Sunday, August 31, 2008
Another attack on GDP
Yesterday’s New York Times included a useful review of the assaults on the notion of GDP. It reminded readers that as long ago as 40 years ago it was attacked by Robert F Kennedy who said it: “measures everything, in short, except that which makes life worthwhile.” The article also welcomed the review of GDP as a measure of well-being in France and suggested it might apply to America too:
“We may be in the early stages in the United States of recognizing that the gross domestic product is very misleading and something must be done to get better measures of well-being,” said Amartya Sen, a Nobel laureate in economics at Harvard. Professor Sen and Joseph Stiglitz, a Nobel laureate at Columbia, are co-chairmen of a commission recently appointed by Nicolas Sarkozy, the French president, to come up with a better measure for France. While Mr. Sarkozy’s goal is to showcase a ‘quality of life’ at odds with the country’s weak G.D.P., the high-profile effort might yield dividends here as well as abroad.”
Ultimately, as I have previously argued, there is less to these attacks than meets the eye. It would be hard to find someone who argues that GDP is a perfect indicator of well-being. But it does not follow that there is no relationship between rising prosperity and well-being. If there is a problem with GDP in this respect it is that it underestimates the benefits of prosperity to human welfare.
“We may be in the early stages in the United States of recognizing that the gross domestic product is very misleading and something must be done to get better measures of well-being,” said Amartya Sen, a Nobel laureate in economics at Harvard. Professor Sen and Joseph Stiglitz, a Nobel laureate at Columbia, are co-chairmen of a commission recently appointed by Nicolas Sarkozy, the French president, to come up with a better measure for France. While Mr. Sarkozy’s goal is to showcase a ‘quality of life’ at odds with the country’s weak G.D.P., the high-profile effort might yield dividends here as well as abroad.”
Ultimately, as I have previously argued, there is less to these attacks than meets the eye. It would be hard to find someone who argues that GDP is a perfect indicator of well-being. But it does not follow that there is no relationship between rising prosperity and well-being. If there is a problem with GDP in this respect it is that it underestimates the benefits of prosperity to human welfare.
Labels: America, economics, Europe, happiness, progress
Saturday, August 30, 2008
Mobiles for all!
Jeffrey Sachs writes in an article for Project Syndicate on the spread of mobile phones in the world’s poorer countries:
“market penetration in poor countries is rising sharply. India has around 300 million subscribers, with subscriptions rising by a stunning eight million or more per month. Brazil now has more than 130 million subscribers, and Indonesia has roughly 120 million. In Africa, which contains the world’s poorest countries, the market is soaring, with more than 280 million subscribers.
“Mobile phones are now ubiquitous in villages as well as cities. If an individual does not have a cell phone, they almost surely know someone who does. Probably a significant majority of Africans have at least emergency access to a cell phone, either their own, a neighbor’s, or one at a commercial kiosk.
“Even more remarkable is the continuing “convergence” of digital information: wireless systems increasingly link mobile phones with the Internet, personal computers, and information services of all kinds. The array of benefits is stunning. The rural poor in more and more of the world now have access to wireless banking and payments systems, such as Kenya’s famous M-PESA system, which allows money transfers through the phone. The information carried on the new networks spans public health, medical care, education, banking, commerce, and entertainment, in addition to communications among family and friends.”
“market penetration in poor countries is rising sharply. India has around 300 million subscribers, with subscriptions rising by a stunning eight million or more per month. Brazil now has more than 130 million subscribers, and Indonesia has roughly 120 million. In Africa, which contains the world’s poorest countries, the market is soaring, with more than 280 million subscribers.
“Mobile phones are now ubiquitous in villages as well as cities. If an individual does not have a cell phone, they almost surely know someone who does. Probably a significant majority of Africans have at least emergency access to a cell phone, either their own, a neighbor’s, or one at a commercial kiosk.
“Even more remarkable is the continuing “convergence” of digital information: wireless systems increasingly link mobile phones with the Internet, personal computers, and information services of all kinds. The array of benefits is stunning. The rural poor in more and more of the world now have access to wireless banking and payments systems, such as Kenya’s famous M-PESA system, which allows money transfers through the phone. The information carried on the new networks spans public health, medical care, education, banking, commerce, and entertainment, in addition to communications among family and friends.”
Labels: Africa, development, india, Latin America, progress, technology
Friday, August 29, 2008
Report on global health inequalities
No doubt the new report on global health inequalities by a commission backed by the World Health Organization (WHO) will repay close study. It is a comprehensive work on an important subject. It also looks certain that some will use the fact that there is not a 100% clear correlation between income levels and health as a way of downplaying the importance of economic growth. To quote the press release:
“Wealth alone does not have to determine the health of a nation's population. Some low-income countries such as Cuba, Costa Rica, China, state of Kerala in India and Sri Lanka have achieved levels of good health despite relatively low national incomes.”
Thankfully the report is not as laughably crude as the leader in today’s Guardian which almost reduces the question to unhealthy lifestyles and even low self esteem:
“We know now that people do not only die of coronary heart disease because of a failure on the part of their local hospital. Such deaths reflect unhealthy lifestyles, and unhealthy lifestyles are often connected to poor education, bad housing, low-paid work and the low self-esteem that accompany them.”
The arguments put forward by the likes of Michael Marmot, the chairman of he WHO commission, and Amartya Sen, a member of the commission, are more sophisticated and harder to take up.
“Wealth alone does not have to determine the health of a nation's population. Some low-income countries such as Cuba, Costa Rica, China, state of Kerala in India and Sri Lanka have achieved levels of good health despite relatively low national incomes.”
Thankfully the report is not as laughably crude as the leader in today’s Guardian which almost reduces the question to unhealthy lifestyles and even low self esteem:
“We know now that people do not only die of coronary heart disease because of a failure on the part of their local hospital. Such deaths reflect unhealthy lifestyles, and unhealthy lifestyles are often connected to poor education, bad housing, low-paid work and the low self-esteem that accompany them.”
The arguments put forward by the likes of Michael Marmot, the chairman of he WHO commission, and Amartya Sen, a member of the commission, are more sophisticated and harder to take up.
Labels: development, health, inequality
Souped up Supercapitalism
Spiked has published an extended version of my review of Robert Reich’s Supercapitalism. The original was published in Fund Strategy (see 4 August 2008 post).
Labels: book, economics, review, spiked
Thursday, August 28, 2008
Worldwrite to launch news channel
Worldwrite is to launch an online monthly video news channel called Worldbytes at 7pm (London time) on Friday 5 September. More details to follow but it promises to be a must watch programme with its staunchly pro-development stance and irreverent attitude to growth scepticism.
Labels: development, inequality, television, Worldwrite
Wednesday, August 27, 2008
World Bank promotes new poverty measure
The World Bank has launched its new $1.25 a day poverty measure (see post of 25 May 2008). Under the new measure a greater number of people are classified as poor although the proportion of people living in poverty is still falling over time.
The number living in poverty is 400m more than previously assumed but, according to the release:
“New poverty estimates published by the World Bank reveal that 1.4 billion people in the developing world (one in four) were living on less than US$1.25 a day in 2005, down from 1.9 billion (one in two) in 1981.”
A new paper by Martin Ravallion and Shaohua Chen discusses the changes in more detail.
The number living in poverty is 400m more than previously assumed but, according to the release:
“New poverty estimates published by the World Bank reveal that 1.4 billion people in the developing world (one in four) were living on less than US$1.25 a day in 2005, down from 1.9 billion (one in two) in 1981.”
A new paper by Martin Ravallion and Shaohua Chen discusses the changes in more detail.
Labels: development, economics, inequality, progress
Sports stars back degraded development
The United Nations Development Programme is recruiting sports stars to promote the Millennium Development Goals. It is running full page ads in prominent newspapers featuring a large picture of Maria Sharapova (photogenic Russian tennis player) and LeBron James (basketball player). The campaign is evidently also backed by two footballers: Zidane and Ronaldo (the Brazilian one rather than the Portuguese player with the same name).
At some point I would like to write an expose of how celebrities are used to win support for campaigns which embody such low horizons.
At some point I would like to write an expose of how celebrities are used to win support for campaigns which embody such low horizons.
Labels: celebrities, development
Inequality row in America
It’s always nice to be proved right on something but it doesn’t often happen right on cue. After noting in yesterday’s post that inequality is a big debate in America many competing views have been expressed in relation to the Poverty, Income and Health Insurance report published by the US Census Bureau.
