Sowell’s “Applied Economics”

According to Word Press, this is a 30-minute read. I believe it will take you longer to read if you are going to absorb anything from this review. It is well written. I am going to leave the explanation of each section to Zetland. I am sure Economist David Zetland spent more than 30 minutes writing this piece. It is a good read if you can get through it all. David starts out by saying “political decisions tend to be categorical, while economic decisions tend to be incremental.”

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Thomas Sowell published this book in 2003/2008. I found it more interesting to read than his Basic Economics (2005) because here he focusses on a few big topics. Here are some excerpts:

Politics vs Economics

1. In short, political decisions tend to be categorical, while economic decisions tend to be incremental. Voting is a package deal: You may agree with candidate A on economic policy, candidate B on foreign policy and candidate C on environmental issues but, in the end, when you enter the voting booth you have to vote for one candidate’s whole package of policies on the economy, foreign policy, and the environment. Moreover, you don’t get to change your mind until the next election. It is not like buying one brand of bread today and a different brand tomorrow if you change your mind.
2. From a political standpoint … there are always numerous desirable things that government officials can offer to provide to voters who want them— either free of charge or at reduced, government-subsidized prices— even when these voters do not want these increments enough to sacrifice their own money to pay for them. Ultimately, of course, the public can end up paying as taxpayers for increments that they would not have chosen to pay for as consumers. The real winners in this process are the politicians whose apparent generosity and compassion gain them political support.
3. No political message has proven to be more welcome, in countries around the world, in both democratic and undemocratic nations, and among peoples of every race and culture, than the message that your problems are not your fault, but the fault of others— and it is they who must change, not you. Moreover, it is they who must pay the consequences if they do not change, but not you. Not only particular political candidates but, in some countries, whole revolutionary movements, have risen to power on the wings of that message.
4. Elected officials’ top priority is usually getting re-elected, and their time horizon seldom extends beyond the next election. Laws and policies that will produce politically beneficial effects before the next election are usually preferred to policies that will produce even better results some time after the next election. Indeed, policies that will produce good results before the next election may be preferred even if they can be expected to produce bad results afterwards.
5. Political thinking tends to conceive of policies, institutions, or programs in terms of their hoped-for results— “drug prevention” programs, “gun control” laws, “environmental protection” policies, “public interest” law firms, “profit-making” businesses, and so forth. But for purposes of economic analysis, what matters is not what goals are being sought but what incentives and constraints are being created in pursuit of those goals.
6. Political thinking tends to conceive of policies, institutions, or programs in terms of their hoped-for results— “drug prevention” programs, “gun control” laws, “environmental protection” policies, “public interest” law firms, “profit-making” businesses, and so forth. But for purposes of economic analysis, what matters is not what goals are being sought but what incentives and constraints are being created in pursuit of those goals.
7. Similarly, it is an open question whether drug prevention programs actually prevent or even reduce drug usage, whether public interest law firms actually benefit the public, or whether gun control laws actually control guns. No economist is likely to be surprised when rent control laws, for example, fail to control rent, so that cities with such laws often end up with higher rents than cities without them — New York and San Francisco being classic examples. But such outcomes may be very surprising to people who think in terms of political rhetoric focussed on desirable goals— and who do not think beyond stage one. [Econ in one lesson: ….and then what happens?]
8. FDR seems never to have considered that incessant experimentation, in and of itself, was a process which could have high costs for the economy, irrespective of the merits or demerits of particular experiments. Government experimentation is different from private experimentation which, for better or worse, affects only those who engage in it, and who have every incentive to stop when it becomes clear that the experiment is not working. But government experiments with the rules under which millions of other people must operate, and the prospect that the basic rules of the economy are likely to continue changing without notice at any time, is not a prospect that encourages long-term investment by businesses or even short-term spending by consumers. People tend to hang on to their money when they don’t know what is likely to happen next. [Trump. Now.]
9. But there are no ribbon-cutting ceremonies for filling in potholes or keeping a bridge or school in good repair. Unless there is some obvious defect, both immediately visible and important to a large segment of the voting public, there is little or no political pay-off for doing such things. Moreover, delayed maintenance is in most cases unlikely to cause any serious problem before the next election, even if it leads to disasters in the long run, during some future administration. Such incentives and responses are not peculiar to the United States or to modern times. In the eighteenth century, Adam Smith noted how in France some “work of splendour and magnificence” was more likely to be built by a “proud minister of an ostentatious court” than were “a great number of little works,” even when the latter have “extreme utility.”
10. The real question is not which policy or system would work best ideally, but which has in fact produced better results with far from ideal human beings. Even with the more modest task of evaluating different policies within a given system, the real question is not which policy sounds more plausible, or which would work best if people behaved ideally, but which policy in fact turns out to produce better results with actual people, behaving as they actually do. [Revealed preference.

