Tag Archives: Basic Economics

Is there evidence of systemic racism in the United States?

ANNOUNCEMENT: I explained my answer to this question on an episode the Free Thinking Ministries podcast, with host Tim Stratton. We discussed Black Lives Matter, Christianity and more. And I explained my plan to achieve the American Dream as a person of color and legal immigrant to America. Live stream link here.

Systemic racism is the idea that people can’t lift themselves out of poverty by making good decisions, because powerful groups in society that hold the poor down, regardless of their decisions. Do you think that America is a place where no matter what choices you make, you’ll never be able to be more properous? That’s what the leaders of Black Lives Matter think.

Here’s what Nikole Hannah-Jones, creator of the 1619 Project, says in the New York Times (a former newspaper):

To summarize, none of the actions we are told black people must take if they want to “lift themselves” out of poverty and gain financial stability — not marrying, not getting educated, not saving more, not owning a home — can mitigate 400 years of racialized plundering.

Got that? It doesn’t matter what individual choices a non-white person takes in America, they’re going to be poor. The “systemic racism” of the powerful whites will always keep them down. Single motherhood doesn’t make people poor, and marriage doesn’t make people wealthier. Dropping out of high school doesn’t make you poor, and getting a Masters degree in computer science won’t make you wealthier.

But let’s take a look at the data from the 2018 Census, and see the evidence.

White people are doing a bad job of keeping non-whites downWhite people are doing a bad job of keeping non-whites down

Well, it looks like at least SOME people of color are able to do well in America despite all the “systemic racism” that keeps non-whites down. And do you know what those non-white groups at the top have in common? They’ve made good decisions, they’ve worked hard, they haven’t blamed other people when they fail, and they’ve saved their money instead of spending it on shiny junk.

Let’s look at some decisions that the non-whites who are prosperous have made, that those further down have not.

Asians marry before they have children, so the kids have two parentsAsians marry before they have children, so the kids have two parents

Education and marriage

This article is written by the far-left radical Nicholas Kristof, writing in the radically-leftist New York Times (a former newspaper).

Excerpt:

A new scholarly book, “The Asian American Achievement Paradox,” by Jennifer Lee and Min Zhou, notes that Asian-American immigrants in recent decades have started with one advantage: They are highly educated, more so even than the average American. These immigrants are disproportionately doctors, research scientists and other highly educated professionals.

It’s not surprising that the children of Asian-American doctors would flourish in the United States. But Lee and Zhou note that kids of working-class Asian-Americans often also thrive, showing remarkable upward mobility.

[…]There’s also evidence that Americans believe that A’s go to smart kids, while Asians are more likely to think that they go to hard workers… Asian-American kids are allowed no excuse for getting B’s — or even an A-. The joke is that an A- is an “Asian F.”

One reason Asians students do so well is because their parents are usually married:

Strong two-parent families are a factor, too. Divorce rates are much lower for many Asian-American communities than for Americans as a whole, and there’s evidence that two-parent households are less likely to sink into poverty and also have better outcomes for boys in particular.

American blacks have a 73% out-of-wedlock birth rate. A huge difference compared to Asians.

So, when Nikole Hannah-Jones tells you that education and marriage don’t matter, she’s just wrong.

Compound interest

Education and marriage are important, but so is saving your money. The wealthiest people in America are typically the ones who are experts at saving money early, and investing it. They know about the law of compound interest. If you invest money early and leave it alone, then it will grow into a fortune by the time you are read to stop working.

This graph explains compound interest:

Don't trust people with non-STEM degrees to tell you how to get richInvesting $24,000 from age 21 to 41 vs investing $24000 from age 47 to 67

What does Nikole Hannah-Jones say when she looks at that graph? She doesn’t think that saving money makes a difference to having more or less wealth. She thinks skin color determines whether saving money makes you wealthy or not. The graph clearly shows what we should be recommending to young people of color. They need to stop spending money and start saving it, and the earlier the better. It doesn’t matter what your skin color is, saving money early JUST WORKS.

Similarly, when she says that home ownership doesn’t make you more wealthy, this is just terrible advice. It’s always better to pay down your own mortgage (at least when interest rates are low like they are now) than to pay someone else rent. You have to live somewhere, and paying for your own home is better because it costs about the same as rent, and then you get to keep the home when you’re done paying for it.

