Overcoming the Recession: An Interview with Thomas Sowell
I was pleased to once again (previous interviews here and here) talk with Thomas Sowell about his new book, Applied Economics: Thinking Beyond Stage One, which I have read twice and highly recommend. What follows is a slightly edited transcript of my conversation with Mr. Sowell.
JH: Barack Obama has publicly said that he expects to run trillion dollar deficits for the next few years. What are the real world consequences of carrying that sort of crushing debt?
Thomas Sowell: Oh, inflation — and this is a debt that is going to be passed on to the next generation. The Keynesians loved to say in the past that we owe it to ourselves, since American citizens used to buy almost all the federal bonds, but now between 40-50% of the debt is owed to foreigners. That means future generations of Americans will be transferring vast sums of wealth to China, among other places.
JH: There has been some concern about the government nationalizing the banks. I guess that’s understating it a bit by saying “some concern.” So, let me ask you a question that many Americans are probably pondering: what’s the harm in having the federal government control our banks?
Thomas Sowell: (Laughs) You have people who know nothing about banking, nothing about economics, and who have no stake in the outcome, issuing orders to people who do know. That’s what’s wrong with government control of banking. It’s what’s wrong with government control of other industries. There’s no human being capable of running all the major industries of the country — or even two or three of the major industries in the country.
JH: Now in the book, you say, “The often expressed desire for a national government program to produce affordable housing has misconceived the reality.” Can you explain what you mean by that?
Thomas Sowell: The politicians say that we have a large national problem of people being unable to afford housing, by whatever standard they are using. That is not the case. That has never been the case. The case is that in much of the United States, during this period of great concern about affordable housing, people are spending no higher percentage of their income on housing than they were 10 years earlier, when there was no such alarm.
What has happened is that in some particular places, of which coastal California is a good example, the housing costs are absolutely astronomical. We’re talking about million dollar homes, for example, in San Mateo County, under 2000 square feet. So you’re talking about paying prices for very modest homes that you pay in other parts of the country for mansions. So the political hype about a national problem is nothing more than the prelude to wanting a federal program. But, in point of fact, in most parts of the country, these are not the situations that exist. In a relatively few places, the situation is virtually impossible, usually due to local politicians interfering with the housing market via land use restrictions.
JH: What is the harm in using taxpayer money to bail out a failing company, like the “Big Three” automakers for example?
Thomas Sowell: Well, you can go back a hundred years and say why shouldn’t the taxpayers have bailed out the horse and buggy industry when the automobile suddenly appeared and began devastating the horse and buggy industry.
JH: Now, we’ve heard people say that this is a uniquely bad economic situation — that it could be as bad as the Depression, etc. However, looking at GDP and job loss numbers, it doesn’t look as bad as, say, the recession in the early 80s. So how bad is this really and if you were advising the president, what would you tell him to do?
Thomas Sowell: Resign.
JH: (Laughs) That would be helpful.
Great interview. A little economic sense would go a lot farther towards curing what’s wrong with our economy that trillion dollar stimuli and bailouts.
“Republicans must avoid going over the cliff…”
Pssst…Lindsay Graham has already jumped.