The New York Times ran a leader entitled “Where’s the Prosperity?” arguing that the benefits of wealth need to be widely shared:
“What is clear is that economic growth alone will not cut it for most American families. The benefits must be shared more broadly. This means more progressive taxation, increasing access to affordable health care, investing more in public education. “
Meanwhile, Mark Thoma on the Economists View blog has done a good job of summarising responses to the report including those of Paul Krugman and Brad DeLong.
The New York Times ran a leader entitled “Where’s the Prosperity?” arguing that the benefits of wealth need to be widely shared:
“What is clear is that economic growth alone will not cut it for most American families. The benefits must be shared more broadly. This means more progressive taxation, increasing access to affordable health care, investing more in public education. “
Meanwhile, Mark Thoma on the Economists View blog has done a good job of summarising responses to the report including those of Paul Krugman and Brad DeLong.
Labels: America, economics, health, inequality
Tuesday, August 26, 2008
Book on rising inequality in America
Chrystia Freeland, the US managing editor of the Financial Times (FT), reviews what she describes as a “fine new book” on “the most important US economic trend, and hence most critical domestic issue - growing income inequality” (FT, 25 August): Claudia Godlin and Larry Katz, The Race Between Education and Technology, Belknap Press.
However, I’m not convinced by her contention that “this trend is hard to discuss in the US”. This blog alone includes numerous references to the debate on rising inequality in America.
However, I’m not convinced by her contention that “this trend is hard to discuss in the US”. This blog alone includes numerous references to the debate on rising inequality in America.
Labels: America, book, inequality
Green culture fuels inflationary surge
The following comment by me appeared in this week’s Fund Strategy. It is related to my cover story on the rising trend in oil prices which you can read here.
Although this week's cover story is about oil it also helps explain why inflation is rising so strongly. It is not just that energy prices are rising - such an assertion simply begs the question of why energy is becoming more expensive. Insufficient investment in energy supply is a key factor in rising prices more generally.
Showing that inflation can largely be attributed to rising food and energy prices at present is simple mathematics. It can be seen by looking at the breakdown of various inflation indices that are available.
It is also clear that rising energy prices are a significant contributor to rising food prices. Energy is used to fix nitrogen from the atmosphere to make fertilisers and it powers farm machinery. The diversion of crops from food to biofuels is another related factor. There are other reasons for rising food prices (see 12 May 2008 cover story) but energy is key.
There may also be other factors pushing up inflation. And at other times a different explanation for rising inflation might be necessary. But at this juncture the energy sector seems to be central to the explanation.
As this week's cover story argues the broad story in relation to energy is that supply is not keeping up with rising demand. As developing economies grow they rightly want and need more energy. The challenge is to ensure there is sufficient investment to guarantee such needs are met.
In the abstract there should be no problem in meeting such needs. There is no absolute shortage of energy resources. There are ample reserves of oil, hundreds of years' worth of coal reserves, plentiful hydroelectric power sources and nuclear.
The problem is insufficient investment to exploit these resources fast enough. That in turn is pushing up prices as rising energy demand exceeds supply growth.
The obstacle is environmentalism in its broadest sense. It is not a question of a few "tree huggers" protesting outside proposed power stations.
Rather it is a culture that is reluctant to invest in energy supply. America, for example, has not built an atomic power station since the 1970s. In Britain too the investment in renewing the energy infrastructure is pitiful.
The best response to inflation would be to invest to make energy too cheap to meter.
Although this week's cover story is about oil it also helps explain why inflation is rising so strongly. It is not just that energy prices are rising - such an assertion simply begs the question of why energy is becoming more expensive. Insufficient investment in energy supply is a key factor in rising prices more generally.
Showing that inflation can largely be attributed to rising food and energy prices at present is simple mathematics. It can be seen by looking at the breakdown of various inflation indices that are available.
It is also clear that rising energy prices are a significant contributor to rising food prices. Energy is used to fix nitrogen from the atmosphere to make fertilisers and it powers farm machinery. The diversion of crops from food to biofuels is another related factor. There are other reasons for rising food prices (see 12 May 2008 cover story) but energy is key.
There may also be other factors pushing up inflation. And at other times a different explanation for rising inflation might be necessary. But at this juncture the energy sector seems to be central to the explanation.
As this week's cover story argues the broad story in relation to energy is that supply is not keeping up with rising demand. As developing economies grow they rightly want and need more energy. The challenge is to ensure there is sufficient investment to guarantee such needs are met.
In the abstract there should be no problem in meeting such needs. There is no absolute shortage of energy resources. There are ample reserves of oil, hundreds of years' worth of coal reserves, plentiful hydroelectric power sources and nuclear.
The problem is insufficient investment to exploit these resources fast enough. That in turn is pushing up prices as rising energy demand exceeds supply growth.
The obstacle is environmentalism in its broadest sense. It is not a question of a few "tree huggers" protesting outside proposed power stations.
Rather it is a culture that is reluctant to invest in energy supply. America, for example, has not built an atomic power station since the 1970s. In Britain too the investment in renewing the energy infrastructure is pitiful.
The best response to inflation would be to invest to make energy too cheap to meter.
Labels: apocalyptic, consumption, economics, energy, finance, Fund Strategy
Monday, August 25, 2008
Upgraded links
I have added to and updated the list of useful links on the left hand bar at the side of this site. New links include China Digital Daily, Climate Debate Daily, Culture Wars’ world development pages, the Future Cities Project and Indur Goklany’s papers. Any suggestions for further links or material for posts please email me HERE.
Labels: china, cities, climate, development, progress
London lecture on trade and development
Supachai Panitchpakdi, the secretary general of the United Nations Conference on Trade and Development, will present The Trade and Development Report 2008 at a public lecture at the London School of Economics on the evening of Tuesday 2 September. The theme of this year’s report is "Commodity Prices, Capital Flows and the Financing of Investment”. I am planning to attend.
Labels: development, economics, finance, trade
Sunday, August 24, 2008
Britain From Above on TV
Andrew Marr’s Britain From Above documentary series on BBC television was a pleasant surprise. His aerial perspective of Britain, although impressionistic in some respects, enabled him to make some useful thematic points. In particular the episode on “Manmade Britain” argued that Britain’s landscape is entirely shaped by human beings. The patchwork quilt of different coloured fields is a result of industrial agriculture which goes back to the enclosure acts of the early nineteenth century and before. Other influences include urbanisation as well as the creation of “green belts” around British cities (under the 1947 Town and Country Planning Act) and the establishment of national parks from 1949 onwards. Overall Marr argues that man has shaped Britain’s environment for more than 6,000 years. Before that it was almost all wood land.
Labels: cities, environment, television
Saturday, August 23, 2008
Me debating at Battle of Ideas
I will be debating Ha-Joon Chang of Cambridge University, Paul Mason of BBC Newsnight and Martin Wolf of the Financial Times in a session on the pros and cons of economic dynamism on 1 November. It is part of the Battle for Prosperity strand at this year’s Battle of Ideas festival in London.
Labels: development, economics, growth, speeches
Friedman’s new Malthusian text
Tom Friedman, a foreign affairs columnist for the New York Times, is having a new book published in September called Hot, Flat and Crowded. Evidently he argues that America should pursue environmental goals both as a good in itself and because it can help the nation retain its position of world leadership. It sounds like it puts him firmly in the neo-Malthusian camp (for Friedman's earlier work on this theme see post of 15 April 2007).
Labels: America, book, environment, Malthus
Friday, August 22, 2008
Water, water, every where
Yet more articles on the wet stuff to coincide with World Water Week:
* New Scientist (23 August) has a cover story on water by Jonathan Chenoweth of the University of Surrey. It makes some useful points including the argument that “virtual water” (a term evidently coined by Tony Allan of King’s College, London) can be an efficient way of distributing water resources around the globe. For example, fruit can be grown in a wet country and exported to a particularly dry one. It is probably easier in most cases to ship fruit around than move large quantities of water. Therefore trade allows for the more effiicient allocation of water resources at a global level.
Chenoweth also makes the point that desalination is falling in price. It can now cost as little as 50 cents per 1000 litres. “All but the world’s least developed countries can afford to supplement their water supplies as long as they have a coastline,” he says.
* The August issue of the New Internationalist has several articles on the debate about toilets in the developing countries. Some are in favour of flushing toilets others (perversely) see them as wasteful of scarce resources in developing countries and therefore undesirable there. One article makes the point that celebrity campaigns for clean water by the likes of Bill Clinton, Bill Gates, Matt Damon and Chris Martin fail to mention sanitation.
