The same day as Argentina’s election, I also saw Killers of the Flower Moon to distract myself from the whole “the hyperinflation guy might win”. The movie is absolutely fantastic and remarkably entertaining despite the three and a half hour runtime and is already considered a frontrunner for the 2024 Oscars1. I had (unsurprisingly) some thoughts, so here they are.
Money flows freely here now
It is generally observed, that in countries of the greatest plenty there is the poorest living.
The Spectator, October 1711
Killers of the Flower Moon takes place throughout the 1920s, and it follows a man named Ernest Burkhart (Leonardo Dicaprio). Ernest moves to the Osage Hills in Oklahoma to work for his uncle “King” Bill Hale. There is an oil boom currently underway in Oklahoma - benefitting, surprisingly, the Osage population (a local Native American tribe), who the movie notes have the highest GDP per capita in the world, and the highest luxury car ownership stats of any county in the United States. This has attracted many people, most of them white men, who want to share in on the Osage’s wealth by doing work for them in some shape or form. The main source of wealth for the Osage is their communal ownership of oil fields, the profits from which are shared among most Osage and their families (known as headrights). This wealth, which is inherited, results in white men marrying into Osage families to take ownership of their wives’ headrights - including Ernest himself, who marries an heiress named Mollie Kyle (Lily Gladstone).
What follows is something known as the “Reign of Terror”, where several wealthy and “full blooded” members of the Osage community are murdered suspiciously - all of which had white legal guardians or were married to whites, and the situation ends up involving government officials up to and including the predecessor to the FBI. Since this all takes place at the same time as a period known as “The Nadir of American Race Relations”, I think you can assume how the story goes and who’s to blame.
Now, around a hundred years later, the Osage do okay, but not as great as they used to. So what happened? Why did having a lot of oil not result in the Osage reservation being wealthy, or at least significantly wealthier than other Native American populations? Well, besides “racism”, the answer is pretty simple: an economics concept known as the Resource Curse. Also known as the “paradox of plenty” (not a great name), it points to regions or countries that are wealthy in natural resources being, in fact, generally quite poor.
Generally speaking, there’s some evidence for a resource curse existing, but with caveats. Most of the issue is that “having natural resources”, in a vacuum, doesn’t specifically state how the outcomes in question are affected - so, for instance, you could have a state like Saudi Arabia (a repressive theocracy) or something like the Alaska Permanent Fund Dividend (Alaska, while not a terrific place to live, is at least a democracy). Exactly how the presence of (and dependency on) natural resource impacts growth and development is as important, if not more, than why it does.
Some proposed explanations have been:
Long run trends in commodity prices (Prebisch-Singer Hypothesis): basically, commodity prices are supposed to go down over the long run, which results in lower and lower growth because the income/export elasticity of commodity producers is less than 1 (as in, exporting 1% more oil increases national income by less than 1%). This explanation not only does not have any evidence to back it, but also runs counter to common sense: most natural resources of relevance (i.e. oil, gas, minerals) are perishable, so prices should trend upwards.
Volatility in commodity markets: the markets for commodities tend to move around a lot, with large changes in prices compared to national markets. This would result in pronounced economic volatility for commodity producers, resulting in worse and more frequent recessions. There is some evidence to back this channel being relevant.
Crowding out manufacturing: in commodity exporters, capital and labor would be utilized by the exporting sector and its value chain, rather than more productive sectors (such as manufacturing). This would cause, over time, national income to stagnate relative to a counterfactual. This explanation is very hard to prove, and generally depends on the other factors too.
Dutch Disease: Dutch Disease is a phenomenon where, after a natural resource is discovered, foreign capital crowds into the location, causing the currency to become overvalued - which has negative impact on trade and employment. Over time, this would cause repeated balance of payments crises, which would cause the national economy to stagnate. Dutch Disease is pretty real, but government policy (especially fiscal) can definitely prevent it.
Institutions: the last channel is probably that countries with natural resources either already had bad governance or developed it as a consequence.
