Ferraris for all

This week my recent Fund Strategy news analysis on the market meltdown (see 6 October post) was reproduced on Real Clear Markets while spiked ran an updated version of my review of Robert Reich’s Supercapitalism. I was also invited to appear on the Al Jazeera English TV station and Sky News but could not do either as I was in Dubai. It seems that I am at my most popular during a global financial crisis!

Labels: book, economics, finance, Fund Strategy, media appearances, review, spiked, television

Spiked has published an extended version of my review of Robert Reich’s Supercapitalism. The original was published in Fund Strategy (see 4 August 2008 post).

Labels: book, economics, review, spiked

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.

Labels: affluenza, America, book, climate, consumption, environment, footprint, inequality, progress, review, sustainability

Today’s Guardian has an unashamedly one-sided review essay by Tim Flannery (Australian academic, climate change activist and author of The Weather Makers), of books on climate change. Among those authors recommended in the piece are works by Al Gore (Earth in the Balance), Mark Lynas (Six Degrees), George Marshall (Carbon Detox) and Oliver Tickell (Kyoto2). The review concentrates on British writers but American authors mentioned include Keith Bradsher (High and Mighty - an interesting sounding book on SUVs), Ross Gelbspan (Boiling Point), William McDonough (Cradle to Cradle), Bill McKibben and Gus Speth. Bjorn Lomborg, a leading sceptic on climate change, is mentioned in a few sentences but disparagingly dismissed.

One telling sentence in the article: “Few books about climate change have been written by the meteorologists and atmospheric physicists that dominate the field”. So even in relation to the science of climate change – as opposed to the politics or economics – there are few popular books written by experts. Pro-environmentalist non-specialists seem to dominate the popular debate.

In relation to the economics of climate change the Stern Review and William Nordhaus (A Question of Balance) are mentioned.

Labels: book, climate, consumption, economics, environment, review, science

The following review by me appeared in this week’s Fund Strategy.

Robert Reich blames big business and technological progress for the erosion of democracy. But his flawed thesis is self-serving and - worryingly - he calls for a lowering of living standards.

Supercapitalism is about a fundamental schism in contemporary society. Robert Reich, a professor at Berkeley and labor secretary under President Bill Clinton, argues that big business is increasingly undermining democracy. Although people have benefited enormously as consumers and investors from this trend they are losing out in their capacity as citizens. His understated conclusion is that people should be pushed into accepting falls in living standards in return for greater democracy.

Reich's critique of contemporary capitalism is more sophisticated than many. He eschews explanations that simply attack human greed or slate conservative politicians. Reich also acknowledges that the recent era of big business has brought some substantial benefits.

But Reich's confusion of basic categories leads him to serious errors and damaging political conclusions. The key development to understand is the demise of the role of humans as producers rather than the rise of consumption. To the extent that consumption has become more important it is largely through default. The striking trend of the past 30 years is in the reduction in importance attached to humanity's productive role.

This productive side of humanity should not be understood simply in terms of making widgets. It needs to be put more broadly in the context of what might be called "the human subject": the capacity of people to make and remake the world around them. The diminished sense of human subjectivity, rather than the rise in importance of consumption, is the key to understanding the trends identified by Reich.

Reich's notion of supercapitalism has to be set against the "not quite golden age" of 1945-75. That period embodied many of the values that he holds dear: it was an era of relative equality, job security and trust. There was also a compact between labour unions and big business. Yet Reich is balanced enough to acknowledge it was far from perfect. For example, women and minorities suffered severe discrimination.

For Reich this set-up began to break down in the second half of the 1970s. New technology increased competition between corporations. This in turn led to a new era of globalisation, new production techniques and deregulation.

He acknowledges that the new era has brought enormous benefits. Thanks largely to innovations in medical science the average American lives almost 15 years longer than in 1950. Americans are also rich and have a far wider range of consumer choices than in the 1970s. Other countries too have benefited from similar developments.

However, many of the positive features of the not quite golden age have gone too. Societies have become more unequal, job security has diminished and trust in politicians has disappeared. Corporations through their incessant lobbying have, in Reich's view, undermined the democratic process.

