused negative outcomes, 5) exploitation of the poor through either slavery or imperialism does not explain prosperity status, 6) poverty and inequality are so ill-defined to the point that comparisons are meaningless, 7) the government has a duty to please the masses through dubious tactics at the expense of economic performance.

• CONTENT:

• PART I: GEOGRAPHIC FACTORS

• Chapter 2: Waterways

• Chapter 3: Lands

• Chapter 4: Climate, Animals and Diseases

• Part II: CULTURAL FACTORS

• Chapter 5: Culture and Economics

• Chapter 6: Cultural Diffusion

• Chapter 7: Culture and Progress

• PART III: SOCIAL FACTORS

• Chapter 8: Population

• Chapter 9: Mental Capabilities

• PART IV: POLITICAL FACTORS

• Chapter 10: Political Institutions

• Chapter 11: Politics and Diversity

• Chapter 12: The Welfare State

• Part V: CONCLUSIONS

• Chapter 13: Economic Differences

• Chapter 14: Implications and Prospects

• Chapter 15: Causation versus Blame

• Chapter 16: Goals

PART I: GEOGRAPHIC FACTORS

Geographic settings vary greatly across continents. Geography is therefore not egalitarian. Due to changing human knowledge over time, and varying knowledge from place to place at a given time, equal opportunity historically never happened. Geographic isolations such as deserts and mountains played a huge role in these populations’ backwardness.

Yet there is no such a thing as geographic determinism. Interactions between geographic and non-geographic factors produce very different outcomes. To illustrate, the same geographic impediment can play very different roles across various periods, depending on interactions between geographic features with changing human knowledge. Oceans were once major barriers to communication and transportation, before the knowledge of science and navigation reached a level where sailors could safely cross an ocean, after which oceans vastly expanded the cultural universe of very distant populations.

Another example is the effect of sunlight in evaporating water. Even places with the same annual rainfall, and the same absorption of that rain water by the land, can have very different amounts of water in the soil to nourish crops if some places receive more sunlight than others. Growing human knowledge leads to new changes, which inevitably affects the existing natural and man-made environments.

Chapter 2: Waterways

The role of waterways as transportation arteries for cargo and people due to large reductions in costs is significant. Given the vast amounts of food, fuel and other necessities that need to be transported, there is no mystery why so many cities around the world have been located on navigable waterways, especially before the transportation revolutions within the past 200 years that produced motorized transport on land.

The African coastline is not only short, but smooth, with few substantial indentations, few good natural harbors, and fewer islands and peninsulas. Ships can seldom get very far inland through the river. China has had a huge network of navigable waterways. Rivers in tropical Africa are seldom continuously navigable for any such distances, even when these rivers have ample water. Another complication is the wide fluctuation in the water level of its rivers, due to highly varying rainfall amounts in different seasons. Yet in other parts of the world, where rivers are continuously navigable for hundreds of miles across level plains, as in the Eurasian landmass or in the Western Hemisphere, bulky cargoes become economically viable to transport by water. But there are differences even within the European continent, the rivers in Eastern Europe are often flowing into lakes or inland seas, rather than out into the open seas that connect with the rest of the world. It is one of the many reasons why Eastern Europe lagged behind Western Europe for centuries.

In tropical lands where the fertility of the soil is often poor, agriculture may not be sufficiently productive to support the population by itself. Fishing villages represent a step upward from a hunter-gathering society toward a sedentary life, even though these villages may not represent the same degree of population concentration as cities fed by agriculture.

Chapter 3: Lands

The east-west orientation of Eurasian landmass allowed similar crops and natural vegetation to grow in both places, as well as similar animals to have natural habitats in both places. Agricultural knowledge could therefore transfer between Europe and Asia. The peoples of the temperate zones of North and South America have similar climates, but they have been separated from each other by the vast area of the tropics between them, preventing knowledge from passing as readily and continuously through the tropics. Even if knowledge could spread, there would be limited applicability because the knowledge of one climate setting does not apply to the other, since north-south distances entail climate differences.

Another factor that is crucial for agriculture is the physical and chemical composition of the soil. Special features of the land, such as mountains, deserts and rift valleys, can fragment a population, as illustrated by the Balkan Mountains, the Kentucky Mountains and the Scottish highlands. Such vectors of isolation typically retard development and progress.

When observing people living in various mountain communities around the world, the most common patterns were poverty, isolation and backwardness. On mountainsides, fertile lands are rarely found, causing people to gather in the flat areas of land in the mountain valleys, which are often isolated from each other. The amount of usable soil in each valley tends to limit the number of people who can be fed, so that small villages have been the norm.

The geographic layout of particular mountains determined to what extent modern features were economically viable. For instance, building roads, water systems, sewage systems, or electric power systems, would be extremely expensive for these isolated and thinly populated mountain communities.

This sort of geographical restriction negatively impacts the exposure to external knowledge, religions, languages etc. The multiplicity of languages is rather telling, and reflects the isolation of their peoples. For example, of the more than one thousand languages in New Guinea, more than 70% come from the mountainous regions, which cover only one-third of the island.

Law and order were harder to establish and maintain in many mountain regions, even when under the control of a nation or empire. In past centuries, it was common in many mountain regions around the world for highland peoples to raid peoples living in the lowlands.

The deficiencies of the soil in Africa is such that the crop yields per acre in Africa are a fraction of the crop yields in China. The topsoil is often shallow, allowing little space for plant roots to reach deep into the ground for nutrients and water. The dryness of much of Africa inhibits the use of fertilizers to supply the nutrients missing in the soil. The rainfall pattern of long dry spells followed by torrential downpours is another handicap for growing crops. Wetlands in central Africa were not cultivated often due to tropical diseases like malaria and river blindness.

Indeed, geography has never been egalitarian. Fertile soils are never evenly distributed around the world. That inequality of fertility in the land has continued on to the present day.

Chapter 4: Climate, Animals and Diseases

The most striking social difference between living in the temperate zones and living in the tropics is not simply the difference in average temperatures. The number one life-threatening challenge that dominated the temperate zones of the world for millennia was growing and accumulating enough food during the limited spring and summer months to last through the cold winter months.

In lands where seasons change drastically during the year, people had to develop a sense of urgency due to seasonal requirements. This requires enough self-discipline for saving, but also necessary skills and knowledge to convert perishable foods like milk and fruit into storable foods like cheese and jam. In many tropical lands on the other hand, food was spontaneously supplied by nature. Also, tropical foods such as bananas and pineapples were not as storable in a hot climate as wheat or potatoes were in a cooler climate.

