Ferraris for all

Spiked has published a review essay by me on books which see affluence and consumerism as leading to mental illness.

Labels: affluenza, book, happiness, review, spiked

The newly opened airport in Beijing looks amazing. Its architects evidently describe it as “the biggest building on the world”.

A comparison with London’s Heathrow airport is instructive. According to an article on the BBC website :

“Beijing's terminal is twice the size and about half the cost of Heathrow's new Terminal Five, which is due to open next month.

“Beijing has got from start to finish in four years. Heathrow has taken nearly 20.”

The BBC tries to soften the comparison by pointing out that the Chinese authorities, unlike those in Britain, do not have to engage in a lengthy consultation exercises.

But there is nothing democratic about such exercises. The slowness is more a symptom of Britain’s lack of dynamism and culture of excessive caution.

It is also sad that the small band of reactionaries who are campaigning against Heathrow’s third runway after often viewed so sympathetically. They should have the right to protest but their cause is entirely backward-looking.

Labels: china, climate, development, progress

A valuable new website on climate change. Climate Debate Daily brings to gether key articles on the subject from, broadly speaking, two opposing perspectives. One column includes articles demanding “calls to action” - generally in favour of the mainstream consensus - while another provides links to “dissenting voices”. There are also numerousl links to both mainstream and sceptical sites. Denis Dutton, who also runs Arts & Letters Daily, is co-managing the site with Doug Campbell.

Labels: climate, environment

A new paper (PDF) by Andrei Shleifer, a professor of economics at Harvard, gives some useful statistics on the general rise in global living standards since 1980. To quote the introduction: “The last quarter century has witnessed remarkable progress of mankind. The world’s per capita inflation-adjusted income rose from $5400 in 1980 to $8500 in 2005.Schooling and life expectancy grew rapidly, while infant mortality and poverty fell just as fast.” I do not accept the generally free market thrust of his conclusions but he is broadly right on the facts of development. Of course things could be better still than they are now.

Labels: development, economics, inequality, progress

Time magazine’s cover story (in the Asia and Europe editions) on “China’s short march” gives a vivid description of China in the midst of transformation from a rural nation to an urban one. In addition to the move from countryside to cities many millions of the newly affluent are moving to suburbs that surround China’s urban centres.

Although Bill Powell refrains from much editorialising in the piece there is a hint of environmental dangers through the spread of car ownership. He also ends with a warning about the potential dangers of inequality:

“It's not the people living the Great Chinese Dream — with the new house and the car and the dog and maybe a second child on the way — that the government needs to worry about. It's the people who build that dream for others, and then move on, hoping to do it again somewhere else. They, too, are vested in the country's economic miracle. But should that miracle somehow turn sour, look out.”

While the dangers are no doubt real it is a pity that it generally seems to be the negative points that are emphasised. On balance the urbanisation of China is a tremendously positive development.

Labels: Asia, china, cities, environment, inequality

Jay Ranyer has a good piece defending supermarkets in today’s Observer.

Labels: consumption, food

I have come across a useful list of blogs on contemporary China.

Labels: Asia, china

James Heartfield has a new book out called Green Capitalism: manufacturing scarcity in an age of abundance. I have not even seen it yet but, judging by the quality of his articles and previous books, it should be excellent. It is available from his personal website.

Labels: book, economics, environment

The Arts & Letters Daily website has published a link to my spiked review on John Kenneth Galbraith as the “midwife of miserabilism”.

Labels: media appearances, review, spiked

Yesterday’s New York Times has an opinion piece by W Michael Cox and Richard Alm, two officials from the Federal Reserve Bank of Dallas, pointing out that consumption inequality in America is far less than income inequality:

“if we compare the incomes of the top and bottom fifths, we see a ratio of 15 to 1. If we turn to consumption, the gap declines to around 4 to 1. A similar narrowing takes place throughout all levels of income distribution. The middle 20 percent of families had incomes more than four times the bottom fifth. Yet their edge in consumption fell to about 2 to 1.

“Let’s take the adjustments one step further. Richer households are larger — an average of 3.1 people in the top fifth, compared with 2.5 people in the middle fifth and 1.7 in the bottom fifth. If we look at consumption per person, the difference between the richest and poorest households falls to just 2.1 to 1. The average person in the middle fifth consumes just 29 percent more than someone living in a bottom-fifth household.

