Book Review – Wealth, Poverty and Politics

Book Review: Sowell, Thomas. 2016. Wealth, Poverty and Politics. 2 edition. New York: Basic Books.

Thomas Sowell is a world renown African American economist. He is a fellow of the Hoover Institute, Stanford University, USA. He is known for his straight forward logical and undaunted views. Looking at the corpus of his vast amount of work, he should’ve long been a recipient of the Swedish National Bank prize in Economic Science in memory of Alfred Nobel. I think he hasn’t won this prize only because of his politically incorrect ideas, which are hard for the establishment to digest.

Dr. Sowell’s work on the factors affecting wealth and poverty of individuals and nations is very important but mostly neglected. All his life’s research work in this field is contained in one of his magnum opuses Wealth, Poverty and Politics. Let us see what Dr. Sowell has to say about the causes of wealth and poverty.

Causes of Poverty

About the causes of poverty, and causes of poverty are researched more than the causes of wealth, Dr. Sowell has a straight forward and politically incorrect answer. He says,

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.

Precisely. Economists and other experts have filled pages to discuss the causes of poverty, but as Dr. Sowell said, poverty doesn’t require any explanation because we all are born poor to begin with. Before the dawn of Industrial Revolution in Britain at the end of the 18^th century, whole world was poor. What needs explaining is, wealth. Why some individuals and countries progress and become wealthy and why others lag behind is what needs a clear explanation. And Dr. Sowell provides that detailed  explanation in the remainder of his book, which I discuss now.

Causes of Wealth

Dr. Sowell divides the causes of wealth in four different broad categories, and they are as follows:

• Geographical factors
• Cultural factors
• Social factors; and
• Political factors.

We see these factors one by one now.

Geographical factors

Geographical factors mainly determine what kinds of natural resources, which are the prerequisite for growth, are available in a given place at a given time. We know that most of the rich countries situated in the Middle East are endowed with huge amount of fossil fuel. But this alone is not enough as example of Japan proves. Japan is a country with a severe crunch of all kinds of natural resources. But despite this handicap, Japan is one of the top richest and developed countries in the world today. On the contrary, most of the African countries are endowed with rich natural resources, but still they are poor and struggling to grow. Why is this? To understand this, we need to understand the underlying cultural factors which I discuss now.

Cultural factors

Cultural factors like individuals’ values, like low time preference i.e., giving more importance to future rather than to present, the habit of saving for a better future, hard work, honesty, high importance given to education and so human capital accumulation, a strong desire to not become dependent on others and to succeed in life etc., and choices are mainly responsible for whether an individual or group of individuals like a community or society or a nation will succeed in creating and maintaining wealth or not.

These cultural factors are responsible for the growth of Japan or retardation of Africa. Most Middle East countries which are wealthy today are wealthy because they have tapped the human capital of the Western nations. Immigrants, Jews, Gujaratis, Chinese, Koreans etc., living in USA are a prime example of importance of cultural factor. These people came to USA without anything with them but within one generation they became wealthy because of their right values and work ethics. What USA gave them was freedom to work their way up the income and wealth ladder.

Although Dr. Sowell broadly dismisses ‘genetic factors’ affecting wealth and poverty, but new evidences that are coming show clearly the interaction between genes and culture (the gene-culture evolution). Cultural factors are surely responsible for the achievement of progress, but behind these cultural traits lie genes. Without the biological base of genotype, the physical extension of that base phenotype is not possible. Of course, I am not talking about genetic determination here. As Dr. Sowell has rightly pointed out in his book, wealth is determined by multiple factors coming together rather than just one factor. While genetic determination is not possible, it is also true that genes create the boundary and playing field outside which it is difficult to move by the phenotype. Genes provide the broad framework inside which many changes are possible. Not just genetics, but as the newly developing science of Epigenetics shows, even environmental factors can affect how genes work. Some genes express themselves, under right epigenetic environment, while some genes don’t. And once that epigenetic factors are gone, expressing genes also become silent. What I want to say here is that we should not throw out the baby of genetics and epigenetics with the bathwater of genetic determination and its accompanying horrors like Eugenics. Something that makes us what we are can’t be ignored when understanding an economic phenomenon like wealth and poverty.

Social factors

Social factors like population size and its quality i.e., demographic composition, its geographical and social migration and its mental capabilities are also crucial in deciding whether individuals or nations will progress or not. For example, recent Mohandas Pai report reveals that the quality of Indian population, especially the young labor force, is very poor and that instead of reaping a demographic dividend for having such a big and young labor force, the young population of India has become a net liability. A rigid caste system and a tribal mindset of people doesn’t allow big social migration and that retards the progress of individuals and the country as a whole. Recent reports are also showing that Indians have a smaller brain size and so a lower average IQ of around 82. This reduced mental capability also affects the progress of Indians and India.

Political factors

The major political factor affecting wealth and poverty is the State, especially the modern warfare-welfare state. Wherever the welfare state is present, wealth accumulation and progress is not possible. Only poverty of all will ensue under the welfare state. Dr. Sowell one by one logically dismantles all the arguments, like the redistribution of income, of welfare state. The reason why under welfare state wealth accumulation and progress is not possible is because it retards individual efforts to better one’s condition. Dr. Sowell cites many cases of this happening from post 1960s America where new Civil Rights Laws came into effect with Lyndon Johnson’s “Great Society’ program, which started the welfare state in USA for the blacks mainly. Black community was doing well before these laws were passed to help them, but once these laws came into effect, they destroyed the blacks.

The same welfare state and its carnage we can see in India today. Years of welfare policies by successive governments have now created a population that doesn’t want to do any hard work to improve their lot. What everyone today want is, freebies. One after another political parties and their demagogue leaders are providing one free stuff after another to these moochers e.g., the chief minister of Delhi Arvind Kejriwal is now giving free electricity, free bus rides, free metro train rides, free accident treatment etc. In today’s India one cannot think of winning an election without first promising something free to voters.

Wealth and progress is only possible when individuals are allowed freedom (liberty) under the system of Capitalism. India lacks this system and so any kind of progress is simply not possible.

Conclusion

We can see from the above discussion that there is no one reason for the presence or absence of wealth. There are many different factors and their many permutations and combinations. The above discussed factors must be present in a fine balance at a given time and place for the progress to take place. For India, no such factors are present right now. The crucial factor of human capital is badly missing in India. The tribal culture of India, which is full of envy and resentment, makes sure that no progress takes place for foreseeable future. The massive parasitic welfare and warfare state looms large over the Indian society and it retards all kinds of progress. Looking at these circumstances, it will take centuries or millennia before any progress can take place. And then if these circumstances do not change over a period of time, as has happened in past 4000 years, then change might never happen. At present it looks like Indians are condemned to their wretched lives forever.