The Incas created a larger and more sophisticated civilization in the tropics than most societies elsewhere in the tropics. However, the climate in which the Inca civilization developed was a very peculiar one. Despite very little change in daily high temperatures during the year, there is a rainy season and a dry season, with large variations in precipitation. The Inca Empire also experienced overnight temperatures going down to freezing levels during winter and highly variable growing seasons for different crops. Overall, they underwent the same challenge as the inhabitants of the temperate zones, i.e., the self-discipline of conforming one’s lifestyle to the seasonally changing conditions in agriculture.

Many goods which originated in Asia became part of European culture, including paper, bells, printing, gunpowder, the compass, rudders, spaghetti, chess, playing cards and so-called Arabic numerals, due to convenience of land transportation allowed by horses and oxen. Much knowledge from the Middle East and North Africa also found its way into Europe. On the other hand, the limitations of both land and water transport for the indigenous populations of America before the arrival of Europeans meant they did not benefit from cultural diffusions, whether of languages, agricultural methods, animal domestication practices or political systems.

Horses were key to the conquests of the great mounted warriors of Central Asia, such as those led by the Mongols and Ottomans, who penetrated into the Middle East before extending their conquests up into Southeastern Europe. Horses were rare within China, India and Africa.

Isolation is a strong impediment to cultural and societal development. The presence of rift valleys, jungles, multiplicity of languages, and lack of navigable waterways, fragmented the indigenous people in Africa. Another factor of isolation is the lack of beasts of burden in Africa due to the tsetse fly that flourishes and carries a disease deadly to animals, which adds to the impediments to local transportation and communication. Beasts of burden were even more lacking in Australia before the arrival of the Europeans, and even farm animals like cows, goats or sheep were lacking. In fact, Australian aborigines were even more backwards in their development compared to Africa. Unlike the indigenous in Africa, the aborigines in Australia lacked iron despite having some of the world’s largest iron ore deposits. This highlights once again the role of geography as either a facilitator or impediment to a larger cultural universe.

Location is a significant geographic factor that increases opportunities to develop culture and civilization. Greece was located near where agriculture developed in the Middle East, which gave them opportunities that they used to make historic intellectual contributions. The Greeks gave birth to modern thinking, with Plato’s rationalism and Aristotle’s empiricism, and to the Western literary traditions, with their works on poems, drama, tragedy, comedy, the study of history. Similarly, Japan was located where China was readily accessible across water, and they took Chinese writing to make their own language and written language. This means they had an opportunity to become literate, centuries before other populations across Asia.

Part II: CULTURAL FACTORS

Physical capital does little to promote development. The European recovery from World War II has often been linked to the Marshall Plan, a US program. But subsequent efforts to promote the development of the Third World have failed. Something else was lacking. The human capital.

Spain, during its golden age in the 16th century, enjoyed their wealth with gold and silver pouring in from its conquered lands. But as they were living in luxury and leisure thanks to the products of other countries, purchased with the windfall gain of gold and silver, they did not have to develop their own human capital. More recently, Middle East’s windfall gain from oil allowed them to live in luxury and take a shortcut by importing technicians from Western nations instead of developing their own human capital to the fullest, which would explain the lower GDP/capita of various oil-rich nations.

Even within a given culture, different age groups often have different time horizons. Young people are often more focused on the immediate present, while old people often think of the long-run consequences. Given that different societies have different mixtures of old and young, those societies with a large proportion of young males are more volatile in their reactions to passing events. Even when leaders are of mature years, the political weight of the more volatile youth can influence policies focused on the immediate present.

Chapter 5: Culture and Economics

Different groups living in the same external environment can have very different productivity if their internal cultural values produce very different priorities. Environment is defined as what is going on around a group while culture is defined as what is going on within each group. Immigrants bring with them their own culture, wherever they go.

Poverty has been a problem for the new Chinese immigrants arriving in the United States as late as the 21st century, whether legally or illegally, from the Fujian province which has been described as a geographically harsh environment, mountainous and infertile. Like other immigrants, they have not scattered randomly but have concentrated in their own communities, located in this case in Brooklyn, New York. While most of the students admitted to the city’s elite public high schools come from middle class or higher-income neighborhoods, a great number come from lower-income neighborhoods where the Fujianese live. Fujianese parents often get their children tutored, increasing their odds to perform well on admission tests and to enter elite colleges.

Likewise, the initial rise of the Jews in America was not through education. It is after they have risen in business that the Jewish immigrants pushed their children on to educational achievements. Not all the doors of opportunity were open to them. Jewish doctors and lawyers could go into private practice but they were kept out of many hospitals and leading law firms. There were quota limits on how many Jewish students would be admitted to various colleges, and Jewish professors were a rarity before World War II. And when the barriers began coming down, the Jews had a backlog of fully qualified people ready to enter those institutions.

What mattered was not that the Lebanese, the Chinese and the Jews arrived first in various countries as immigrants with very little education, but that they came from a culture which valued education highly.

Many Cubans who had been professional and business people in their homeland, before Fidel Castro imposed Communism, fled to the United States, were unable to take much of their physical wealth and were unable to resume the same professions they had back in Cuba. They found themselves at the bottom, economically. These Cuban refugees, when their exodus began in 1959, had children who, by 1990, earned more than $50,000 a year twice as frequently as white Americans. The total revenue of Cuban American businesses was even greater than the total revenue of the entire nation of Cuba.

It is common to blame the poverty of some nations on exploitation by other nations or foreign investors, yet one would hardly find any nations that rose from poverty to prosperity by ridding themselves of colonial overlords or by confiscating the property of foreign investors. Still less often can nations be found that rose from poverty to prosperity by driving out various minorities widely described as exploiters such as the Jews in Eastern Europe, the Chettiars in Burma, the Asians in East Africa.

The downfall of Spain was rather telling. After its Moorish conquerors were driven out in 1492, the Jews were driven out that same year as well, and the Moriscos were driven out in 1609. The expelled Jews contributed to the economies of the Islamic world and helped make Holland a major economic power. After the Moriscos (Christianized Moors) were gone, Spain’s agriculture suffered because their replacements were unable to maintain the country’s intricate irrigation system.

