Thursday, March 04, 2010
On missing baby girls
In 1990 Amartya Sen, who has since won the Nobel prize in economics, wrote an article in the New York Review of Books arguing there were 100m “missing” baby girls in the third world. From an examination of statistics that many baby girls in poorer countries died as a result of poorer medical care or even deliberate infanticide. It is strange that two decades later the same story should make the cover of the Economist with both the lead editorial and a substantial feature.
It is of course right that girls should have the same access to public health resources as boys and that men and women should have equal rights. However, something odd is going on with the recent heavy emphasis by establishment figures on gender equality in poorer countries.
As I argued in my recent spiked review defending abundance something odd seems to be going on. The aspiration to achieve material equality between the rich countries and the poor has become subdued. Instead there is a widespread discussion of gender inequality - and this in turn is often understood in terms of the authorities intervening in family life to stop men abusing women.
As a result tackling inequality is redefined as a problem of male abuse rather than one of a lack of economic development. From this perspective the relatively recent mainstream preoccupation with gender inequality is more problematic than it first appears.
It is of course right that girls should have the same access to public health resources as boys and that men and women should have equal rights. However, something odd is going on with the recent heavy emphasis by establishment figures on gender equality in poorer countries.
As I argued in my recent spiked review defending abundance something odd seems to be going on. The aspiration to achieve material equality between the rich countries and the poor has become subdued. Instead there is a widespread discussion of gender inequality - and this in turn is often understood in terms of the authorities intervening in family life to stop men abusing women.
As a result tackling inequality is redefined as a problem of male abuse rather than one of a lack of economic development. From this perspective the relatively recent mainstream preoccupation with gender inequality is more problematic than it first appears.
Labels: development, inequality, review, spiked, women
Sunday, February 28, 2010
Indian growth scepticism
An example of the growth scepticism of Arundhati Roy, a leading Indian writer and social campaigner, in an article in Outlook India. Roy moves from criticising the Indian government’s repressive military campaign against “Maoists” in Orissa (which she suggests is actually against indigenous people), to a discussion of the vested interests of mining companies in the region to a rejection of growth in general:
“The real problem is that the flagship of India’s miraculous ‘growth’ story has run aground. It came at a huge social and environmental cost. And now, as the rivers dry up and forests disappear, as the water table recedes and as people realise what is being done to them, the chickens are coming home to roost. All over the country, there’s unrest, there are protests by people refusing to give up their land and their access to resources, refusing to believe false promises any more. Suddenly, it’s beginning to look as though the 10 per cent growth rate and democracy are mutually incompatible. To get the bauxite out of the flat-topped hills, to get iron ore out from under the forest floor, to get 85 per cent of India’s people off their land and into the cities (which is what Mr Chidambaram says he’d like to see), India has to become a police state. The government has to militarise. To justify that militarisation, it needs an enemy. The Maoists are that enemy. They are to corporate fundamentalists what the Muslims are to Hindu fundamentalists.”
I know nothing about the conflict in Orissa but I am certain it should not be used as a general argument against development. It is not growth that leads to repression but stifling people’s aspirations by keeping them poor.
“The real problem is that the flagship of India’s miraculous ‘growth’ story has run aground. It came at a huge social and environmental cost. And now, as the rivers dry up and forests disappear, as the water table recedes and as people realise what is being done to them, the chickens are coming home to roost. All over the country, there’s unrest, there are protests by people refusing to give up their land and their access to resources, refusing to believe false promises any more. Suddenly, it’s beginning to look as though the 10 per cent growth rate and democracy are mutually incompatible. To get the bauxite out of the flat-topped hills, to get iron ore out from under the forest floor, to get 85 per cent of India’s people off their land and into the cities (which is what Mr Chidambaram says he’d like to see), India has to become a police state. The government has to militarise. To justify that militarisation, it needs an enemy. The Maoists are that enemy. They are to corporate fundamentalists what the Muslims are to Hindu fundamentalists.”
I know nothing about the conflict in Orissa but I am certain it should not be used as a general argument against development. It is not growth that leads to repression but stifling people’s aspirations by keeping them poor.
Labels: environment, growth, india, inequality
Tuesday, February 16, 2010
Against the Robin Hood tax
Yesterday spiked ran a critique by me of the campaign for a Robin Hood tax. Proceeds from the proposed levy on financial transactions would go to offset spending cuts in Britain, tackle climate change and help deal with global poverty.
Labels: finance, Fund Strategy, inequality, media appearances, spiked
Saturday, January 30, 2010
The new intolerance
Janice Turner, a Times (London) columnist, does a good job of showing how British society has become less tolerant towards obesity at the same time as it has become more tolerant towards gays. The welcome news that homosexuality is more widely accepted was contained in the annual British Social Attitudes survey. But, as Turner astutely points out, it does not necessary follow that society has become more tolerant in other respects:
“Sometimes it feels as if the anger and intolerance upon our angry, always up-for-a-fight island, is just being funnelled to other targets: the fat, the poor, the white trash, the chavs and pikeys, the underclass on the fringes of society who we loathe almost as much as we fear.”
In my view the new intolerance is closely related to the elitist disdain for consumption that is pervasive in growth scepticism. It is seen as OK for the relatively wealthy to consume – as long as they do so in what is deemed an “ethically correct” way – but popular consumption is seen as truly disgusting.
“Sometimes it feels as if the anger and intolerance upon our angry, always up-for-a-fight island, is just being funnelled to other targets: the fat, the poor, the white trash, the chavs and pikeys, the underclass on the fringes of society who we loathe almost as much as we fear.”
In my view the new intolerance is closely related to the elitist disdain for consumption that is pervasive in growth scepticism. It is seen as OK for the relatively wealthy to consume – as long as they do so in what is deemed an “ethically correct” way – but popular consumption is seen as truly disgusting.
Labels: consumption, inequality
Saturday, January 23, 2010
Global poverty "plummeting"
A new study by two prominent economists argues that global poverty has plummeted since 1970. Maxim Pinkovskiy of MIT and Xavier Sala-i-Martin of Columbia university use the percentage of the population living on less than $1 a day (in 2000 dollars adjusted for purchasing power parity) as their benchmark. According to their article on the Vox website:
“World poverty is falling. This column presents new estimates of the world’s income distribution and suggests that world poverty is disappearing faster than previously thought. From 1970 to 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East, and 20% in Africa. Barring a catastrophe, there will never be more than a billion people in poverty in the future history of the world.”
Economists may argue over inequality but in relation to absolute poverty it seems hard to deny the long-term trend is for a substantial fall.
“World poverty is falling. This column presents new estimates of the world’s income distribution and suggests that world poverty is disappearing faster than previously thought. From 1970 to 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East, and 20% in Africa. Barring a catastrophe, there will never be more than a billion people in poverty in the future history of the world.”
Economists may argue over inequality but in relation to absolute poverty it seems hard to deny the long-term trend is for a substantial fall.
Labels: development, inequality
Monday, December 14, 2009
Obama called for growth sacrifice
Barack Obama argued during the presidential campaign that some economic growth should be sacrificed for fairness according to this blog post on the Forbes website. The remarks were evidently made last year during an interview with Charlie Gibson of ABC news. Unfortunately I cannot find an original source to verify this claim.
Labels: America, growth, inequality, Obama
Sunday, December 13, 2009
Government invading our minds
This week, virtually unnoticed, the British government announced an intervention into the minds of the country’s inhabitants. Although it was pitched as a strategy to deal with mental illness it has implications for the whole of British society although it is particularly aimed at the poor. The official New Horizons website run by the Department of Health quotes Gordon Brown, the prime minister, as saying: “This is about more than preventing mental illness...it is also about helping individuals and communities to bring the best out of themselves”. This trend is also embodied in a recent World Health Organization report on Mental health, resilience, and inequalities (PDF). Catherine Bennett also discusses the broadening of the conception of mental illness in a comment in the Observer but for her the problem is that Brown’s initiative is too timid.
For me this trend represents the redefinition of inequality in therapeutic terms. It gives the government licence to intervene in the most intimate aspects of our lives – even our interior mental world.
For me this trend represents the redefinition of inequality in therapeutic terms. It gives the government licence to intervene in the most intimate aspects of our lives – even our interior mental world.
Labels: affluenza, happiness, inequality
The poverty conundrum
Ravi Kanbur, a professor of economics at Cornell, tries to explain a contradiction in poverty statistics in an article in Finance & Development. Although the official statistics show that poverty is falling there is a widespread perception that the opposite is the case:
“Setting aside the effects of the crises of the late 2000s and looking back two decades from the mid-2000s, the broad facts can be classified into the following stylized patterns (Kanbur, forthcoming). Where there has been no economic growth, poverty has risen. This is true of many African and some Latin American countries. In a large number of countries, including the biggest ones, such as India and China, and even in some African countries, such as Ghana, there has been fast growth by historical standards, and poverty—the percentage of the population below the poverty line—has fallen, as measured by official data.
“What is interesting, however, is the disconnect between the optimistic picture painted by these official data on poverty and the more pessimistic view of grassroots activists, civil society, and policymakers more generally.”
Kanbur tries to explain this gap in terms of the limitations of the official statistics. He says part of the explanation lies in the limitations of household survey data. For example, they do not account for the value of public services of inequalities within households. He then goes on to endorse the non-material approach to poverty proposed by the Stiglitz-Sen commission (see 15 September 2009 post). For Kanbur it is necessary to look at “nonmarket services, gender inequalities within households, and non-income dimensions of well-being”. His forthcoming paper cited above will be published by the commission.
However, it seems to be that a key element of the “disconnect” he talks about is the prevalence of a profound social pessimism. This is not something he seems to consider.
“Setting aside the effects of the crises of the late 2000s and looking back two decades from the mid-2000s, the broad facts can be classified into the following stylized patterns (Kanbur, forthcoming). Where there has been no economic growth, poverty has risen. This is true of many African and some Latin American countries. In a large number of countries, including the biggest ones, such as India and China, and even in some African countries, such as Ghana, there has been fast growth by historical standards, and poverty—the percentage of the population below the poverty line—has fallen, as measured by official data.
“What is interesting, however, is the disconnect between the optimistic picture painted by these official data on poverty and the more pessimistic view of grassroots activists, civil society, and policymakers more generally.”
Kanbur tries to explain this gap in terms of the limitations of the official statistics. He says part of the explanation lies in the limitations of household survey data. For example, they do not account for the value of public services of inequalities within households. He then goes on to endorse the non-material approach to poverty proposed by the Stiglitz-Sen commission (see 15 September 2009 post). For Kanbur it is necessary to look at “nonmarket services, gender inequalities within households, and non-income dimensions of well-being”. His forthcoming paper cited above will be published by the commission.
However, it seems to be that a key element of the “disconnect” he talks about is the prevalence of a profound social pessimism. This is not something he seems to consider.
Labels: development, inequality
Wednesday, December 09, 2009
Redefining development
A paper by Ha-Joon Chang (PDF), a development economist at Cambridge University, makes a valuable point about the redefinition of development: “the currently dominant discourse on ‘development’ really lacks any real notion of development in the sense of transformation of productive capabilities and structure (and the accompanying social changes”. However, to my mind he still concedes too much ground to, for example, the notion of environmental sustainability and to Amartya Sen’s “humanistic” redefinition of development.
Labels: development, inequality, sustainability
Tuesday, December 08, 2009
Redefining poverty
Geoff Mulgan, the director of the Young Foundation and a former senior adviser to Tony Blair, has a comment piece in the Times (London) arguing that poverty should be redefined in psychological and psychosocial terms. In relation to the former he argues:
“Most of the arguments about poverty in the past have focused on material needs. Today there is still some material poverty, but psychological needs are much more important and much more challenging. Around one in five people in the UK experience mental health problems at some point in their lives. The number of prescriptions for antidepressant drugs increased from 9 million in 1991 to 34 million in 2007.”
In relation to psychosocial needs he points to the problem of loneliness.
How he can claim that his argument challenges the conventional wisdom is a mystery. Amartya Sen won the Nobel prize for economics in 1998 for advocating such a view.
“Most of the arguments about poverty in the past have focused on material needs. Today there is still some material poverty, but psychological needs are much more important and much more challenging. Around one in five people in the UK experience mental health problems at some point in their lives. The number of prescriptions for antidepressant drugs increased from 9 million in 1991 to 34 million in 2007.”
In relation to psychosocial needs he points to the problem of loneliness.
How he can claim that his argument challenges the conventional wisdom is a mystery. Amartya Sen won the Nobel prize for economics in 1998 for advocating such a view.