Communism

Nikole Hannah-Jones does have a “solution” to disparities in wealth. Her solution is communism. She wants to transfer money from those who earn, to those who don’t. But we already have tried that in the 20st century and it resulted in the deaths of over 100 million people. That’s not my opinion, that’s all documented in a book published by Harvard University Press.

You don’t even have to read the book to know the truth – just look at countries that score low on the Index of Economic Freedom, and compare their GDP per capita to countries that score high on the Index of Economic Freedom. The more communist a nation goes, the less wealth there is for the citizens. That’s why people in Venezuela are eating zoo animals and selling their bodies in prostitution in order to get food to eat and water to drink. Nikole Hannah-Jones wants to reduce economic freedom, but we know by looking at other countries that this reduces per-capita GDP over time.

There’s a lot more than could be said here, but the point is that we need to be telling American blacks to make decisions that match the decisions of other successful non-white communities in America. We need to start teaching young people basic economics so they don’t fall prey to charlatans.

How a small, poor country became the top economy in Latin America

South America Map
South America Map

One way to learn about whether specific economic policies work or not is to look at different countries that have tried them. Believe it or not, patterns do emerge about what works and what doesn’t work, as you look across different times and places. I’ve been reading a book called “Money, Greed and God” with my friend Carla, which talks about what has worked to reduce poverty.

The author basically outlined two approaches. In the first approach, the government 1) confiscates the wealth of the most productive workers, 2) nationalizes (takes control of) the businesses of the most successful entrepreneurs, 3) restricts trading between citizens and with other countries, with minimum wage, price controls and tariffs. In the second approach, the government does the opposite: 1) lowers taxes on the most productive workers, and 2) lets entrepreneurs compete to provide goods and services to consumers, and 3) lowers restrictions on internal trading and trading with other countries, e.g. – eliminating minimum wage, tariffs and price controls.

Let’s take a look at two Latin American countries that went in opposite directions. Venezuela and Chile. Then we can finally find out which policies actually achieve results for the people.

Here is how Chile started out in 1973.

PROBLEM: Price controls and tariffs:

Prices for the majority of basic goods were fixed by the government in 1973. Even though Chile was and still is a small economy, the level of protection­ism was high. By the end of 1973, the nominal average tariff for imports was 105 percent, with a maximum of 750 percent. Non-tariff barriers also impeded the import of more than 3,000 out of 5,125 registered goods. Just as economic theory predicts, large queues in front of stores were usual in Santiago and other cities in Chile as a result of the scarcity caused by price controls.

PROBLEM: Government taking over private businesses:

The decline in GDP during 1973 reflected a shrinking productive sector in which the main assets were gradually falling under government control or ownership through expropriations and other government interventions in the economy.

PROBLEM: Deficit spending and government printing money:

The fiscal situation was chaotic. The deficit reached 55 percent of expenditures and 20 percent of GDP and was the main cause of inflation because the Central Bank was issuing money to finance the government deficit.

SOLUTION: lower or eliminate restrictions on trade:

The most important economic reform in Chile was to open trade, primarily through a flat, low tar­iff on imports. Much of the credit for Chilean eco­nomic reforms in the following 30 years should be given to the decision to open our economy to the rest of the world. The strength of Chilean firms, productive sectors, and institutions grew up thanks to that fundamental change.

SOLUTION: let competing entrepreneurs in the private sector provide goods and services to consumers:

A second fundamental reform was to allow the private sector to recover, adding dynamism to the economy. In fact, important sectors such as elec­tricity generation and distribution and telecommu­nications were still managed by state companies. After we implemented a massive privatization plan that included more than 50,000 new direct share­holders and several million indirect (through pen­sion funds) shareholders, these companies were managed by private entrepreneurs that carried out important expansion plans.

SOLUTION: let people take responsibility for their own lives instead of depending on government:

The 1981 reform of the Chilean pension fund system deserves special mention. Under the leader­ship of Minister José Piñera, an individual capitali­zation account program was designed with specific contributions, administered by private institutions selected by the workers. The Chilean Administra­doras de Fondos de Pension (Pension Fund Administrators or AFP) has been replicated in more than 20 countries, and more than 100 million workers in different parts of the world use these accounts to save for retirement.