The Italians were the largest number of immigrants to Argentina in the 19th and early 20th centuries. Unlike the Argentines, the Italians were willing to take on the hardest work, and to save, even out of low incomes. Seasonal migrants from Italy were in great demand as agricultural laborers, and have been credited with contributing to the vast expansion of agriculture in 19th century Argentina. That the land was always capable of growing wheat meant nothing before Argentina acquired people who could become successful wheat farmers. Argentines were consistently outperformed by immigrants, as the foreigners owned the great majority of the commercial businesses. Argentines were not noted for saving, and were in fact called “the spendthrift of the world.” In 1887, the Banco de la Provincia de Buenos Aires had twice as many depositors who were Italians as there were who were Argentines. During that era, most of Argentina’s masons, seamen, tradespeople, architects, importers, engineers and restaurant and hotel owners were also Italian.

In Brazil and Chile, a similar scenario unfolded: German immigrants established a flourishing agriculture. This leads the historian Fernand Braudel to conclude that the modern Brazil, modern Argentina, modern Chile were created by foreigners but not by natives.

Latin America was not unique in not simply failing to reach the standards of productivity set by others, but in positively rejecting and restricting those who were more productive, and explaining away their own lags by blaming “exploitation” by others at home and abroad.

Chapter 6: Cultural Diffusion

Cultural diffusion has taken place on a massive scale over the centuries for the own benefit of the people who made the choice to borrow particular features from others. The replacement of Roman numerals by Arabic numerals happened because Arabic numerals were simply better when it came to mathematical operations.

While China had navigable rivers, along with fertile land in its northern region, Japan was a rather small and mountainous country, with less navigable rivers, and with only a fraction of the country’s land being level enough for agriculture, and with a dearth of natural resources. Given these geographic handicaps, Japan unsurprisingly lagged for centuries behind China, during the era of Chinese world leadership in many fields. Japan’s rise to an economic parity with the leading Western nations was achieved by a mass importation of Western technology and Western experts to begin teaching that technology in Japan. Over time, the Japanese have improved to the point where most foreign experts were no longer needed and were gone, as they were able to produce many industrial products (though being cheap imitations at first) and, later on, they became pacesetters in both technology and quality.

During the Middle Ages, the Islamic world was more advanced, thus Europe learned much from the Islamic world of the Middle East and North Africa, especially in mathematics, philosophy, agriculture and architecture. The Christian scholars went to Cordoba and other Muslim intellectual centers to study classical philosophy and science while the Christian merchants learned Muslim commercial practices and techniques. Over time, the Islamic world has fallen off. One reason why Arabs are now lagging behind Europeans is lack of cultural receptivity. In today’s Arab world (a population of 300 million people) the number of books translated from other languages has been just one-fifth of the number translated by Greece alone (a population of 11 million people).

Pretty much like geographic isolation, cultural isolation makes it harder for individuals and nations to keep up with the advances of others. China’s decline from world leadership was characterized by reluctance to learn from others. In the 18th century, when King George III sent technological devices as gifts to the emperor of China as a proof of their advancements, the emperor replied that there was nothing China lacked. He said: “We have never set much store on strange or ingenious objects, nor do we need any more of your country’s manufactures.”

Chapter 7: Culture and Progress

Trust without trustworthiness is a formula for disaster. The Soviet Union was one of the most richly endowed nations on earth in natural resources, with such an abundance of petroleum, a soil of legendary fertility, and the world’s largest level plains, the largest reserves of iron ore, the second-largest deposits of manganese, and possessing one-third of the world’s natural gas, etc. Despite being gifted with a quantity of natural resources and well-educated citizens, the Soviet economy was far less efficient than the economies of Germany, Japan or the United States.

Corruption is typically characterized by the bribes paid, money stolen or goods pilfered. But these are all internal transfers, rather than being themselves net reductions of the country’s income or wealth. Instead, the main costs consist of what is not done, such as the businesses that are not started, the investments that are not made and the loans that are not granted, because their rate of return need to be much higher to make such activities worthwhile due to the much higher risks of being deprived of its fruits. To illustrate, the stock of a Russian oil company was estimated to sell for much less than the stock of a similar US oil company, due to the market expectation that Russian oil companies will be systematically looted by insiders.

Latin America has likewise been seen as a place where “the inability to trust and work with others” has been “antithetical to effective entrepreneurship.” Most of the countries rated as most corrupt were among the poorest, even when they had rich natural resources. Pervasive corruption makes investments too risky for either local or foreign investors to take a chance.

During the antebellum era in America, it was observed that many Southern businessmen paid little attention to their business and were unreliable when it came to either paying their bills or delivering goods and services when promised. The South did not lack in natural resources, quite the contrary, but its deficiencies in human capital (in both labor and management) handicapped the development of its industries compared to the North.

While years of education are often used as a rough proxy for human capital in general, not only is much human capital obtained outside of school, as illustrated in previous chapters, but education sometimes produces negative human capital, in the form of attitudes that negatively impact the economy. In the 21st century, Russia has been called “a society characterized by high levels of education but low levels of human capital.” In some cultures, educated people were unwilling to work with, or dirty, their hands, refusing to do any work that does not qualify as meaningful (i.e., agreeable and fulfilling). To illustrate, the industrial revolution was not created primarily by highly educated people. It was largely the work of people with practical job skills and experience, rather than a mastery of science or a systematic study of engineering. The industrial revolution was already well underway before the formal study of science and engineering became widespread. The industrial pioneers such as Thomas Edison and Henry Ford had very little formal education, the Wright brothers were high school dropouts and, in the electronic age, Bill Gates and Michael Dell were dropouts.

Choices of educational specialties vary across groups with different cultures in the same society. In Malaysia, during the 1960s, when university admissions were still based on academic qualifications, the Chinese were over-represented among university students. The disparity was especially great in mathematical, scientific and technological specialties. During the 1960s, Chinese students received 1,488 Bachelor of Science degrees in Malaysia, while Malay students received just 69.

Majority groups that are lagging economically tend also to lag educationally, both quantitatively and qualitatively. As university students they tend to specialize in easier subjects, rather than in subjects like mathematics, science or engineering. This in turn often leads to less promising careers, or to unemployment. The “educated unemployed” has now sadly become a common expression. Universities in Sri Lanka had “a backlog of unemployed graduates” who had specialized in the humanities and the social sciences. When individuals from lagging groups tend to take less challenging courses, they are unlikely to create as valuable services as people who study important fields such as medicine, science or technology. In the end, education becomes a boon only if its specific qualitative level creates sufficient additional output.

