Ferraris for all

I will be part of a panel discussing happiness at a meeting at the Royal Society of Arts (RSA) in London at lunchtime on 6 December. The other panellists are David Willets (a Conservative MP) and Paul Ormerod (an economist).

Labels: happiness, speeches

The World Bank has produced a useful website which pulls together numerous statistics on African development.

Labels: Africa, development, economics

Nuclear fusion is virtually forgotten in the popular discussion of energy yet it offers the prospect of abundant, clean power. For that reason the FUSION NOW! exhibition at the Rokeby gallery in London till 20 December, curated by JJ Charlesworth of the Manifesto Club, is particularly welcome. There is also an accompanying text (PDF) with contributions from Charlesworth, Professor Mike Dunne, Joe Kaplinsky and James Woudhuysen and James Heartfield.

Labels: energy, environment

On Thursday I will be debating the virtues of America at a Manifesto Club event timed to coincide with Thanksgiving. My brief is to talk on the importance of mass consumption and production. I have also contributed to a Spiked article on the subject.

Labels: America, consumption, speeches, spiked

Today’s Fund Strategy includes a comment by me on the revision of statistics on the size of Chinese and Indian economies.

Last week's biggest economic news got hardly any attention. Both China and India are about 40% smaller than they were. Also global economic growth was half a percentage point less than previous assumed. Never mind the Bank of England possibly reducing interest rates by a little bit at some point in the future. This was shocking.

Of course, the Chinese and Indian economies have not literally shrunk. What has happened is that more accurate statistics are becoming available which give a better idea of the size of their economies.

Nowadays growth statistics are often quoted on a purchasing power parity (PPP) basis. This means that the figures are adjusted to take into account different price levels in different countries. So a dollar in America can buy a lot less than its equivalent in China.

The truth is that until now the PPP statistics have largely been based on guesswork. So it turns out that the size of the Chinese and Indian economies has been substantially over-estimated. And since these are large components of global growth it means the world GDP figures are exaggerated too.

Such statistical revisions do not change reality but they do make some comparisons starker. For example, they show that both China and India are considerably poorer than previously assumed. Not only is the average income level lower but the number of people below the standard $1 a day threshold is much higher.

It is a sobering thought that, according to the new data, China's average GDP per head is only 10% of the American level. China may be growing rapidly but its living standards remain well below America's.

Another lesson from this revision is that it is generally better to compare the relative sizes of economies by using GDP at market exchange rates rather than PPP. This may seem a small technical detail but it can make a huge difference to the numbers.

Since countries trade and invest with each other at market rates, these provide the most meaningful comparisons of the relative weights of national economies. Judging on a market exchange rate basis the Chinese economy is still only fourth largest in the world rather than second.

PPP statistics have their uses. But they are more appropriate for comparing living standards between different countries than comparing their relative economic weights in the world.

Labels: Asia, china, economics, Fund Strategy, india

The happiness conference circuit is, it seems, incredibly busy. This coming Monday and Tuesday there is a two-day conference in Brussels on “Beyond GDP” hosted by the European Commission, European Parliament, Club of Rome, Organisation for Economic Cooperation and Development (OECD) and World Wildlife Fund. The conference can be watched by webcast via its website.

This conference follows a similar one organised by the OECD in Istanbul in June (see 24 June post). A glossy brochure (PDF) is now available on that one.

Then from 22-28 November in Thailand there is the third international conference on gross national happiness. It will be opened by the prime ministers of Bhutan and Thailand while partners included the Centre for Bhutan Studies and the Japan Foundation. This is followed from December 6-9 in San Diego by the 2007 conference of the International Society for Quality-of-Life Studies.

Next year there is an International Sociological Association conference in Barcelona from September 5-8 on the role of social indicators in public policy.

Labels: Asia, happiness, progress

Spiked has published an article by me on the global working class. It relates to the debate I am taking part in on the subject at the Institute of Contemporary Art on 20 November.

Labels: Asia, globalisation, inequality, speeches, spiked

The World Bank has endorsed Bhutan’s goal of pursuing Gross National Happiness rather than economic growth. India’s Economic Times quotes Graeme Wheeler, the World Bank's Managing Director (Operations), on a visit to the Himalayan nation, as saying: "Bhutan has been practising what other countries need to do. We need to extend the concept of gross national happiness to gross international happiness" (“Top World Bank official asks countries to emulate Bhutan”
11 November 2007).

I have previously criticised those who praise Bhutan in an article I wrote for spiked in May 2006. But at some point it deserves a more extensive expose.

Labels: Asia, happiness, spiked

Today’s Fund Strategy includes a review by me of a book on India and China.

The rise of China and India has, apart from anything else, produced a booming economy of books designed to introduce the countries to western readers. Robyn Meredith's The Elephant and the Dragon is one of the best of the genre.

Meredith's perspective is that of an American journalist who has covered recent developments in India and China at first hand. From her base in Hong Kong, where she is a correspondent for Forbes magazine, she has written widely on both countries. Her mission in the book is to help her predominantly American readership better understand the two emerging Asian powers.