Labels: affluenza, happiness, inequality
Friday, November 27, 2009
Poverty reduction and growth
The Economist has an article on poverty reduction which suggests there is no correlation between economic growth rates and eradicating hunger. It is based on studies by ActionAid and by Martin Ravallion of the World Bank.
Such studies can lead to naïve conclusions. No doubt there is no simple correlation between economic growth and poverty reduction in individual countries. Many factors can influence the precise outcomes in each nation. But the long-term historical trend is for economic growth to drive economic development.
For anyone who has the perspective of development as transformation – poor countries becoming rich ones – economic growth has a central role. In contrast, those who want to tinker with the figures for individuals slightly above or below the poverty line will be content for things to stay more-or-less as they are.
Such studies can lead to naïve conclusions. No doubt there is no simple correlation between economic growth and poverty reduction in individual countries. Many factors can influence the precise outcomes in each nation. But the long-term historical trend is for economic growth to drive economic development.
For anyone who has the perspective of development as transformation – poor countries becoming rich ones – economic growth has a central role. In contrast, those who want to tinker with the figures for individuals slightly above or below the poverty line will be content for things to stay more-or-less as they are.
Labels: development, economics, inequality
Sunday, November 22, 2009
Explanations for inequality
Daron Acemoglu, a professor of economics at MIT, summarises contemporary theories of global inequality in an article in Esquire (of all places). In broad terms two main lines of thought are popular nowadays: those that emphasise environmental factors such as geography and weather (such as Jeffrey Sachs) or natural endowments (such as Jared Diamond) or whose which emphasise “institutions” (which essentially means market incentives and stable politics).
Theories which look at society more broadly, such as Max Weber’s Protestant ethic, are summarily dismissed as superficial.
Theories which look at society more broadly, such as Max Weber’s Protestant ethic, are summarily dismissed as superficial.
Labels: corruption, development, environment, growth, inequality
Wednesday, October 07, 2009
Old snobbery against new wealth
Amanda Platell exhibits the classic signs of aristocratic snobbery against new wealth in her description of Simon Cowell’s over-the-top 50th birthday party.
According to her report in the Mail: “the party's entertainment included exotic topless dancers, naked women gyrating behind a big screen, and a guest enjoying a good whipping on stage from a dominatrix.
“But the highlight of the show was the appearance on stage of a giant replica of female genitalia, joined by two giant sex toys.”
Admittedly I would not choose to celebrate my 50th birthday in that way. But Platell, a former press secretary to the head of the Conservative Party, makes it clear later on in the article that she sees old, inherited wealth as OK:
“There is something deeply unpleasant about today's nouveau celebrity rich and the excessive way they flaunt their wealth.
“The truth is that, on the whole, 'old money' hides its wealth, dresses scruffily and plays down its privilege.”
Her piece may sound radical to some but essentially it is a snobbish defence of old wealth and privilege.
I am not a fan of Simon Cowell but he probably has a slightly stronger claim to have earned his fortune than, say, Prince Charles. And think of those bizarre costumes worn at royal celebrations such as the trooping of the colour or the state opening of parliament.
According to her report in the Mail: “the party's entertainment included exotic topless dancers, naked women gyrating behind a big screen, and a guest enjoying a good whipping on stage from a dominatrix.
“But the highlight of the show was the appearance on stage of a giant replica of female genitalia, joined by two giant sex toys.”
Admittedly I would not choose to celebrate my 50th birthday in that way. But Platell, a former press secretary to the head of the Conservative Party, makes it clear later on in the article that she sees old, inherited wealth as OK:
“There is something deeply unpleasant about today's nouveau celebrity rich and the excessive way they flaunt their wealth.
“The truth is that, on the whole, 'old money' hides its wealth, dresses scruffily and plays down its privilege.”
Her piece may sound radical to some but essentially it is a snobbish defence of old wealth and privilege.
I am not a fan of Simon Cowell but he probably has a slightly stronger claim to have earned his fortune than, say, Prince Charles. And think of those bizarre costumes worn at royal celebrations such as the trooping of the colour or the state opening of parliament.
Labels: consumption, ethics, inequality
Friday, July 03, 2009
Attitudes to inequality
A belated look at the recent Joseph Rowntree Foundation report on Understanding Attitudes to Tackling Economic Inequality by Tom Horton and Louise Barnfield of the Fabian Society. A couple of points that struck me:
* Almost everyone defined themselves as in the middle of the income spectrum. This is despite the fact that those polled were a cross-section of the population. The “income gap” was therefore interpreted as being between the “middle” and the super rich.
* The idea of prioritising economic growth as a way of raising living standards was unpopular (p45). This could well be a popular perception but it is also possible that the authors’ prejudices skewed the results. They linked support for economic growth with a free market vision and support for smaller government. It apparently it did not even occur to them that it is possible to be in favour of strong growth without being a free marketeer.
* Almost everyone defined themselves as in the middle of the income spectrum. This is despite the fact that those polled were a cross-section of the population. The “income gap” was therefore interpreted as being between the “middle” and the super rich.
* The idea of prioritising economic growth as a way of raising living standards was unpopular (p45). This could well be a popular perception but it is also possible that the authors’ prejudices skewed the results. They linked support for economic growth with a free market vision and support for smaller government. It apparently it did not even occur to them that it is possible to be in favour of strong growth without being a free marketeer.
Labels: growth, inequality
Tuesday, June 02, 2009
On American inequality
A couple of interesting articles on the American inequality debate.
Brink Lindsey, vice president of research at the Cato Institute, has written a critique of what he calls “nostalgianomics”. This is the tendency to romanticise the “golden age” of relatively low income inequality from the 1930s to the 1970s. Paul Krugman, Nobel laureate and New York Times columnist, is the arch-exponent of this view.
Krugman favours the system under the “Treaty of Detroit” (1950) in which the United Auto Workers (UAW) agreed not to strike in return for such gains as health, unemployment and pensions benefit. More generally it refers to a more conciliatory approach to relations between capital and labour.
Yet according to Lindsey the treaty was deeply flawed:
“The Treaty of Detroit was built on extensive cartelization of markets, limiting competition to favor producers over consumers. The restrictions on competition were buttressed by racial prejudice, sexual discrimination, and postwar conformism, which combined to limit the choices available to workers and potential workers alike. Those illiberal social norms were finally swept aside in the cultural tumults of the 1960s and ’70s. And then, in the 1970s and ’80s, restraints on competition were substantially reduced as well, to the applause of economists across the ideological spectrum. At least until now.”
Lindsey goes on to conclude:
“Paul Krugman may long for the return of selfdenying corporate workers who declined to seek better opportunities out of organizational loyalty, and thus kept wages artificially suppressed, but these are creatures of a bygone ethos—an ethos that also included uncritical acceptance of racist and sexist traditions and often brutish intolerance of deviations from mainstream lifestyles and sensibilities.”
Meanwhile, Benjamin Page and Lawrence Jacobs have written what sounds like an insightful book on American inequality judging by a review on Miller-McCune. Class War: What Americans Really Think About Income Inequality evidently argues that: “Americans are both philosophically conservative and operationally liberal”. It calls this belief system “conservative egalitarianism”. According to the review this outlook “admires individual self-reliance but accepts public intervention as necessary to help citizens strive for the American Dream on an ostensibly level playing field”.
Brink Lindsey, vice president of research at the Cato Institute, has written a critique of what he calls “nostalgianomics”. This is the tendency to romanticise the “golden age” of relatively low income inequality from the 1930s to the 1970s. Paul Krugman, Nobel laureate and New York Times columnist, is the arch-exponent of this view.
Krugman favours the system under the “Treaty of Detroit” (1950) in which the United Auto Workers (UAW) agreed not to strike in return for such gains as health, unemployment and pensions benefit. More generally it refers to a more conciliatory approach to relations between capital and labour.
Yet according to Lindsey the treaty was deeply flawed:
“The Treaty of Detroit was built on extensive cartelization of markets, limiting competition to favor producers over consumers. The restrictions on competition were buttressed by racial prejudice, sexual discrimination, and postwar conformism, which combined to limit the choices available to workers and potential workers alike. Those illiberal social norms were finally swept aside in the cultural tumults of the 1960s and ’70s. And then, in the 1970s and ’80s, restraints on competition were substantially reduced as well, to the applause of economists across the ideological spectrum. At least until now.”
Lindsey goes on to conclude:
“Paul Krugman may long for the return of selfdenying corporate workers who declined to seek better opportunities out of organizational loyalty, and thus kept wages artificially suppressed, but these are creatures of a bygone ethos—an ethos that also included uncritical acceptance of racist and sexist traditions and often brutish intolerance of deviations from mainstream lifestyles and sensibilities.”
Meanwhile, Benjamin Page and Lawrence Jacobs have written what sounds like an insightful book on American inequality judging by a review on Miller-McCune. Class War: What Americans Really Think About Income Inequality evidently argues that: “Americans are both philosophically conservative and operationally liberal”. It calls this belief system “conservative egalitarianism”. According to the review this outlook “admires individual self-reliance but accepts public intervention as necessary to help citizens strive for the American Dream on an ostensibly level playing field”.
Labels: America, book, consumption, inequality, review, work
Saturday, May 23, 2009
Progressive austerity?
It is rare to find new ways of expressing growth scepticism – the arguments tend to fit into well-established patterns – but Richard Reeves came up with one in an article in the Financial Times yesterday. The director of Demos, an influential British think tank, came up with “progressive austerity”. By this he means cutting public spending in such a way that preserves the programmes that most benefit from the poor.
The fundamental point this misses is that what is needed is growth rather than austerity. Rather than debate which London professional orchestra to cut funding to – he says there are five – we should be discussing how to restructure the economy to bring about vibrant growth.
What next from Demos? Perhaps “how dictatorship can advance democracy”!
The fundamental point this misses is that what is needed is growth rather than austerity. Rather than debate which London professional orchestra to cut funding to – he says there are five – we should be discussing how to restructure the economy to bring about vibrant growth.
What next from Demos? Perhaps “how dictatorship can advance democracy”!
Labels: economics, growth, inequality, progress
Friday, April 10, 2009
Therborn on inequality
Interesting to read Göran Therborn, a sociologist with a radical reputation, trying, like me in my recent spiked review, to grapple with the contemporary meaning of inequality. Only Therborn’s concern in his article in Open Democracy is defining and measuring different dimensions of inequality. There is no conception of the need to realise the human potential. Instead he proposes measures related to social inclusion and redistribution. He concludes (at least implicitly), as many such discussions do, that the Nordic welfare states are probably the best that can be achieved.
Labels: inequality, review, spiked
Sunday, April 05, 2009
Explaning inequality
This week’s Economist special report on the rich includes an article on social inequality. It starts with the observation that inequality has widened considerably over the past 30 years after narrowing from the 1930s to the late 1970s. But it reviews competing explanations for the recent widening without coming decisively down in favour of any one in particular:
• Technology. The problem with this argument is the tech-savvy Nordic countries are generally egalitarian.
• The abolition of ultra-high tax rates. But inequalities are just as marked in pre-tax and post-tax incomes.
• The demise of trade unionism. Seen as being a possible factor lower down the income scale.
• Globalisation. The emergence of a global market for talent.
For me the explanation most likely lies in the political defeat of organised labour represented by the rise of free market economics and the end of the Cold War. In addition, the rich benefitted from the surge in the volume and price of financial assets over the past three decades.
However, the recent economic crisis has, in some respects at least, hit the rich harder than the poor. “Although they [the poor] may lose their jobs and default on their loans, they will not be troubled by collapsing asset prices because they do not own assets”.
Clearly the poor live closer to the margin of subsistence than the rich so any loss will be felt particularly hard by those closer to the bottom of the income scale. But the rich have, as would be expected, lost more in absolute terms (in dollars or pounds) and may well have lost more relative to their incomes too.
The idea of “popular capitalism” – with the mass of the population having a substantial financial stake in the market economy – was always a myth.
• Technology. The problem with this argument is the tech-savvy Nordic countries are generally egalitarian.
• The abolition of ultra-high tax rates. But inequalities are just as marked in pre-tax and post-tax incomes.
• The demise of trade unionism. Seen as being a possible factor lower down the income scale.
• Globalisation. The emergence of a global market for talent.
For me the explanation most likely lies in the political defeat of organised labour represented by the rise of free market economics and the end of the Cold War. In addition, the rich benefitted from the surge in the volume and price of financial assets over the past three decades.
However, the recent economic crisis has, in some respects at least, hit the rich harder than the poor. “Although they [the poor] may lose their jobs and default on their loans, they will not be troubled by collapsing asset prices because they do not own assets”.