Despite beliefs that education makes people more tolerant of other groups, it has been precisely individuals from newly educated groups, often lacking marketable skills, who have promoted group polarization, whether in Europe, Asia, Africa or the Western Hemisphere.

PART III: SOCIAL FACTORS

Performances and achievements between groups are likely affected by the varying combinations and permutations of these groups’ arrival times, arrival locations, the complementarity or competition of other groups at the time and place of their arrival, the regions from which they come, their demographic characteristics in terms of age, sex, number of children, the skills and cultural values they brought with them. Given the complexity of these interactions, one has to be overly, unreasonably optimistic to believe that equality of achievement is even a possibility.

Multiculturalists tend to either dismiss the idea of cultural differences in economic performances and blame whatever differences exist on discrimination barriers. This has often been carried to the point of encouraging lagging groups to proudly cling to their own culture.

Chapter 8: Population

There is no consistent relationship between population density and either wealth or poverty. The historical trend gives no support to the theory that “overpopulation” causes poverty. Between the 1890s and 1930s, the increase in population in Malaysia was accompanied by improvements in material standards. A similar scenario has been observed for Hong Kong and Singapore since the 1950s.

Within a given nation, incomes and wealth vary greatly with age. These age gaps have increased over time. On the one hand, the physical strength of youth has become much less demanded due to the mechanical sources of power. On the other hand, more complex technology has made knowledge, experience and analytical skills more valuable. The net result is that the age at which people receive their highest incomes has shifted upward in the United States. The growing pay differential between experienced workers and entry-level workers suggests that human capital is increasingly in demand in an economy that is becoming technologically and organizationally more complex.

Child-rearing practices differ by race, as well as by class. White American parents communicate with their children three times as often as black American parents. Black homes have less than half as many books as White, and even black homes in the highest SES quintile have slightly fewer books than white homes in the lowest SES quintile. For these reasons, black children are handicapped from the start in both the quantity and the quality of their parents’ education. Adding to this, the large number of unmarried black women.

Immigration has not been random. People sort themselves out in all kinds of groups, within races as well as between races. Of the Italian immigrants who came to Australia between 1881 and 1899, 88% came from places containing only 10% of the Italian population. Not only that, but nearly nine-tenths of these Italian immigrants who came from the Mount Etna region of Sicily settled in the northern part of the state of Queensland, while Italian immigrants from the nearby Lipari Islands settled together hundreds of miles away, in Sydney and Melbourne. Similar clustering was observed in the US. During the era of mass immigration from Europe to America, Italian immigrants lived clustered together on particular streets within Italian neighborhoods in New York, San Francisco, etc. Similar clusters of Italians from particular places in Italy were also common in Buenos Aires and Toronto during that same era. Similar clusters were observed as well for Chinese who migrated to a certain region in the US or Germans who migrated to a certain region in Brazil.

People form clusters within the same racial/ethnic group as well. Within black communities, different people have clustered in different places. In Chicago during the 1930s, delinquency rates were above 40% in some black neighborhoods but under 2% in other black neighborhoods. Residential separation between different people within black communities was observed in Harlem and in other black communities as well.

In the past, there were other mass movements of people that have not been voluntary at all. The most involuntary transfers were those of slaves. But other peoples have moved into new countries as conquerors, as has happened in many places in many eras. Turks are not the indigenous people of Turkey, nor the Malays in Malaysia or the English in England. Often indigenous populations living in the lowlands have been forced up into the highlands or mountains by invaders, as the Vlachs were in southeastern Europe when masses of Slavs invaded the region in the Middle Ages

There is a fundamental difference between equal opportunity and equal probability of achieving a given outcome, yet often ignored or blurred, not only in popular discussions but even in scholarly studies. If equal opportunity (or mobility) implies the absence of external obstacles, it does not preclude group differences in productivity. If equal opportunity is defined as movement taking place independently of parental origins, then the statement is true by definition (i.e., immune to confirmation or refutation), and therefore scientifically irrelevant.

Studies by the Pew Charitable Trusts concluded that the vast majority of Americans have higher family incomes than their parents did and that 50% of Americans have greater wealth than their parents did at the same age. While there is conclusive evidence of intergenerational mobility, the evidence is ambiguous regarding social mobility. The numbers showed that 60% those raised in the bottom two of the wealth ladder remain there while 66% of those raised in the top two of the wealth ladder remain there. These studies however do not include immigrants, because of a lack of historical family and economic data.

Chapter 9: Mental Capabilities

In 1939, the proportion of US blacks attending the elite Stuyvesant High School was high, but it declined to 12.9% in 1979, to 4.8% in 1995, and to 1.2% in 2012. Sowell believes that such puzzling trends present a challenge to believers in either heredity or environment. There is no obvious genetic reason why blacks of an earlier generation were more able to meet demanding mental test standards to get into an elite public high school. An environmental explanation is even less convincing, since socioeconomic conditions have improved among blacks since 1938, both absolutely and relative to the general population. One of the few possibilities left is that the culture within black communities has in some respect changed for the worse over the years.

Thousands of volunteers from the North went into the South after the Civil War to educate the children of freed slaves, hoping to displace the Southern culture that blacks had absorbed. One of those institutions in the South was the first black public high school in the country. Although the IQ of blacks has consistently averaged 85 over the years, the average IQ at this school, called Dunbar High School after 1916, was consistently at 100 or above every year from 1938 to 1955. Dunbar was an all-black school during 1870-1955. This school had a cultural orientation that departs seriously from the ghetto culture. The principals of that school were highly educated. The school even issued a handbook on behavior to its students which gives instruction on how to act in school and in the world at large. In 1954 though, racial segregation in schools was made unconstitutional, and since then Dunbar became a typical ghetto school and the academic standards fell terribly.

A study of black youngsters in the racially mixed, affluent suburb of Shaker Heights, Ohio, observed an aversion to behaviors regarded as “acting white”. Another research found that the black children of doctors and lawyers are not thinking like their parents and they were instead looking at rappers in ghettos as their role models. When asked why they did not take school work seriously, many black students in Shaker Heights said that they knew they were going to be promoted to the next grade anyway. To make things worse, many black leaders and spokesmen, like leaders and spokesmen for other lagging racial/ethnic groups in various other countries, depict their group’s problems as primarily due to other people, and depict opposing those other groups and their culture as the way to advance.