SOLUTION: allow parents to choose the school that fits their needs from competing education providers, and push school administration down from the federal government to the municipal level, where it would be more responsive to voter’s needs:

In 1981, Chile introduced a universal educational voucher system for students in both its elementary and secondary schools. At the same time, the central government transferred the administration of public schools to municipal governments…  The financial value of the voucher did not depend on family income.

RESULTS: And I was able to find a nice short, description of how all that worked out for them on the far-left Wikipedia, of all places:

The economy of Chile is a high-income economy as ranked by the World Bank, and is considered one of South America’s most stable and prosperous nations, leading Latin American nations in competitiveness, income per capita, globalization, economic freedom, and low perception of corruption.

In 2006, Chile became the country with the highest nominal GDP per capita in Latin America. In May 2010 Chile became the first South American country to join the OECD. Tax revenues, all together 20.2% of GDP in 2013, were the second lowest among the 34 OECD countries, and the lowest in 2010. In 2017, only 0.7% of the population lived on less than US$1.90 a day.

According to the Heritage Foundation, Chile is ranked as the 18th freest economy in the world. The World Bank ranked Chile as the 50th highest GDP per capita for 2018, just below Hungary and above Poland.

Now, you can contrast those results with Venezuela. I have been blogging about Venezuela for years on this blog, and documenting how they raised taxes, banned guns, nationalized private sector companies, raised tariffs, and increased regulations. They are now ranked JUST ABOVE NORTH KOREA for economic freedom – #179 out of 180 countries measured. Basically, they did the opposite of everything that Chile did – transferring power away from parents, workers, business owners, churches and municipal governments to the powerful centralized federal government.

Wikipedia explains how Hugo Chavez took over in 1999 and enacted a communist revolution.

More:

Since the Bolivarian Revolution half-dismantled its PDVSA oil giant corporation in 2002 by firing most of its 20,000-strong dissident professional human capital and imposed stringent currency controls in 2003 in an attempt to prevent capital flight, there has been a steady decline in oil production and exports. Further yet, price controls, expropriation of numerous farmlands and various industries, among other government authoritarian policies… have resulted in severe shortages in Venezuela and steep price rises of all common goods, including food, water, household products, spare parts, tools and medical supplies; forcing many manufacturers to either cut production or close down, with many ultimately abandoning the country as has been the case with several technological firms and most automobile makers.

They confiscated private property, took over private sector businesses, implemented tariffs and price controls, redistributed wealth via massive welfare programs, and pushed all decision-making out of families and municipal governments up to the federal government. By depriving the producers of their earnings, the country caused massive shortages of goods and services, to the point where people are fleeing the country, consuming zoo animals, and selling their bodies as prostitutes in order to get food and water.

Application

In the next election, we are not picking a tribe because of how they make us feel about ourselves. We are not choosing in order to see ourselves as “nice” and “not nice”. We need to look at specific policies being proposed, and see what works and what doesn’t work. The examples of Chile (rags-to-riches) and Venezuela (riches-to-rags) are helpful for voters who want to get RESULTS instead of FEELINGS.

I’ll leave you with a list of links from previous posts so you can see how communism worked out for Venezuela.

Related posts

Is there evidence of systemic racism in the United States?

ANNOUNCEMENT: I’m going to be on the Free Thinking Ministries podcast today at 2 PM Pacific, 5 PM Eastern, with host Tim Stratton. Join us, and we will discuss Black Lives Matter, Christianity and more. And I’ll explain my plan to achieve the American Dream as a person of color and legal immigrant to America. Live stream link here.

Systemic racism is the idea that people can’t lift themselves out of poverty by making good decisions, because powerful groups in society that hold the poor down, regardless of their decisions. Do you think that America is a place where no matter what choices you make, you’ll never be able to be more properous? That’s what the leaders of Black Lives Matter think.

Here’s what Nikole Hannah-Jones, creator of the 1619 Project, says in the New York Times (a former newspaper):

To summarize, none of the actions we are told black people must take if they want to “lift themselves” out of poverty and gain financial stability — not marrying, not getting educated, not saving more, not owning a home — can mitigate 400 years of racialized plundering.