Against those who argue that conservative politicians, such as Ronald Reagan in America or Margaret Thatcher in Britain, are to blame for this shift Reich points out (correctly) that the shift predates their time in office. Reagan was president from 1981-89 while Thatcher was prime minister from 1979-1990 yet the shift started in the 1970s. Both leaders simply intensified an attack on the post-War consensus, particularly in relation to unions, that had started before their time in office.

However, in relation to this point Reich seems to be suffering from a temporary memory lapse. The attack on the consensus in America started in earnest under the presidency of Jimmy Carter (1977-81). It was under Carter's presidency that Reich himself was a political appointee at the Federal Trade Commission. Reich does not deny his position but is shy of drawing any conclusions about the role of the Democrats in breaking the consensus. In Britain the Labour government of 1974-9 played a similar role in launching an assault on unions and destroying post-War institutions.

More broadly the way to understand this shift is as a response to the end of the post-War boom. After the second world war the world economy, particularly the developed countries, grew at record rates. But by the early 1970s signs of economic crisis were clear. This lead governments on both sides of the Atlantic to launch an assault on the unions and give much freer rein to business.

This trend in turn meant that ordinary people had much less of a say in their lives. Politics was no longer about competing camps or competing visions of how to organise society. Instead the era of "Tina" - as Thatcher put it "There Is No Alternative" came to the fore. The focus of politics switched to regulating individual behaviour - including such areas as drinking, smoking and even eating - rather than battling over how to organise society.

This is a much more convincing explanation for the shifts that Reich identifies than his focus on technology. Although Reich denies being a technological determinist his explanation exaggerates the role of technology and understates the role of political defeat in creating the current climate.

Reich's outlook also leads to some deeply conservative conclusions despite his reluctance to spell them out in detail. He is in favour of "new rules of the game" (read regulation) particularly in relation to corporate lobbying. Reich seems to lack confidence in the capacity of others to counter the arguments of corporations.

More worryingly, he twice advocates "sacrifice" by ordinary people by which he seems to mean an acceptance of lower living standards. He appears to take the peculiar view that reducing living standards will somehow bolster democracy.

In reality democracy can only be achieved by a revival of politics in the proper sense of the term. This means relaunching a battle of ideas over competing visions of how to organise society. It involves a struggle that is entirely consistent with raising rather than lowering the living standards of the bulk of the population. It is Reich's demand for sacrifice that is the antithesis of democracy.

Labels: book, economics, Fund Strategy, globalisation, review, technology

Burn-up, BBC 2’s big budget eco-thriller on the oil companies and runaway climate change, was awful in every way: as a drama, politically and in relation to the science. Rob Johnston on spiked has written an incisive review but it is worth outlining the key misconceptions embodied in the drama as they are common in the green mindset:

* It is assumed that there is no question that runaway warming (not just climate change) is happening. Catastrophe is imminent. A worst case scenario is presented as indisputable fact.

* Corporations are driven by greed in their ruthless pursuit of oil. In this sense attacks on capitalism are moral (it is driven by bad people) rather than linked to the pursuit of profit in itself. Companies and the economy are “addicted” to oil. (Insurance companies are a partial exception as they are suffering big losses as a result of climate change).

* The role of corporate lobbyists is to shed doubt on “the science”. They play the pernicious role of generating uncertainty and may engage in “greenwash” to improve their clients’ images.

* Deep down America knows that climate change is bad but it should help further its drive for global domination.

* Britain is on the right side but ineffectual.

* China is duplicitous – playing America against Europe to further its own interests,

* The only way to deal with climate change is to cut emissions. Adaptation is hardly discussed at all let along geo-engineering.

Sadly such mistaken views are widely held in the climate change debate.