Free and Unfree Labor

1. A student asked his history professor: “Where did slavery come from?” “You’re asking the wrong question,” the professor replied. “The real question is: Where did freedom come from?” Slavery is one of the oldest and most universal of all human institutions. Slavery has existed among peoples around the world, as far back as recorded history goes— and archaeological explorations suggest that it existed before human beings learned to write. No one knows when slavery began. It is the idea of freedom for the great masses of ordinary people that is relatively new.
2. In more recent times, minimum wage laws and public disapproval of non-paying jobs have largely eliminated this particular way of acquiring human capital. However, many people continue to take lower-paying jobs than they could get elsewhere when they value the experience available to them in the less remunerative job and expect to cash in on it later on in their careers. They are thinking beyond stage one.
3. Having wage rates set by third parties’ notions of workers’ “essential needs” would be a radical departure from having wages set by supply and demand— and it is by no means clear how either the allocation of resources in the economy or the interests of the workers themselves would be better served in this way. These workers may well feel that their most “essential need” is a job.
4. Moreover, discussions of what tax rates are appropriate for “the rich” are almost invariably discussions of income taxes, not taxes on accumulated wealth, though one is rich only when one has accumulated wealth, not just because one has a high current income.
5. In other words, the monopolistic firm has incentives to produce less than competitive firms would have produced in the same industry, just as with legal economic activity. In this case, that means producing less crime. When there is strong organized crime control of a given neighborhood, even independent criminals operating in that neighborhood have to take into account whether some of the things that they would do otherwise might displease organized crime leaders and bring retribution. In some cases, independent criminals may have to split their earnings with the syndicate for permission to operate, thereby reducing the rewards of crime and the incentives for being an independent career criminal.
6. During the war years as a whole, more than 2 million people died in Soviet prison camps. Despite the long hours of work and inadequate food, clothing, housing, and medical care that contributed to staggering death rates, the forced labor of the inmates still did not cover the costs of the Gulags. Shortly after Stalin’s death, the head of the Soviet secret police— hardly a humanitarian— began closing the camps down for economic reasons.
7. Educating slaves was forbidden by law throughout the Western Hemisphere in post-Columbian times. From an economic standpoint, this meant that, in addition to inefficiencies in using people of a given capability, slavery also limited the capabilities that could be developed among people of a given potential. Put differently, freedom has not only personal and political benefits, but economic benefits as well.
8. For centuries that usually meant that Europeans enslaved other Europeans, Asians enslaved other Asians, Africans enslaved other Africans, and the indigenous peoples of the Western Hemisphere enslaved other indigenous peoples of the Western Hemisphere. Only in relatively recent centuries, as local sources of supply of slaves dried up with the consolidation of nation-states, and as growing wealth enabled people to be enslaved at greater distances and transported far away, did Africa become the principal source of supply of slaves for Europeans who transported them across the Atlantic.