Clearly the poor live closer to the margin of subsistence than the rich so any loss will be felt particularly hard by those closer to the bottom of the income scale. But the rich have, as would be expected, lost more in absolute terms (in dollars or pounds) and may well have lost more relative to their incomes too.
The idea of “popular capitalism” – with the mass of the population having a substantial financial stake in the market economy – was always a myth.
Labels: finance, globalisation, inequality, technology
Friday, March 27, 2009
Review of Spirit Level on spiked
Spiked has published my review of Spirit Level by Richard Wilkinson and Kate Pickett. The article looks at how the idea of equality has been redefined from political to therapeutic terms.
Labels: book, health, inequality, review, spiked
Saturday, March 07, 2009
Riposte on the Spirit Level
Kate Pickett, one of the co-authors of Spirit Level, has emailed me to say I misrepresented some of the book’s statistical arguments in my 5 March post. I did point out that the post makes clear it is based on a limited range of sources – I have not read the book yet. However, in the interests of a fair and balanced debate, I have pasted her statistical rebuttal below. I hope to review the book properly before too long:
“First, our Index of Health and Social Problems does not contain happiness, it is based on hard, factual data from reputable sources like the World Bank, OECD, UN, etc. It contains life expectancy, infant mortality, obesity, mental illness, imprisonment, homicide, teenage births, educational scores, social mobility (correlation between father's and son's incomes over 30 years) and trust. I think the only one that is arguably a "soft" outcome is trust. This is based on official surveys of random samples of the population who say that other people can be trusted or not. But really, if someone says they don't trust other people, they probably don't. And indeed the causal impact of inequality on trust has been demonstrated by others. We show relationships with income inequality for all of the outcomes in our index separately as well as when combined, and we show the same for the 50 US states, as well as rich market economies.
“Second, although definitions of mental illness do indeed change over time, we use data from the World Health Organization's Consortium on Mental Illness, which used the same psychiatric diagnostic interviews in population samples of several different countries at the same time, so the data are certainly comparable and are not simply measures of how people are feeling.
“Third, we do not, of course, only use evidence from primate studies to help us understand how status insecurities and anxieties can affect our behaviour and biology, but they can be very useful. It would be silly to think that we do NOT have an evolved response to social status and social interactions and anxieties. I imagine while we all sat in the Moral Maze green room, our adrenaline and cortisol were running pretty high, all due to our feelings about whether or not we were going to make a good showing on the programme and how we were going come across and be judged!”
“First, our Index of Health and Social Problems does not contain happiness, it is based on hard, factual data from reputable sources like the World Bank, OECD, UN, etc. It contains life expectancy, infant mortality, obesity, mental illness, imprisonment, homicide, teenage births, educational scores, social mobility (correlation between father's and son's incomes over 30 years) and trust. I think the only one that is arguably a "soft" outcome is trust. This is based on official surveys of random samples of the population who say that other people can be trusted or not. But really, if someone says they don't trust other people, they probably don't. And indeed the causal impact of inequality on trust has been demonstrated by others. We show relationships with income inequality for all of the outcomes in our index separately as well as when combined, and we show the same for the 50 US states, as well as rich market economies.
“Second, although definitions of mental illness do indeed change over time, we use data from the World Health Organization's Consortium on Mental Illness, which used the same psychiatric diagnostic interviews in population samples of several different countries at the same time, so the data are certainly comparable and are not simply measures of how people are feeling.
“Third, we do not, of course, only use evidence from primate studies to help us understand how status insecurities and anxieties can affect our behaviour and biology, but they can be very useful. It would be silly to think that we do NOT have an evolved response to social status and social interactions and anxieties. I imagine while we all sat in the Moral Maze green room, our adrenaline and cortisol were running pretty high, all due to our feelings about whether or not we were going to make a good showing on the programme and how we were going come across and be judged!”
Labels: affluenza, book, happiness, health, inequality
Thursday, March 05, 2009
The Spirit Level
The Spirit Level by Richard Wilkinson and Kate Pickett, published today in Britain by Allen Lane, looks set to become an influential addition to the enormous and dubious growth sceptic canon. The two authors are proving popular on the circuit for such things including appearances on the Moral Maze with me yesterday, Start the Week on BBC Radio 4, Nightwaves on Radio 3 as well as a lecture at the Royal Society of Arts today. They were also reviewed in the Economist.
The authors present the book as a technical – that is non-political – book on the facts of social inequality. Their central thesis is that what matters in the developed economies is not poverty but inequality. Better to have more equal societies, such as Sweden or Japan, than highly unequal ones, such as America or Britain.
Judging by what I have heard and read so far, it has several weaknesses. These include:
• Lumping together disparate forms of data in dubious composite “indices”. As far as I can gather these include more subjective factors (such as “happiness”) with more objective ones (such as life expectancy).
• They miss the extent to which many factors, such as mental illness, are largely socially defined. So, for example, the definition of mental illness in many western societies have been substantially widened in recent years.
• They seem to rely on primate studies for at least part of their evidence in relation to status. In its review of the book the Economist moves shamelessly from talking about poor Indian children to discussing baboons in the course of one paragraph: “Low-caste Indian children do worse on cognitive tests if they must state their identities beforehand. High-status baboons bred in captivity show elevated levels of stress hormones and become ill more often when they are moved to groups where they no longer dominate.”
In any case they draw sweeping growth sceptic conclusions which are clearly political – despite their protestations – and not justified by the data. The Economist quotes the two authors as arguing that: “We have got close to the end of what economic growth can do for us.”
Much of my work is focused on refuting such ideas. For example, I argue that the challenge of climate change and an ageing population can only be met with substantially more resources – and that means economic growth. That is leaving aside the benefits to individuals being wealthier in the West and the still enormous challenge of development in the third world.
I have also argued the meaning of the demand for equality has been fundamentally transformed with the acceptance of the idea that there is no alternative to the market. It used to be a demand for more – for realising the human potential – whereas it is now typically a demand for less. I have written about this before in a 2006 article for spiked on Polly Toynbee (who has also just had a paperback edition of her latest book on “greed” in Britain published). However, I plan to extend the thesis considerably in my book.
The authors present the book as a technical – that is non-political – book on the facts of social inequality. Their central thesis is that what matters in the developed economies is not poverty but inequality. Better to have more equal societies, such as Sweden or Japan, than highly unequal ones, such as America or Britain.
Judging by what I have heard and read so far, it has several weaknesses. These include:
• Lumping together disparate forms of data in dubious composite “indices”. As far as I can gather these include more subjective factors (such as “happiness”) with more objective ones (such as life expectancy).
• They miss the extent to which many factors, such as mental illness, are largely socially defined. So, for example, the definition of mental illness in many western societies have been substantially widened in recent years.
• They seem to rely on primate studies for at least part of their evidence in relation to status. In its review of the book the Economist moves shamelessly from talking about poor Indian children to discussing baboons in the course of one paragraph: “Low-caste Indian children do worse on cognitive tests if they must state their identities beforehand. High-status baboons bred in captivity show elevated levels of stress hormones and become ill more often when they are moved to groups where they no longer dominate.”
In any case they draw sweeping growth sceptic conclusions which are clearly political – despite their protestations – and not justified by the data. The Economist quotes the two authors as arguing that: “We have got close to the end of what economic growth can do for us.”
Much of my work is focused on refuting such ideas. For example, I argue that the challenge of climate change and an ageing population can only be met with substantially more resources – and that means economic growth. That is leaving aside the benefits to individuals being wealthier in the West and the still enormous challenge of development in the third world.
I have also argued the meaning of the demand for equality has been fundamentally transformed with the acceptance of the idea that there is no alternative to the market. It used to be a demand for more – for realising the human potential – whereas it is now typically a demand for less. I have written about this before in a 2006 article for spiked on Polly Toynbee (who has also just had a paperback edition of her latest book on “greed” in Britain published). However, I plan to extend the thesis considerably in my book.
Labels: affluenza, book, consumption, happiness, inequality, radio
Sunday, March 01, 2009
The 1960s backlash
Sean Collins, writing in the latest spiked review of books, makes an important point on the conservative backlash against the 1960s counterculture in America. Many working class Americans supported the backlash in response to liberal condescension, including on the question of mass affluence. Collins quotes Rick Perlstein as arguing in Nixonland that:
“The liberal capitalism that had created this mass middle class created, in its wake, a mass culture of consumption. And the liberals whose New Deal created this mass middle class were more and more turning their attention to critiquing the degraded mass culture of cheap sensation and plastic gadgets and politicians who seemed to cater to this lowest common denominator.”
“The liberal capitalism that had created this mass middle class created, in its wake, a mass culture of consumption. And the liberals whose New Deal created this mass middle class were more and more turning their attention to critiquing the degraded mass culture of cheap sensation and plastic gadgets and politicians who seemed to cater to this lowest common denominator.”
Labels: America, book, consumption, ethics, inequality, review, spiked
Sunday, February 22, 2009
Critique of Krugman on inequality
Brink Lindsey, the vice president for research at the Cato Institute, has written a critique of Paul Krugman’s views on American inequality.
Labels: America, economics, inequality
Guns, Germs and Steel
Until I saw the documentary version of Guns, Germs and Steel yesterday I had not realised how much Jared Diamond, one of the world’s most prominent environmentalist writers, pitched his argument in terms of global inequality. Diamond first set out in 1972 to explain why people in developed societies had so much “cargo” (stuff) compared with hunger-gatherers in New Guinea. His answer started with the agricultural revolution of 11,000 years ago where those in the Middle East had an advantage thanks to their indigenous crops, barley and wheat, along with access to animals that could be domesticated. Such knowledge was then gradually passed on to Europe and Asia. Later on, in the sixteenth century, the Spanish conquistadores used their superior technology to subjugate Latin America.
Relatively little of Diamond’s documentary was spent on recent years. To the extent he talked about contemporary inequality it was presented as a legacy of the past. Essentially his views amount to a kind of geographical determinism. There was no attempt to explain the role of contemporary social factors create inequality today.
Although Diamond’s views may have some merit as an explanation of history they do not explain the present. It may well be true that indigenous crops and access to animals that could be domesticated gave those in the Middle East an advantage at the dawn of the Agricultural Revolution. But to properly explain contemporary inequality means starting with social relations today rather than the distant past.
Strangely the documentary had a relatively upbeat ending. It was implied that Africa could potentially achieve development along the lines of Malaysia or Singapore. As far as I can see there is no reference to this possibility in the book on which the documentary was based. It is also at odds with his 1987 essay on how the Agricultural Revolution was “The worst mistake in the history of the human race”. That implies the best form of equality would be if we were all still hunter-gatherers.
Relatively little of Diamond’s documentary was spent on recent years. To the extent he talked about contemporary inequality it was presented as a legacy of the past. Essentially his views amount to a kind of geographical determinism. There was no attempt to explain the role of contemporary social factors create inequality today.
Although Diamond’s views may have some merit as an explanation of history they do not explain the present. It may well be true that indigenous crops and access to animals that could be domesticated gave those in the Middle East an advantage at the dawn of the Agricultural Revolution. But to properly explain contemporary inequality means starting with social relations today rather than the distant past.
Strangely the documentary had a relatively upbeat ending. It was implied that Africa could potentially achieve development along the lines of Malaysia or Singapore. As far as I can see there is no reference to this possibility in the book on which the documentary was based. It is also at odds with his 1987 essay on how the Agricultural Revolution was “The worst mistake in the history of the human race”. That implies the best form of equality would be if we were all still hunter-gatherers.
Labels: book, consumption, development, environment, inequality, television
Sunday, February 15, 2009
How crisis hits world's poorest
The World Bank has conducted a study on how the economic crisis will hit the world’s poorest countries.
Labels: development, economics, inequality
Sunday, February 08, 2009
The social impact of the downturn
Belatedly caught up with an article on the likely social impact of the recession by Tyler Cowen, a professor of economics at George Mason University, in last Sunday’s New York Times. Among other things he predicts:
• A return to less expensive activities: “They may take the form of greater interest in free content on the Internet and the simple pleasures of a daily walk, instead of expensive vacations and NBA [National Basketball Association] box seats.”
• A larger than usual decline in consumption by the wealthy. Although the poor will suffer the most pain the rich have suffered a sharp decline in labour incomes owing to the problems in the financial sector. This is on top of the impact of declining asset prices.
• Popular culture catering to the wealthy, such as fancy restaurants, could decline.
• More mental health problems although paradoxically physical health could, on average, improve. On the latter accidents could decline as people make fewer trips while spending on alcohol and tobacco could also fall.