* Brendan O’Neill, the irrepressible editor of spiked, makes the point that demand for humans to be “water wise” is underpinned by shame at our existence.
* New Scientist (23 August) has a cover story on water by Jonathan Chenoweth of the University of Surrey. It makes some useful points including the argument that “virtual water” (a term evidently coined by Tony Allan of King’s College, London) can be an efficient way of distributing water resources around the globe. For example, fruit can be grown in a wet country and exported to a particularly dry one. It is probably easier in most cases to ship fruit around than move large quantities of water. Therefore trade allows for the more effiicient allocation of water resources at a global level.
Chenoweth also makes the point that desalination is falling in price. It can now cost as little as 50 cents per 1000 litres. “All but the world’s least developed countries can afford to supplement their water supplies as long as they have a coastline,” he says.
* The August issue of the New Internationalist has several articles on the debate about toilets in the developing countries. Some are in favour of flushing toilets others (perversely) see them as wasteful of scarce resources in developing countries and therefore undesirable there. One article makes the point that celebrity campaigns for clean water by the likes of Bill Clinton, Bill Gates, Matt Damon and Chris Martin fail to mention sanitation.
* Brendan O’Neill, the irrepressible editor of spiked, makes the point that demand for humans to be “water wise” is underpinned by shame at our existence.
Labels: celebrities, environment, spiked, technology, water
Opposition to GM technology hurts Africa
For time reasons I have so far avoided commenting on Prince Charles’s silly intervention in the debate on genetically modified (GM) foods. But the Comment Is Free article by Paul Collier, the director of the Centre for the Study of African Economies at Oxford University, on the damaging effect of opposition to GM makes many useful points. I have disagreed with Collier on some key issues in the past including his implicit support for empire and his relatively narrow vision (see posts of 14 May 2007, 6 June 2007, 1 July 2007, 20 July 2007 and 15 October 2007). But his support for GM and large scale farming is welcome (also see post of 15 April 2008).
Labels: Africa, environment, food, science, technology
Wednesday, August 20, 2008
Now water gets a footprint too
The annual World Water Week in Stockholm seems to be an occasion for an outpouring of panic about global water shortages. BBC Two’s flagship Newsnight programme has already fallen for it (see Monday’s post) and now, not surprisingly given its environmentalist leanings, the Guardian has too. The lead news story in today’s paper gave credence to the World Wildife Fund’s notion of a water footprint and a related leader called for individuals to reduce their water use.
Such demands get reality upside down. As I have argued before it is the shortage of investment in water infrastructure that is the problem. There is no absolute shortage of water. The underlying problem is poverty rather than a particular chemical compound.
It is strange that the stuff of life itself - carbon and water - is being demonised by environmentalists.
Such demands get reality upside down. As I have argued before it is the shortage of investment in water infrastructure that is the problem. There is no absolute shortage of water. The underlying problem is poverty rather than a particular chemical compound.
It is strange that the stuff of life itself - carbon and water - is being demonised by environmentalists.
Labels: consumption, environment, footprint, water
Tuesday, August 19, 2008
Found a publisher!
I have finally managed to find a publisher for my book on growth scepticism! I tried three other publishers before I found my present one but each of them backed away when they realised the full implications of my argument. The experience reinforced my view that an uncompromising defence of prosperity is both necessary and likely to prove unpopular in some quarters.
Celebrate Brazil’s agricultural surge
In this climate of gloom and low expectations it is fantastically refreshing to come across anyone with a positive “can do” spirit. This is certainly the case in relation to Brazilian agriculture which, according to an article on BBC online, has enjoyed a productivity surge in recent years. As a result it has grown from being a marginal player to a position as a large international supplier of food and biofuel. What is more only 70m - 80m hectares of a potential 350m hectares of land available for agriculture is being used.
No doubt the Brazilian President Lula has his limitations but his aspirations should not be faulted:
"We have more Chinese people eating, we have more Indians eating, we have more Africans eating and we have a lot more Brazilians eating.
"All this, which is treated by the press as if it were a crisis and is sold to the world as if it were a crisis," he said.
"Without any arrogance or self-importance, we Brazilians need to confront what for others is a crisis, as an extraordinary opportunity to truly transform ourselves into the granary of the world, as many people have long predicted."
No doubt the Brazilian President Lula has his limitations but his aspirations should not be faulted:
"We have more Chinese people eating, we have more Indians eating, we have more Africans eating and we have a lot more Brazilians eating.
"All this, which is treated by the press as if it were a crisis and is sold to the world as if it were a crisis," he said.
"Without any arrogance or self-importance, we Brazilians need to confront what for others is a crisis, as an extraordinary opportunity to truly transform ourselves into the granary of the world, as many people have long predicted."
Labels: development, food, Latin America
Fetishising water
The BBC2 Newsnight programme this evening completely succumbed to the panic about water shortages. Its underlying assumption was simple: population growth and industrialisation are leading to greater use of this scarce commodity. This in turn is leading to the prospect of conflict and even water wars worldwide.
Sadly none of the studio guests challenged the fetishisation of water. It is wrong to see water as causing conflict – water is just “stuff” – the problem is the lack of investment in infrastructure to ensure everyone has enough water. Nor is it true that water is a finite resource (see, for example, posts of 22 August 2006, 19 October 2006 and 12 March 2008).
Worldwrite is also producing a documentary on this topic called Flush It!. Hopefully it will provide an antidote to such scare-mongering. Its premiere is at the Battle of Ideas festival on 2 November.
Sadly none of the studio guests challenged the fetishisation of water. It is wrong to see water as causing conflict – water is just “stuff” – the problem is the lack of investment in infrastructure to ensure everyone has enough water. Nor is it true that water is a finite resource (see, for example, posts of 22 August 2006, 19 October 2006 and 12 March 2008).
Worldwrite is also producing a documentary on this topic called Flush It!. Hopefully it will provide an antidote to such scare-mongering. Its premiere is at the Battle of Ideas festival on 2 November.
Labels: consumption, environment, film, television, water, Worldwrite
Monday, August 18, 2008
A squeeze not a recession
The following comment by me appeared in this week’s Fund Strategy.
Many will no doubt see the latest gloomy data from the eurozone and Japan as confirmation that the world economy is heading for a deep recession. Such a view is based on a superficial reading of global developments.
GDP figures for the second quarter show output falling by 0.2% in the eurozone and 0.6% in Japan. In addition, global fund managers say that the credit crunch is spreading from America to the rest of the world.
It is certainly possible, although not certain, that many developed countries will see a technical recession in the coming year (defined as two consecutive quarters of falling output). However, given the strength and size of the developing economies it is hard to see the whole global economy suffering such a fate. In July the International Monetary Fund forecast that emerging and developing economies would grow by 6.9% this year and 6.7% in 2009.
What looks likely is a protracted period of slow growth in the developed world punctuated by financial volatility. Developing country growth is likely to slow but to remain positive.
It is also important to remember that numbers only tell part of the story. This downturn is different from most previous ones in that it is a consumption-led slowdown. It is centred on problems on the consumption side of the economy and the financial markets rather than the industrial sector. Instead of the violent shake-out that has characterised many previous cycles, a less intensive but more prolonged squeeze looks likely.
The outlook is far from rosy, but it is not comparable to recessions such as that of the mid-1970s or early 1980s, let alone the Great Depression of the 1930s. Although the contraction will not be as great, it is likely that the recovery will be muted. Previous shake-outs often played the role of restructuring the economy with a new round of expansion after the weakest firms and sectors were shaken out - what one economist famously called "creative destruction". This time around, no such recovery is likely as no fundamental restructuring has occurred.
The other big difference is the relative importance of the developing world. In relation to the global economy, the past provides little guide to the present or the future.
Many will no doubt see the latest gloomy data from the eurozone and Japan as confirmation that the world economy is heading for a deep recession. Such a view is based on a superficial reading of global developments.
GDP figures for the second quarter show output falling by 0.2% in the eurozone and 0.6% in Japan. In addition, global fund managers say that the credit crunch is spreading from America to the rest of the world.
It is certainly possible, although not certain, that many developed countries will see a technical recession in the coming year (defined as two consecutive quarters of falling output). However, given the strength and size of the developing economies it is hard to see the whole global economy suffering such a fate. In July the International Monetary Fund forecast that emerging and developing economies would grow by 6.9% this year and 6.7% in 2009.