The Economics of Housing

1. Given the high man-made costs of various restrictions on land use, how and why do such restrictions occur? One reason is that many voters simply do not think beyond stage one— that is, they do not see the connection between land use restrictions and the various consequences which unfold over time. Another reason is that those who clearly do see the connection may not pay those costs themselves, and may instead gain financially from laws which cost others dearly. Those who already own their own homes will see the value of their homes rise as restrictions are put on the building of new homes. It is those who are already living in a given community who vote on its laws, while newcomers are the ones confronted with the higher housing prices that these restrictive laws create.
2. Under severe land use restrictions, prices no longer serve the function of allocating scarce resources among competing alternative users. Instead, third parties are able to override other people’s desires or preferences with their own desires and preferences, not by competing with them on an equal plane in the market but by using politics to tilt the competition in their direction by passing laws to prohibit the choices of other people.
3. In short, whether with residential or commercial buildings, there has been no fixed, ideal configuration of structures. Instead, structures have adapted to the changing circumstances of individuals and of the economy and society. But those who are today ensconced in many upscale communities often seek to freeze the existing community as it is by law, using various political devices to block others from exercising the same freedom of choice that they exercised when they chose to live where they settled. Often this is done using noble phrases expressing concern for “preserving” something for “posterity.” But what this amounts to is that the posterity of existing residents is to have a legal right to keep out the posterity of other people.
4. The virtual impossibility of producing much housing that ordinary people could afford under severe land use restrictions has led to various token amounts of affordable housing being created, either by government subsidies or by imposing legal requirements on private developers to build a certain percentage of their housing to be sold or rented at prices “below market,” as a precondition for getting permits to build at all. The amount of “affordable housing” produced by either of these methods has of course been very limited by the unwillingness of taxpayers to pay for massive amounts of subsidies and by the fact that developers could recover their losses on “below market” housing only by increasing still more the rent and home sale prices to others, who obviously do not have unlimited resources either.
5. Although many people see government intervention as necessary to produce “affordable housing,” history as well as economics says otherwise. Prior to the advent of large-scale government involvement in the housing market, people tended to pay a smaller proportion of their incomes for housing, even though incomes in earlier times were lower. Back in 1901, Americans spent a smaller proportion of their income on housing than they did a century later—23 percent in 1901 versus 33 percent in 2002-03.
6. One solution to the problem of “affordable housing” that many find attractive is rent control. It shares both economic and political characteristics with other forms of price control. Its political advantage is that its goal is attractive, so that it gains the political support of those who think in terms of desirable goals, rather than in terms of the incentives and constraints created— or the consequences of such incentives and constraints. Those who do not think beyond stage one find rent control especially attractive because the good effects come immediately, while the bad effects come later— and persist for decades or even generations.
7. Among the consequences of price controls in general have been (1) a shortage, as the quantity demanded increases while the quantity supplied decreases, both in response to artificially lower prices, (2) a decline in quality, as the shortage makes it unnecessary for the sellers to maintain high quality in order to sell, and (3) a black market, when the difference between the legal price and the price people are willing to pay becomes large enough to compensate for the risks of breaking the law. These same consequences have recurred again and again, for all sorts of different goods and services whose prices have been held down by law, in countries around the world, over a period of centuries, and under governments ranging from monarchy to democracy to totalitarian dictatorship.
8. Perhaps the most basic principle in economics is that people tend to buy more at a lower price than at a higher price. Rent control enables people to demand more housing than they would otherwise. In San Francisco, a study in 2001 showed that 49 percent of that city’s rent-controlled apartments were occupied by just one person each. Similar patterns have been found under rent control in New York City and in Sweden. One reason, then, for a housing shortage under rent control laws is that more people occupy more housing space than they would in a competitive market.
9. Usually, rent control laws do not apply to office buildings, so there may be surplus office space, with high vacancy rates, in the same city where there is a housing shortage with virtually no vacancies available in rent-controlled apartment buildings. In some places, rent control laws do not apply to luxury housing, so there is a shift of resources from the building of ordinary housing for ordinary people to the building of luxury housing that only the very affluent or the wealthy can afford. A study of rent control in various countries in Europe concluded: “New investment in private unsubsidized rented housing is essentially nonexistent in all the European countries surveyed, except for luxury housing.” Such shifts to luxury housing help explain one of the supreme paradoxes of rent control— that cities with rent control laws typically have higher rents than cities without such laws.
10. Even famed nineteenth-century crusading journalist Jacob Riis noted in passing that Jewish immigrants packed into crowded slums on New York’s lower east side saved a substantial proportion of their incomes. Since the money that they saved could have been spent on better housing, they obviously had other goals besides maximizing the space, comfort, or amenities of the places where they lived. When slum clearance forced them to move into housing more pleasing to third-party observers, the costs of this upgrading had to be paid by the tenants, not the observers, and it would come at the expense of the tenants’ other goals and desires. [Same as Amsterdam and Dutch government policies now]
11. Politics offers attractive solutions but economics can offer only trade-offs. For example, when laws are proposed to restrict the height of apartment buildings in a community, politics presents the issue in terms of whether we prefer tall buildings or buildings of more modest height in our town. Economics asks what you are prepared to trade off in order to keep the height of buildings below some specified level.