Energy is what maintains any decent standard of living. As I like to often say, “Without cheap energy we live in mud huts while making sharp sticks.” If electricity were cheap enough in the USA, many manufacturers wouldn’t have shut down and many more that left would come back to America. Energy may not be much cheaper in other places, but wages and taxes are cheaper and that offsets the high cost of power. Thus, it’s cheaper to make something abroad and ship it here. Why would any American company do that if our low energy costs mitigated our higher wages abnd taxes? If it were “A Wash”, companies would stay here and eliminate the waste of time, cost and energy to ship goods. In addition to Crude oil, Coal for Liquefied Synthetic Fuel, Bio-fuel and Natural Gas, America has the largest Oil Shale deposit in the world. (Google “Green River Oil Shale”). It alone is estimated to contain over two trillion barrels of recoverable oil (And it sits on Federal Land). For comparison, since oil was discovered in Pennsylvania in the 1850’s, the entire world has used 1-trillion barrels. If any Administration wanted to, they could sign an Executive order, citing both the Economy and National Security, to immediately harvest our domestic sources, build the refineries and power plants and upgrade the power transmission grid. Jobs constructing it, by it‘s nature, would have to be spread throughout the Nation. Jobs harvesting it. Jobs refining it. Jobs running and distributing it. Jobs maintaining it. Jobs for companies that build the equipment to do all that (Caterpillar, GM, Cummings, Grumman, GE). Jobs in companies that use the Energy end product (Manufacturing, Steel Production). The economy would Boom, as lower energy costs mean companies and individuals have more money for discretionary spending. Jobs mean more home ownership. The cycle is instantly reversed, literally overnight. And our Nation becomes immune from Energy Blackmail. Fewer wars to fight over resources. Just imagine what ONE TRILLION DOLLARS of investment would do to get the ball rolling, and the tax revenues from sales and earnings once it does get rolling. But that’s not what Bush did, and it certainly isn’t what this 111th Congress will do. At least McCain /Palin advocated developing our resources. So far, the 111th Congress has done nothing but place one roadblock after another in front of doing so, and that’s why we are doomed. We will spend a trillion on this ridiculous “Stimulus Package” and in the end have absolutely nothing to show for it, and most of that money won’t be spent for many years. It isn’t going to “Stimulate” anything except inflation, higher interest rates, higher unemployment, higher taxes and a higher cost of doing business. The cycle will continue, and we risk another Great Depression. THIS IS A WAR, a war against economic ruin, and it should be fought exactly as if our country were under attack, because in a sense we are. Just as industry saved us and our Allies during WWII, so too it can save us from this attack by foreign nations and our own foolish National Energy policy. The fact is: We have plenty of resources. We have the ability to build what needs to be built to do it. We have the knowledge and Lord knows we have the workforce to do it. So why aren’t we?
Would somebody PLEASE convince Thomas Sowell to run for President? Even if he lost the election, the media would have to cover him – and the American public would be exposed to one of the clearest-thinking, sensible persons to have ever lived. He is a national treasure.
I would like to know how, seeing all this, Mr. Sowell is able to maintain his sense of humor?
Great interview! I wish that more people could hear Thomas Sowell speak about the economy because he explains it in a way that it’s easy for the average person to understand.
Thomas Sowell would make a great addition to the PBS Show “The Newshour with Jim Lehrer” because they have too many liberals on the show.
It’s refreshing to hear someone with some common sense.
His other book, “Basic Economics: A Common Sense Guide to the Economy” is a good book, too.
With all due respect (and a lot of it) to VDH and Krauthammer, this guy is the greatest living columnist, and probably the greatest living mind in America today.
Indeed he is. I’ve been a follower of Sowell for years now.
Sowell’s columns are always a breath of fresh air, especially during times like these. Someone who understands economic principles and can communicate them effectively is our best weapon against Obama’s platform. Keep up the good work, Dr. Sowell!
One of the strangest ironies to me and has been for some years now, is we have black men like Thomas Sowell, Walter Williams and Clarence Thomas, three of the best in their chosen professions in my book, who are then viewed as pariahs and sell outs. Three self made men of high character and good standing, and have been around for years.
But some two bit, slick hoodwinker like the current President hits the scene, and is viewed at as patriarch of the black community. It’s Obama that is the man of low expectations, which will eventually get black Americans nothing but the claim, “HEY! We got our first black President.”
And for all their troubles accompanied by feckless cliches of “hope & change”, they’ll watch their best hope called America go down the tubes.
What we’ve got are a generations of lackeys, and there is a bunch of white trash too to be fair, so accustomed to suckling the public teat, they don’t even recognize greatness when they see it.
You’re right RobertS. Thomas Sowell is a national treasure.
Awesome article.
I live in a small town in NC. Our newspaper, The Hendersonville Times-News formerly carried Sowell’s column, which I enjoyed and looked forward to. I still have some columns I cut out and saved, one of which dissected the problem of our dumbed down educational system (I wish it could be repeated. I am a former teacher.) Bottom line, our newspaper is owned by The New York Times. They eliminated his column and no amount of questioning brought an answer. This newspaper carries Gary Trudeau’s cartoon and used to carry the one with the “duck” can’t remember the name (conservative humor), that was eliminated also !!!