What looks likely is a protracted period of slow growth in the developed world punctuated by financial volatility. Developing country growth is likely to slow but to remain positive.
It is also important to remember that numbers only tell part of the story. This downturn is different from most previous ones in that it is a consumption-led slowdown. It is centred on problems on the consumption side of the economy and the financial markets rather than the industrial sector. Instead of the violent shake-out that has characterised many previous cycles, a less intensive but more prolonged squeeze looks likely.
The outlook is far from rosy, but it is not comparable to recessions such as that of the mid-1970s or early 1980s, let alone the Great Depression of the 1930s. Although the contraction will not be as great, it is likely that the recovery will be muted. Previous shake-outs often played the role of restructuring the economy with a new round of expansion after the weakest firms and sectors were shaken out - what one economist famously called "creative destruction". This time around, no such recovery is likely as no fundamental restructuring has occurred.
The other big difference is the relative importance of the developing world. In relation to the global economy, the past provides little guide to the present or the future.
Labels: America, Asia, economics, Europe, Fund Strategy
Disputing China’s manufacturing edge
John Engler, the president of America’s National Association of Manufacturers (NAM), has written a piece in the Financial Times disputing the newspaper's article last week arguing China is about to come the world’s largest manufacturing power (see 12 August post):
“China has a long way to go to catch up with the US. The NAM’s analysis shows that in terms of real manufacturing value-added (price-adjusted, to reflect the quantity of output) the US remains by far the world’s largest manufacturer, producing nearly one-fourth of the world’s industrial output. Based on the highly respected World Bank database, our analysis also shows that we will produce twice as much this year as the fourth placed economy, China (the European Union and Japan are in second and third position, respectively). Even in current measures of manufacturing denominated in dollars (which inflate China’s position because of the rising yuan and other factors), China will produce only about 60 per cent as much as the US in 2008.”
“China has a long way to go to catch up with the US. The NAM’s analysis shows that in terms of real manufacturing value-added (price-adjusted, to reflect the quantity of output) the US remains by far the world’s largest manufacturer, producing nearly one-fourth of the world’s industrial output. Based on the highly respected World Bank database, our analysis also shows that we will produce twice as much this year as the fourth placed economy, China (the European Union and Japan are in second and third position, respectively). Even in current measures of manufacturing denominated in dollars (which inflate China’s position because of the rising yuan and other factors), China will produce only about 60 per cent as much as the US in 2008.”
Labels: America, china, economics
Sunday, August 17, 2008
More of more-is-less
Miller-McCune magazine, a publication from the Miller-McCune Center for Research, Media and Public Policy in California, has a useful review essay by David Villano on the “more-is-less” thesis. In other words it examines (sympathetically) the argument that it is possible to be more prosperous while consuming less.
Many of the points it makes are familiar – Americans consume far more per head than most of the rest of the world, the threat of climate change is imminent, the need to change lifestyles etc – but it includes many useful references. Among them are Confronting Consumption, (MIT Press) a 2002 book on America’s consumer society co-edited by Michael Maniates. Others include the California-based Global Footprint Network, the Voluntary Simplicity Movement, Redefining Progress and Mean Genes, a book on how our desire to consume is embedded in our DNA.
Many of the points it makes are familiar – Americans consume far more per head than most of the rest of the world, the threat of climate change is imminent, the need to change lifestyles etc – but it includes many useful references. Among them are Confronting Consumption, (MIT Press) a 2002 book on America’s consumer society co-edited by Michael Maniates. Others include the California-based Global Footprint Network, the Voluntary Simplicity Movement, Redefining Progress and Mean Genes, a book on how our desire to consume is embedded in our DNA.
Labels: affluenza, America, book, climate, consumption, environment, footprint, inequality, progress, review, sustainability
Self-loathing in America and beyond
Dick Meyer, a veteran American journalist, has written an interesting-sounding book on self-loathing in America with the brilliant title of Why We Hate Us (Crown 2008). To quote the blurb from his publisher:
“Meyer argues—with biting wit and observations that make you want to shout, “Yes! I hate that too!”—that when the social, spiritual, and political turmoil that followed the sixties collided with the technological and media revolution at the turn of the century, something inside us hit overload. American culture no longer reflects our own values. As a result, we are now morally and existentially tired, disoriented, anchorless, and defensive. We hate us and we wonder why.”
No doubt there is much that is wrong with Meyer’s analysis but he raises some important questions. There certainly is a strong element of self-loathing in America and Western culture more generally. This is apparent in many areas including environmentalism, identity politics and the hostility towards Chinese economic development. It is a topic that is worth examining in more detail.
An extract from the book and interview with the author are available here.
“Meyer argues—with biting wit and observations that make you want to shout, “Yes! I hate that too!”—that when the social, spiritual, and political turmoil that followed the sixties collided with the technological and media revolution at the turn of the century, something inside us hit overload. American culture no longer reflects our own values. As a result, we are now morally and existentially tired, disoriented, anchorless, and defensive. We hate us and we wonder why.”
No doubt there is much that is wrong with Meyer’s analysis but he raises some important questions. There certainly is a strong element of self-loathing in America and Western culture more generally. This is apparent in many areas including environmentalism, identity politics and the hostility towards Chinese economic development. It is a topic that is worth examining in more detail.
An extract from the book and interview with the author are available here.
Labels: America, book, china, consumption, happiness
Saturday, August 16, 2008
More on delayed gratification
Rob Williams, a freelance journalist and former assistant to a Labour MP, echoes David Lammy’s call for delayed gratification (see 14 August 2008 post) in an article in the Guardian Comment is free blog today:
“if there is a common theme running through the last decade, indeed, the last 30 years, it is one of instant gratification for businesses, governments and for individuals. There has been a total unwillingness to plan, wait for something, to save or to look more than five minutes ahead.”
He hopes the credit crunch will bring delayed gratification back into fashion again:
“For a start deferred gratification (remember your sociology classes?) needs to become acceptable again. The right amount of money to have is actually not quite enough, so that you have to save for a treat, and even, shock, horror, go without another luxury to get what you want. If you really want that holiday, or car, then save up for it.”
His conclusion:
“plastic is no longer fantastic, and our flexible friends are now cracking the whip. Hopefully the lesson of the next couple of years will be ‘how I learned to stop worrying and love the downturn.’ “
It is amazing how creative New Labour and its supporters are when it comes to trying to get the rest of us to make do with less.
Sadly I expect this to be a common reaction to the economic downturn. If anything green trends are likely to be strengthened rather than weakened.
“if there is a common theme running through the last decade, indeed, the last 30 years, it is one of instant gratification for businesses, governments and for individuals. There has been a total unwillingness to plan, wait for something, to save or to look more than five minutes ahead.”
He hopes the credit crunch will bring delayed gratification back into fashion again:
“For a start deferred gratification (remember your sociology classes?) needs to become acceptable again. The right amount of money to have is actually not quite enough, so that you have to save for a treat, and even, shock, horror, go without another luxury to get what you want. If you really want that holiday, or car, then save up for it.”
His conclusion:
“plastic is no longer fantastic, and our flexible friends are now cracking the whip. Hopefully the lesson of the next couple of years will be ‘how I learned to stop worrying and love the downturn.’ “
It is amazing how creative New Labour and its supporters are when it comes to trying to get the rest of us to make do with less.
Sadly I expect this to be a common reaction to the economic downturn. If anything green trends are likely to be strengthened rather than weakened.
Labels: affluenza, consumption, economics, finance
Friday, August 15, 2008
Blaming affluence for youth violence
David Lammy, New Labour’s skills minister, makes a crass link between growing affluence and youth violence in the latest New Statesman (14 August). Some excerpts:
* “In society, the fetishisation of money and the growth of consumerism add new pressures. In a "bling" culture, criminality easily becomes a short cut to symbols of wealth and power that will otherwise take years of hard work to achieve.”
* “the crucial point is this: a resilient economy cannot substitute for a good society.”
“An inability to delay gratification - whether with food, alcohol, money or sex - is becoming a hallmark of our age, reinforced by advertising and media (by the age of ten, the average British child recognises nearly 400 brand names).”
Some questions for Lammy:
- Why is it that richer societies are generally less violent than poorer ones (see posts of 20 July 2006, 30 July 2006 and 31 December 2007)?
- Why is it that only a tiny minority are involved in youth violence despite the mass of society becoming more affluent?