Another puzzle for cognitive gaps comes from the KIPP (“Knowledge Is Power Program”) network schools which have a great share of Black (58%) and Latino (38%) students in public charter schools throughout the US. 87% are from low-income families. The KIPP schools network shares one feature with the Dunbar school: hard work. Yet the graduating seniors from KIPP high schools had an average SAT score of 1373, which is unusually high for these groups. Students from public charter schools had higher academic performance than students from regular public schools. The disparities in educational outcomes are striking when the public charter school is physically located in the very same building as a regular public school. Sowell believes that neither poverty, genes nor a legacy of slavery can explain the vast educational gap between public charter school students and the regular public school students from the same neighborhood who were taking classes in the same school building. Interestingly though, many charter schools were implicitly selective in that the parents who enter their children in the lottery can differ from parents who do not bother. This also shows that individuals’ values and choices are more predictive of outcomes than factors that governments can manipulate.

The egalitarian dogma gave birth to affirmative action. One widely acclaimed book was from Bowen’s and Bok’s (1998). They found that black students in their sample “graduated at higher rates, the more selective the school that they attended” which seemingly disproved the mismatch hypothesis. First, the authors aggregated all blacks, including those who were admitted with the same qualifications as others and those admitted under affirmative action with lower qualifications. Second, the mismatch hypothesis says that academic gaps correlate with failure to graduate within institutions. When this hypothesis is tested at individual institutions, as in Thernstrom & Thernstrom (1999), rather than in aggregations of institutions from different SAT levels, as in Bowen’s and Bok’s (1998), the mismatch hypothesis is confirmed. To be fair though, this is a bit more complex.

National IQ gap (or its genetic gap) cannot be the only factor that explains differences in outcomes, as Northern Europe has higher IQ than Southern Europe yet in ancient times it was the South that outperformed the North in its economies, science and technology. There is a similar observation for China who lost its once commanding lead over all the Europeans (and over Japan, which much later overtook China).

Sowell argues that, in the heated debate between heredity and discrimination theory, a third option that is often overlooked is that groups with different cultures do not necessarily want to do the same things. Even if they are, they may not put the same level of effort.

PART IV: POLITICAL FACTORS

In times and places where there was no effective government with law enforcement, people have improvised their own, whether in caravans crossing the deserts, or in many isolated mountains. Organizations such as crime syndicates on land or pirates at sea have set up and enforced their own internal rules.

Culturally less advanced invaders from various parts of Europe were capable of defeating the Romans militarily, but were not capable of running the empire, which fragmented and collapsed. The network of Roman roads and aqueducts fell into neglect, traveling became dangerous, and their various artifacts showed that the quality of their workmanship declined. This downfall coincided with the disappearance of an effective national government. It doesn’t mean that more government control is always better, as exemplified by the Soviet Union, but that at least some enforceable framework of laws are needed to guarantee the physical safety of the persons and their property as they engage in economic activities.

Chapter 10: Political Institutions

The process of forming larger governing or political units has the benefit of a larger protection of society and lower production costs by selling large volumes of consumer goods. This process is much slower in regions that are fragmented geographically, as in the Balkan mountains, or on small islands scattered across a vast sea, or in much of sub-Saharan Africa, with its limitations on communication and transportation. Peoples in such isolated places have usually been unable to create nations on a scale like that of ancient China or the Roman Empire.

The forces working against consolidation into larger political units include a multiplicity of languages and dialects among fragmented populations, preventing simple communication. Clan, tribal and religious differences have also solidified this isolation. The limited economic benefits of cooperation between these communities unsurprisingly reduce the incentives to consolidate.

There are special local conditions that made Switzerland and the Inca Empire exceptions to the handicaps that kept mountain populations poor and unable to form political units. For the Incas, seasonality, plus the vulnerability of crops to drought and hard frosts, as well as varying weather conditions across years, created the same life-threatening challenge as in the temperate zones. The Incas built large networks of food storage facilities, scattered throughout their far-flung empire, and developed ways of making some perishable foods storable. Thus the geographic environment of the Incas had them develop self-discipline and human capital.

Slavery has been observed everywhere. As John Stuart Mill put it: “almost every people, now civilized, have consisted, in majority, of slaves.” Even after much of Europe was consolidated into nations with military forces, there were unprotected coastal settlements that proved vulnerable to raids by the pirates from Barbary Coast of North Africa, who enslaved at least a million Europeans between 1500 and 1800. That is more than the number of African slaves transported to the US and to the American colonies from which it was formed. The Ottoman Empire also enslaved Europeans, taking away boys, who were then converted to Islam, trained and assigned civil and military duties in the empire.

The claim that slavery was the basis for prosperity of the Western civilization is not backed by any evidence. The American South, where slavery was concentrated, was for centuries the poorest region of the country, for its white population as well as for its black population. In Brazil, where slavery was concentrated in its northern region, this region was the poorest as well. By contrast, Brazil’s industrial development was concentrated in its southern region, and was largely the work of immigrants, most of whom arrived after the abolition of slavery.

In numerous empires, a common pattern was one in which the conquerors were of a race or culture different from that of the majority population that they ruled, resulting in language barriers. This often leads to the creation of an intermediate class of functionaries and subordinates drawn from the conquered people. Language differences have been impediments to consolidating smaller political units into larger ones, whether nations or empires. This problem has been dealt with in different ways at various times and places. In China, the advantage of the Chinese character is to be a non-phonetic language, its symbols conveying ideas rather than using individual written words as building blocks for ideas. This facilitated communications despite the huge number of dialects. Likewise, empires have been facilitated by requiring them to learn the language of the rulers. The spread of Islamic empires in the Middle East and North Africa was spearheaded by Arabs, but the vast territories they conquered contained predominantly non-Arab populations. Due to the Koran, written in Arabic, the Arabic language and literacy were spread to many non-Arab peoples who sought to become Muslims.

The imposed language could become universal for different groups among the conquered peoples, facilitating both economic transactions and, in some cases, eventually political cooperation in demands for independence from their conquerors. In times and places where the conquerors no longer felt necessary to maintain control over conquered lands and peoples, these territories became independent in the form of larger nations than had existed before they were conquered.

The end of empires likewise often threatened the continued existence of those larger political units. The Roman Empire combined independent tribes in ancient Britain into Roman Britain, but Britain fragmented into tribal areas again and retrogressed economically when the Romans withdrew. Nigeria and India were under British imperialism and consisted of extremely heterogeneous peoples which were lumped together by their conquerors. After the British pulled out, carnage happened in both Nigeria and India.

