Thomas Sowell is one of the most influential and insightful voices in American academia. At 95, he wrote a new website: Facts Against Rhetoric. His work is known for its willingness to challenge even the most set notions with objectivity and command of empirical evidence.
But arguably his most important, yet overlooked, work is The Vision of The Anointed. The process that Sowell describes in that book can be applied to analyze almost any government policy in any country in the world. As the host of the Uncommon Knowledge podcasts, Peter Robinson, put it, “It is a book that explains everything.” But why?
Thomas Sowell explained that every crisis facing the US right now emerged from a notoriously similar pattern that follows these 4 steps:
- The anointed—the intellectual elites and the political classes—establish (manufacture) a crisis that they believe presents a great threat to the country. Many times, they allegedly act in good faith, but as Thomas Sowell said, “Economic policies need to be analyzed in terms of the incentives they create, rather than the hopes that inspired them.”
- They then advocate for the solution of the crisis, ignoring critics who believe that the policies might lead to a detrimental result. The criticism is dismissed by the anointed as dishonest, self-serving, or simplistic.
- Policies are implemented and end up leading to the detrimental result predicted by the critics.
- They dismay objections to their policies as dishonest, dishonorable, or defend their policies by arguing that the result was correlation rather than causation.
Let’s empirically check Sowell’s theory and see if it holds in the real world. There are three relevant problems that I think we can look at through the prism of the 4-step vision—African-American poverty and fatherlessness epidemic; inflation caused by covid stimulus; and tariffs.
Problem 1: African-American Poverty and The Welfare State
Step 1: In the 1960s, white liberals wanted to solve the black poverty rate, which stood at 47 percent and the out-of-wedlock birth rate, which was 20 percent.
Step 2: They failed to see how the previous 20 years—1940 to 1960—were the period of greatest economic growth in history of the black community, with the poverty rate dropping from 87 percent to 47 percent, while black literacy rates were skyrocketing, and before the minimum wage was pretty much reintroduced in 1948 after the runaway inflation during WWII, black youth unemployment was lower than white youth unemployment.
Step 3: After LBJ created the modern welfare state, the black poverty rate decreased, but not because of the welfare state. It was just the continuation of the previous trend, at a much slower pace (18 percent instead of 40), while the absolute number of people below the poverty line actually increased. The greatest emergency, however, is on the family front. The black out-of-wedlock birth rate has jumped from 20 percent to 69.4 percent in less than half a century.
Step 4: Critics of the welfare state are accused of racism and bigotry. Sowell himself has likewise been accused of similar ill will. The intellectuals who once promoted every welfare program now avoid any scrutiny of their ideas for a simple reason—they are afraid and/or self-assured.
Problem 2: Inflation
Step 1: During the late stages of the covid crisis, the political elites created a narrative of a depressed economy, despite unemployment being down for consecutive months.
Step 2: Democratic nominee Joe Biden promised the American Recovery Act—an ambitious stimulus project that promised to fight unemployment by spending trillions of dollars. Critics warned that a surge in spending will have an inflationary effect and not reduce unemployment. They pointed out that the New Deal, which arguably is the blueprint behind both ARPA and ARRA, failed miserably. From 1930 to 1940, there has never been a year in which the unemployment rate fell below 14 percent. For context, the highest in post-WWII history was only 10.1 percent in 1981. Economists like John Cochrane argued that such a spree of spending risks an inflationary effect. The Biden administration dismissed those claims as bad faith and self-serving.
Step 3: Inflation did spike to the highest level in 40 years. Unemployment did go down, but that was nothing more than continuation of the previous trend. Real median income has declined by 2.6 percent, despite rising 4 percent a year on average from 2014 to 2020.
Step 4: The Biden administration claimed that price inflation had nothing to do with their fiscal policies. They argued it was caused by high energy prices and supply chain disruption. A recent MIT study showed that the spending spree was responsible for almost half of the inflation. Once again, the anointed tried to shift the blame on corporations. The truth is that their bad ideas are responsible, but, instead of admitting it, they run away from the consequences.
Problem 3: The Tariffs
Step 1: The Democrats are not the only ones who impose their radical ideas to solve manufactured crises. The recent Trump tariff episodes are another example of a policy with supposedly good intentions but horrendous results. Trump argues that the decline of the number of American workers involved in manufacturing constitutes a crisis. He is right that industrial employment has declined from 32 million in 1950 to 8 million today.
Step 2: He ignores the fact that the biggest reason is automation, not offshoring. In fact, after adjusting for inflation, total manufacturing value added went from 1.4 trillion in 1997 to 2.4 trillion dollars in 2024. Economists warned that the uncertainty created by the tariffs and higher input costs might lead to further offshoring.
In general, tariffs never had a great track record. For example, see the Smoot-Hawley Act. In March 1930 unemployment was 8.9 percent—not even double digits—almost half a year after the stock market crash of 1929. It then trended downward reaching the low of 6.3 percent in June, when president Hoover signed the Smoot-Hawley tariffs. Unemployment went up to 25 percent and—despite the attempts of the New Deal—never fell below 14 percent. Back in the recent past, Trump dismissed criticism as globalism.
Step 3: The results that are coming in now show that detrimental results are unfolding. Unemployment is up to 4.3 percent, with job creation slowing significantly, even going negative in June.
Step 4: This one is a little different. President Trump claimed that the economy is booming and the previously mentioned numbers are inconsistent with reality.
Sowell’s message is as relevant as ever. The cycle Sowell described continues to repeat itself again and again. What Sowell gives as in not a grand theory of everything, but a framework for analyzing any plan wrapped in moral superiority but thin in empirical evidence. If Sowell is right, the most crucial political virtue is patience: the ability not to turn every problem into a crusade and every dissenting voice into an enemy. So while in each crisis we face the substance changes, but the script doesn’t. Recognizing that script is the first step towards the solution.