- How does he square his argument with the fact that, according to official figures, violent crime is not increasing in Britain (see Mick Hume’s recent article in spiked on this theme)?
* “In society, the fetishisation of money and the growth of consumerism add new pressures. In a "bling" culture, criminality easily becomes a short cut to symbols of wealth and power that will otherwise take years of hard work to achieve.”
* “the crucial point is this: a resilient economy cannot substitute for a good society.”
“An inability to delay gratification - whether with food, alcohol, money or sex - is becoming a hallmark of our age, reinforced by advertising and media (by the age of ten, the average British child recognises nearly 400 brand names).”
Some questions for Lammy:
- Why is it that richer societies are generally less violent than poorer ones (see posts of 20 July 2006, 30 July 2006 and 31 December 2007)?
- Why is it that only a tiny minority are involved in youth violence despite the mass of society becoming more affluent?
- How does he square his argument with the fact that, according to official figures, violent crime is not increasing in Britain (see Mick Hume’s recent article in spiked on this theme)?
Labels: affluenza, consumption, spiked
Tuesday, August 12, 2008
China to take manufacturing lead
To many it will probably come as a surprise that China is not already the “workshop of the world”. But according to a piece in yesterday’s Financial Times (FT) it is likely that China will take over from America as the world’s largest manufacturer sometime next year. China will account for about 17% of manufacturing output value added ($6.1 trillion) compared with 16% for America. This will end over a 100 years of American dominance. The exact figure is not quoted in the report but India is expected to remain way behind in this respect, despite often being mentioned in the same breath as China.
Today’s FT included a follow-up comment which argued the main challenge from China’s rise is likely to be environmental.
Today’s FT included a follow-up comment which argued the main challenge from China’s rise is likely to be environmental.
Labels: America, china, economics, india
An antidote to Gore
Not Evil Just Wrong, an anti-environmentalist documentary by two Irish film-makers, sounds interesting. From an account in the Sunday Times (London) it sounds like a much needed antidote to Al Gore’s An Inconvenient Truth.
Labels: climate, environment, film
Celebrate China’s Olympian achievements
The following comment by me - written during the opening ceremony for the Olympic games - appeared in this week’s Fund Strategy.
The Beijing Olympics symbolises the most important and positive development in the world in decades: the rapid economic development of China. Those who whine so noisily about the Olympics and China reveal more about their own insecurities than about the Asian giant.
China’s rapid growth over the past 30 years has raised more people out of poverty than any other development in world history. Its population is benefiting enormously from rising prosperity in a country where the scourge of famine was until recently a frequent occurrence. It is true that inequalities within China are widening, but in absolute terms living standards are immensely higher than in the past. China’s rapid growth has also led to a welcome reduction in the inequality gap between the developed world and emerging economies.
Given that China’s population is 1.3 billion, a fifth of the world’s, its internal development is hugely important. But it has also brought immense benefits to the rest of us. The global economy would have grown far more slowly in recent years if it were not for China’s contribution. Its rapid growth has played a key role in keeping the world economy going in the midst of an economic slowdown in the West.
If China’s development is so positive, why does it elicit so many complaints? It is hard to escape the conclusion that the West feels threatened by China’s emergence. Although China’s growth strategy is pragmatic, the western countries are worried they could lose their privileged place in the world.
The nauseating double standards applied to China confirm the point that the criticism is driven by western anxieties. No doubt the Chinese regime is deeply autocratic, but many critics forget, or at least downplay, anti-democratic trends at home. Try drawing breath in any British city without being filmed by CCTV cameras. Or how about detaining suspects for 42 days without charge? Those who complain about Tibet seem to forget about British troops in Afghanistan and Iraq. Defenders of such measures might point to the threat of terrorism and crime, but Beijing could do the same.
Rather than carp about the Olympics and China, it is time to enjoy the spectacle of the greatest sporting event on Earth.
The Beijing Olympics symbolises the most important and positive development in the world in decades: the rapid economic development of China. Those who whine so noisily about the Olympics and China reveal more about their own insecurities than about the Asian giant.
China’s rapid growth over the past 30 years has raised more people out of poverty than any other development in world history. Its population is benefiting enormously from rising prosperity in a country where the scourge of famine was until recently a frequent occurrence. It is true that inequalities within China are widening, but in absolute terms living standards are immensely higher than in the past. China’s rapid growth has also led to a welcome reduction in the inequality gap between the developed world and emerging economies.
Given that China’s population is 1.3 billion, a fifth of the world’s, its internal development is hugely important. But it has also brought immense benefits to the rest of us. The global economy would have grown far more slowly in recent years if it were not for China’s contribution. Its rapid growth has played a key role in keeping the world economy going in the midst of an economic slowdown in the West.
If China’s development is so positive, why does it elicit so many complaints? It is hard to escape the conclusion that the West feels threatened by China’s emergence. Although China’s growth strategy is pragmatic, the western countries are worried they could lose their privileged place in the world.
The nauseating double standards applied to China confirm the point that the criticism is driven by western anxieties. No doubt the Chinese regime is deeply autocratic, but many critics forget, or at least downplay, anti-democratic trends at home. Try drawing breath in any British city without being filmed by CCTV cameras. Or how about detaining suspects for 42 days without charge? Those who complain about Tibet seem to forget about British troops in Afghanistan and Iraq. Defenders of such measures might point to the threat of terrorism and crime, but Beijing could do the same.
Rather than carp about the Olympics and China, it is time to enjoy the spectacle of the greatest sporting event on Earth.
Labels: china, development, Fund Strategy, growth
Monday, August 11, 2008
Capitalism’s cheerleaders lose faith
Spiked has published an article by me on how even the most ardent free market economists are losing faith in capitalism.
Labels: economics, environment, globalisation, spiked
Sunday, August 10, 2008
Globalisation and overfishing
Spiegel Online has a substantial article arguing that globalisation, by encouraging overfishing, is destroying the world’s oceans. As it happens even Indur Goklany, an articulate and avid defender of economic development, concedes that overfishing is a problem. But the solution is more systematic farming of the world’s oceans rather than the hunter-gatherer approach that prevails at present.
Labels: consumption, environment, Europe, globalisation, progress
Saturday, August 09, 2008
Review essay on climate change
Today’s Guardian has an unashamedly one-sided review essay by Tim Flannery (Australian academic, climate change activist and author of The Weather Makers), of books on climate change. Among those authors recommended in the piece are works by Al Gore (Earth in the Balance), Mark Lynas (Six Degrees), George Marshall (Carbon Detox) and Oliver Tickell (Kyoto2). The review concentrates on British writers but American authors mentioned include Keith Bradsher (High and Mighty - an interesting sounding book on SUVs), Ross Gelbspan (Boiling Point), William McDonough (Cradle to Cradle), Bill McKibben and Gus Speth. Bjorn Lomborg, a leading sceptic on climate change, is mentioned in a few sentences but disparagingly dismissed.
One telling sentence in the article: “Few books about climate change have been written by the meteorologists and atmospheric physicists that dominate the field”. So even in relation to the science of climate change – as opposed to the politics or economics – there are few popular books written by experts. Pro-environmentalist non-specialists seem to dominate the popular debate.
In relation to the economics of climate change the Stern Review and William Nordhaus (A Question of Balance) are mentioned.
One telling sentence in the article: “Few books about climate change have been written by the meteorologists and atmospheric physicists that dominate the field”. So even in relation to the science of climate change – as opposed to the politics or economics – there are few popular books written by experts. Pro-environmentalist non-specialists seem to dominate the popular debate.
In relation to the economics of climate change the Stern Review and William Nordhaus (A Question of Balance) are mentioned.
Labels: book, climate, consumption, economics, environment, review, science
Friday, August 08, 2008
Green hypocrisy and low horizons
Anything that winds up George Monbiot, the Guardian’s most high profile environmental columnist, is worth looking into. He wrote a comment entitled “Hypocrites unite!” in response to a new book by Julie Burchill, a well known British writer, on hypocrisy. Monbiot deployed what could be called the standard hypocrisy defence. In addition to admitting to being a “posh git” (his father was deputy chairman of the Conservative party) he goes on:
“Sure we are hypocrites. Every one of us, almost by definition. Hypocrisy is the gap between your aspirations and your actions. Greens have high aspirations - they want to live more ethically – and they will always fall short. But the alternative to hypocrisy isn’t moral purity (no one manages that) but cynicism.”