“To understand why consumption is a better guideline of economic prosperity than income, it helps to consider how our lives have changed. Nearly all American families now have refrigerators, stoves, color TVs, telephones and radios. Air-conditioners, cars, VCRs or DVD players, microwave ovens, washing machines, clothes dryers and cellphones have reached more than 80 percent of households.”

However, Paul Krugman, writing in his blog, is sceptical: “there’s no question that consumption inequality at a point in time is less than income inequality. But the CEX study on which they rely is widely believed to be seriously flawed, especially for tracking recent trends. For whatever reason, the survey seems to be missing a lot of consumption growth among the affluent.”

He also points to a useful academic paper (PDF) by Robert Gordon of Northwestern and Ian Dew-Becker of Harvard on “Unresolved issues in the rise of American inequality”.

Labels: America, economics, inequality

The latest Fund Strategy has a comment by me on the debate about productivity trends in America.

It seems a world away but the late 1990s discussion of the "new economy" is worth revisiting in the light of recent data. Looking at trends in productivity growth helps discern the direction in which the American economy, and possibly the markets, are likely to be heading.

Back in the second half of the 1990s there was an obsession with rising productivity growth. The argument was that the diffusion of new technology, such as the personal computer and the world wide web, was making the American economy more dynamic. The rise of numerous dotcom companies seemed to confirm this trend.

In a self-serving way many financial institutions promoted the idea of the "new stockmarket" to complement that of the new economy. Many fund managers endorsed the argument that rising productivity growth meant market valuations could be revised permanently upwards. The theory seemed to explain the stockmarket surge of the late 1990s.

Then reality intervened with decisive brutality. In early 2000 equities started to fall and a three-year bear market followed. It seemed that the golden new era, with ever rising markets, was a mirage after all.

Given the attention paid to the productivity figures a few years ago, it is perhaps surprising that they are hardly discussed today. Maybe it is too painful a memory. But the latest statistics are revealing.

Superficially, the figures appear reasonable. According to America's Bureau of Labor Statistics, productivity grew at an annual rate of 1.8% in the fourth quarter of 2007. But Professor Robert Gordon of Chicago's Northwestern university, a renowned expert on productivity, has calculated that the long-term trend rate for productivity growth has fallen back to 1995 levels. It appears that if there was a spurt in productivity growth, it was relatively short-lived.

Several lessons can be learnt from this. First, it is a mistake to draw sweeping conclusions from short-term trends. A few years of above-trend productivity growth do not make a new economy.

Second, the American economy is not as dynamic as many have claimed in recent years. Productivity growth is an important indicator of underlying economic strength.

Finally, beware of theories that link apparently positive economic developments to the stockmarket. Self-serving ideas normally come unstuck sooner or later.

Labels: America, economics, Fund Strategy

Today’s Something Understood programme on BBC Radio 4, presented by Mark Tully, was unwittingly revealing about the thrust of the happiness discussion. Its main emphasis is that people should be happy with what they have got rather than try to achieve more.

The case was put by the presenter and most articulately by Anthony Seldon, the headmaster of Wellington College (a posh “public school”) in an article in the Independent (19 April 2006) quoted in the programme:

“The lessons will, I believe, be highly moral. The pupils will learn how to look after their bodies well and how not to abuse them. A healthy body is far more likely to lead to a happier mind than one which has been abused with bad food, drink, cigarettes and drugs.

“Good relationships, which lie at the heart of anyone's happy life, are based on a strong moral code of caring for the other and being loyal. Abusing others, either with words, physically or by inappropriate sexual relations, does not produce happiness but rather the opposite.

“The pursuit of true happiness is also a deeply spiritual quest: the heart of spirituality is about the transcendence of one's own self and the forming of deeply loving and compassionate relationships with others. Neither do I see these lessons as selfish. Ask any parent. Would they sooner see their children happy and fulfilled, even at the cost of achieving slightly less, or stressed out and vexed in the pursuit of ever-higher goals which always seem to be beyond their reach? Happiness I believe lies in knowing one's own limitations, accepting oneself for what one is, and being proud of what one achieves, at whatever level that might be.”