Got that? It doesn’t matter what individual choices a non-white person takes in America, they’re going to be poor. The “systemic racism” of the powerful whites will always keep them down. Single motherhood doesn’t make people poor, and marriage doesn’t make people wealthier. Dropping out of high school doesn’t make you poor, and getting a Masters degree in computer science won’t make you wealthier.

But let’s take a look at the data from the 2018 Census, and see the evidence.

White people are doing a bad job of keeping non-whites down

White people are doing a bad job of keeping non-whites down

Well, it looks like at least SOME people of color are able to do well in America despite all the “systemic racism” that keeps non-whites down. And do you know what those non-white groups at the top have in common? They’ve made good decisions, they’ve worked hard, they haven’t blamed other people when they fail, and they’ve saved their money instead of spending it on shiny junk.

Let’s look at some decisions that the non-whites who are prosperous have made, that those further down have not.

Asians marry before they have children, so the kids have two parents

Asians marry before they have children, so the kids have two parents

Education and marriage

This article is written by the far-left radical Nicholas Kristof, writing in the radically-leftist New York Times (a former newspaper).

Excerpt:

A new scholarly book, “The Asian American Achievement Paradox,” by Jennifer Lee and Min Zhou, notes that Asian-American immigrants in recent decades have started with one advantage: They are highly educated, more so even than the average American. These immigrants are disproportionately doctors, research scientists and other highly educated professionals.

It’s not surprising that the children of Asian-American doctors would flourish in the United States. But Lee and Zhou note that kids of working-class Asian-Americans often also thrive, showing remarkable upward mobility.

[…]There’s also evidence that Americans believe that A’s go to smart kids, while Asians are more likely to think that they go to hard workers… Asian-American kids are allowed no excuse for getting B’s — or even an A-. The joke is that an A- is an “Asian F.”

One reason Asians students do so well is because their parents are usually married:

Strong two-parent families are a factor, too. Divorce rates are much lower for many Asian-American communities than for Americans as a whole, and there’s evidence that two-parent households are less likely to sink into poverty and also have better outcomes for boys in particular.

American blacks have a 73% out-of-wedlock birth rate. A huge difference compared to Asians.

So, when Nikole Hannah-Jones tells you that education and marriage don’t matter, she’s just wrong.

Compound interest

Education and marriage are important, but so is saving your money. The wealthiest people in America are typically the ones who are experts at saving money early, and investing it. They know about the law of compound interest. If you invest money early and leave it alone, then it will grow into a fortune by the time you are read to stop working.

This graph explains compound interest:

Don't trust people with non-STEM degrees to tell you how to get rich

Investing $24,000 from age 21 to 41 vs investing $24000 from age 47 to 67

What does Nikole Hannah-Jones say when she looks at that graph? She doesn’t think that saving money makes a difference to having more or less wealth. She thinks skin color determines whether saving money makes you wealthy or not. The graph clearly shows what we should be recommending to young people of color. They need to stop spending money and start saving it, and the earlier the better. It doesn’t matter what your skin color is, saving money early JUST WORKS.

Similarly, when she says that home ownership doesn’t make you more wealthy, this is just terrible advice. It’s always better to pay down your own mortgage (at least when interest rates are low like they are now) than to pay someone else rent. You have to live somewhere, and paying for your own home is better because it costs about the same as rent, and then you get to keep the home when you’re done paying for it.

Communism

Nikole Hannah-Jones does have a “solution” to disparities in wealth. Her solution is communism. She wants to transfer money from those who earn, to those who don’t. But we already have tried that in the 21st century and it resulted in the deaths of over 100 million people. That’s not my opinion, that’s all documented in a book published by Harvard University Press.

You don’t even have to read the book to know the truth – just look at countries that score low on the Index of Economic Freedom, and compare their GDP per capita to countries that score high on the Index of Economic Freedom. The more communist a nation goes, the less wealth there is for the citizens. That’s why people in Venezuela are eating zoo animals and selling their bodies in prostitution in order to get food to eat and water to drink. Nikole Hannah-Jones wants to reduce economic freedom, but we know by looking at other countries that this reduces per-capita GDP over time.

There’s a lot more than could be said here, but the point is that we need to be telling American blacks to make decisions that match the decisions of other successful non-white communities in America. We need to start teaching young people basic economics so they don’t fall prey to charlatans.