Her approach is in contrast to that of David Smith, the economics editor of the Sunday Times, who recently wrote a book on the same subject called The Dragon and the Elephant (see 9 July post). His work, while worth reading, is more historical and based largely on secondary sources. But Meredith has spent much time watching Chinese workers produce goods for western markets, navigating India's awful roads and talking to people in the region. Both books are well written, but Meredith's is more vivid.

She, like Smith, tends to alternate chapters on the two countries. So after a general introduction on "tectonic economics" she has a chapter on China's rise since the 1970s, followed by one on India's ascent. She then moves on to China's manufacturing and India's surge in IT services.

Perhaps most interesting is her chapter on what she calls "the disassembly line". This describes how the world economy has moved from one where production is focused on assembly lines to one where supply chains are key. Under the old system, of which Ford was the emblematic example, each company was responsible for a series of processes that ended up with a final product.

Under the new system, different parts of a product can be made by an enormous array of producers all over the world. Chinese firms play a key role in such supply chains as important links in this new set of processes. Often the final goods end up in the West, under western brand names, even though a good part of their value is created in China.

Although Meredith is generally sympathetic to the rise of India and China, she does discuss problems associated with their emergence as economic powers. First, she says that the rise of the two nations puts strains on the availability of natural resources. Second, she warns that the modernisation of their military forces could create tensions with America. Finally, she discusses the environmental problems posed by the rise of the two Asian giants.

In her conclusion, Meredith looks at what the rise of China and India means for America. She argues that the solution to the challenge they pose is neither an unadulterated free market nor protectionism. Instead, America needs to create more jobs and educate its population better.

Unfortunately, The Elephant and the Dragon takes the mainstream view of the two countries too much at face value. Perhaps this is inevitable in what is essentially a primer. But, like Smith, she accepts what I call the "revelation theory" of economic development.

This essentially argues that China and India lived in the intellectual dark ages until their leaders realised that capitalism was best. If only they had latched on to this perspective sooner they could, so the argument goes, have enjoyed spectacular growth rates much earlier.

What this argument misses is that there was little incentive for third-world countries to open their economies in the decades following the second world war. During the post-war boom the West was generally uninterested in investing in or trading with the developing world. Therefore there was not much incentive for third-world leaders to encourage western investment or trade. This was particularly true of demographic giants such as China and India as their strategy of relying on their large domestic markets seemed reasonable at the time.

This is not to be in favour of autarky in principle. On the contrary, it has many disadvantages. But even if China and India had opened themselves up earlier, it is doubtful whether the West would have been particularly interested in doing business with them. It was only with the end of the post-war boom in the West that an externally orientated development strategy became feasible.

The Elephant and the Dragon is also too much influenced by western, and particularly American, preconceptions. Rather than ask what the rise of China and India means for the world, the "all of us" in the subtitle seems to refer only to Americans. Meredith's primary concern is how American policy-makers should react, rather than what is best for humanity.

Such one-sidedness is particularly apparent in her discussion of the environment. She describes, correctly, how China and India are heavily polluted. But she fails to recognise that focusing on economic development, rather than the environment, can be the correct approach for developing countries. Since human welfare is closely linked to poverty, a focus on development can benefit a country's citizens even if it increases pollution.

Meredith also fails to draw out the fact that economic development provides the resources to tackle pollution. American cities are cleaner than those of Asia precisely because America is so rich. It has the economic resources and technology to clean up its environment. As time goes on it is likely that India and China will make a clean environment a greater priority.

Despite these weaknesses, The Elephant and the Dragon is well worth reading for anyone who wants to get a quick overview of the Asian giants. Given their importance to the world economy, they are countries of which people can no longer afford to be ignorant. The rise of India and China is one of the key trends in the contemporary world.

Labels: book, china, Fund Strategy, india, review

My comment in the latest Fund Strategy argues that the increase in energy demand should be a cause for job rather than gloom.

The 2007 World Energy Outlook from the International Energy Agency describes the rapid growth in energy demand as "alarming". A better phrase would be "wonderful".

Greater energy use should be welcomed because it is closely correlated with rising affluence. As the world becomes richer it uses more energy. Peasant farmers, with no access to running water or electricity, use little energy. The average westerner, in contrast, uses much more. Unless we are happy for billions to remain in poverty we need to generate much more energy.

Some might object that it is better to increase energy efficiency rather than energy use. But this argument is flawed. Greater energy efficiency leads to more energy use rather than less. The world has become far more energy efficient since the oil crisis of 1973-4 while also using much more energy. What energy efficiency means is that people can use even more energy more cheaply.

Environmentalists will sound dire warnings about climate change and resource shortages. But these too are misplaced. For a start they should recognise that curbing the growth in energy demand means leaving billions mired in poverty. If they are willing for this to happen they should say so openly.