The institutional channel is very interesting. Obviously we have to address that imperialism and racism play a major role. Beyond colonialism, it’s well known that oil states are less democratic, both because authoritarians are stronger (more money that nobody else gets to have) but also because oil democracies can become autocratic more easily, i.e. are weaker. But oil could also strengthen democracies, especially poor ones, by giving them more resources - so it might just strengthen whatever kind of government is already in place. In addition, besides from changing which institutions the country has, natural resource wealth also makes them worse: inefficiency, incompetence, and corruption multiply after oil is discovered.
The last kind of channel that is relevant is the incidence of civil conflict in resource-rich states. Conflict, especially when violent, is probably bad for economic development, and countries with oil and mineral wealth tend to be more prone to conflict if they’re wealthy enough that the resources are worth taking, but not wealthy enough that victory is impossible. This is both because (as seen above) oil-dependent governments are generally worse, but also because the benefits to an insurrection, rebellion, or coup are much much higher.
That dynamic is especially true in cases where there are sharp boundaries drawn between the owners of the resources and the rest of the population, particularly ethnic divisions. If an ethnic minority is in control of the resources, it is much more likely that a group representing the majority will attempt to (usually violently) seize it. One can see this very clearly in the most traditional studies of the settlement of the United States: besides from the usual trade-off between direct “war” and commerce, the (White) majority can also engage in systematic, coercive violence in order to lower the costs of Native land.
There’s also a bunch of other negative effects of the resource curse, such as environmental degradation or increased gender discrepancies (without any benefits to families), but that’s a bit secondary to “the collapse of democracy into bloody lynch mobs trying to seize the oil”. So the institutional channel, and particularly the one involving violence, is probably the most relevant one. It should be noted that most experts agree that the best thing to do with oil wealth is to just distribute the dividends to citizens in the form of social services or direct transfers, which is (kind of) what the Osage did.
This part also plays into a theme that has been running through Scorsese’s filmography at the very least since Casino, and especially in his more recent work: that the history of American capitalism is, largely, the history of crime. This is very evident on The Wolf of Wall Street (about the finance industry preying on regular schmucks and getting away with it) and The Irishman (about the mob doing basically the same thing by comandeering labor unions). Scorsese’s “capitalism movies” generally focus on violent, amoral worlds where the threat of violence and betrayal tints every single social interaction - both ocurring mainly over profit. In Scorsese’s world of gangsters and corruption, the rich and powerful get their way by either silver or lead.
a toxic mix of paramilitary organizations, drug and arms trafficking, hostage taking and kidnapping, and systematic sexual assault, combined with the personal enrichment of those in power, provides unmistakable affinities with the racket model. The mollifying effects of mediating or universalizing ideologies or institutions are diminished, and self-preservation depends on obedience to the most plausible protector. State sovereignty, popular or not, is weakened to the point of virtual extinction, as legitimate authority is replaced by raw coercion and the monopoly of violence famously assigned by Max Weber to the modern state is undone.
This sociological phenomenon, of a “gangsterization” of the public sphere and of the economy, was also analyzed by the Frankfurt School back in the 1930s - under the concept of the racket society2. Basically, the world of laws, norms, and universal shared values was being replaced by one of violence, graft, and patronage; political divisions over differences in values and priorities replaced by sheer greed and transactional pressures between patrons and clients. The only ideologies that can actually through the complete collapse of economic rationality are violent, extremist ones: the virulent white supremacy expressed by the Ku Klux Klan (who are, weird fact, Mollie’s legal guardians) and their local allies.
You’re charging me Osage prices!
The movie deals with issues of racism and discrimination, albeit in a secondary place - mainly, I think, due to Scorsese’s discomfort with portraying the experiences of victims when he can really only relate to the perpetrators. And he’s pretty good at it! The bad guys, who are all racists, are all very bad and bad in a sort of creeping dread kind of way. Like, you don’t really pick up on how bad it’s all getting until it’s gotten really bad
Well, onto discrimination. Obviously some people don’t think that having statistically disparate outcomes in life counts as evidence, and that’s fine. Healthy skepticisim is, after all, healthy. Well, there’s plenty of (empirical, experimental) evidence that discrimination exists.
A study (by Nobel Laureate Claudia Goldin) found that blind auditions for orchestra positions increased the chances that women get hired.