Fran H.:
I live in a small town in NC. Our newspaper, The Hendersonville Times-News formerly carried Sowell’s column, which I enjoyed and looked forward to. I still have some columns I cut out and saved, one of which dissected the problem of our dumbed down educational system (I wish it could be repeated. I am a former teacher.) Bottom line, our newspaper is owned by The New York Times. They eliminated his column and no amount of questioning brought an answer. This newspaper carries Gary Trudeau’s cartoon and used to carry the one with the “duck” can’t remember the name (conservative humor), that was eliminated also
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Too FRAN H …. Sowell is a regular on Town Hall .com .He is also a Member of the Hoover Inst.
His GREAT ALWAYS COMMON SENSE AND ”REASON “articles are also on Real Clear Politics and the National Review .The Corner
You can also go to Thomas Sowell .com
He has written 34 Books to date and 6 are the best on Economics ever .
He was a student and close friend to Milton Freedman and give the last rights at Freedman’s Funeral .
I have even spoken with Sowell on a personal note bt email since we were both Marines alone with a lot more commonality and agreeing viewson the world and Politics .
The Prof’s Econ books are great!!! But, I would also strongly encourage you to take a look at two more of his….”The Vision of The Anointed” and “The Quest for Cosmic Justice.” Both are most excellent and give a very solid reading of the mindsets of the loonies we are battling.
Sowell is definitely on my top-5 list. Victor Davis Hanson is easily my favorite writer, and just as prolific a writer as Sowell. But VDH writes intensly cerebrally while Sowell writes about his observations and common sense. Two different styles where, if you read them both, give you a great understanding of ourselves and our neighbors. In addition, VDH is anavid Military Historian, which was my Major at West Point, so I’ve got a special place for his books and essays on by shelves. Mark Styne is right up there also. Mark injects humor and satire into many of his essays.
To Jim D and Fran H :
His Man of Letters …. and Best Seller ” White Liberals and Black Red Necks were great reads as well .
Just for the record T.Sowell is a great Photo Artist trekking off to wild and Beautiful natural places all over America when he has time off or Vacations . Sowell is a Black Man ……. Not a Africian “anything ” to quote him . Thank God his Anstorers were brought from Africa he says often ….. He likes his Car , AC ,Heat , Food in a Refrig and Freezer among many things few Africans have and enjoy there .
I have personally invited him to Historic Va and my home here in beyond Beautiful race horse county of VA.
Sowell recommends reading Shelby Steele’s” White Guilt “as do I as well .
It helps understand a little Libearls sick Minds .
Congrads to Pajamas Media for posting this interview with one of the leading Austrian school of Economics writers alive today.
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The story of the Austrian School begins in the fifteenth century, when the followers of St. Thomas Aquinas, writing and teaching at the University of Salamanca in Spain, sought to explain the full range of human action and social organization…………..
The fascinating history of this great body of thought, through all its ebbs and flows, is the story of how great minds can advance science and oppose evil with creativity and courage. Now the Austrian School enters a new millennium as the intellectual standard bearer for the free society…………….
http://mises.org/etexts/austrian.asp
Want the next GOP Leader?
For a start, look for one who has a couple of Sowell’s books on their bookshelf, and has one in their hand when the press happens to photo them.
We are what we read to some extent.
daily required reading for me is Sowell, VDH, Krauthammer, Larry Elder, Steyn…VDH has 3 sites he writes at..Dr Sowell 2 that I’ve found…looking at IBD’s Michael Ramirez is a must for me also…great Americans all…if I were still teaching Government and Economics to high schoolers they would have lots of “required readying”
I wish we had many clones of Thomas Sowell working in our education system. I’ve always found him a breath of fresh air. But I’m sure the Keynesians in the Ivy League do not like Thomas Sowell one bit.
I’m getting tired of Ivy League people running the country. Especially this group of them.