• Finally, a more “prudent” and risk averse climate could take hold.
I would not concur with all of Cowen’s predictions but the subject is worth considering.
• A return to less expensive activities: “They may take the form of greater interest in free content on the Internet and the simple pleasures of a daily walk, instead of expensive vacations and NBA [National Basketball Association] box seats.”
• A larger than usual decline in consumption by the wealthy. Although the poor will suffer the most pain the rich have suffered a sharp decline in labour incomes owing to the problems in the financial sector. This is on top of the impact of declining asset prices.
• Popular culture catering to the wealthy, such as fancy restaurants, could decline.
• More mental health problems although paradoxically physical health could, on average, improve. On the latter accidents could decline as people make fewer trips while spending on alcohol and tobacco could also fall.
• Finally, a more “prudent” and risk averse climate could take hold.
I would not concur with all of Cowen’s predictions but the subject is worth considering.
Labels: affluenza, America, Austerity Watch, consumption, economics, happiness, inequality
Friday, January 23, 2009
A tragic reminder
Unicef’s report on the State of the World’s Children 2009 provides a reminder of how far the world still is from being developed. Evidently more than 500,000 women die from causes related to pregnancy and childbirth, and nearly 4 million newborns die within the first 28 days of life.
Labels: development, health, inequality
Tuesday, January 20, 2009
Slumdog Millionaire
Just saw Slumdog Millionaire, Danny Boyle’s film about an 18-year-old from the slums of Bombay who overcomes adversity to win the Indian version of Who Wants to be a Millionaire? The film does not have a explicit political message but there is something unhealthy about its obsession with India’s urban squalor. The characters tend to be portrayed as either victims of terrible abuse or abusers themselves. A central character in the film moves from being one to the other. To be fair the ending is, on balance, happy but it is presented as thanks to fate and perhaps luck more than anything else.
I have not read it yet but the obsession with India’s squalid cities probably informs the popularity of White Tiger, Aravind Adiga’s Man Booker prize-winning novel (see post of 15 October 2008). A similar preoccupation is apparent in films on slum dwellers in other countries such as Circus of God (Brazil 2002) and Tsotsi (South Africa 2005).
The pedigree of those involved in making Slumdog Millionaire is also telling. Danny Boyle, its director, is best known for Trainspotting (1996), a tale of urban squalor and depravity in Edinburgh. Simon Beaufoy, who wrote the screenplay, made his name by writing The Full Monty (1997), a tale of former Sheffield steelworkers as laughable victims.
Something about urban squalor and violence seems to attract a particular kind of middle class imagination. I suspect if they saw urban dwellers as more of a political threat, rather than as simply decadent or pathetic, they might not be sympathetic.
I have not read it yet but the obsession with India’s squalid cities probably informs the popularity of White Tiger, Aravind Adiga’s Man Booker prize-winning novel (see post of 15 October 2008). A similar preoccupation is apparent in films on slum dwellers in other countries such as Circus of God (Brazil 2002) and Tsotsi (South Africa 2005).
The pedigree of those involved in making Slumdog Millionaire is also telling. Danny Boyle, its director, is best known for Trainspotting (1996), a tale of urban squalor and depravity in Edinburgh. Simon Beaufoy, who wrote the screenplay, made his name by writing The Full Monty (1997), a tale of former Sheffield steelworkers as laughable victims.
Something about urban squalor and violence seems to attract a particular kind of middle class imagination. I suspect if they saw urban dwellers as more of a political threat, rather than as simply decadent or pathetic, they might not be sympathetic.
Labels: cities, film, india, inequality
Monday, January 19, 2009
Environmentalism with jewels on
Who every said environmentalism need not be elitist (see 18 January post)? According to an article on the ABC News website the following is available to well-heeled greens who want to attend Barack Obama’s inauguration as president:
“The Ritz-Carlton sold a "Politically Correct" package for $50,000, which includes four nights in one of the hotel's suites; two hard-to-come-by seats at the inaugural parade; two tickets to an inaugural ball; a luxury hybrid vehicle with chauffeur on call 24 hours a day; a ball gown and tuxedo from Saks Fifth Avenue; a private in-suite dinner for two at the hotel's restaurant, and more, including a special, inauguration-themed pendant of gold, diamonds, rubies and sapphires valued at $8,000.”
Nor are such standards limited to one swish hotel. The Obama “We Are One” is evidently not an egalitarian event:
“The concert was supposed to be part of "the people's party," said Shawn Paterniti, who had come with his wife Mia from Columbia, Md., to see the show. "But still, you have the VIPs who want their front-row seats. So I guess they get their tickets no one knows about," he said, as he and his wife headed to join the "general population," far away from the performances.
“‘It seems odd to have a VIP section for a concert about unity,’ quipped the local blog DCist.com. The blogger, Kriston Capps, suggested a new name for the event: ‘We Are One, but Some Are More One Than Others.’”
“The Ritz-Carlton sold a "Politically Correct" package for $50,000, which includes four nights in one of the hotel's suites; two hard-to-come-by seats at the inaugural parade; two tickets to an inaugural ball; a luxury hybrid vehicle with chauffeur on call 24 hours a day; a ball gown and tuxedo from Saks Fifth Avenue; a private in-suite dinner for two at the hotel's restaurant, and more, including a special, inauguration-themed pendant of gold, diamonds, rubies and sapphires valued at $8,000.”
Nor are such standards limited to one swish hotel. The Obama “We Are One” is evidently not an egalitarian event:
“The concert was supposed to be part of "the people's party," said Shawn Paterniti, who had come with his wife Mia from Columbia, Md., to see the show. "But still, you have the VIPs who want their front-row seats. So I guess they get their tickets no one knows about," he said, as he and his wife headed to join the "general population," far away from the performances.
“‘It seems odd to have a VIP section for a concert about unity,’ quipped the local blog DCist.com. The blogger, Kriston Capps, suggested a new name for the event: ‘We Are One, but Some Are More One Than Others.’”
Labels: America, consumption, economics, environment, inequality
Sunday, January 18, 2009
A non-elitist environmentalism?
Can there be a non-elitist environmentalism? The is the question posed, implicitly at least, by an article on Greening the ghetto in the New Yorker.
The piece is a profile of Van Jones, the founder and president of Green for All, a California-based “national organization dedicated to building an inclusive green economy strong enough to lift people out of poverty”. His project is to reduce poverty by creating millions of “green jobs” in such areas as installing solar panels, “weatherising” buildings and constructing mass transit systems. Jones’s book on the subject, The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems (HarperOne 2008), has the endorsement of the likes of former vice President Al Gore, Nancy Pelosi (the speaker of the house of representatives) and Thomas Friedman (New York Times columnist).
The article acknowledges that environmentalists normally come from an affluent minority: “A 2006 study commissioned by Earthjustice, a nonprofit environmental-law group, found that the ecological base ‹defined as Americans who report the environment as being central to their concerns) is nearly ninety percent white, mostly college-educated, higher-income, and over thirty-five.” It is implied that Jones, who is black, could represent the future of a more broad-based environmentalism.
There is a problem with this argument. Even if environmentalism caught on among the mass of the population it would remain an elite ideology in an important sense. Any project with the goal of curbing economic growth is likely to reinforce the existing order. As far as it is possible to tell from the Green for All website the campaign shares the prejudices of mainstream environmentalism in relation to curbing energy use and penalising the use of fossil fuels.
The Jones campaign could be a pragmatic way of raising funds from the federal government and other sources. Clearly his pitch is likely to appeal in today’s intellectual and political climate. But even if he genuinely believes it the campaign will not solve America’s economic problems or benefit the mass of the population.
The piece is a profile of Van Jones, the founder and president of Green for All, a California-based “national organization dedicated to building an inclusive green economy strong enough to lift people out of poverty”. His project is to reduce poverty by creating millions of “green jobs” in such areas as installing solar panels, “weatherising” buildings and constructing mass transit systems. Jones’s book on the subject, The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems (HarperOne 2008), has the endorsement of the likes of former vice President Al Gore, Nancy Pelosi (the speaker of the house of representatives) and Thomas Friedman (New York Times columnist).
The article acknowledges that environmentalists normally come from an affluent minority: “A 2006 study commissioned by Earthjustice, a nonprofit environmental-law group, found that the ecological base ‹defined as Americans who report the environment as being central to their concerns) is nearly ninety percent white, mostly college-educated, higher-income, and over thirty-five.” It is implied that Jones, who is black, could represent the future of a more broad-based environmentalism.
There is a problem with this argument. Even if environmentalism caught on among the mass of the population it would remain an elite ideology in an important sense. Any project with the goal of curbing economic growth is likely to reinforce the existing order. As far as it is possible to tell from the Green for All website the campaign shares the prejudices of mainstream environmentalism in relation to curbing energy use and penalising the use of fossil fuels.
The Jones campaign could be a pragmatic way of raising funds from the federal government and other sources. Clearly his pitch is likely to appeal in today’s intellectual and political climate. But even if he genuinely believes it the campaign will not solve America’s economic problems or benefit the mass of the population.
Labels: America, book, economics, environment, inequality, work
The growing clout of the poor?
Barbara Ehrenreich writes on the “growing clout of the nouveau poor” in the Nation, a radical American weekly magazine. She is probably right to argue that: “the ranks of the poor are swelling every day with failed business owners, office workers, salespeople and long-time homeowners”. However, she is wrong to assume that simply because the ranks of the poor are swelling they are likely to have more political influence.
Labels: America, inequality
Monday, November 17, 2008
Linking aid to military intervention
William Easterly, a professor at New York University and one of the world’s leading conservative development economists, has done a belated review (PDF) of Paul Collier’s The Bottom Billion ( “Foreign aid goes military”, New York Review of Books 55(19), 4 December 2008). Easterly looks at the increasing trend to link development to calls for Western military intervention. He also argues Collier is guilty of statistical fallacies such as confusing correlation with causation.
Labels: aid, book, development, economics, inequality
Sunday, November 09, 2008
Brown on health inequalities
The British prime minister’s speech last week on global health inequalities was a classic of grand rhetoric and small ambitions. Gordon Brown sounded like he was making a humanistic speech with his concerns about such things as high infant mortality and low life expectancy in much of the world:
“Today a woman born in Zambia is likely to live half as long as a woman born in Japan; half a million mothers will die each year, one mother in eight dies in childbirth in some of the poorest countries like Sierra Leone, and one of the reasons is that of six million people in that country there are only 200 nurses, 100 doctors and 80 midwives.”
The problem with Brown’s speech was that it separated health inequalities from social inequality in a broader sense – the gross economic inequality in the world. In that way he could turn the poorer countries into grateful recipients of Western aid rather than support the cause of true equality through development. Such a conception is also embodied in the Department of Health’s Health is Global report published last year.
In addition, Brown announced that Michael Marmot will conduct a review of health inequalities in Britain. Marmot was one of the key thinkers behind the recent World Health Organization report on global health inequalities (see 29 August 2008 post).
“Today a woman born in Zambia is likely to live half as long as a woman born in Japan; half a million mothers will die each year, one mother in eight dies in childbirth in some of the poorest countries like Sierra Leone, and one of the reasons is that of six million people in that country there are only 200 nurses, 100 doctors and 80 midwives.”
The problem with Brown’s speech was that it separated health inequalities from social inequality in a broader sense – the gross economic inequality in the world. In that way he could turn the poorer countries into grateful recipients of Western aid rather than support the cause of true equality through development. Such a conception is also embodied in the Department of Health’s Health is Global report published last year.
In addition, Brown announced that Michael Marmot will conduct a review of health inequalities in Britain. Marmot was one of the key thinkers behind the recent World Health Organization report on global health inequalities (see 29 August 2008 post).
Labels: health, inequality
Tuesday, November 04, 2008
When “broadening” is a step back
Some useful references on Duncan Green’s blog for Oxfam. He point to what looks likely to be a key paper by Paul Shaffer of the University of Toronto on the “broadening” of the definition of poverty from the Real-World Economics Review (formerly the Post Autistic Economics Review). As I have alluded to in the past (see 27 September 2008 post), and I will expand on in the future, this represents a retrograde step. Green also points to another paper on the increasingly influential “growth diagnostics” approach to development favoured by Dani Rodrik of Harvard and others.
Labels: development, economics, inequality
Sunday, October 26, 2008
Welcome India’s lunar programme
India’s lunar programme should be welcomed. India is sending an unmanned space probe to the moon and in the course of it explore the possibility of bringing helium 3 – the ideal fuel for nuclear fusion – back to earth.