Also there are plenty of technologies that do not emit greenhouse gases or depend on supposedly scarce resources. These include hydroelectric power and nuclear power. Technology for using fossil fuels can be made cleaner too. Other forms of energy, such as nuclear fusion, should also become feasible.

Strikingly it is often those who complain about climate change who most loudly resist other technologies that do not lead to climate change. They warn of the dangers of nuclear power and argue that hydroelectric power damages the environment.

It is hard to resist the conclusion that what such critics really abhor is modernity itself. They would rather the bulk of the population lives in near feudal conditions than have access to modern amenities with the attendant energy use. They already insist we spend inordinate amounts of time sorting through our rubbish and curbing domestic energy use.

Of course the most vociferous environmentalists would not want to live in such conditions themselves. There is no way the Prince Charles or Al Gores of this world will forsake their palaces or mansions. They just favour austerity for the rest of us.

Labels: energy, Fund Strategy

A new documentary from Worldwrite, an education charity, examines the question of corruption from an African perspective. In Corruptababble two young South Africans, Brendon and Yolanda, travel around London and Edinburgh to gauge perceptions of corruption. Virtually everyone they speak to sees corruption as a big problem in Africa but few come even close to being able to back up their arguments. Most simply assert that corruption must be largely to blame for Africa’s difficulties while many others argue it is a more extreme form of corruption in the West.

The people shown to have the most coherent explanation for corruption are free marketers speaking at a conference on development. They argue in detail that Africa is poor because predatory African elites have siphoned off money for their own benefit. But such arguments have a strongly apologetic character. Blaming Africans for the continent’s lack of development is a way of diverting responsibility from the West or the weaknesses of the market system.

Corruptababble is a step towards challenging one of the most enduring myths about Africa. Anyone who supports African development needs to be able to challenge the unhealthy obsession with corruption.

Labels: Africa, corruption, film, Worldwrite

Martin Wolf has a characteristically astute piece on global inequality in today’s Financial Times. He makes a distinction between a capitalism where wealth is generated on the back of political connections combined with resistance to competition and the normal operation of the market. Carlos Slim, a Mexican who is the richest man in the world according to Fortune, is for Wolf an example of the former. Slim made his fortune from buying a controlling stake in Telmex, the national telephone company, from the government in 1990. Since then it has enjoyed protected status as an extremely profitable quasi-monopoly.

I am sceptical that the distinction between deserving and undeserving capitalists is as straightforward as Wolf makes out. But no doubt it could prove popular with defenders of the free market.

Labels: corruption, inequality, Latin America

There is a useful new website tracking progress in achieving the Millennium Development Goals. I am no fan of the goals but, since they are the official targets endorsed by world leaders, it is useful to know more about them.

Labels: development

It is frustrating that two recent key books in the growth sceptic genre are not yet available in Britain. From what I can gather Paul Krugman’s The Conscience of a Liberal focuses more on politics than economics. Krugman, a New York Times columnist and professor of economics at Princeton, apparently blames fundamentalist Republicanism for widening inequality in American society. It is hard to be sure but I strongly suspect he somehow links inequality to economic growth. I hope to receive the book soon. In the meantime there is a useful review in the New York Sun and a piece in the New York Review of Books.

Robert Reich, a professor of public policy at the University of California at Berkeley and former Clinton labor secretary, is more clearly a growth sceptic. In a Q&A on Supercapitalism, his new book, he argues that contemporary capitalism has a dynamic side but then refers to the familiar growth sceptic litany:

“Inequality hasn’t been this wide in 80 years. Jobs are far less stable, and the median wage is below where it was in 1980, adjusted for inflation. Main Streets are disappearing. And our planet’s environment is endangered.”

To him the solution is to put curbs on corporations. For him it appears corporations are the force that gives capitalism both its dynamic and destructive side:

“We have to end the corporate arm’s race. That means strict limits on corporate lobbying, on corporate spending for public relations intended to influence legislation, on legislators and public officials turning to lobbying when they leave office, and on corporate money otherwise flowing in politics.”

In reality the problem is not that capitalism is too dynamic. On the contrary, it is not dynamic enough. Rather than putting curbs on corporations the emphasis should be on promoting even more growth.

The first chapter of Supercapitalism is available on the New York Times website. More information can also be found on Reich’s website.

Labels: America, book, corporations, corruption, inequality

In the discussion on India mentioned below (see 28 October post) I argued that it did not follow from widening inequalities that the poor were necessarily getting poorer. On the contrary, what seems to be happening is a rise in absolute living standards for the bulk of the population at the same time as a widening of inequalities. However, it is also true that greater inequality can lead to tensions within a society. This seems to be the case in a march to Delhi of 25,000 landless workers, indigenous tribespeople and “untouchables” covered in an article in the Financial Times this week.

The relationship between widening inequalities and political consciousness is less straightforward than often assumed. It is a subject I want to discuss in my introduction to the discussion on the new global working class at the ICA later in the month (see 30 October post).

Labels: india, inequality