Thomas + Sowell = @#$%! greatness. I wish more people read him.
He’s saying the same things Reagan did. To end the recession, just get the government out of the way. How complex is that, really? Too complex, apparently. Sheesh.
Let me try my hand at this. Government produces nothing. It only consumes resources. It never produces a profit. It only consumes profits. Therefore, it should only do those specific things that we cannot do by ourselves, like national defense, for one example. Anything else is just consuming resources unnecessarily. How hard is that? Too hard, I guess. (sigh)
This interview was full of typical free market fallacies, errors in fact and illogical reasoning.
Sowell’s comparison of the current dilemma of the auto industry of the obsolete horse and buggy industry of 100 years ago was laughable. Automobiles are not obsolete, and there’s no replacement industry out there waiting in the wings. Retarded.
His slighting reference to the Keynesians of 70 years ago was a self-defeating argument in that those folks were correct about government spending at that point in time spurring aggregate demand. The American economy started to rebound around 1936-37, years before WWII began, and the legacy of the New Deal continued into the 1950s. And 70% the federal debt that has to be repaid was largely incurred in a mere 20 years of GOP free-marketeer presidential administrations over the past three decades. He conveniently failed to point this out.
He’s also incorrect about the so-called “Reagan Miracle” in that after the 1981-82 recession, the American economy moved forward until about a year after The Crapper left office before it soured. If you remember correctly, Bush I lost the election to Clinton largely because of American’s concerns about the slack economy of his tenure. There was no 20-year period of sustained economic benefit. In fact, it was the policies of the Clinton administration that started to turn around the damage caused by decisions made in the Reagan and Bush I years. This Sowell should get his facts straight.
Finally, his explanation about housing prices wasn’t an explanation at all. It was mumbo jumbo about relative RE in values in different parts of the country, conveniently avoid the core issue of the question, namely the lack of affordable housing for millions of Americans.
And this clown is supposed to be one of the great thinkers of the political right? No wonder those people are in the doghouse. They don’t have to worry about going over the cliff with the Democrats. They’re already broken up and dead at the bottom of the ravine.
20YearsInDependency:
Nice job of obfuscation:
Sowell’s point about the horse and buggy is that life will go on if the U.S. auto industry was allowed to go bankrupt. You have heard, I am sure, that the U.S. auto market is too big to be serviced by foreign makers alone. GM (as an example) can emerge from bankruptcy a stronger, profitable company without the use of taxpayer money.
You have your dates wrong regarding the rebound of the economy during the Great Depression. There is a reason why after bottoming out in 1933 the rest of the 30′s are called a Great Depression. Yes, there was growth in GDP and improvement in employment. But an unemployment rate of over 14% is still very high. Economic bubbles have always occurred and the economy will snap back on its own. Did the New Deal contribute to stubborn unemployment?
Re: Bush I, Clinton. The “worst economy in 50 years” (Clinton’s words during the presidential campaign) turned out to be one of the shortest recessions in 50 years. No one has figured out how to avoid the business cycle.
I think the point about housing prices around the country is that:
1) Most Americans can afford housing just fine.
2) Government policies such as rent control make housing more pricey in certain parts of the country. Those places happen to be the localities complaining the most about unaffordable housing.
20YearsIndependent:
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His Mindless Rant is Typical by all Light weights !
He is now new to nothing more than hot air and it is obvious he has never been successful in Business owned one .
He sees Clinton as the second Coming Yet the Soft ware market went 90 % dead Broke and for Millions of Stock Holders as well …..Not to mention Clinton was strongly behind the Sub Prime market rape of America with his Buddies running Freddy and Fanny .Clinton had created a FALSE ECONOMY and it fell before he left office .
Clinton caused 9/11 at the trade towers (a second time )and that which followed !
Not to mention being offered Bin Laden 4 times .
He saw this world war on Islamic Terrorist as a CIVIL MATTER ? DUH !
20YearsIndependent: Sowell’s “Basic Economics” book fleshes out many of the points Sowell makes here. A short Q&A cannot fully cover the problems with government tampering, which might explain why you are not convinced — yet. You can find a used copy online for about $20.