It was inevitable that many would sneer at such a mission when India is still mired in poverty. But it is wrong to counter-pose missions such as India’s space programme with economic development. On the contrary, the same bold ambitious attitude is required of both.
Randeep Ramesh, the Guardian’s south Asia correspondent, claims he is not against the mission in principle but sees it as precocious:
“India is a nation with a proliferating development needs – the global hunger index ranks it below Laos and Burkina Faso. Hundreds of millions of Indians still openly defecate in fields, at roadsides and beside train tracks. Common tropical diseases easily overwhelm the country's poorly-funded public health system. Its roads, railways and airports all need money and managerial overhauls.”
He misses the point that looking to the stars cultivates the right attitude to solve problems on earth too.
It was inevitable that many would sneer at such a mission when India is still mired in poverty. But it is wrong to counter-pose missions such as India’s space programme with economic development. On the contrary, the same bold ambitious attitude is required of both.
Randeep Ramesh, the Guardian’s south Asia correspondent, claims he is not against the mission in principle but sees it as precocious:
“India is a nation with a proliferating development needs – the global hunger index ranks it below Laos and Burkina Faso. Hundreds of millions of Indians still openly defecate in fields, at roadsides and beside train tracks. Common tropical diseases easily overwhelm the country's poorly-funded public health system. Its roads, railways and airports all need money and managerial overhauls.”
He misses the point that looking to the stars cultivates the right attitude to solve problems on earth too.
Labels: Asia, energy, india, inequality, science, technology
Tuesday, October 21, 2008
Inequality widening in developed countries
Income inequality is widening in most developed country according to a report on Growing Unequal by the Organisation for Economic Cooperation and Development (OECD). According to the press release the report:
“finds that the economic growth of recent decades has benefitted the rich more than the poor. In some countries, such as Canada, Finland, Germany, Italy, Norway and the United States, the gap also increased between the rich and the middle-class.”
Of course a widening of income inequality does not necessarily preclude a rise in absolute living standards for the poor.
“finds that the economic growth of recent decades has benefitted the rich more than the poor. In some countries, such as Canada, Finland, Germany, Italy, Norway and the United States, the gap also increased between the rich and the middle-class.”
Of course a widening of income inequality does not necessarily preclude a rise in absolute living standards for the poor.
Labels: inequality
Sunday, October 19, 2008
America’s inequality debate
William Tucker argues in an article in the American Spectator that Paul Krugman’s contention that inequality is widening in America – a view that has influenced Barack Obama - is wrong. Tucker starts by pointing out that absolute living standards in America are rising:
“One out of every twelve Americans annually visits Disney World, making Orlando the nation's 9th busiest airport. With children in tow, the trip easily costs several thousand dollars yet the place is always packed. Eighty percent of American homes now have air conditioning. Almost everyone owns a television set. Seventy-five percent have a cell phone. The poorest in America -- the people in the bottom ‘quintile’ - live as well as the average American did in 1970. Calorie intake is now perfectly level across all classes in America - meaning we have reached the millennial dream where everyone has enough to eat” (original emphasis).
Tucker then goes on to examine the methodology favoured by Krugman to show it is wrong. He claims that Krugman’s argument is based on a 2001 paper (PDF) by Thomas Piketty and Emmanuel Saez published by the National Bureau of Economic Research. Tucker argues this paper distorts the true picture because it is based on individual tax returns. This means, for example, that teenagers on holiday jobs and babies with a college fund are counted towards the average. Average household incomes rose from $44,000 in 1980 to $57,000 in 2006, a 30 percent increase. The compound the effect the size of an average household fell over the same period.
I am not sure who is right in this debate but it is a topic worth examining.
“One out of every twelve Americans annually visits Disney World, making Orlando the nation's 9th busiest airport. With children in tow, the trip easily costs several thousand dollars yet the place is always packed. Eighty percent of American homes now have air conditioning. Almost everyone owns a television set. Seventy-five percent have a cell phone. The poorest in America -- the people in the bottom ‘quintile’ - live as well as the average American did in 1970. Calorie intake is now perfectly level across all classes in America - meaning we have reached the millennial dream where everyone has enough to eat” (original emphasis).
Tucker then goes on to examine the methodology favoured by Krugman to show it is wrong. He claims that Krugman’s argument is based on a 2001 paper (PDF) by Thomas Piketty and Emmanuel Saez published by the National Bureau of Economic Research. Tucker argues this paper distorts the true picture because it is based on individual tax returns. This means, for example, that teenagers on holiday jobs and babies with a college fund are counted towards the average. Average household incomes rose from $44,000 in 1980 to $57,000 in 2006, a 30 percent increase. The compound the effect the size of an average household fell over the same period.
I am not sure who is right in this debate but it is a topic worth examining.
Labels: America, inequality
Wednesday, October 15, 2008
An Indian growth sceptic?
The backdrop to the 2008 Booker Prize Winner, White Tiger by Aravind Adiga, is evidently inequality and getting rich in India. I could be wrong but it sounds relevant to the growth sceptic discussion. The chairman of the award judges was Michael Portillo, a former Conservative politician in Britain, so it should not be surprising that the winning novel has a political theme.
Labels: book, india, inequality
Friday, October 03, 2008
Me on global equality on Worldbyes
Worldwrite’s latest Worldbytes television programme includes an item with me talking about global inequality. Other stories include challenging China bashing, a scientist talks about waste and an alien’s take on carbon footprints.
Labels: china, development, environment, footprint, inequality, media appearances, Worldwrite
Saturday, September 06, 2008
Worldwrite launches news channel
Worldwrite has launched its Worldbytes television channel (see 28 August post). The first programme includes an item with me talking about poverty in London.
Labels: inequality, media appearances, television, Worldwrite
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
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
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
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
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
Tuesday, July 29, 2008
Ehrenreich on American extremes
Barbara Ehrenreich, a prominent American activist and writer, has added her voice to the debate about inequality in America. This Land is Their Land (Metropolitan Books), her book on American extremes, seems to be receiving a lot of publicity. This includes an appearance on Comedy Central’s The Colbert Report.
Labels: America, book, inequality, television
Sunday, July 27, 2008
More on American inequality
The cover story of the July-August issue of Harvard Magazine is a piece by Elizabeth Gudrais on American inequality. Compare it to last Friday’s post.
Labels: America, health, inequality
Friday, July 25, 2008
American inequality over-stated?
Studies of inequality typically overstate the widening of inequality in America according to a study cited in the Economist. The magazine’s Economics Focus column refers to work which argues that the inflation rate for the poor has generally proved higher than for the rich:
“A challenge to the conventional wisdom is set out in a recent research paper by Christian Broda and John Romalis, both of the University of Chicago’s business school. They argue that standard measures of inequality do not reflect differences in the way that the rich and poor spend their money. A person’s demand for a particular good or service does not rise in exact proportion to his income. As he grows richer, the pattern of his spending changes, as well as the amount. In particular, high-wage households spend a greater share of their income on services and a smaller share on “non-durable” items, such as food, clothing, footwear and toiletries.
“For most of the past three decades, the price of non-durable goods has been falling relative to the price of the services—investment advice, personal care, domestic help and so on—that the rich spend more of their money on. If these differences between the inflation rates faced by the rich and the poor are taken into account, the rise in inequality is reduced and may even vanish.”
The article acknowledges that the recent rise in food and commodity prices may have reversed part of this trend.
“A challenge to the conventional wisdom is set out in a recent research paper by Christian Broda and John Romalis, both of the University of Chicago’s business school. They argue that standard measures of inequality do not reflect differences in the way that the rich and poor spend their money. A person’s demand for a particular good or service does not rise in exact proportion to his income. As he grows richer, the pattern of his spending changes, as well as the amount. In particular, high-wage households spend a greater share of their income on services and a smaller share on “non-durable” items, such as food, clothing, footwear and toiletries.
“For most of the past three decades, the price of non-durable goods has been falling relative to the price of the services—investment advice, personal care, domestic help and so on—that the rich spend more of their money on. If these differences between the inflation rates faced by the rich and the poor are taken into account, the rise in inequality is reduced and may even vanish.”
The article acknowledges that the recent rise in food and commodity prices may have reversed part of this trend.
Labels: America, economics, inequality
Tuesday, July 22, 2008
The world economy and Chinese inequality
The recent BBC Radio 4 Analysis programme by Martin Wolf, the chief economics commentator at the Financial Times, was particularly interesting. He looked at the significance of the increasing importance of the developing world.
Justin Lin, a contributor to the programme and chief economist of the World Bank, has also recently had an interesting sounding chapter published on Chinese inequality. It is part of China's Dilemma, a collection of papers co-published by the Australian National University and the Asia Pacific Press.
Justin Lin, a contributor to the programme and chief economist of the World Bank, has also recently had an interesting sounding chapter published on Chinese inequality. It is part of China's Dilemma, a collection of papers co-published by the Australian National University and the Asia Pacific Press.
Labels: china, development, economics, inequality
Monday, July 21, 2008
A rising global middle class
The following news story by me from Fund Strategy summarises a recent Goldman Sachs paper on the rising middle class.
Another two billion more people could join the global middle class by 2030 according to a new report by Goldman Sachs*. Such an expansion, which would be unprecedented in world history, is based on a definition of middle class as those with incomes of between $6,000 and $30,000 at purchasing power parity (PPP).
At present the group is growing at an unprecedented rate of 70m people a year. Even if China and India are excluded from the growth statistics the figure would be 20m a year.
Overall, there will be a shift to both middle income economies and middle income people. The largest four emerging economies (Brics) and the next 11 down (N11) will dominate.
By 2050 six of the largest seven economies in the world are likely to be emerging with America as the only exception (see table). However, most of them will remain below average in terms of income per head.
The middle three quintiles in terms of country incomes (that is excluding the top and bottom 20 percent) is likely to account for 57 percent of global GDP in PPP terms compared with 31 percent today. In dollar terms the increase will be from 15 percent to 43 percent.
Overall, this trend looks set to lead to a substantial fall in global inequality.
Although inequalities within countries may increase on a global level the world is likely to become more even.
Goldman Sachs acknowledges that its projections may not all materialise. But it regards them as the most likely outcome on the basis of present trends.
* Dominic Wilson and Raluca Dragusanu "The Expanding Middle: the Exploding Middle Class and Falling Global Inequality". Goldman Sachs Global Economics Paper No: 170.
Another two billion more people could join the global middle class by 2030 according to a new report by Goldman Sachs*. Such an expansion, which would be unprecedented in world history, is based on a definition of middle class as those with incomes of between $6,000 and $30,000 at purchasing power parity (PPP).
At present the group is growing at an unprecedented rate of 70m people a year. Even if China and India are excluded from the growth statistics the figure would be 20m a year.
Overall, there will be a shift to both middle income economies and middle income people. The largest four emerging economies (Brics) and the next 11 down (N11) will dominate.
By 2050 six of the largest seven economies in the world are likely to be emerging with America as the only exception (see table). However, most of them will remain below average in terms of income per head.
The middle three quintiles in terms of country incomes (that is excluding the top and bottom 20 percent) is likely to account for 57 percent of global GDP in PPP terms compared with 31 percent today. In dollar terms the increase will be from 15 percent to 43 percent.
Overall, this trend looks set to lead to a substantial fall in global inequality.
Although inequalities within countries may increase on a global level the world is likely to become more even.
Goldman Sachs acknowledges that its projections may not all materialise. But it regards them as the most likely outcome on the basis of present trends.
* Dominic Wilson and Raluca Dragusanu "The Expanding Middle: the Exploding Middle Class and Falling Global Inequality". Goldman Sachs Global Economics Paper No: 170.
Labels: economics, Fund Strategy, globalisation, inequality
Sunday, June 22, 2008
New Oxfam book on development
Oxfam has published a book that looks likely to become highly influential in the development debate. Although From Poverty to Power, written by Duncan Green, probably says little original it codifies the current development consensus. It has a foreword by Amartya Sen and is endorsed by, among others, Dani Rodrik of Harvard. An accompanying website includes a full download of the book, background papers and a blog. The New Statesman (23 June) has already carried an article on it.
Labels: book, development, economics, inequality
Tuesday, June 17, 2008
Indian cheap labour obsession
It seems that British documentary film-makers are becoming obsessed with cheap labour in India. After the awful Blood, Sweat and T-Shirts on BBC (see 18 April 2008 and 14 May 2008 posts) it seems that Panorama has a programme on the topic next week while Channel 4 is planning one entitled The Devil Wears Primark (see 1 June 2008 post).