This conveniently absolves him of any need for consistency but it is also untrue. Greens are characterised by their low expectations rather than high aspirations. It is their glum view of humanity that leads them to elevate the idea of natural limits to human action. It is hard to imagine a more cynical outlook.
Those who want a more considered critique of green elitism and double standards should read James Heartfield’s book on the subject (see 17 February 2008 post).
“Sure we are hypocrites. Every one of us, almost by definition. Hypocrisy is the gap between your aspirations and your actions. Greens have high aspirations - they want to live more ethically – and they will always fall short. But the alternative to hypocrisy isn’t moral purity (no one manages that) but cynicism.”
This conveniently absolves him of any need for consistency but it is also untrue. Greens are characterised by their low expectations rather than high aspirations. It is their glum view of humanity that leads them to elevate the idea of natural limits to human action. It is hard to imagine a more cynical outlook.
Those who want a more considered critique of green elitism and double standards should read James Heartfield’s book on the subject (see 17 February 2008 post).
Labels: book, environment, ethics
Thursday, August 07, 2008
FT on happynomics
Many newspaper articles on happiness economics follow more-or-less the same line (see 27 July 2008 post). A touch of utilitarianism (Jeremy Bentham, John Stuart Mill) followed by some quotes from the usual suspects (including Richard Easterlin, Richard Layard, Nic Marks and Andrew Oswald). Today’s Financial Times piece by Jonathan Guthrie on “happynomics” at least has the virtue of mentioning that Nicholas Sarkozy has toyed with the idea of happiness yardsticks. It also points out that some academics argue there is a link between happiness and income: “Ruut Veenhoven of Erasmus University, Rotterdam, claims happiness increases steadily with wealth, albeit at a declining rate.”
Labels: economics, Europe, happiness
Posing the right questions on energy
The Wall Street Journal poses an important question in a column on energy published in America yesterday and today in Europe:
“Al Gore said the other day that ‘the future of human civilization’ depends on giving up fossil fuels within a decade -- and was acclaimed as a prophet by the political class. Obviously boring reality doesn't count for much these days. Even so, when Barack Obama wheels out an energy agenda nearly as grandiose as Mr. Gore's, shouldn't it receive at least some media scrutiny?” (original emphasis).
It also comes to a sensible conclusion:
“Consumption isn't rising because of wastefulness. The U.S. produces more than twice as much GDP today per unit of energy as it did in the 1950s, yet energy use has risen threefold. That's because energy use is tethered to growth, and the economy continues to innovate and expand. Mr. Obama seems to have other ideas.”
Despite a common misconception it is not true that energy efficiency means less energy use. On the contrary, it means even more energy can be used.
“Al Gore said the other day that ‘the future of human civilization’ depends on giving up fossil fuels within a decade -- and was acclaimed as a prophet by the political class. Obviously boring reality doesn't count for much these days. Even so, when Barack Obama wheels out an energy agenda nearly as grandiose as Mr. Gore's, shouldn't it receive at least some media scrutiny?” (original emphasis).
It also comes to a sensible conclusion:
“Consumption isn't rising because of wastefulness. The U.S. produces more than twice as much GDP today per unit of energy as it did in the 1950s, yet energy use has risen threefold. That's because energy use is tethered to growth, and the economy continues to innovate and expand. Mr. Obama seems to have other ideas.”
Despite a common misconception it is not true that energy efficiency means less energy use. On the contrary, it means even more energy can be used.
Labels: America, economics, energy, environment
Wednesday, August 06, 2008
American happiness gap narrowing
A recent study by Betsey Stevenson and Justin Wolfers suggest that the happiness gap between some sections of the American population (black-white, male-female) seems to have narrowed. This is despite a widening of income inequality. A summary of the paper is below:
“Surveys that have attempted to measure the level of happiness in US citizens by means of a subjective response have unveiled decreases in happiness inequality. These findings come in spite of the long-term trend of increasing income inequality.
“The authors of CEPR DP6929 have used these responses to analyse the level and dispersion of happiness within and between demographic groups over the period of 1972-2006. In particular, they look at changes in the racial, gender and education gaps.
“Whilst they find that overall levels of happiness have remained relatively stable with a slight, but statistically significant decline, the distribution of happiness between and within demographic groups has changed significantly. The black-white gap was found to have narrowed substantially and the gender gap to have almost disappeared. In addition, the education gap was found to have widened.
“In light of increasing income inequality, the authors suggest that these findings may reveal a possible decrease in inequality in the non-pecuniary domain. In particular they highlight changes in the US legal and institutional framework that occurred during the observed time period that may help to explain the changes.”
For a reference to an earlier work by the same authors debunking the “paradox of prosperity” see my post of 16 April 2008.
“Surveys that have attempted to measure the level of happiness in US citizens by means of a subjective response have unveiled decreases in happiness inequality. These findings come in spite of the long-term trend of increasing income inequality.
“The authors of CEPR DP6929 have used these responses to analyse the level and dispersion of happiness within and between demographic groups over the period of 1972-2006. In particular, they look at changes in the racial, gender and education gaps.
“Whilst they find that overall levels of happiness have remained relatively stable with a slight, but statistically significant decline, the distribution of happiness between and within demographic groups has changed significantly. The black-white gap was found to have narrowed substantially and the gender gap to have almost disappeared. In addition, the education gap was found to have widened.
“In light of increasing income inequality, the authors suggest that these findings may reveal a possible decrease in inequality in the non-pecuniary domain. In particular they highlight changes in the US legal and institutional framework that occurred during the observed time period that may help to explain the changes.”
For a reference to an earlier work by the same authors debunking the “paradox of prosperity” see my post of 16 April 2008.
Labels: America, happiness, inequality
Another depressed cheerleader
I am struggling to find a term to describe the angst-ridden mindset of even the most pro-capitalist economists nowadays (see 1 August post). Cheerless cheerleaders? Demand depressives? Moody mentalists? None of these quite captures it. Any ideas please email me.
In the meantime here is a contribution from Willem Buiter, a professor at the London School of Economics and former member of the Bank of England’s monetary policy committee, from today’s Financial Times:
“Once the cyclical correction in emerging markets has run its course, I expect growth in those countries to resume at rates that are high but no longer stratospheric. The reason is the environmental constraints on growth in these markets. I am not referring to the (massive) contribution of China and others to global warming, but to the local and regional environmental fall-out from unsustainable industrial and agricultural development: increasing scarcity and rising costs of clean fresh water, clean air and soil that is fit for humans. When the last athlete hobbles out of the polluted Olympic Games of Beijing, black-lunged and gasping for oxygen, there is likely to be a reassessment of what is sustainable growth in China. Even totalitarian regimes require, if not the consent, at least the acquiescence of the populace. Double-digit rates of growth are a thing of the past.”
His article concludes:
“So how bad will things get? After the slowdown/recession has corrected the excesses of the past decade, prospects for the overdeveloped part of the world are quite reasonable, as long as material aspirations moderate in line with modest prospects for sustained growth in standards of living. For emerging and developing countries at the right end of the commodity boom, the potential for prosperity is there, as long as the resource curse is avoided. For poorer countries at the wrong end of the commodity boom, the combination of the terms-of-trade shock and acute environmental challenge will make life very difficult.”
I was particularly struck by the reference to the "overdeveloped" parts of the world.
Pass the prozac!
In the meantime here is a contribution from Willem Buiter, a professor at the London School of Economics and former member of the Bank of England’s monetary policy committee, from today’s Financial Times:
“Once the cyclical correction in emerging markets has run its course, I expect growth in those countries to resume at rates that are high but no longer stratospheric. The reason is the environmental constraints on growth in these markets. I am not referring to the (massive) contribution of China and others to global warming, but to the local and regional environmental fall-out from unsustainable industrial and agricultural development: increasing scarcity and rising costs of clean fresh water, clean air and soil that is fit for humans. When the last athlete hobbles out of the polluted Olympic Games of Beijing, black-lunged and gasping for oxygen, there is likely to be a reassessment of what is sustainable growth in China. Even totalitarian regimes require, if not the consent, at least the acquiescence of the populace. Double-digit rates of growth are a thing of the past.”
His article concludes:
“So how bad will things get? After the slowdown/recession has corrected the excesses of the past decade, prospects for the overdeveloped part of the world are quite reasonable, as long as material aspirations moderate in line with modest prospects for sustained growth in standards of living. For emerging and developing countries at the right end of the commodity boom, the potential for prosperity is there, as long as the resource curse is avoided. For poorer countries at the wrong end of the commodity boom, the combination of the terms-of-trade shock and acute environmental challenge will make life very difficult.”
