The girlfriend and I were hanging out with some of her friends the other day. And there were some friends of those friends. One of them started rattling something off about economics, and talked about how he was an econ major at Berkley. Okay, if you're an econ major at Berkley, I know what kind of economics you learned. Not that they teach it MUCH different at most major public schools (one class I took notwithstanding).
But here was an obviously intelligent guy who seemed to think that income stratification CAUSE poverty. I disagreed. We tiffed back and forth, seemly friendly, then he threw this one out at me:
"So, why do YOU think some people are poor?"
I made a dumb answer, not thinking first, "Because of learned helplessness."
"Oh my god," he said. "I can't-I-you really said that. I can't even have a conversation with you." And then the car sat in awkward silence for a while.
Those of you who've taken a glance at the Mises Institute or looked at non-Keynesian economics know that my answer wasn't necessarily WRONG in the context of "not related," but it was more INCOMPLETE, and not the best way to handle that confrontation. So I want to respond to that question with my thoughts, and at least know that I got the right answer out into the void.
Why are some people poor? Way to give me a question that can be answered in one sentence! I can tell you that poor people don't exist because rich people exist. There aren't 2.5 billion people living on a dollar a day because Bill Gates owns all the money.
Maybe we're asking the wrong question. Poverty is natural, like gravity. Show me another animal that has cell phones, climate controlled homes, and has built rockets that take them to the moon and back, and I'll admit I might be wrong. Every other animal on this planet lives, naturally, in what we humans consider "poverty." Why are we different?
Our difference has to do with the source of wealth. Some people would say that wealth comes from natural resources. The continent of Africa has more natural resources than any other, yet almost the entire land mass is soaked in abject poverty. South America is rich in oil, forests, gold. So many are so poor. Hong Kong is a barren rock, yet is ahead of Greece, New Zealand, and Portugal for GDP per capita. Natural resources cannot be the answer. It is the mind that creates value. Someone had to figure out how to turn a toxic, gooey substance into something that can power vehicles, and also into something that can preserve food in our refrigerators. Someone-actually, many someones-had to figure out how to take a pile of rocks, remove certain particles, then reassemble them into something we can drive around. These, and a billion other things, are not natural. They are a product of mind.
This is the simple part. It's easy to understand, so I'm not going to spend a lot of time on it. What this person really meant when he asked the question is: why are specific people poor, while other specific people are much richer in comparison?
And this deserves a very long, in depth answer. But I'm going to defer to the experts. The Index of Economic Freedom spells out what countries do or have that lead to riches:
1) Rule of Law
2) Low Government Spending
3) Secure property rights
4) Freedom from corruption
Notice what is not on this list:
1) "Social safety net"
2) democracy
3) public schools
Creating wealth is about opportunity. If you want to see wealth created, either create it, or get out of the way so others can.
My Conversation with the excellent Coleman Hughes
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Here is the audio, video, and transcript. Here is part of the episode
summary: Coleman and Tyler explore the implications of colorblindness,
including w...
2 hours ago
That's not at ALL how that conversation went. We were discussing how when Black families couldn't get loans for houses, they enacted legislation to enable minority families with poor credit scores and less savings to be able to get a loan. You said something about how keeping high standards for receiving a loan, even though it consequently drew housing-purchasing accessibility across racial lines, WASN'T racist. What the other party felt was probably that since this policy created clear, widespread disadvantages to a vast majority of the Black population, while whites did not equally experience this disadvantage, there was institutional racism in this policy. See here: http://www.knowledgeplex.org/kp/text_document_summary/scholarly_article/relfiles/jhr_0402_carr.pdf
ReplyDeleteThat WAS part of the conversation, but not the part I wanted to talk about. But, since you bring it up....
ReplyDeleteI don't consider this to be racism. "The System" was certainly built to systematically disadvantage certain people and races, but that does not make the bank racist, as they did not use race as a decision-making tool.
Calling this racism creates a talking point when we need dialogue and deeper solutions. The bank did not do anything wrong, and should not be held directly accountable for things that are systemic.