In a pre-emptive strike against possible criticism from Panorama it seems that Primark, a bargain clothes retailing chain, has cut ties with Indian suppliers that used child labour.
There seems to be little understanding that simply cutting such ties is likely to make the plight of poor Indians worse. Child labour is a symptom of extreme poverty rather than its cause.
It is reminiscent of the spoilt western fashionistas in Blood, Sweat and T-Shirts hectoring Indian workers about how their working conditions are “disgusting”. Indians are well aware that they are poor - the difficult part is finding ways to make them rich.
The broader context for this discussion is the feigned concern for developing country workers from the likes of Joseph Stiglitz (see 6 May 2008 post).
In a pre-emptive strike against possible criticism from Panorama it seems that Primark, a bargain clothes retailing chain, has cut ties with Indian suppliers that used child labour.
There seems to be little understanding that simply cutting such ties is likely to make the plight of poor Indians worse. Child labour is a symptom of extreme poverty rather than its cause.
It is reminiscent of the spoilt western fashionistas in Blood, Sweat and T-Shirts hectoring Indian workers about how their working conditions are “disgusting”. Indians are well aware that they are poor - the difficult part is finding ways to make them rich.
The broader context for this discussion is the feigned concern for developing country workers from the likes of Joseph Stiglitz (see 6 May 2008 post).
Labels: consumption, ethics, film, india, inequality
Tuesday, June 10, 2008
Gap narrows on the road to prosperity
The following comment by me appeared in yesterday’s issue Fund Strategy.
Only a few years ago the emerging markets were considered suitable only for the young and adventurous. The average investor would have at most a few per cent of emerging market stocks in his portfolio.
Times are changing fast. In recent months Fund Strategy has examined the rise of new funds specialising in such areas as Africa, India and the Middle East. Such fund launches reflect a fundamental change in the global economy. Although the developed economies are growing, the developing ones are typically growing much faster.
As a result, a growing proportion of the world economy consists of developing countries. Back in 2000 the advanced economies accounted for about two-thirds of global output on a purchasing power parity basis, according to the International Monetary Fund. By 2013 the advanced economies are projected to account for only about half of the global economy. The advanced economies remain far richer than the developing ones but, on this measure at least, the gap is narrowing.
This trend is to be wholly welcomed. In the past, the benefits of development - including a modern infrastructure and access to consumer goods - were confined to a largely white elite. Now they are becoming more evenly spread.
One of the most potent symbols of this change is the advent of the Tata Nano. The £1,000 people's car is designed to bring motoring to India's masses. Given that the Ford Model T, which made motoring a popular reality in America, was launched a century ago, the development is long overdue. Even in as poor a country as India, with 80% of the population living on less than $2 a day, cars should become more widely available as long as growth continues.
Of course, it may be that one of Tata's rivals ultimately builds a more successful car. However, the key point is not about an individual model of car but the fact that Indians can now realistically aspire to such things. India will also need to sustain a massive roadbuilding programme to ensure that its citizens can enjoy the full benefits of mobility.
If there is a problem, it is that developing economies still have a long way to go to catch up with the West. Sub-Saharan Africa and South Asia in particular remain desperately poor.
The sooner developing economies can be considered mainstream rather than exotic the better.
Only a few years ago the emerging markets were considered suitable only for the young and adventurous. The average investor would have at most a few per cent of emerging market stocks in his portfolio.
Times are changing fast. In recent months Fund Strategy has examined the rise of new funds specialising in such areas as Africa, India and the Middle East. Such fund launches reflect a fundamental change in the global economy. Although the developed economies are growing, the developing ones are typically growing much faster.
As a result, a growing proportion of the world economy consists of developing countries. Back in 2000 the advanced economies accounted for about two-thirds of global output on a purchasing power parity basis, according to the International Monetary Fund. By 2013 the advanced economies are projected to account for only about half of the global economy. The advanced economies remain far richer than the developing ones but, on this measure at least, the gap is narrowing.
This trend is to be wholly welcomed. In the past, the benefits of development - including a modern infrastructure and access to consumer goods - were confined to a largely white elite. Now they are becoming more evenly spread.
One of the most potent symbols of this change is the advent of the Tata Nano. The £1,000 people's car is designed to bring motoring to India's masses. Given that the Ford Model T, which made motoring a popular reality in America, was launched a century ago, the development is long overdue. Even in as poor a country as India, with 80% of the population living on less than $2 a day, cars should become more widely available as long as growth continues.
Of course, it may be that one of Tata's rivals ultimately builds a more successful car. However, the key point is not about an individual model of car but the fact that Indians can now realistically aspire to such things. India will also need to sustain a massive roadbuilding programme to ensure that its citizens can enjoy the full benefits of mobility.
If there is a problem, it is that developing economies still have a long way to go to catch up with the West. Sub-Saharan Africa and South Asia in particular remain desperately poor.
The sooner developing economies can be considered mainstream rather than exotic the better.
Labels: America, Asia, Fund Strategy, india, inequality
Sunday, June 01, 2008
A devilish mystery
I was planning to watch The Devil Wears Primark, yet another documentary on Indian sweatshops (see posts of 18 April 2008 and 14 May 2008), on Channel 4 this evening. However, despite being trailed last week, it seems to have mysteriously disappeared from the TV listings. Perhaps satanic forces associated with the cheap clothes retailer are at work?
Labels: consumption, film, india, inequality
Sunday, May 25, 2008
Rethinking poverty measures
This week’s Economist includes a discussion (subscription required) of the World Bank’s $1 a day poverty line – its official measure of absolute poverty. However, the World Bank is rethinking this measure, which first emerged in the 1990 World Development Report, as it does not take into account relative deprivation. Evidently two new working papers (Dollar a day revisited and China is poorer than we thought) from the World Bank suggest a new poverty line of $1.25. The Economist concludes:
“For practical purposes, policymakers will always care more about their own national poverty lines than the bank's global standard. The dollar-a-day line is more of a campaigning tool than a guide to policy. And as a slogan, $1.25 just doesn't have the same ring to it. A better option might be to reset the poverty line at $1 in 2005 PPP, which would line up reasonably well with at least ten countries in the authors' sample. In adding a quarter to the dollar-a-day poverty line, the researchers may cut its popular appeal by half.”
As it happens such measures are generally arbitrary. But, in the absence of better data, they give some indication of trends in poverty and inequality.
“For practical purposes, policymakers will always care more about their own national poverty lines than the bank's global standard. The dollar-a-day line is more of a campaigning tool than a guide to policy. And as a slogan, $1.25 just doesn't have the same ring to it. A better option might be to reset the poverty line at $1 in 2005 PPP, which would line up reasonably well with at least ten countries in the authors' sample. In adding a quarter to the dollar-a-day poverty line, the researchers may cut its popular appeal by half.”
As it happens such measures are generally arbitrary. But, in the absence of better data, they give some indication of trends in poverty and inequality.
Labels: china, development, economics, inequality
Wednesday, May 14, 2008
Protection harms workers
It is becoming increasingly clear how mainstream concern for labour standards has become (see 6 May 2008 post). It used to be the case that radicals would typically support workers in their struggles against employers. Today self-appointed defenders of labour standards seek to protect employees against greedy companies. In the past it was about expressing solidarity for workers’ battles today it is primarily a case of using state institutions to defend employees as victims. The two notions could not be more different.
Two recent examples of how this works. The awful British fashion brats from BBC3’s Blood, Sweat and T-shirts (see 18 April 2008 post) appearing on Newsnight to talk about labour standards in the developing world. The group were at best gormless (wearing an £800 bracelet while working in an Indian cotton factory) and more often contemptuous of their Indian hosts. Yet they somehow have the moral authority to talk about Indian labour standards on a premier news programme.
A more perceptive piece by TA Frank, a former sweatshop inspector, appears in the April issue of Washington Monthly. Among other things it reminds readers that both Hillary Clinton and Barack Obama have criticised trade deals as unfair to American workers while arguing for future agreements to have higher labour standards. It also makes the point that Robert Reich started cracking down on American sweatshop when he was labor secretary in the Clinton administration.
It is hard to think of many things more nauseating than protectionism masquerading as support for workers. Nor, as some of the Indian workers featured in Blood, Sweat and T-shirts pointed out, is it as simply as banning child labour in the developing world. The alternative for many child workers and their families is often extreme hardship and even starvation. The solution is economic development in the poorer countries. Child labour is rare when countries become rich.
Two recent examples of how this works. The awful British fashion brats from BBC3’s Blood, Sweat and T-shirts (see 18 April 2008 post) appearing on Newsnight to talk about labour standards in the developing world. The group were at best gormless (wearing an £800 bracelet while working in an Indian cotton factory) and more often contemptuous of their Indian hosts. Yet they somehow have the moral authority to talk about Indian labour standards on a premier news programme.
A more perceptive piece by TA Frank, a former sweatshop inspector, appears in the April issue of Washington Monthly. Among other things it reminds readers that both Hillary Clinton and Barack Obama have criticised trade deals as unfair to American workers while arguing for future agreements to have higher labour standards. It also makes the point that Robert Reich started cracking down on American sweatshop when he was labor secretary in the Clinton administration.
It is hard to think of many things more nauseating than protectionism masquerading as support for workers. Nor, as some of the Indian workers featured in Blood, Sweat and T-shirts pointed out, is it as simply as banning child labour in the developing world. The alternative for many child workers and their families is often extreme hardship and even starvation. The solution is economic development in the poorer countries. Child labour is rare when countries become rich.
Labels: development, ethics, india, inequality, television
Tuesday, May 06, 2008
Globalisation and anti-globalisation
A column by Lawrence Summers, a former US treasury secretary, in today’s Financial Times shows how far the mainstream has gone in taking on “anti-globalisation” arguments. Tackling inequality and raising labour standards are integral to the conventional wisdom:
“The domestic component of a strategy to promote healthy globalisation must rely on strengthening efforts to reduce inequality and insecurity. The international component must focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global corporations.”
Yet, as I have argued elsewhere, this sentiment is not about raising the living standards of ordinary people. On the contrary, it is essentially a demand for greater social regulation to protect society against the alleged disintegrative effects of inequality. It can also be a form of protectionism against developing countries.
Dani Rodrik of Harvard also recognises the mainstream character of anti-globalisation thinking in his blog. He says that much of the Summers column could “have been written by, say, Robert Kuttner or Tom Palley”. He later complains about a student who pigenholes him as an anti-globaliser. The student’s retort was "[Joseph] Stiglitz doesn't think he is an anti-globalizer either."
“The domestic component of a strategy to promote healthy globalisation must rely on strengthening efforts to reduce inequality and insecurity. The international component must focus on the interests of working people in all countries, in addition to the current emphasis on the priorities of global corporations.”
Yet, as I have argued elsewhere, this sentiment is not about raising the living standards of ordinary people. On the contrary, it is essentially a demand for greater social regulation to protect society against the alleged disintegrative effects of inequality. It can also be a form of protectionism against developing countries.
Dani Rodrik of Harvard also recognises the mainstream character of anti-globalisation thinking in his blog. He says that much of the Summers column could “have been written by, say, Robert Kuttner or Tom Palley”. He later complains about a student who pigenholes him as an anti-globaliser. The student’s retort was "[Joseph] Stiglitz doesn't think he is an anti-globalizer either."
Labels: corporations, globalisation, inequality
Monday, March 24, 2008
A costly middle class?
Moisés Naím has an ambivalent article in Foreign Policy (March / April 2008) entitled “Can the World Afford A Middle Class?”. His short answer is “yes, but it will be awfully expensive”. Naim makes the correct but obvious point that the economic development of the likes of China and India will involve the use of a huge amount of resources. However, Naím seems doubtful about the ability of humanity to find new sources of supply for natural resources. Although he does not openly embrace Malthus he expects the surge in demand for resources to have unexpected and painful side effects.
Labels: china, consumption, development, economics, inequality, Malthus
Wednesday, March 19, 2008
A contemporary Malthus
Jeffrey Sachs has a new book out. Yet, judging by an extract in Time magazine (24 March), Common Wealth for a Crowded Planet repeats many of the themes of his previous work (see links to “my reviews” in the left hand column):
“The defining challenge of the 21st century will be to face the reality that humanity shares a common fate on a crowded planet. We have reached the beginning of the century with 6.6 billion people living in an interconnected global economy producing an astounding $60 trillion of output each year. Human beings fill every ecological niche on the planet, from the icy tundra to the tropical rain forests to the deserts. In some locations, societies have outstripped the carrying capacity of the land, resulting in chronic hunger, environmental degradation and a large-scale exodus of desperate populations. We are, in short, in one another's faces as never before, crowded into an interconnected society of global trade, migration, ideas and, yes, risk of pandemic diseases, terrorism, refugee movements and conflict.