Also, I’d recommend reading “The Anti-Federalist Papers and the Constitutional Convention Debates.” What does this have to do with the economy? Read “Centinel” and “Brutus” on taxation — it will hit you like a lightning bolt.
Nostradamus wrote: “America has the largest oil shale deposit in the world. It alone is estimated to contain over two trillion barrels of recoverable oil.” Ah, but there is a big time catch. There is no technologically & economically feasible method to extract the product. Oil shale has been a “pipe dream” since at least the 1920s. Energy companies own a couple hundred thousand acres of oil shale land and they are doing exactly nothing with their land. Leasing large amounts of federal estate, as advocated by some Republican leaders, won’t bring about production.
Shell Oil is perhaps the farthest along in testing a new technology involving extreme heat in situ for several years, with a “freeze wall” around the site so the fluid doesn’t leak into the groundwater. Shell says it will be several years before they know if this technology actually works. But, it will require enormous amounts of energy. One estimate is that production of 100,000 barrels per day will require a new power plant the size of the biggest in Colorado, near Craig west of Steamboat Springs. 500,000 barrels = five new power plants. Each site would be only a few acres in size.
Then there is the water issue; enormous amounts will be needed to sustain freeze walls for a couple years. Where will the water come from? Certainly not from a nearly over-appropriated Colorado River system. Anybody REALLY want to reopen the Colorado River Compact of 1922 to remove water from California & Arizona; from Colorado’s Front Range? Bottom line is simple: oil shale has never been a viable source of oil and likely won’t be.
I just read a very frightening statistic. It was reported by Ellen Miller of the Sunlight Foundation that:
By a three to one margin worldwide, those surveyed are in favor of government regulation of industry or nationalization of companies to restore public trust. In the U.S., only 49 percent say government should not intervene and the free market should be allowed to function independently.
So what is so frightening? That more than half of those surveyed are not in favor of the free market.
Whether you are speaking of the EDD or OSHA or the IRS or the Franchised Tax Board of one of 50 other alphabet combinations, bureaucrats who have never had to make payroll, have never had to resolve a customer problem and who have never had to try to coax a business through troubled economic times are telling those who have years of experience doing just that, how to make their businesses viable.
Added to the mix is the oft times adversarial view that government employees have of private industry and you have a situation where the number one creator of jobs in the country is being hamstrung.
Nice for fixing the economy, right?
to 20yearsin(explicably…)dependent(…upon the modern-day tripe that passes for liberal/fascist thought):
I was going to base my response on your all-too pedantic recourse to ad-hominem attack by pointing out to other contributors here that this sort of attack is the standard, leftist response to any strong conservatives. Especially when that conservative is a black man – you & your fellow lemmings – leastways the ones that haven’t merrily gone over the cliff yet following their holy trinity of theChosenOne, Pelosi & Reid – just love to slam dem “oreos”, dontcha? The Collective cannot abide an ungrateful negro who’s gone off the reservation… just ask Clarence Thomas about that.
But rather than play your game, bringing up reasoned points to your b/s attacks on T. Sowell, what better response than to attack you myself, using your own tactics?
Actually, all toying with your thoughtless remarks aside, my first para above ridicules your inferior reasoning that underpins your attack – my second para much more clearly qualifies as a worthy cousin to your own remarks.
So… you “believe” everything you wrote in #23. Of course! And Clinton fixed welfare, he also balanced the budget, dhimmicrats love and respect the military, government can grow an economy (just ask the USSR & the ChiComs…), locking republicans out of any discussion/input on the stimulus then demanding their support is really true bi-partisanship, and the chosen one really is a natural born citizen because he’s conclusively proved it.
Sheesh… what a fascist you are.
Re”Guards” — your friendly neighborhood Jacksonian CoastGuard Man
PS: A big “Semper Par” to my Recon USMC BaA (that’s “Brother at Arms” for any members of the America’s-what’s-wrong-with-the-world crowd reading this
Great interview, very informative.
Bonjour, Nice to unify you, I am alise