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Samuelson's Slip-Up on Inequality
is a serious problem, but inequality is not ..."
May 7, 2001
Bob Samuelson, Newsweek's economics pundit, is both an acute thinker and a brave one. He's one of the very few neo-cons to warn repeatedly about the ill effects of our current system of mass immigration. Surprisingly, though, he misses the point in his latest column when he claims that America's growing inequality in wealth doesn't matter. In reality, inequality poses the single largest long-term political threat to the free market policies he advocates.
Samuelson points out that the rise in economic inequality hasn't lead to a corresponding rise in class animosity. No - in contemporary America, wealth inequality typically leads instead to racial animosity. If African-Americans were able to make as much money as Asian-Americans, then black-white relations would look a lot like Asian-white relations. There would still be competition and conflicts, of course, just as there are between families - because racial groups are extended families. Yet, blacks would be far less bitter and quick to blame whites for their shortcoming if, like Asian-Americans, they had fewer shortcomings.
Similarly, blacks might not vote as a bloc for quotas, higher taxes, and bigger government payrolls if they could succeed in the free market as well as Asian-Americans.
Mestizos tracing their ancestry to Mexico and Central America are the wild cards in America's future. Currently, their illegitimacy and crime rates, as well as their SAT and IQ scores, tend to fall in-between African-Americans and whites. The most optimistic scenario is that they will follow the Italian-American route - after several generations, winding up solidly in America's mainstream. Few tasks should be given a higher national priority than making sure that our current Mestizo-Americans evolve in this direction rather than toward African-American norms.
Of course, Italian-Americans benefited economically by the 1924 cutoff in immigration. The law of supply and demand explains that the wages of, say, Italian-American marble masons would tend to rise once there was no new supply of marble masons getting off the boat from Sicily each year.
I went to high school with an Italian-American fellow who spent his summers cutting marble with his brothers in their dad's business. Their family had been in marble since, maybe, Michelangelo's day. The three brothers swore that their generation would be different. They'd get normal American office jobs and leave behind this hard, gritty but technically demanding work. They tried it, but after a few years the three brothers went back to the family craft after their father offered to double their office salaries to come to work for him as master marble masons. The last time I talked to my old classmate, he'd taken over his father's firm. He was charging a movie studio executive with a Caligula-complex $1.5 million for the marble going into his new Hollywood Hills palace.
Not surprisingly, my friend is a Republican.
In contrast to this success story, continued immigration from Latin America holds down the wages of earlier mestizo immigrants. Latino gardeners, for instance, will continue to make dismal wages as long as there is an endless supply of similarly skilled immigrants arriving each year from Mexico. Samuelson pointed out last year, "An increase of 10 percent in new immigrants can reduce the wages of earlier immigrants by 9 or 10 percent, says a report from the Urban Institute in Washington."
Not surprisingly, Hispanics vote strongly Democratic.
Libertarians and their fellow travelers are rightfully leery of most proposals for cutting inequality, since these generally entail pervasive government intrusions into the market. This would corrupt Americans by placing too much power in the hands of politicians, luring more citizens into careers in the political rackets and away from economically and morally productive lives.
Fortunately, there is one win-win policy that would reduce inequality in America, yet preserve the free market and the virtues of hard work and self-reliance that it inculcates. The least corrupting way to ensure that capitalism does not commit political suicide by generating too much inequality is to impose strict controls to keep out unskilled immigrants.
This would nudge the supply and demand balance in the direction of favoring America's less skilled workers - yet allow the free market free reign within America.
April 16, 2001