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
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