Risky Business

1. Those who are in the business of selling insurance try to take into account not only the existing risks, but also the increased amount of risky behavior that the policy holder may engage in as a result of becoming insured. For similar reasons, the family— the oldest insurer of all— cautions its members, both when they are growing up and on specific occasions afterwards, against various kinds of risky behavior. When families had the burden of taking care of an unwed daughter’s baby, there was more chaperoning, screening of her associates, and moral stigma attached to unwed motherhood. All these things declined or disappeared after many of these costs were shifted to government agencies. [Moral hazard]
2. For a government agency, however, financed by taxpayers’ money, there is no such urgency about discouraging the increased risks that people may take when those risks are covered by others. Moreover, the agency gets its biggest political support from helping those suffering the consequences of the risks they have taken, however unwisely, not by criticizing them. Thus government emergency programs to help people struck by floods, hurricanes, and other natural disasters make it easier for people whose homes have been destroyed to rebuild at the same locations, in areas where such disasters recur regularly over the years.
3. In India, for example, the millions of people with modest but rising incomes, in the wake of that country’s faster growth rate after markets began to be freed from stifling government controls, created a market for very small and inexpensive automobiles. But some have worried about the safety of flimsy little cars, which have higher rates of injury and death in accidents. However, the key question here, as in many other situations involving risk, is: Compared to what? Current transportation for millions of Indians is hardly a model of safety:   Currently, entire families commute on scooters, with the man of the house driving, his wife sitting side-saddle on the rear, and as many as three children wedged in between.
4. These include “public interest” law firms, ideological organizations and movements, such as the so-called Center for Science in the Public Interest, and government agencies such as the National Highway Traffic Safety Administration. Since these organizations do not charge directly for their services like mutual aid societies or insurance companies, they must collect the money needed to support themselves from lawsuits, donations, or taxes. Put differently, their only money-making product or service is fear— and their incentives are to induce as much fear as possible in jurors, legislators, and the general public. [Follow the money]
5. However irrational such results might seem in economic terms, they are perfectly rational in political terms, for the government officials who impose such requirements benefit politically in stage one, even if both the insurance companies and their policy-holders end up worse off in stage two. Political incentives also make it rational to mandate insurance coverage for things that would not be covered by insurance on economic grounds, since those things are not matters of risk. For example, the cost of annual medical checkups is not a risk, since it is known in advance that these checkups occur once a year. To have health insurance cover such things would be like having automobile insurance cover annual smog checks or routine oil changes.
6. What this means is that other drivers are subsidizing high-risk drivers. Looking beyond stage one, what this also means is that more pedestrians and motorists are likely to suffer injuries or death because more high-risk drivers can afford to be on the roads and highways than could do so if auto insurance rates were allowed to rise to the very high levels required to compensate for all the damage caused by reckless drivers.
7. The underlying reason for the crisis atmosphere surrounding many discussions of how to “save” Social Security in the late twentieth and early twenty-first centuries came from the fact that the contributions paid by workers were not invested, like insurance premiums, but spent. Because there was no real fund of wealth to draw on in pay-as-you-go government pension plans, these plans had the same fatal weakness as the original Ponzi scheme. Yet none of that became obvious in stage one.

