Economist Thomas Sowell’s Conservative Perspective On Poverty And Inequality

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Derek Draplin Associate Editor
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Renowned economist Thomas Sowell was 16 years old when he first noticed a disparity between the rich and poor while growing up in New York City.

As a Western Union messenger boy in downtown Manhattan, Sowell would sometimes “splurge” by taking the 15 cent bus instead of the 5 cent subway.

“It was a double decker bus that would go up Fifth Avenue, really through the heart of the upscale Fifth Ave. shops and buildings, and [it] would turn on 57th Street,” Sowell says in an interview with The Daily Caller. He would make his way down Riverside Drive, “a very exclusive neighborhood in those days.”

As he would pass Columbia University, down 135th Street, he would also pass the tenements of Harlem, “in contrast to everything that I would have seen up till that time.”

“Why this great disparity?” Sowell thought. It’s a question Sowell has explored throughout his career and most recently in his new book, “Wealth, Poverty and Politics: An International Perspective.”

“I was struck by all this and puzzled as to how and why it came to be,” the economist, who’s a senior fellow at the Hoover Institution, says reflectively. His response, as with many intellectuals of his generation, was to turn to Marxism.

“I was led to Marxism because it offered a simple explanation and there was no competing explanation,” Sowell, who in his youth subscribed to Marxism intellectually, but not organizationally, says. “It’s one of the things that’s bad about our educational system.”

In “Wealth, Poverty and Politics” — Mr. Sowell’s 45th book according to his friend and fellow economist Walter Williams — the economist addresses common misconceptions and challenges academic norms in order “to determine or at least suggest why there are the kinds of disparities in incomes and wealth that exist not only between nations but within the same nation.” (RELATED: Thomas Sowell Argues Income Inequality And Institutional Racism Aren’t Really Problems)

He examines four factors that influence the production of wealth: geography, society, culture and politics. But, as Sowell explains, “general human tendency to find not simply causation but blame,” so the less-glamorous factors tend to be under researched or reported by academia and the media.

For example, geographic factors are largely neglected, he says. This is problematic, since “Geography is not egalitarian.”

“Obviously people living in remote mountain villages are going to have very little contact with what’s going on in the rest of the world,” Sowell explains. “Certainly as time’s passed, you know before radio and television, they were truly isolated. And isolation is one of the main factors in poverty and backwardness.”

As for cultural factors, “people tend not to give due weight to culture” because of division at the heart of the debate.

“Probably the biggest debate today is between people who think that those who are less successful are less successful because they’re genetically incapable of a level of intelligence,” Sowell says. On the other hand are “those who think… that they’re less successful because society is discriminating against them.”

But what both sides ignore, Sowell says, is production, or the motivation to produce.

“Both sides of that issue tend to ignore is the fact that you have to want to do something — you must not only want it in some abstraction,” he says. “We would all like to be billionaires, but most of us aren’t doing anything to move in that direction […] you must have a desire to do something or put forth the effort and make the sacrifices.”

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One basic but widespread misconception Mr. Sowell debunks in “Wealthy, Poverty and Politics” is the misuse of “income” and “wealth,” which “are just two fundamentally different things. It’s not just a matter of semantics,” he says.

“Income is a flow of money during a given time period and wealth is an accumulation of over time,” Mr. Sowell explains.

Progressives have it wrong when they talk about raising the income tax, which actually makes it more difficult for workers to accumulate wealth. Mr. Sowell says income taxes ultimately don’t touch billionaires’ wealth because it’s a tax on their incomes.

“When people talk about how they want to raise taxes on the rich, they usually are talking about raising the income tax, which is not a tax on wealth,” Mr. Sowell explains. “So some billionaires who say ‘yes, we’re for higher tax rates,’ phrased as if they were making some sacrifice, when in fact the higher income tax rate will have zero effect on their accumulated wealth in the billions of dollars.”

“The person who will be effected is the person who was trying to accumulate some wealth, perhaps” the man trying to raise a family. “That’s the person that will be hit with the higher income tax because there is no wealth tax,” he says. “The people who are somewhat prosperous at the moment, those are the people who are going to get hit with these huge tax rates. The billionaires, their billions will be untouched.”

When it comes to Bernie Sanders, who’s made a progressive talking point this election cycle with income redistribution and higher taxes, Sowell thinks support for the self-described socialist is “simply ridiculous.”

“I really haven’t thought very much about it because so much of what he says is so absurd on the face of it,” Sowell says. “The idea that you can just have great giveaways then tax people to pay for it… people are not going to just stand still like sheep and be sheered.”

“All kinds of attempts to finance things by raising taxes on the rich have had terrible repercussions in the sense that you don’t even get any more tax revenue that way,” he says. “If anything you get less tax revenue by having very high tax rates, because people always have the option of sending their money into some jurisdiction where the tax rate is lower or to move themselves.”

The welfare state is another worldview skewered by the 85-year-old in “Wealth, Poverty and Politics,” who criticizes the knee-jerk reaction of expecting the government to intervene at the first whiff of unfairness.

“There seems to be a notion that if the income distribution doesn’t strike us as fair then what the government needs is to intervene and make those incomes seem more like what we would want them to be like,” Sowell says. “And this is done ignoring the consequences of this for production.”

“You can’t just come in and change the income, which after all are incentives at all income levels, and then not expect that to have any repercussions on how people work, where they put their investments and so on.”

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