Another study found that, for similar positions and identical resumes, those with stereotypically “white” or “neutral” names got more call-backs than those with “Black” names.
Evidence from European countries also showed that identical resumes for women with different names (“Muslim” and “local”) and different pictures (none, without a veil, and with a veil); and while “Muslim” names overall were disfavored for subsequent interviews, the discrimination was worse for Muslim women who were wearing veils in their pictures.
All else being equal, recruiters are more likely to call back for interviews men to women, especially if the women have children.
People rate the job performance of women as worse than that of men, and mothers as even worse - despite women being as productive as men.
The traditional way to make sense of discrimination, in an economics context, is what’s known as taste-based discrimination - people don’t like individuals from another group, and so when identifying that group is easy or possible, they tend to harm them in a variety of ways (usually labor-related). This model of discrimination comes from Nobel Laureate Gary Becker, and it assumes people’s preferences for racial/gender/etc segregation range from “none” to “extreme”. Assuming ceteris paribus between candidates, the decision between a white and non-white (for instance) applicant comes down to the racial preferences of the employer - but minority applicants can get an edge by changing their conditions, as in taking lower pay or showing up with a better resume. So, for instance, Black and Hispanic individuals were subject to systematic discrimination in the rental market, resulting in lower quality housing on average - and for Black prospective homebuyers/renters, they need a pretty significant income advantage versus a White candidate to actually get preference. A study evaluating Becker’s claims found them adequate, but also couldn’t explain three quarters of the impact of racial prejudice. In the movie, this would manifest as the very obvious moments where bigotry is expressed. It’s not rocket science that if someone says “I hate X group” then they’re prejudiced against that group and would discriminate against them.
Another somewhat related model of discrimination is what’s known as statistical discrimination, where absent accurate information on the specific individual, decisions are made based on general prejudices about the group, resulting in biased outcomes. The clearest example of this is the unintended effects of legislation banning verifying criminal history of prospective tenants (i.e. “ban the box” laws), where landlords tend to discriminate against racial minorities assuming they are more likely to have criminal records. The Osage, who are assumed both wealthy and idle and thus undeserving (through their headrights revenue) actually suffer from this type of discrimination as well, when Ernest has to arrange a funeral for an Osage character and gets charged outrageous prices for every part of the process.
But obviously the “ceteris paribus-ing race away” idea has a lot of problems; mainly, that you can’t actually take it out cleanly of someone’s life without altering the rest of their experiences. So, for instance, Black and White people had really different economic realities for the past 150 years, in ways that affect significantly the possibilities of both today, and you couldn’t really separate the past from the present cleanly there. With limited intergenerational economic mobility, and high intergenerational transmission of poverty, then discrimination begets poverty and poverty begets poverty. This structural discrimination, where disadvantages get baked in and persist for generations, is very real - even when the original biases don’t really play much of a role.
There’s a philosophy paper I really like called “White Psychodrama” (you can also find a more accesible writeup at Salon), which is mostly about how different groups of Americans deal with racism (feeling guilty, feeling guilty about being made to feel guilty, or - if they’re not white - by cashing in). But the crux of the question is that a big part of the issue is that there are significant economic disparities between the races, and a lot of issues that minorities face stem from there - for Black people, there’s some issues they face for being Black, and some because Black people are (on average) poorer. I’ve written about this, and there’s also a non-economic component, but that’s neither here nor there. This applies to many groups - to a large extent most “discourse” is about semantics and labels, and not really about whatever the actual issues are. While the debate about economic disparities is largely about “discrimination versus choice”, the real issue isn’t really that evil bosses are paying marginalized people less or whatever, it’s that there’s a different choice set for those people because they are marginalized and that has economic consequences. And this doesn’t even account for the impact of direct violence, which has enormous economic costs not only for the people directly affected, but also for society at large.
Conclusion
Racism - bad. Violence- bad. The intersection thereof? Very bad.
Go read the trillion posts I’ve written about gender disparities or the one I wrote about racial disparities or low economic mobility or the one about culture stuff.
Another frontrunner, Oppenheimer, already has a blog post in the works, and has had it basically since it came out, but I didn’t have the time to get around to finishing it.
Loyal readers might remember this concept from a blog post about House of the Dragon.