The Economic Development of Nations

1. In the long millennia of history, economic growth has usually not been something that could be taken for granted. Moreover, growth— an increase in output— is not the same as development, an improvement in the ways and means of producing output, whether through technological advances or improved management or organization.
2. The farther from the tropics an agricultural society is, the more keenly the people must be aware of time and of the necessity of beginning planting soon after the snow and ice are gone in the spring, so as to be able to produce a crop during the shorter growing seasons of climates farther away from the equator. Farmers cannot simply drift along from day to day, as hunter-gatherers might in some tropical land with abundant food spontaneously supplied by nature the year round. Farming demands that particular things be done in particular seasons— which is to say, that people are constantly forced to think beyond whatever stage they are in currently.
3. Even more important for economic and cultural development, concentrations of population made cities possible, with all their potential for economies of scale and for making costly investments in both economic, social, and cultural institutions achievable, when the high costs of these institutions could be spread over large numbers of people living within a relatively small area of land. Because cities were usually established on navigable waterways, they had access and communication with other cities and ultimately to the seaports of distant lands. The cultural universe of a city was thus much larger than the cultural universe of land-locked villages. [Economies of scale and scope, etc.]
4. The role of government can be crucial. After the Roman Empire collapsed in the fifth century A.D., the institutions it had maintained collapsed with it. What had once been an inter-connected economy and legal system, stretching from Britain to North Africa, now fragmented into many independent local jurisdictions… As trade declined and the advantages of specialization disappeared for lack of markets, cities also declined, roads fell into disrepair, educational institutions declined or disappeared, and law and order broke down. It has been estimated that it was a thousand years after the collapse of the Roman Empire before the standard of living in Europe rose again to where it had been in Roman times. The presence or absence of effective government can be a major factor in economic development or economic retrogression.
5. When the British established control over vast areas of West Africa formerly controlled by a variety of tribes and rulers, this enabled the Ibos from southern Nigeria to migrate to northern Nigeria in safety, setting up enterprises and pursuing careers in places where they would never have dared to locate before, among alien peoples. In various other parts of the world as well, during the period of European imperialism, vast numbers of immigrants from China, India, and Lebanon migrated to lands under the protection of imperial law, establishing many enterprises and creating whole industries that helped bring these societies into the modern world. [Upside of colonialism?]
6. Many Americans have created their own businesses— some of which later grew into giant corporations— by borrowing money to get started, using their homes, farms, or other real estate as collateral to get the initial capital required.27 But an Egyptian or a Peruvian or other Third World individual who wants to do the same thing cannot get a loan on a home that is not legally recognized as property, because banks and other financial institutions avoid lending money on assets whose ownership is unknown or unclear.
7. In short, although property rights are often thought of as things that are important primarily to the affluent and the rich, these legal recognitions of existing assets may be especially needed by poor individuals in poor countries, if they do not wish to continue to be poor.
8. As Peruvian economist Hernando de Soto concluded, after a worldwide study of this phenomenon:   The lack of legal property thus explains why citizens in developing and former communist nations cannot make profitable contracts with strangers, cannot get credit, insurance, or utilities services: They have no property to lose. Because they have no property to lose, they are taken seriously as contracting parties only by their immediate family and neighbors. People with nothing to lose are trapped in the grubby basement of the precapitalist world.
9. Although urban growth was dramatic in much of nineteenth century Europe, few towns developed in the Balkans. As roads and railroads developed and were improved in the more developed parts of Europe, they remained virtually unknown in the Balkans, so that people living in Balkan villages were isolated from people in other villages less than 20 miles away. The Balkan Mountains fractured the peninsula culturally as well as isolating it economically, thereby contributing to the tribalistic divisions and lethal hatreds which have long marked the region. Although the Balkans were rich in natural harbors, there were few rivers to connect these harbors to the hinterlands, which were often cut off by mountains. While much of nineteenth century Europe not only grew economically but became interconnected with other nations within the continent and overseas, much of Eastern and Southeastern Europe lived close to “self-sufficiency”— which is to say, it was isolated, poor, and backward.
10. Sometimes a variety of favorable geographical features exist in combination within a given region, as in northwestern Europe, and sometimes virtually all are lacking, as in much of tropical Africa, while still other parts of the world have some of these favorable features but not others. The consequences include not only large variations in economic wellbeing but, more fundamentally, large variations in the skills and experience— the human capital— of the people themselves. Given the enormous range of combinations of geographical features, the peoples from different regions of the earth have had highly disparate opportunities to develop particular skills and economic experience or to acquire them from others. International migrations then put these peoples with disparate skills, aptitudes, and outlooks in proximity to one another and in competition with one another in other lands, often producing very different economic and social outcomes.
11. Favorable climate is also a factor. The Western European climate is greatly benefitted by the flow of the Gulf Stream, cutting through the North Atlantic, just as other streams flow through land. This stream of warm water, originating in the Gulf of Mexico, warms Western Europe to give it milder winters than places at similar latitudes in the Western Hemisphere or in Asia. London, for example, is farther north than any place in the 48 contiguous United States, yet it has milder winters than New York City, much less cities in Minnesota or Wisconsin.