“We also face a momentous choice. Continue on our current course, and the world is likely to experience growing conflicts between haves and have-nots, intensifying environmental catastrophes and downturns in living standards caused by interlocking crises of energy, water, food and violent conflict. Yet for a small annual investment of world income, undertaken cooperatively across the world, our generation can harness new technologies for clean energy, reliable food supplies, disease control and the end of extreme poverty.”
Although he does not say it explicitly his argument is that there are natural limits to economic growth. The best we can hope for is to eradicate “extreme poverty”. Our growing use of resources, in his view, could lead to disease, terrorism and conflict.
“The defining challenge of the 21st century will be to face the reality that humanity shares a common fate on a crowded planet. We have reached the beginning of the century with 6.6 billion people living in an interconnected global economy producing an astounding $60 trillion of output each year. Human beings fill every ecological niche on the planet, from the icy tundra to the tropical rain forests to the deserts. In some locations, societies have outstripped the carrying capacity of the land, resulting in chronic hunger, environmental degradation and a large-scale exodus of desperate populations. We are, in short, in one another's faces as never before, crowded into an interconnected society of global trade, migration, ideas and, yes, risk of pandemic diseases, terrorism, refugee movements and conflict.
“We also face a momentous choice. Continue on our current course, and the world is likely to experience growing conflicts between haves and have-nots, intensifying environmental catastrophes and downturns in living standards caused by interlocking crises of energy, water, food and violent conflict. Yet for a small annual investment of world income, undertaken cooperatively across the world, our generation can harness new technologies for clean energy, reliable food supplies, disease control and the end of extreme poverty.”
Although he does not say it explicitly his argument is that there are natural limits to economic growth. The best we can hope for is to eradicate “extreme poverty”. Our growing use of resources, in his view, could lead to disease, terrorism and conflict.
Labels: book, development, economics, environment, inequality, Malthus
Sunday, March 16, 2008
A “pro-poor” attack on growth
Thomas Pogge argues in the Winter 2008 issue of Dissent that sacrificing economic growth is a “moral imperative”. His argument, which has many elements to it, is based on professed concern for the poor and for the environment.
To begin to tackle his arguments lets take four of his points on China and work out how to counter them:
* Claim one: Severe poverty has declined in China but the exact magnitude is uncertain. Counter: The magnitude may be uncertain but it does not follow that the gain is not worth having.
* Claim two: The sharp rise in international inequality may not be necessary for China’s growth and poverty reduction. Counter: China’s growth and poverty reduction are good things in themselves. The “necessity” of inequality is another question.
* Claim three: “Intranational inequality is not a simple economic parameter that clever economic planners can, in light of prevailing conditions, move up or down like the overnight interest rate”. Counter: That is true. Inequality does seem to be deeply rooted in capitalist economics. But at other points in the argument Pogge himself seems to assume that redistribution can be easily achieved.
Claim four: China’s spectacular growth is at the expense of other countries. Counter: No. Economic growth is not a zero-sum game. Pogge grudgingly admits this point but then seems to backtrack on it.
To begin to tackle his arguments lets take four of his points on China and work out how to counter them:
* Claim one: Severe poverty has declined in China but the exact magnitude is uncertain. Counter: The magnitude may be uncertain but it does not follow that the gain is not worth having.
* Claim two: The sharp rise in international inequality may not be necessary for China’s growth and poverty reduction. Counter: China’s growth and poverty reduction are good things in themselves. The “necessity” of inequality is another question.
* Claim three: “Intranational inequality is not a simple economic parameter that clever economic planners can, in light of prevailing conditions, move up or down like the overnight interest rate”. Counter: That is true. Inequality does seem to be deeply rooted in capitalist economics. But at other points in the argument Pogge himself seems to assume that redistribution can be easily achieved.
Claim four: China’s spectacular growth is at the expense of other countries. Counter: No. Economic growth is not a zero-sum game. Pogge grudgingly admits this point but then seems to backtrack on it.
Labels: development, environment, inequality
Saturday, February 23, 2008
Global living standards are improving
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
Tuesday, February 19, 2008
China’s short march
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.
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
Monday, February 11, 2008
Debating American inequality
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”.
“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
Wednesday, February 06, 2008
More inequality concerns
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.
“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
Tuesday, February 05, 2008
On unequal gains from 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
Sunday, February 03, 2008
Myths of Chinese and Indian development
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.
“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
Wednesday, January 30, 2008
Revealing trends in consumption
The latest annual Family Expenditure Survey from Britain’s National Statistics gives some idea of how living standards have increased over the past 50 years.
For example, according to the official release: “In 2006 most homes had central heating (95 per cent), a washing machine (96 per cent), a microwave (91 per cent) and a telephone or mobile phone (99 per cent).”
Even the bottom decline (poorest 10th) of the population is benefitting. According to a BBC report on the survey 31% of the bottom decline have computers, 21% an internet connection and 56% a mobile phone.
From a 50 year perspective the trends are also revealing. For instance, in 1957 food and non-alcoholic drinks took up 33% of the household budget compared with 15% in 2006.
In contrast, food and travel costs have risen from 8% to 16%. This suggests more people have cars and they travel more.
For example, according to the official release: “In 2006 most homes had central heating (95 per cent), a washing machine (96 per cent), a microwave (91 per cent) and a telephone or mobile phone (99 per cent).”
Even the bottom decline (poorest 10th) of the population is benefitting. According to a BBC report on the survey 31% of the bottom decline have computers, 21% an internet connection and 56% a mobile phone.
From a 50 year perspective the trends are also revealing. For instance, in 1957 food and non-alcoholic drinks took up 33% of the household budget compared with 15% in 2006.
In contrast, food and travel costs have risen from 8% to 16%. This suggests more people have cars and they travel more.
Labels: affluenza, consumption, inequality, progress
Sunday, January 27, 2008
A stimulating discussion
Barbara Ehrenreich makes an unusual analogy when she discusses the American economy in an article on The Nation website (posted 22 January): “With all the talk about how to stimulate it, you'd think that the economy is a giant clitoris.”
Her initial target is the recently announced fiscal stimulus. She makes the fair point that it looks likely to benefit the rich more than the poor. But then she moves on to a broader attack on what she calls “economy fetishism”. She goes on: “If we have learned anything in the last few years, it is that the economy is no longer an effective measure of human well-being. We've seen the economy grow without wage gains; we've seen productivity grow without wage gains. We've even seen unemployment fall without wage gains.”
In her conclusion she argues: “My point is just that our economy--with its dizzying bubbles, wild lending sprees, reckless downsizings and planet-wide hyper-sensitivity--has gotten too far disconnected from ordinary human needs.”
As I have argued before it is a mistake to use the undoubted existence of inequality as an argument against economic growth. If anything there needs to be even more importance attached to the economy and more growth so that everyone can benefit. The problem is not too much emphasis on growth but too little.
Her initial target is the recently announced fiscal stimulus. She makes the fair point that it looks likely to benefit the rich more than the poor. But then she moves on to a broader attack on what she calls “economy fetishism”. She goes on: “If we have learned anything in the last few years, it is that the economy is no longer an effective measure of human well-being. We've seen the economy grow without wage gains; we've seen productivity grow without wage gains. We've even seen unemployment fall without wage gains.”
In her conclusion she argues: “My point is just that our economy--with its dizzying bubbles, wild lending sprees, reckless downsizings and planet-wide hyper-sensitivity--has gotten too far disconnected from ordinary human needs.”
As I have argued before it is a mistake to use the undoubted existence of inequality as an argument against economic growth. If anything there needs to be even more importance attached to the economy and more growth so that everyone can benefit. The problem is not too much emphasis on growth but too little.
Labels: economics, growth, inequality
Wednesday, January 23, 2008
Attitudes towards inequality and car use
The annual British Social Attitudes survey contains some insights into changing perceptions of inequality and of the environment.
On poverty it is clear that there is widespread concern about the existence of inequality. Some 76% say the gap between those on high and those on low incomes is “too large”. However, this concern about inequality tends not to translate into sympathy for the poor. For example, the proportion who say the government should redistribute from the well-off to the poor has fallen to 34% compared with 47% in 1995. One in four say poverty is the result of laziness or lack of willpower.
On the environment there is a split on attitudes towards car use. Almost one in four say they should be able to use their cars as much as they like irrespective of damage to the environment. But 66% say everyone should reduce their car use for the sake of the environment.
On poverty it is clear that there is widespread concern about the existence of inequality. Some 76% say the gap between those on high and those on low incomes is “too large”. However, this concern about inequality tends not to translate into sympathy for the poor. For example, the proportion who say the government should redistribute from the well-off to the poor has fallen to 34% compared with 47% in 1995. One in four say poverty is the result of laziness or lack of willpower.
On the environment there is a split on attitudes towards car use. Almost one in four say they should be able to use their cars as much as they like irrespective of damage to the environment. But 66% say everyone should reduce their car use for the sake of the environment.
Labels: environment, inequality
Thursday, January 17, 2008
Therapy culture not selfish capitalism
Brendan O’Neill has an article on the BBC online website on Oliver James’s The Selfish Capitalist. After letting James explain his argument it quotes myself and Simon Wessely, professor of epidemiological and liaison psychiatry at King's College, London, giving a contrary view.
I will leave readers to look up my remarks if they want to but Wessely is worth quoting at length:
‘[He] believes that cultural factors, not capitalism itself, have created a situation where more people define themselves as mentally ill.
‘"In this country, rates of actual mental illness are not increasing," he says. "Studies by the Office for National Statistics, repeated over a decade, do not show an increase in all neurotic disorders, depressive disorders or depression."
‘"It is true that rates of self-reported symptoms are on the rise," says Wessely, but that has to be seen in a context where "more human experiences" are seen as illnesses nowadays.
‘"In my trade, for example, states of sadness are now seen as 'depression', shyness has become 'social phobia', and all sorts of variations in childhood temperament, personality, emotions and behaviour have become characterised as diseases that need treatment, be it Asperger's autism or ADHD."
‘Mr Wessely believes that this "therapy culture" means that people now regard as abnormal things that "previous generations regarded as part and parcel of normal variations in personality and emotion". So what earlier generations saw as an everyday struggle to make ends meet might now be referred to as stress or workaholism.
‘"I would lay the blame less at the door of Margaret Thatcher's selfish capitalism, and more at the door of Richard and Judy or Oprah," says Mr Wessely.’
I will leave readers to look up my remarks if they want to but Wessely is worth quoting at length:
‘[He] believes that cultural factors, not capitalism itself, have created a situation where more people define themselves as mentally ill.
‘"In this country, rates of actual mental illness are not increasing," he says. "Studies by the Office for National Statistics, repeated over a decade, do not show an increase in all neurotic disorders, depressive disorders or depression."
‘"It is true that rates of self-reported symptoms are on the rise," says Wessely, but that has to be seen in a context where "more human experiences" are seen as illnesses nowadays.
‘"In my trade, for example, states of sadness are now seen as 'depression', shyness has become 'social phobia', and all sorts of variations in childhood temperament, personality, emotions and behaviour have become characterised as diseases that need treatment, be it Asperger's autism or ADHD."
‘Mr Wessely believes that this "therapy culture" means that people now regard as abnormal things that "previous generations regarded as part and parcel of normal variations in personality and emotion". So what earlier generations saw as an everyday struggle to make ends meet might now be referred to as stress or workaholism.
‘"I would lay the blame less at the door of Margaret Thatcher's selfish capitalism, and more at the door of Richard and Judy or Oprah," says Mr Wessely.’
Labels: affluenza, happiness, inequality
Sunday, January 13, 2008
Inequality in America
The New York Times has a useful topics page on the debate on income inequality in America. It includes links to the newspaper’s key articles on the subject.
Labels: America, inequality
Monday, December 31, 2007
Romanticising hunter-gatherers
The current Economist (19 December) has an article savaging those who romanticise hunter-gatherer societies. It argues against the view put forward by the likes of Jared Diamond that the development of agriculture was the worst mistake in human history.