Even the technological progress (e.g., transportation and communications) facilitated by the establishment of large political units over the past centuries cannot undo all the effects of earlier centuries or millennia of isolation. The consolidated populations living in a wider cultural universe had millennia to work out cooperative relationships among each other, unlike isolated, smaller populations.

That the economic effects of imperialism vary too greatly should be enough to refute the idea that exploitation of other, poorer populations explains the prosperity of the West. Portugal and Spain once had large empires but now they are one of the poorest nations in Europe. Macau, once a Portuguese possession, today has a per capita GDP that largely surpasses Portugal. Switzerland never had an empire and has few natural resources but now is wealthier than Spain. Turkey, the successor to the Ottoman Empire, is even poorer than Portugal.

Obviously, having an empire does not preclude prosperity. Various British offshoot nations such as Australia, New Zealand, Canada and the United States, have prospered after Britons conquered and displaced the respective indigenous populations of these countries. Not because of the forced transfer of wealth. The lands and natural resources had a value, but that value was greatly exceeded by the wealth created after the land was taken.

Chapter 11: Politics and Diversity

While importing selected cultural features is an incremental and reversible decision, subject to feedback from on-going experience, importing people as permanent settlers tends to be a categorical and irreversible decision, regardless of what later experience turns out to be. The whole culture of a country can be altered in unpredictable and irreversible ways after the arrival of large numbers of people unfamiliar with the prevailing habits, norms and values that foster the kind of radius of trust that holds a society together.

Because it is far easier to concentrate power than to concentrate knowledge, totalitarian regimes would not achieve what they sought. This was true of Mao’s China, Hitler’s Germany and ruthless dictatorships in Yugoslavia under Tito or Iraq under Hussein. Of the communist dictatorships which abandoned central planning, their rate of growth in output usually increased, and dramatically so in India and China.

This problem, the separation of knowledge and power, is in fact unsolvable. The Soviet Union could assign production quotas to individual factories, but only the manager in charge of each factory’s equipment and personnel is aware of its surrounding conditions as he knows what each factory was or was not capable of producing. Only private agents know the best pattern of resource allocation.

In setting up regulations, governments’ expenditures tend to exceed what is just necessary, since they are less regarding of the money that does not belong to them, but also because the public can criticize the government for being reckless. Private organizations however would have calculated precisely the cost of this excess expenditures before committing themselves.

The same applies to human activities. Even if discrimination fades over time, it is unlikely that the regulations will follow. On the contrary, the definition of discrimination is likely to expand over time, to ensure the survival of the anti-discrimination agency. And then, one finds that employers who hire and promote employees solely on the basis of the employees’ qualifications or performances may nevertheless find themselves accused of discrimination by the government agency, if qualifications or performances differ between groups.

Since group differences in skills and cultures have long been common around the world, outcome disparities are unavoidable. But the agency will perpetuate as long as it interprets any observed difference as the product of discrimination. Affirmative actions have often been justified as temporary policies, designed to ease the transition of lagging groups. But, even in countries where time limits were announced at the outset, as in Pakistan, India and Malaysia, such programs have persisted beyond the supposed cut-off date. Regulations have this tendency to perpetuate.

Private individuals and organizations have financial incentives to act incrementally, pursuing a given activity so long as the incremental benefits exceed the incremental costs. But the government pursues a different strategy. Even if the net effect of the program is detrimental, that does not matter politically if the public perceives the program as beneficial. In Malaysia, whatever the Malays could do, the Chinese could do better and more cheaply. This provided a political rationale for imposing preferential policies for the benefit of the Malays. This is perceived as economically beneficial by the masses even if it is actually counterproductive.

Political leaders seek the votes of lagging groups by offering them the assurance that their lags are others’ fault, that their culture is just as good if not better, that they deserve a demographically defined “fair share” of the economic outcomes of the society. These leaders have every incentive to promote the isolation of the groups they lead, despite the fact that isolation has been a major factor of poverty.

For lagging groups with a short time horizon, political activities such as rallies and demonstrations offer instant gratification through emotional expression and solidarity in the form of a righteous crusade against presumed enemies responsible for their lags. By contrast, investing into the acquisition of education and work skills, and self-discipline, involves a much longer but also lonely process of unromantic drudgery, with no such immediate gratification as solidarity with others voicing opposition to presumed enemies.

Chapter 12: The Welfare State

The premise of the welfare state vision, that all individuals should be provided with at least some basic necessities, is so widely accepted today that it may be surprising that this view was not prevalent a hundred years ago, even among people on the political left. A major reason why some people are poor is that they are not acquiring valuable human capital. More than half of the American households in the bottom 20% of income recipients have no one working, and also have lower educational levels. In an age of widespread access to education in advanced countries, external barriers cannot automatically be linked to low incomes. The minimum wage laws provide one of these necessities for the less endowed. There is a vast literature on the negative repercussions of the minimum wage, including the increased numbers of unemployed young males. The data shows that when the wage rate was raised to keep up with inflation over time, the unemployment rate among young blacks rose sharply.

Nicholas Kristof criticizes those people who are oblivious of their own advantages. He even argues that slavery and post-slavery oppression left a legacy of broken families among blacks. The proportion of black children living with only one parent was much lower during the period after slavery than it was after the great expansion of the welfare state, beginning in the 1960s. Kristof’s response to the unfairness of life is to require a government transfer of wealth.

Today, poverty in America is arbitrarily defined by government statisticians. Most poverty-level households in the US in the early 2000s had central air conditioning, a microwave oven, a cable TV, at least one motor vehicle, etc. In the past, low-income people lived packed into overcrowded housing. Today, the Americans living below the poverty level have more housing space per person than the average European (not poor Europeans, but really the average European). Between 1940 and 1960, the black poverty rate decreased substantially, before both the civil rights laws and the war on poverty of the 1960s. The black poverty rate continued to drop between 1960 and 1980, but it is simply the continuation of a pre-existing trend at a slower pace.

The black progress was halted by, of course, government interventions. A series of riots across the country erupted in Los Angeles, just days after the Voting Rights Act of 1965 was passed. Such riots were less common in the South, where racial discrimination in laws and practices remained more common. The worst of these riots occurred in Detroit, where black median family income was 95% of white median family income, where the black unemployment was 3.4% and where black home ownership was higher than in any other major city.