So for Seldon, as for the other happiness gurus, happiness means acceptance of limits. It is a deeply conservative message.

Meanwhile, I read in the Harvard Crimson that introduction to economics has retaken its position as the most popular course at the university from positive psychology.

Labels: happiness

William Easterly, doyen of free market development economists, had a polemic against Bill Gates’ “creative capitalism” schemes to help the poor in yesterday’s Wall Street Journal. Easterly rightly attacks the limitiations of schemes such as the partnership to give African farmers access to the premium coffee market. “This is fine as a modest endeavor to help a few Rwandan and Kenyan coffee farmers, but it's hardly going to remake capitalism.”

Easterly is also right that economic development is preferable to such limited schemes. “The number of poor people who can't afford food for their children is a lot smaller than it used to be - thanks to capitalism. Capitalism didn't create malnutrition, it reduced it. The globalization of capitalism from 1950 to the present has increased annual average income in the world to $7,000 from $2,000. Contrary to popular legend, poor countries grew at about the same rate as the rich ones. This growth gave us the greatest mass exit from poverty in world history.”

However, Easterly’s avid support for capitalism grates at times. It is true that the market system has provided significant growth - and to that extent it should be welcomed - but growth remains too limited and uneven. The demand should be for more rather than less.

Labels: Africa, development, trade

The backlash against an obsessive attachment to happiness seems to be gaining ground. An article in the December 2007 issue of Perspectives on Psychological Science evidently argues that moderate happiness is better than maximising happiness. A press release from the University of Illinois at Urbana-Champaign quotes Ed Diener, one of the authors of the study, explaining:

“Happy people are more likely (than unhappy people) to get married, are more likely to stay married, are more likely to think their marriage is good,” Diener said. “They’re more likely to volunteer. They’re more likely to be rated highly by their supervisor and they’re more likely to make more money.”

Happy people are also, on average, healthier than unhappy people and they live longer, Diener said. And, he said, some research indicates that happiness is a cause of these sources of good fortune, not just a result.

“But there is a caveat, and that is to say: Do you then have to be happier and happier" How happy is happy enough"”

The research team began with the prediction that mildly happy people (those who classify themselves as eights and nines on the 10-point life satisfaction scale) may be more successful in some realms than those who consider themselves 10s. This prediction was based on the idea that profoundly happy people may be less inclined to alter their behavior or adjust to external changes even when such flexibility offers an advantage.

Their analysis of World Values Survey data affirmed that prediction.

“The highest levels of income, education and political participation were reported not by the most satisfied individuals (10 on the 10-point scale),” the authors wrote, “but by moderately satisfied individuals (8 or 9 on the 10-point scale).”

The 10s earned significantly less money than the eights and nines. Their educational achievements and political engagement were also significantly lower than their moderately happy and happy-but-not-blissful counterparts.

In the more social realms, however, the 10s were the most successful, engaging more often in volunteer activities and maintaining more stable relationships.

Labels: affluenza, happiness

Newsweek has a particularly interesting article on the backlash against the obsession with happiness (2 February). This blog has already mentioned some of the key references but it adds more as well as some illuminating details:

* Allan V Horwitz and Jerome Wakefield The Loss of Sadness: How Psychiatry Transformed Normal Sorrow Into Depressive Disorder (see 22 December 2007 post). In the foreword Robert Spitzer of the New York State Psychiatric Institute, the psychiatrist who oversaw the current Diagnostic and Statistical Manual, expresses doubts about the medicalising of sadness: "To be human means to naturally react with feelings of sadness to negative events in one's life".

* Eric Wilson Against Happiness (see 17 January post).

* Also Ed Diener, a veteran happiness researcher, has evidently co-written a book with his son, Robert Biswas-Diener, called Rethinking Happiness. It is due for publication later this year.

Labels: affluenza, book, happiness

Kenneth Rogoff, a professor of economics at Harvard and former chief economist at the International Monetary Fund, expressed concern about inequality in an article in yesterday’s Financial Times. Although the article focused on the possibility of a Chinese economic slowdown its points on inequality were much broader. He argues that:

“Protectionism is another growing risk. With income and wealth inequality rising throughout the developed world, politicians may start lashing out at China with trade sanctions on automobile parts, steel, paper products and, of course, textiles. China’s explosive export growth has made it far more vulnerable to a fall in exports than it was during the 2001 global recession.