I was particularly struck by the reference to the "overdeveloped" parts of the world.
Pass the prozac!
Labels: consumption, economics, environment, growth, water
Tuesday, August 05, 2008
Mixed international views on China
An interesting international poll for the BBC Newsnight programme shows mixed views on China. For instance, the Chinese were widely seen as both modern and friendly but also oppressed. The poll was conducted in America, Brazil, Britain, India and South Korea. It is an interesting counterpoint to the recent Pew poll of the Chinese themselves (see 24 July 2008 post).
Labels: china
Monday, August 04, 2008
Review of Supercapitalism
The following review by me appeared in this week’s Fund Strategy.
Robert Reich blames big business and technological progress for the erosion of democracy. But his flawed thesis is self-serving and - worryingly - he calls for a lowering of living standards.
Supercapitalism is about a fundamental schism in contemporary society. Robert Reich, a professor at Berkeley and labor secretary under President Bill Clinton, argues that big business is increasingly undermining democracy. Although people have benefited enormously as consumers and investors from this trend they are losing out in their capacity as citizens. His understated conclusion is that people should be pushed into accepting falls in living standards in return for greater democracy.
Reich's critique of contemporary capitalism is more sophisticated than many. He eschews explanations that simply attack human greed or slate conservative politicians. Reich also acknowledges that the recent era of big business has brought some substantial benefits.
But Reich's confusion of basic categories leads him to serious errors and damaging political conclusions. The key development to understand is the demise of the role of humans as producers rather than the rise of consumption. To the extent that consumption has become more important it is largely through default. The striking trend of the past 30 years is in the reduction in importance attached to humanity's productive role.
This productive side of humanity should not be understood simply in terms of making widgets. It needs to be put more broadly in the context of what might be called "the human subject": the capacity of people to make and remake the world around them. The diminished sense of human subjectivity, rather than the rise in importance of consumption, is the key to understanding the trends identified by Reich.
Reich's notion of supercapitalism has to be set against the "not quite golden age" of 1945-75. That period embodied many of the values that he holds dear: it was an era of relative equality, job security and trust. There was also a compact between labour unions and big business. Yet Reich is balanced enough to acknowledge it was far from perfect. For example, women and minorities suffered severe discrimination.
For Reich this set-up began to break down in the second half of the 1970s. New technology increased competition between corporations. This in turn led to a new era of globalisation, new production techniques and deregulation.
He acknowledges that the new era has brought enormous benefits. Thanks largely to innovations in medical science the average American lives almost 15 years longer than in 1950. Americans are also rich and have a far wider range of consumer choices than in the 1970s. Other countries too have benefited from similar developments.
However, many of the positive features of the not quite golden age have gone too. Societies have become more unequal, job security has diminished and trust in politicians has disappeared. Corporations through their incessant lobbying have, in Reich's view, undermined the democratic process.
Against those who argue that conservative politicians, such as Ronald Reagan in America or Margaret Thatcher in Britain, are to blame for this shift Reich points out (correctly) that the shift predates their time in office. Reagan was president from 1981-89 while Thatcher was prime minister from 1979-1990 yet the shift started in the 1970s. Both leaders simply intensified an attack on the post-War consensus, particularly in relation to unions, that had started before their time in office.
However, in relation to this point Reich seems to be suffering from a temporary memory lapse. The attack on the consensus in America started in earnest under the presidency of Jimmy Carter (1977-81). It was under Carter's presidency that Reich himself was a political appointee at the Federal Trade Commission. Reich does not deny his position but is shy of drawing any conclusions about the role of the Democrats in breaking the consensus. In Britain the Labour government of 1974-9 played a similar role in launching an assault on unions and destroying post-War institutions.
More broadly the way to understand this shift is as a response to the end of the post-War boom. After the second world war the world economy, particularly the developed countries, grew at record rates. But by the early 1970s signs of economic crisis were clear. This lead governments on both sides of the Atlantic to launch an assault on the unions and give much freer rein to business.
This trend in turn meant that ordinary people had much less of a say in their lives. Politics was no longer about competing camps or competing visions of how to organise society. Instead the era of "Tina" - as Thatcher put it "There Is No Alternative" came to the fore. The focus of politics switched to regulating individual behaviour - including such areas as drinking, smoking and even eating - rather than battling over how to organise society.
This is a much more convincing explanation for the shifts that Reich identifies than his focus on technology. Although Reich denies being a technological determinist his explanation exaggerates the role of technology and understates the role of political defeat in creating the current climate.
Reich's outlook also leads to some deeply conservative conclusions despite his reluctance to spell them out in detail. He is in favour of "new rules of the game" (read regulation) particularly in relation to corporate lobbying. Reich seems to lack confidence in the capacity of others to counter the arguments of corporations.
More worryingly, he twice advocates "sacrifice" by ordinary people by which he seems to mean an acceptance of lower living standards. He appears to take the peculiar view that reducing living standards will somehow bolster democracy.
In reality democracy can only be achieved by a revival of politics in the proper sense of the term. This means relaunching a battle of ideas over competing visions of how to organise society. It involves a struggle that is entirely consistent with raising rather than lowering the living standards of the bulk of the population. It is Reich's demand for sacrifice that is the antithesis of democracy.
Robert Reich blames big business and technological progress for the erosion of democracy. But his flawed thesis is self-serving and - worryingly - he calls for a lowering of living standards.
Supercapitalism is about a fundamental schism in contemporary society. Robert Reich, a professor at Berkeley and labor secretary under President Bill Clinton, argues that big business is increasingly undermining democracy. Although people have benefited enormously as consumers and investors from this trend they are losing out in their capacity as citizens. His understated conclusion is that people should be pushed into accepting falls in living standards in return for greater democracy.
Reich's critique of contemporary capitalism is more sophisticated than many. He eschews explanations that simply attack human greed or slate conservative politicians. Reich also acknowledges that the recent era of big business has brought some substantial benefits.
But Reich's confusion of basic categories leads him to serious errors and damaging political conclusions. The key development to understand is the demise of the role of humans as producers rather than the rise of consumption. To the extent that consumption has become more important it is largely through default. The striking trend of the past 30 years is in the reduction in importance attached to humanity's productive role.
This productive side of humanity should not be understood simply in terms of making widgets. It needs to be put more broadly in the context of what might be called "the human subject": the capacity of people to make and remake the world around them. The diminished sense of human subjectivity, rather than the rise in importance of consumption, is the key to understanding the trends identified by Reich.
Reich's notion of supercapitalism has to be set against the "not quite golden age" of 1945-75. That period embodied many of the values that he holds dear: it was an era of relative equality, job security and trust. There was also a compact between labour unions and big business. Yet Reich is balanced enough to acknowledge it was far from perfect. For example, women and minorities suffered severe discrimination.
For Reich this set-up began to break down in the second half of the 1970s. New technology increased competition between corporations. This in turn led to a new era of globalisation, new production techniques and deregulation.
He acknowledges that the new era has brought enormous benefits. Thanks largely to innovations in medical science the average American lives almost 15 years longer than in 1950. Americans are also rich and have a far wider range of consumer choices than in the 1970s. Other countries too have benefited from similar developments.
However, many of the positive features of the not quite golden age have gone too. Societies have become more unequal, job security has diminished and trust in politicians has disappeared. Corporations through their incessant lobbying have, in Reich's view, undermined the democratic process.
Against those who argue that conservative politicians, such as Ronald Reagan in America or Margaret Thatcher in Britain, are to blame for this shift Reich points out (correctly) that the shift predates their time in office. Reagan was president from 1981-89 while Thatcher was prime minister from 1979-1990 yet the shift started in the 1970s. Both leaders simply intensified an attack on the post-War consensus, particularly in relation to unions, that had started before their time in office.
However, in relation to this point Reich seems to be suffering from a temporary memory lapse. The attack on the consensus in America started in earnest under the presidency of Jimmy Carter (1977-81). It was under Carter's presidency that Reich himself was a political appointee at the Federal Trade Commission. Reich does not deny his position but is shy of drawing any conclusions about the role of the Democrats in breaking the consensus. In Britain the Labour government of 1974-9 played a similar role in launching an assault on unions and destroying post-War institutions.
More broadly the way to understand this shift is as a response to the end of the post-War boom. After the second world war the world economy, particularly the developed countries, grew at record rates. But by the early 1970s signs of economic crisis were clear. This lead governments on both sides of the Atlantic to launch an assault on the unions and give much freer rein to business.