Evidently in the 1970s some experts began to argue that the advent of agriculture led to a decline in human health – as people were short of protein and caught diseases from domestic animals – and the emergence of significant social inequalities. However, it now seems that hunter-gatherer societies were exceedingly violent:
“Several archaeologists and anthropologists now argue that violence was much more pervasive in hunter-gatherer society than in more recent eras. From the !Kung in the Kalahari to the Inuit in the Arctic and the aborigines in Australia, two-thirds of modern hunter-gatherers are in a state of almost constant tribal warfare, and nearly 90% go to war at least once a year. War is a big word for dawn raids, skirmishes and lots of posturing, but death rates are high—usually around 25-30% of adult males die from homicide. The warfare death rate of 0.5% of the population per year that Lawrence Keeley of the University of Illinois calculates as typical of hunter-gatherer societies would equate to 2 billion people dying during the 20th century.” (For another reference to Keeley’s work see post of 30 July 2006. On living conditions before the Industrial Revolution see 14 August 2006 and 7 April 2007 posts).
The Economist also makes an interesting parallel with the Industrial Revolution:
“When rural peasants swapped their hovels for the textile mills of Lancashire, did it feel like an improvement? The Dickensian view is that factories replaced a rural idyll with urban misery, poverty, pollution and illness. Factories were indeed miserable and the urban poor were overworked and underfed. But they had flocked to take the jobs in factories often to get away from the cold, muddy, starving rural hell of their birth.”
Evidently in the 1970s some experts began to argue that the advent of agriculture led to a decline in human health – as people were short of protein and caught diseases from domestic animals – and the emergence of significant social inequalities. However, it now seems that hunter-gatherer societies were exceedingly violent:
“Several archaeologists and anthropologists now argue that violence was much more pervasive in hunter-gatherer society than in more recent eras. From the !Kung in the Kalahari to the Inuit in the Arctic and the aborigines in Australia, two-thirds of modern hunter-gatherers are in a state of almost constant tribal warfare, and nearly 90% go to war at least once a year. War is a big word for dawn raids, skirmishes and lots of posturing, but death rates are high—usually around 25-30% of adult males die from homicide. The warfare death rate of 0.5% of the population per year that Lawrence Keeley of the University of Illinois calculates as typical of hunter-gatherer societies would equate to 2 billion people dying during the 20th century.” (For another reference to Keeley’s work see post of 30 July 2006. On living conditions before the Industrial Revolution see 14 August 2006 and 7 April 2007 posts).
The Economist also makes an interesting parallel with the Industrial Revolution:
“When rural peasants swapped their hovels for the textile mills of Lancashire, did it feel like an improvement? The Dickensian view is that factories replaced a rural idyll with urban misery, poverty, pollution and illness. Factories were indeed miserable and the urban poor were overworked and underfed. But they had flocked to take the jobs in factories often to get away from the cold, muddy, starving rural hell of their birth.”
Labels: cities, happiness, health, inequality, progress
Sunday, December 23, 2007
Krugman counter-attacks on inequality
Paul Krugman has written a dispatch on his blog counter-attacking the criticisms against him in the Economist (see 21 December post). His main points:
“Inequality denial generally involves four dodges — all four of which are present in this article.
“First is a narrow technical issue — the misuse of the Consumer Expenditure Survey, which is used to claim that there hasn’t been much rise in spending inequality. First of all, that’s not true even if you believe the survey; plus, there’s good reason to believe that the Survey has been systematically underreporting the growth in higher-income-group consumption. See CBPP on all this.
“Second is the use of very long-run comparisons — what I think of as the “but even Louis the XIV didn’t have electricity!” defense. Yes, over the centuries economic progress has reduced some gross disparities — modern Americans are relatively unlikely to simply starve to death (though it can happen), so in that sense the gap between rich and poor has narrowed. But the question isn’t whether society is, in some sense, more equal than it was in 1900. It’s whether it is radically more unequal than it was in 1970. And of course it is.
“Third is the downplaying of poverty. Seventy percent of the poor have cars! They must be doing fine! Except that they often can’t afford medical care, sometimes can’t afford enough food, and usually can’t find a way to get their children a decent education.
“Finally, there’s the failure to appreciate just how rich today’s rich are. They’re not people who drive cars just like the rest of us, only fancier.”
Elsewhere on his blog Krugman includes an audio link to a speech he gave on The Conscience of Liberal at the Commonwealth Club of San Francisco.
“Inequality denial generally involves four dodges — all four of which are present in this article.
“First is a narrow technical issue — the misuse of the Consumer Expenditure Survey, which is used to claim that there hasn’t been much rise in spending inequality. First of all, that’s not true even if you believe the survey; plus, there’s good reason to believe that the Survey has been systematically underreporting the growth in higher-income-group consumption. See CBPP on all this.
“Second is the use of very long-run comparisons — what I think of as the “but even Louis the XIV didn’t have electricity!” defense. Yes, over the centuries economic progress has reduced some gross disparities — modern Americans are relatively unlikely to simply starve to death (though it can happen), so in that sense the gap between rich and poor has narrowed. But the question isn’t whether society is, in some sense, more equal than it was in 1900. It’s whether it is radically more unequal than it was in 1970. And of course it is.
“Third is the downplaying of poverty. Seventy percent of the poor have cars! They must be doing fine! Except that they often can’t afford medical care, sometimes can’t afford enough food, and usually can’t find a way to get their children a decent education.
“Finally, there’s the failure to appreciate just how rich today’s rich are. They’re not people who drive cars just like the rest of us, only fancier.”
Elsewhere on his blog Krugman includes an audio link to a speech he gave on The Conscience of Liberal at the Commonwealth Club of San Francisco.
Labels: America, book, economics, inequality
Friday, December 21, 2007
Debating forms of inequality
The special double holiday issue of the Economist (22 December) includes a piece on inequality which is essentially a rebuttal to Paul Krugman. In his recent book, The Conscience of a Liberal, the New York Times columnist and Princeton professor emphasises widening income inequalities in America. The Economist concedes they are widening but argues they only tell a small part of the story:
“measures of income inequality are misleading because an individual's income is, at best, a rough proxy for his or her real economic wellbeing. Because we can save, draw down savings, or run up debt, our income may tell us little about how we're faring. Consumption surveys, which track what people actually spend, sketch a more lifelike portrait of the material quality of life. According to one 2006 study, by Dirk Krueger of the University of Pennsylvania and Fabrizio Perri of New York University, consumption inequality has barely budged for several decades, despite a sharp upswing in income inequality.”
However, consumption surveys also have their limits. The Economist argues that broader measures of well-being show that inequality is narrowing in many respects:
“This increasing equality in real consumption mirrors a dramatic narrowing of other inequalities between rich and poor, such as the inequalities in height, life expectancy and leisure. William Robert Fogel, a Nobel prize-winning economic historian, argues that nominal measures of economic well-being often miss such huge changes in the conditions of life. “In every measure that we have bearing on the standard of living...the gains of the lower classes have been far greater than those experienced by the population as a whole,” Mr Fogel observes.” (The Economist reference is to Fogel’s The Escape from Hunger and Premature Death 1700-2100 Cambridge University Press 2004).
“measures of income inequality are misleading because an individual's income is, at best, a rough proxy for his or her real economic wellbeing. Because we can save, draw down savings, or run up debt, our income may tell us little about how we're faring. Consumption surveys, which track what people actually spend, sketch a more lifelike portrait of the material quality of life. According to one 2006 study, by Dirk Krueger of the University of Pennsylvania and Fabrizio Perri of New York University, consumption inequality has barely budged for several decades, despite a sharp upswing in income inequality.”
However, consumption surveys also have their limits. The Economist argues that broader measures of well-being show that inequality is narrowing in many respects:
“This increasing equality in real consumption mirrors a dramatic narrowing of other inequalities between rich and poor, such as the inequalities in height, life expectancy and leisure. William Robert Fogel, a Nobel prize-winning economic historian, argues that nominal measures of economic well-being often miss such huge changes in the conditions of life. “In every measure that we have bearing on the standard of living...the gains of the lower classes have been far greater than those experienced by the population as a whole,” Mr Fogel observes.” (The Economist reference is to Fogel’s The Escape from Hunger and Premature Death 1700-2100 Cambridge University Press 2004).
Labels: America, book, inequality
Thursday, November 15, 2007
Article on global working class
Spiked has published an article by me on the global working class. It relates to the debate I am taking part in on the subject at the Institute of Contemporary Art on 20 November.
Labels: Asia, globalisation, inequality, speeches, spiked
Wednesday, November 07, 2007
Wolf on the undeserving rich
Martin Wolf has a characteristically astute piece on global inequality in today’s Financial Times. He makes a distinction between a capitalism where wealth is generated on the back of political connections combined with resistance to competition and the normal operation of the market. Carlos Slim, a Mexican who is the richest man in the world according to Fortune, is for Wolf an example of the former. Slim made his fortune from buying a controlling stake in Telmex, the national telephone company, from the government in 1990. Since then it has enjoyed protected status as an extremely profitable quasi-monopoly.
I am sceptical that the distinction between deserving and undeserving capitalists is as straightforward as Wolf makes out. But no doubt it could prove popular with defenders of the free market.
I am sceptical that the distinction between deserving and undeserving capitalists is as straightforward as Wolf makes out. But no doubt it could prove popular with defenders of the free market.
Labels: corruption, inequality, Latin America
Sunday, November 04, 2007
On Krugman and Reich
It is frustrating that two recent key books in the growth sceptic genre are not yet available in Britain. From what I can gather Paul Krugman’s The Conscience of a Liberal focuses more on politics than economics. Krugman, a New York Times columnist and professor of economics at Princeton, apparently blames fundamentalist Republicanism for widening inequality in American society. It is hard to be sure but I strongly suspect he somehow links inequality to economic growth. I hope to receive the book soon. In the meantime there is a useful review in the New York Sun and a piece in the New York Review of Books.
Robert Reich, a professor of public policy at the University of California at Berkeley and former Clinton labor secretary, is more clearly a growth sceptic. In a Q&A on Supercapitalism, his new book, he argues that contemporary capitalism has a dynamic side but then refers to the familiar growth sceptic litany:
“Inequality hasn’t been this wide in 80 years. Jobs are far less stable, and the median wage is below where it was in 1980, adjusted for inflation. Main Streets are disappearing. And our planet’s environment is endangered.”
To him the solution is to put curbs on corporations. For him it appears corporations are the force that gives capitalism both its dynamic and destructive side:
“We have to end the corporate arm’s race. That means strict limits on corporate lobbying, on corporate spending for public relations intended to influence legislation, on legislators and public officials turning to lobbying when they leave office, and on corporate money otherwise flowing in politics.”
In reality the problem is not that capitalism is too dynamic. On the contrary, it is not dynamic enough. Rather than putting curbs on corporations the emphasis should be on promoting even more growth.
The first chapter of Supercapitalism is available on the New York Times website. More information can also be found on Reich’s website.
Robert Reich, a professor of public policy at the University of California at Berkeley and former Clinton labor secretary, is more clearly a growth sceptic. In a Q&A on Supercapitalism, his new book, he argues that contemporary capitalism has a dynamic side but then refers to the familiar growth sceptic litany:
“Inequality hasn’t been this wide in 80 years. Jobs are far less stable, and the median wage is below where it was in 1980, adjusted for inflation. Main Streets are disappearing. And our planet’s environment is endangered.”
To him the solution is to put curbs on corporations. For him it appears corporations are the force that gives capitalism both its dynamic and destructive side:
“We have to end the corporate arm’s race. That means strict limits on corporate lobbying, on corporate spending for public relations intended to influence legislation, on legislators and public officials turning to lobbying when they leave office, and on corporate money otherwise flowing in politics.”
In reality the problem is not that capitalism is too dynamic. On the contrary, it is not dynamic enough. Rather than putting curbs on corporations the emphasis should be on promoting even more growth.
The first chapter of Supercapitalism is available on the New York Times website. More information can also be found on Reich’s website.
Labels: America, book, corporations, corruption, inequality
Saturday, November 03, 2007
More on India and inequality
In the discussion on India mentioned below (see 28 October post) I argued that it did not follow from widening inequalities that the poor were necessarily getting poorer. On the contrary, what seems to be happening is a rise in absolute living standards for the bulk of the population at the same time as a widening of inequalities. However, it is also true that greater inequality can lead to tensions within a society. This seems to be the case in a march to Delhi of 25,000 landless workers, indigenous tribespeople and “untouchables” covered in an article in the Financial Times this week.
The relationship between widening inequalities and political consciousness is less straightforward than often assumed. It is a subject I want to discuss in my introduction to the discussion on the new global working class at the ICA later in the month (see 30 October post).
The relationship between widening inequalities and political consciousness is less straightforward than often assumed. It is a subject I want to discuss in my introduction to the discussion on the new global working class at the ICA later in the month (see 30 October post).
Labels: india, inequality