“Perhaps the greatest threat to China’s expansion, however, comes from pressures created by its own exploding inequality levels. According to World Bank statistics, income inequality in China has leapfrogged that of the US and Russia, which is no small feat. Rising inequality is placing enormous strains on the political system, as is evident from a recent sequence of ill-considered policies that have been aimed at mitigating the problem. The government’s recent attempt to fight food inflation by using price controls is a highly conspicuous example.”

Later on Rogoff argues for welfare reforms as the best way of dealing with inequality:

“Rather than try to deal with inequality by labour market fiat, the government would do better to improve the social safety net through provision of more and better healthcare and pensions.”

Soon I hope to write a critique of these limited views of inequality.

Labels: china, economics, inequality, trade

Even free market economists are rethinking their outright support for free trade according to an article in Business Week (31 January). Worries focus on the alleged impact of trade growth in widening inequalities: “concern is rising that the gains from free trade may increasingly be going to a small group at the top. For the vast majority of Americans, Dartmouth's [Matthew J ] Slaughter points out, income growth has all but disappeared in recent years. And it's not just the low-skilled who are getting slammed. Inflation-adjusted earnings have fallen in every educational category other than the 4% who hold doctorates or professional degrees. Such numbers, Slaughter argues, suggest the share of Americans who aren't included in the gains from trade may be very big. ‘[That's] a very important change from earlier generations, and it should give pause to people who say they know what's going on,’ he says.”

Labels: economics, inequality, trade

Pranab Bardhan, a professor of economics at the University of California, Berkeley, has an interesting article in the Boston Review (“What makes a miracle” January / February 2008) on myths of Chinese and Indian development. His concern is to show the misconceptions in the standard account of recent rapid growth in China and India. He describes the orthodoxy as follows:

“The answer that continues to dominate public discussion in the United States runs along the following lines: decades of socialist controls and regulations stifled enterprise in India and China and led them to a dead end. A mix of market reforms and global integration finally unleashed their entrepreneurial energies. As these giants shook off their “socialist slumber,” they entered the “flattened” playing field of global capitalism. The result has been high economic growth in both countries and correspondingly large declines in poverty.”

However, for Bardhan the facts do not fully correspond with the account. For example, “China has indeed made large strides in foreign trade and investment since the 1990s, but well before then, say between 1978 and 1993, the country had already achieved an average annual growth rate of about nine percent.” And in relation to poverty reduction in China he argues that: “World Bank estimates suggest that two-thirds of the decline in extremely poor people (those living below the admittedly crude poverty line of one dollar a day per capita at 1993 international parity prices) between 1981 and 2004 had taken place by the mid-1980s. Much of the extreme poverty was concentrated in rural areas, and its large decline in the first half of the 1980s may have been principally the result of domestic factors that have little if anything to do with global integration: a spurt in agricultural growth following de-collectivization, in which output increased at 7.1% per year on average between 1979 and 1984, almost triple the 1970-78 rate; a land reform program, involving a highly egalitarian distribution of land-cultivation rights subject only to differences in regional average and family size, which provided a floor for rural income; and increased farm procurement prices.”

He makes similar points in relation to India. For instance. “As for poverty, the latest Indian household survey data suggest that the rate of decline, if anything, slowed somewhat in 1993-2005—the period of global integration—compared with the ’70s and ’80s. Moreover, some non-income indicators of poverty such as those relating to child health, already rather dismal, have hardly improved in recent years.”

There are many other points in the article that are worth pondering.

Labels: Asia, china, development, economics, health, inequality

Unicef’s latest annual report on The state of the world’s children (PDF) reveals enormous improvements in infant mortality. Evidently the number of deaths of children under five fell from about 20m in 1960 - the earliest year for which such figures are available - to under 10m in 2006. This despite a large increase in total population over the period. Between 1990 and 2006 infant mortality fell by 23% to 93 deaths per 1,000 live births to 72.

Clearly the figures could and should fall much further still. But it would be wrong to underplay what has already been achieved.

Labels: development, health, progress