12. If we were in fact approaching those ultimate limits, whether in food supply, natural resources, or other necessities of life, their rising prices would not only inform us, but force us to change course, without public exhortations or politically-imposed limitations. Indeed, many political solutions are as inconsistent as they are counterproductive. For example, there are restrictions on the use of water by the general public, imposed by the same political authorities who supply water below cost to farmers. These farmers consequently grow crops requiring huge amounts of water from costly government irrigation projects in the California desert, instead of leaving such crops to be grown in the rainy regions of the world, where ample water is supplied free from the clouds. Although the water is costly to the government— which is to say, the taxpayers— it is cheap to the farmers, and is used as if it were abundant. [Need a price signal! We are lacking that with carbon, so we’re getting climate chaos.]
13. How the native-born population responded to the influx of foreign-born people with skills that they lacked was also a crucial factor. Nineteenth century Japanese, for example, not only welcomed but recruited these foreigners with the skills and experience to industrialize Japan, while they sent many of their own young people to more industrially advanced countries as students to acquire such skills themselves. But twentieth century Malays remained largely spectators as Europeans, Chinese, and people from India created a modern industrial and commercial economy in colonial Malaya and then in an independent Malaysia. Indeed, Malays resented all three and, after independence, greatly restricted the economic activities and educational opportunities of the Chinese and Indian minorities. Among nations lagging in economic development, what happened in nineteenth century Japan was the exception and what happened with the Malays has been the rule. Accordingly, the dramatic rise of Japan from a poor and backward nation in the nineteenth century to one of the most advanced and prosperous nations in the world during the twentieth century has likewise been the exception rather than the rule.
14. The magnitude of the self-inflicted economic losses from rejection and suppression of foreign financial and human capital can be estimated from the dramatic increases in economic development in both China and India after such restrictive policies were eased in both countries toward the end of the twentieth century. Economic growth rates rose rapidly in China and India after such restrictions were greatly reduced, and tens of millions of people in both countries rose out of poverty.
15. Another source of foreign financial and human capital— transfers of wealth to governments in poorer countries from governments in more prosperous countries or from international agencies— does not have nearly as good a track record. While these kinds of transfers have been called “foreign aid,” it is an open question whether or how much this process has in fact aided poorer countries to rise out of their poverty. Moreover, the amount of private capital going to Third World nations is many times the amount of foreign aid, even though most private capital goes to prosperous nations rather than poor nations. Indeed, the amount of remittances from Third World citizens living abroad exceeds all the foreign aid in the world.
16. The ultimate economic factor is the human factor. Even such a major factor as geography exerts much, if not most, of its effects through its expanding or restricting the cultural universe from which given peoples can draw on other peoples, near and far. As already noted, when Europeans first crossed the Atlantic to settle in the Western Hemisphere, they were able to find their way where only water could be seen from horizon to horizon by using astronomy, compasses and a numbering system all first developed outside of Europe. People cut off from such sources of foreign knowledge by geographic barriers would have had a far more daunting task. People kept out of touch with most of the rest of the human race by geographic barriers would likewise find it difficult to match the progress of people able to draw on many cultures. Narrow, inbred cultures have often been impoverished cultures, and impoverished cultures have usually meant economically impoverished people.
17. Exploitation theories explain the wealth of some by the poverty of others, whether comparing nations or classes within a given nation. Sadly, however, many of those who are said to be exploited have had very little to exploit and many of those described as “dispossessed” have never possessed very much in the first place. Moreover, the actual behavior of those described as exploiters often shows them shunning those that they are said to exploit, in favor of dealing with more prosperous people, from whom they expect to earn more money. Thus, most American international trade and investment goes to high-income nations like those in Western Europe or the more prosperous regions of Asia, such as Japan or Singapore, with only a minute fraction of that trade or investment going to Africa or to the more poverty stricken regions of Asia or the Middle East.
18. At particular times and places in history, conquerors have indeed extracted wealth from the conquered peoples, but the real question is: How much of today’s economic differences between nations and peoples does that explain? Spain, for example, extracted vast amounts of gold and silver from its conquered lands and peoples in the Western Hemisphere, at great economic and human costs to those who were subjugated. But much of this wealth was quickly spent, buying imported goods from other countries, rather than developing Spain itself, which has remained one of the poorer nations in Western Europe. Meanwhile, Germany— lacking colonies of any serious economic consequence for the German economy, for most of its history— became one of the most prosperous nations in Europe. Switzerland and Sweden have had no colonies at all and yet have been among the most prosperous countries in Europe and the world.
19. Japan used its own lack of natural resources as a justification for its actions. Yet, after Japan’s defeat in World War II led to the loss of all its colonies and conquered lands, the Japanese economy not only recovered from the devastations of war, it rose to new heights. The natural resources that it lacked could be bought in international markets for less than the cost of conquering other countries and maintaining armies there to keep them subjugated.