We find that cities [in the former USSR] where the Holocaust was more intense have relatively lower population today and have voted in greater numbers for communist candidates since the collapse of the Soviet Union. Similar results also hold for oblasts that were impacted relatively more by the Holocaust. Such oblasts have lower levels of per capita income, and lower average wages today. Moreover, they tended to exhibit greater vote shares for communist candidates during the 1990s and higher support for preserving the Soviet Union in the referendum of 1991.The lower population in cities touched by the Holocaust is not a mere mathematical artefact of the massacre of Jews. Populations are even lower than can be explained by the numbers of Jews killed. Instead, it seems to be the case that they grew more slowly after the war.
Of course, this could be just a curious coincidence. But maybe it isn’t. Acemoglu and colleagues point out that, because Russian Jews were disproportionately middle class, the Holocaust, in effect, changed cities’ social structure. And cities with a smaller middle class grew more slowly thereafter and were poorer even 60 years after the Holocaust.
The story here is not just about the USSR’s history. It’s wider than that. We should read this alongside Nathan Nunn’s work on the way in which the African slave trade still depresses African economies today; Eric Chaney’s work on the malevolent legacy of the expulsion of Muslims from Spain in 1609; and Engermann and Sokoloff’s account (pdf) of how slavery in south America led to slower growth for decades afterwards. The message is the same. Regions’ prosperity or poverty today depends on events decades or centuries earlier because these have shaped institutions now.
All this corroborates a point made by Herbert Simon. Differences in wealth between rich and poor nations, he said:
are not simply a matter of acres of land or tons of coal or iron ore, but, more important, differences in social capital that takes primarily the form of stored knowledge (e.g., technology, and especially organizational and governmental skills)…This, he said, has implications for redistribution:
When we compare the poorest with the richest nations, it is hard to conclude that social capital can produce less than about 90 percent of income in wealthy societies like those of the United States or Northwestern Europe.
On moral grounds, then, we could argue for a flat income tax of 90 percent to return that wealth to its real owners.Though, you might think, this conclusion requires some extra arguments.