The social vision offered to American blacks resembles the solution offered to Czechs in 19th century Bohemia, Sinhalese in 20th century Sri Lanka, Maoris in New Zealand and many others elsewhere. The groups that have risen from poverty to prosperity in countries around the world, e.g., the Chinese, Lebanese, Jews, and Japanese, were also groups which played very little role in politics during their rise. Conversely, the Irish are one of the most politically successful groups in America yet they continued to lag behind other Americans economically, and even behind some other immigrant groups.

Social pathology in black ghettos is often assumed to be due to poverty and discrimination. During the 1940s and 1950s the homicide rate for black males fell sharply before it reversed during the 1960s. In England, as in the US, the downward trends in crime rates were suddenly reversed so that crime rose sharply during the second half of the 20th century, as the social vision of the intelligentsia triumphed in both countries, not only as regards the welfare state but also as regards a more lenient, non-judgmental attitude toward criminals, and politically correct policing. Children of African immigrants achieve higher educational levels in England compared to ghetto blacks in the US. This welfare state ideology, emphasizing entitlement, victimhood, grievances is what makes their prospects hopeless.

The welfare state in the Scandinavian countries provides an interesting contrast. Their more homogeneous populations likely have not developed many leaders of subgroups with a sense of historic grievances as in Britain and the United States. There is an interaction between welfare and multiplicity of cultures in the US and England that is absent in Scandinavian countries.

People who promote the social vision are unaware that it may increase disparities instead, especially group differences. The welfare state reduces the need for people at the bottom to earn income and penalizes their earnings, since higher income leads to a reduction in eligibility for government benefits. If increasing one’s income by 10,000 dollars would involve a loss of eligibility for 15,000 dollars worth of benefits, that would be an implicit “tax” rate of more than 100% on earned income.

Part V: CONCLUSIONS

Spain, during its golden age, received other countries’ products in exchange for the gold and silver. The disdainful attitudes of Spanish toward productive work ultimately resulted in negative human capital, taking the form of the expulsions of Jews and, later, Moriscos, both of whom had skills largely lacking among the Spanish. By contrast, the economies of Scotland and Japan rose dramatically by acquiring the human capital of other cultures, rather than by importing their consumer products.

Redistribution of income is therefore not redistribution of human capital. Such redistribution of income not only reduces the incentives of lagging groups to develop human capital and of more advanced groups to develop their human capital to the fullest, because the rewards for doing so are reduced by confiscatory policies. It is not poverty that needs to be explained but what combinations of circumstances come together in particular places and times to enable economic progress to take place.

Chapter 13: Economic Differences

The statements such as “the gap between rich and poor has widened in America” are very misleading due to being phrased as if they are comparing the same categories of people over time, i.e., “the rich” and “the poor”, but they are in fact comparing the incomes of particular income brackets containing an ever-changing mix of people over time, due to income mobility during the lifecycle and intergenerationally.

Longitudinal studies which follow a given set of individuals over time produce different conclusions. A study at the University of Michigan that followed the same working Americans from 1975 to 1991 found that the individuals who were initially in the bottom 20% in income had their real incomes rise over the years, not only at a higher rate but in a several times larger total amount, than the real incomes of the individuals whose incomes were initially in the top 20%.

Thomas Piketty in his much acclaimed book, Capital in the Twenty-First Century, declared that “the upper decile is truly a world unto itself”. This ignores that 53% (and 11%) of American households reach the top decile (and top one percent) at some point in their lives, usually in their older years. This is not a class warfare, just a confusion between social classes and age cohorts. The analyses ignore the fundamental difference between a fixed structure and a fluid process.

There is a downward mobility among high income people. Only about one-quarter of those in the top one-hundredth of one percent in 1996 were still there in 2005. The downward mobility is stronger the higher income people earn. Fewer than one-fourth of the income tax filers with the top 400 incomes in 1992 were in that same bracket more than once during the years ending in 2000.

Comparing annual incomes from salaries with multi-year incomes from capital gains received in a given year is comparing apples and oranges. Higher turnover rates in very high income brackets add to the distortions that exaggerate income disparities, especially when the individuals whose multi-year accruals of wealth put them in the highest income bracket due to being turned into cash are disappearing and are being replaced by new individuals with one-year spikes in capital gains incomes. Sowell takes the example of a writer, who spends 10 years writing a book with no guarantee he will receive anything and receiving no income during the years of the write-up. A publisher pays the authors 100,000 dollars, but the IRS will tax the author as if he made 100,000 dollars a year on this book instead of 100,000 dollars for 10 years. When the earnings of multiple years are treated as if they were earned in a single year, it statistically exaggerates the annual income of people who receive capital gains, making statistical comparisons of disparities between people with high and low incomes similarly exaggerated.

Piketty’s conclusion that the rich are getting richer falsely assumes it’s the same people getting richer. Of the people from families on various other lists of Americans with the largest fortunes in 1918, 1930 and 1957, not one of these families was on the list of the top 30 American fortunes in 2014.

Within a country, since more than half of the households in the bottom 20% in income do not even include working people, it is not clear what the rich can be taking from those who are producing nothing. Between countries, if the rich grew rich by exploiting the poor, the median income in countries with many billionaires should be lower than in countries with few billionaires. Yet hard data show the opposite.

Human activities are seldom random. Charles Murray examined the pattern of human accomplishments. European historic figures in the arts and sciences, from the beginning of the 15th century through the middle of the 20th century, have their geographic origins highly concentrated in particular places: “80 percent of all the European significant figures can be enclosed in an area that does not include Russia, Sweden, Norway, Finland, Spain, Portugal, the Balkans, Poland, Hungary, East and West Prussia, Ireland, Wales, most of Scotland, the lower quarter of Italy, and about a third of France.” And in the US, half of the significant American individuals in the arts and sciences were concentrated in an arc extending from Portland, Maine, to the southern tip of New Jersey. The New England states plus New York, Pennsylvania and New Jersey produced more than 7 times the number of significant American figures in the arts and sciences as did the 13 states that had formed the Confederacy during the Civil War. Most of those Southern states had none at all, with Virginia being a notable exception.