This trend in turn meant that ordinary people had much less of a say in their lives. Politics was no longer about competing camps or competing visions of how to organise society. Instead the era of "Tina" - as Thatcher put it "There Is No Alternative" came to the fore. The focus of politics switched to regulating individual behaviour - including such areas as drinking, smoking and even eating - rather than battling over how to organise society.
This is a much more convincing explanation for the shifts that Reich identifies than his focus on technology. Although Reich denies being a technological determinist his explanation exaggerates the role of technology and understates the role of political defeat in creating the current climate.
Reich's outlook also leads to some deeply conservative conclusions despite his reluctance to spell them out in detail. He is in favour of "new rules of the game" (read regulation) particularly in relation to corporate lobbying. Reich seems to lack confidence in the capacity of others to counter the arguments of corporations.
More worryingly, he twice advocates "sacrifice" by ordinary people by which he seems to mean an acceptance of lower living standards. He appears to take the peculiar view that reducing living standards will somehow bolster democracy.
In reality democracy can only be achieved by a revival of politics in the proper sense of the term. This means relaunching a battle of ideas over competing visions of how to organise society. It involves a struggle that is entirely consistent with raising rather than lowering the living standards of the bulk of the population. It is Reich's demand for sacrifice that is the antithesis of democracy.
Labels: book, economics, Fund Strategy, globalisation, review, technology
The credit crunch as the new climate change
The following comment by me appeared in this week’s Fund Strategy.
Has anyone noticed that the credit crunch is the new climate change?
Until about a year ago, we were being advised to take such measures as reducing energy consumption, not wasting food and being financially frugal to save the planet. Now we are being told to do more-or-less the same thing for the sake of our household finances in the midst of recession. It seems that austerity is in the air.
The most stomach-churning expressions of this trend are the self-appointed experts who dispense their banal advice at every opportunity. They tell us how much money we can save by making packed lunches to eat at work or making sure we do not leave our televisions on standby. Such trite observations are routinely indulged by the media.
But such measures are also backed by government and business. The government sponsors reports such as those on how much food is wasted and promotes regulations to discourage the use of plastic bags. A Scrooge-like attitude to consumption is being encouraged at every opportunity.
This is all pretty strange because the credit crunch and climate change are two fundamentally different types of problem. The former is a relatively muted economic slowdown driven by difficulties on the consumption side of the economy (see last week's comment). The latter is a long-term trend towards an increase in average global temperatures.
If the two have anything in common, it is more in the reaction to them than what they are. Both seem to be prompting a panic reaction that is out of proportion to the immediate threat.
In both cases, the reaction emphasises the need for people to behave "responsibly" and curb their consumption. At best, such measures are irrelevant. At worst, they encourage a small-mindedness that detracts from finding a solution to the problems that they are ostensibly supposed to tackle.
In the case of the economy the challenge in broad terms is to find new ways to promote economic growth and encourage a culture of genuine innovation. In relation to climate change, it is to develop new technology and to work out the best way to adapt to the challenge.
Looking at either problem from the narrow perspective of the individual consumer only mystifies what is going on. We need a broader vision if we are to move forward with confidence.
Has anyone noticed that the credit crunch is the new climate change?
Until about a year ago, we were being advised to take such measures as reducing energy consumption, not wasting food and being financially frugal to save the planet. Now we are being told to do more-or-less the same thing for the sake of our household finances in the midst of recession. It seems that austerity is in the air.
The most stomach-churning expressions of this trend are the self-appointed experts who dispense their banal advice at every opportunity. They tell us how much money we can save by making packed lunches to eat at work or making sure we do not leave our televisions on standby. Such trite observations are routinely indulged by the media.
But such measures are also backed by government and business. The government sponsors reports such as those on how much food is wasted and promotes regulations to discourage the use of plastic bags. A Scrooge-like attitude to consumption is being encouraged at every opportunity.
This is all pretty strange because the credit crunch and climate change are two fundamentally different types of problem. The former is a relatively muted economic slowdown driven by difficulties on the consumption side of the economy (see last week's comment). The latter is a long-term trend towards an increase in average global temperatures.
If the two have anything in common, it is more in the reaction to them than what they are. Both seem to be prompting a panic reaction that is out of proportion to the immediate threat.
In both cases, the reaction emphasises the need for people to behave "responsibly" and curb their consumption. At best, such measures are irrelevant. At worst, they encourage a small-mindedness that detracts from finding a solution to the problems that they are ostensibly supposed to tackle.
In the case of the economy the challenge in broad terms is to find new ways to promote economic growth and encourage a culture of genuine innovation. In relation to climate change, it is to develop new technology and to work out the best way to adapt to the challenge.
Looking at either problem from the narrow perspective of the individual consumer only mystifies what is going on. We need a broader vision if we are to move forward with confidence.
Labels: climate, consumption, economics, finance, Fund Strategy
Friday, August 01, 2008
Mainstream economists fear globalisation
Harvard’s Dani Rodrik makes the correct point that even staunch defenders of globalisation are becoming nervous about its benefits. Writing for Project Syndicate (reproduced in Britain’s Guardian newspaper) he argues that:
“we have Paul Samuelson, the author of the postwar era's landmark economics textbook, reminding his fellow economists that China's gains in globalisation may well come at the expense of the US; Paul Krugman, today's foremost international trade theorist, arguing that trade with low-income countries is no longer too small to have an effect on inequality; Alan Blinder, a former US Federal Reserve vice-chairman, worrying that international outsourcing will cause unprecedented dislocations for the US labour force; Martin Wolf, the Financial Times columnist and one of the most articulate advocates of globalisation, writing of his disappointment with how financial globalisation has turned out; and Larry Summers, the US Treasury chief and the Clinton administration's "Mr Globalisation," musing about the dangers of a race to the bottom in national regulations and the need for international labour standards.” (see original article for links).
He could have added Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard, who recently argued in the Financial Times (29 July) that:
“Of course, today’s mess was many years in the making and there is no easy, painless exit strategy. But the need to introduce more banking discipline is yet another reason why the policymakers must refrain from excessively expansionary macroeconomic policy at this juncture and accept the slowdown that must inevitably come at the end of such an incredible boom. For most central banks, this means significantly raising interest rates to combat inflation. For Treasuries, this means maintaining fiscal discipline rather than giving in to the temptation of tax rebates and fuel subsidies.”
As Rodrik argues it is now mainstream economists who pose the most criticisms of globalisation: “The cheerleaders' true sparring partners today are not rock-throwing youths but their fellow intellectuals.”
For Rodrik the key question is to find the appropriate rules for regulating the globalised world. He does not appreciate the dangers that such regulation can bring - particularly if they restrain economic growth.
“we have Paul Samuelson, the author of the postwar era's landmark economics textbook, reminding his fellow economists that China's gains in globalisation may well come at the expense of the US; Paul Krugman, today's foremost international trade theorist, arguing that trade with low-income countries is no longer too small to have an effect on inequality; Alan Blinder, a former US Federal Reserve vice-chairman, worrying that international outsourcing will cause unprecedented dislocations for the US labour force; Martin Wolf, the Financial Times columnist and one of the most articulate advocates of globalisation, writing of his disappointment with how financial globalisation has turned out; and Larry Summers, the US Treasury chief and the Clinton administration's "Mr Globalisation," musing about the dangers of a race to the bottom in national regulations and the need for international labour standards.” (see original article for links).
He could have added Kenneth Rogoff, a former chief economist at the International Monetary Fund and now an economics professor at Harvard, who recently argued in the Financial Times (29 July) that:
“Of course, today’s mess was many years in the making and there is no easy, painless exit strategy. But the need to introduce more banking discipline is yet another reason why the policymakers must refrain from excessively expansionary macroeconomic policy at this juncture and accept the slowdown that must inevitably come at the end of such an incredible boom. For most central banks, this means significantly raising interest rates to combat inflation. For Treasuries, this means maintaining fiscal discipline rather than giving in to the temptation of tax rebates and fuel subsidies.”
As Rodrik argues it is now mainstream economists who pose the most criticisms of globalisation: “The cheerleaders' true sparring partners today are not rock-throwing youths but their fellow intellectuals.”
For Rodrik the key question is to find the appropriate rules for regulating the globalised world. He does not appreciate the dangers that such regulation can bring - particularly if they restrain economic growth.
Labels: economics, globalisation, growth