Skewed distribution is the norm. This is often seen in sports, especially among the winners in a given sports discipline. In golf, among the very best players, one observed that 53% never won a PGA tournament while 47% won just one, two or three. But the three biggest figures in golf won a total of 200 PGA tournaments. Skewed distribution is observed in academics as well. Among people who earned a Bachelor’s degree in the US in the academic year 2011-2012, nearly four-fifths of those with degrees in education were women and nearly four-fifths of those with degrees in engineering were men.

The irony is that considerations of uneven outcomes are taken seriously in courts of law and in cases involving “disparate impact” statistics, whenever a particular group is under-represented.

Redistributionists cannot offer a principled criterion by which current inequalities might be judged because production processes change over time, making different mixes of skills and talents more or less in demand depending on the time and place. An obvious example has been the reduced value of physical strength, as machine power has replaced human muscle, thereby making the male worker’s advantage in physical strength less relevant, reducing the pay gap between the sexes, even before there were equal pay laws.

Increased income differences between the top and the bottom may in some (or most) situations reflect a greater demand for particular skills relative to unskilled labor, or a greater demand for financial expertise relative to personnel department experience. Increased income disparities may also be the result of an increased population who can live without working, or simply doing part-time work, thanks to the many in-kind benefits from the welfare state.

In 1960 a comparison of the average per capita income of the 20 nations with the highest incomes and the 20 nations with the lowest incomes showed a ratio of 23/1, and in 2000 this ratio was 36/1. But here again, the opposite conclusion is found if one compares the same set of nations over time. In this case, the ratio between the per capita incomes of the particular nations initially in each category fell from about 23/1 to less than 10/1.

That some rich countries, such as the United States, consume a disproportionate share of the world’s wealth is often seen as being the result of exploitation of the poor. The US, like other countries, produces the amount of output it consumes. Imports are paid for out of American income and wealth, in transactions that are voluntary on both sides, so that what is paid compensates the sellers of these imports, and so there is no deduction from the wealth of that country.

Foreign investment, especially foreign ownership, are treated as major concerns. The wages of Chinese and Indian employees of foreign companies have been going up. For instance, the advantage of US computer programmers’ salary compared to India has substantially narrowed over time. On the other hand, Zimbabwe collapsed after mass confiscations of foreign investments. Similarly, Argentina has reduced the share of foreign investment under the dictator Juan Perón and, as a result, went from being one of the most prosperous nations in the world to being one of the most economically troubled nations.

Chapter 14: Implications and Prospects

If inequality is due in part to inequality of initial endowments owing to inheritance, then it could be argued that property should be confiscated by the government for the purpose of being used in the most efficient way possible. There is not even a pretense of an argument that politicians will be more efficient than the designated heir. The incentives for the creation of inherited wealth likely include a desire to leave something behind for one’s family. When this hope is erased, the incentives to produce and save won’t stay the same.

Not only redistributionists focus on the redress of past unfairness rather than on concerns about future productivity, they create pervasive poverty trap by discouraging people to develop their own human capital because they are rewarded with unearned transfers of money or in-kind benefits.

People with careers as ethnic leaders usually tell their followers what they want to hear. An illustration that equal opportunity and equal probability are fallaciously used interchangeably is the claim by Stiglitz that economic mobility in America is a myth because minorities are paid less than whites and women are paid less than men. The fact that Irish and Jewish immigrants in the US once lived in a poverty and squalor unseen today yet rose from such painful beginnings is best described as an achievement rather than a privilege. Indeed, redistributionists often play word games. In Malaysia, the Malays are referred to as deprived and non-Malays as privileged, despite government-mandated preferences for Malays in both public and private institutions.

Looking back at prehistoric times, one would wonder whether it was fair that some populations invented the fire and wheel before others. What should matter is that these advances were actually made in the real world. In modern times, people who have acquired valuable skills such as doctors or pilots are paid for what those skills add to the lives of other people. Acquiring valuable skills is an achievement that benefits others, rather than a privilege that benefits only themselves at the expense of others.

Chapter 15: Causation versus Blame

Researchers often conclude that poverty leads to poor human capital. The average SAT of blacks is indeed lower than the average of either white or asians. But the fact that blacks with incomes of 50,000 dollars score slightly below white with incomes under 6,000 dollars and even further below asians with incomes under 6,000 dollars, clearly income is not a cause of test score differences. Sowell indicates that there are cultural differences between races, such as the number of books and time spent studying is substantially lower among blacks than among whites. The black culture is not oriented toward intellectual achievement because they would be accused of “acting white”. Somehow, Sowell fails to provide evidence of causality for these cultural factors.

That there are statistical gaps observed in the institution where those data were collected is typically but falsely interpreted as the institution being the cause of that outcome. Some hospitals have higher death rates than others precisely because they have the most highly-skilled doctors and the most advanced medical technology and therefore treat patients with the most difficult, life-threatening medical problems. Higher death rates at more advanced hospitals convey a reality that these hospitals did not cause.

The presumption of equal outcomes in the absence of discriminatory factors can lead to unfortunate outcomes. When Dr. Whitman treated both indigenous American Indians and white Americans for measles in the Pacific northwest in 1847, the death rates among whites and Indians were 15 and 50%. Whitman was blamed for this outcome and killed. But the people of European origin were much more exposed to many diseases with which the Indians had historically had no contact and therefore had developed no biological resistance.

Chapter 16: Goals

The Middle East acquired unearned wealth from an abundance of rich natural resources, such as vast oil reserves, as they hired foreigners to supply the technological expertise to develop those resources while doing little to develop the human capital of their own people. Ironically, the era of Islamic economic advantage over the Europeans came before the era when oil became enormously valuable.

While tangible physical wealth could be seized, this wealth gets used up but the human capital that created it and could replenish it is no longer there. After the entrepreneurial Gujaratis from India were expelled from Uganda in the 1970s, and arrived destitute in England, they rose to affluence and wealth again in England, while Uganda collapsed. After Germans were expelled from Czechoslovakia following World War II, the Sudeten region in which they lived had still not recovered decades later. Such reactions against inequalities and minority businessmen and professionals typically originated from the intellectual groups who feared for their status.

In the US, during the 20th century, many luxuries of the rich spread to virtually all by the normal processes of a market economy. The luxuries that are considered now to be the most basic things include: flush toilets, electric lights, central heating, cars, telephone, air conditioning, washing machines, televisions. People responsible for creating such major advances have become rich. For this reason, rising standards of living, especially for those at the bottom economically, have resulted not so much from changing the relative sizes of different slices of the economic pie as from increasing the size of the pie itself.