Labels: climate, environment, review, science, spiked, television

Evidently Fareed Zakaria, one of America’s most influential commentators on international relations, expresses concern about the impact of China’s economic growth on the global environment in his new book. Although he welcomes poverty reduction in China he is concerned that rapid growth will lead to such problems as climate change and water shortages. According to Sean Collins writing in the latest spiked review of books:

“In viewing growth as problematic and potentially destructive, Zakaria raises a common theme of our time. Rather than celebrate the benefits of growth, such as a reduction in poverty, Zakaria and others emphasise the downsides that accompany development. This gloomy outlook reveals more about the commentator than the reality on the ground. Zakaria refers to the predicted increase in the number of cars in China from 26million to 120million in 2020 as an environmental problem rather than a cause of celebration, as the Chinese people gain greater freedom of movement. In doing so, Zakaria joins in with today’s growing China-bashing chorus.”

Labels: America, climate, environment, review, spiked

Josie Appleton has a perceptive review of Benjamin Barber’s Consumed in the latest (April) spiked review of books. Rather than focus too closely on the book itself she looks at the changing ethic of capitalism. In broad terms her breakdown is the following:

* “The capitalist bookkeeper”. The model was Benjamin Franklin (18th century). Its chief theoritician was Max Weber in his Protestant Ethic (1910).

* “The counter-cultural ethic” of the 1920s and later the 1960s. Analysed by Daniel Bell in his Cultural Contradictions of Capitalism (1976).

* “Infantalisation”. Posited as the ethic for 21st century capitalism by Barber. However, Appleton argues it is misleading to talk of an ethic of consumption and that Barber’s is a weaker book than Bell’s. Rather it has taken on a greater importance in society by default. She cites George Simmel in his Philosophy of Money as a useful theorist of consumption.

It is a useful complement to Dolan Cummings’ recent essay on contemporary anti-capitalism (see 9 March 2008 post) which also refers to Barber’s book.

Labels: book, consumption, economics, review, spiked

Ceri Dingle of Worldwrite has previewed a BBC documentary series on six fashion designers who visit India to work for firms producing clothes for the British high street. Evidently the young British brats cannot even sew straight and are contemptuous of Indians. The views of the Indian clothing workers are not even represented on screen. Blood, Sweat and T-Shirts starts at 9pm on Tuesday 22 April on BBC Three.

Labels: india, review, television, Worldwrite

Fund Strategy has run my review of James Heartfield’s Green Capitalism in today’s issue.

Terms such as "ethical", "responsible" and "environmentally friendly" are used so often nowadays in the investment world that it almost seems churlish to question them. Who would want to present themselves as unethical, irresponsible or hostile to the environment?

Yet James Heartfield, a writer and lecturer based in London, puts a strong case for such terms to be interrogated. In "Green Capitalism" he argues that the rise of environmentalism and green consumerism are entirely negative trends. His logic is compelling even though it runs directly counter to the spirit of the times.

Heartfield's starting point is that the global elite is facing its worst nightmare: cornucopia. Until recently the history of humanity was one of living in conditions of scarcity. But the virtual abolition of scarcity, at least in the developed West, has radically changed perceptions. The elite feels a desperate need to recreate scarcity artificially just as developed economies have overcome its constraints.

The origins of contemporary environmentalism go back to the economic crisis of the mid-1970s. At that time the Club of Rome, an organisation of top industrialists, sponsored a high-profile report on "The Limits to Growth". It argued that the world economy was increasingly coming up against natural limits - although its predictions have proved ridiculously pessimistic over time. The backdrop to the report was the combination of economic crisis and industrial militancy of the time. Under such circumstances this early form of environmentalism helped make cuts in wages and a reduction in popular living standards more acceptable.

More recently, two developments have helped popularise green thinking. The first is what Heartfield calls "the retreat from production". With the abolition of scarcity it became easier to prioritise other forms of economic activity besides industry. Financial markets took on an enormous importance; most strikingly in Britain.

Notions such as brands and the New Economy were elevated to the status of key concepts. Industry, in contrast, was increasingly viewed with disdain. It was often more associated with emerging economies, notably China and India, than the developed West.

The second development was the end of the Cold War and the demise of the Soviet Union in the late 1980s. This deprived the ruling elite of a focus as anti-communism had long played an important unifying role for the Western powers. It also led many disorientated radicals to support environmentalism.

This combination of factors has had perverse results. In particular it has meant that a misplaced belief in natural limits has come to the fore. For Heartfield there is no real shortage of natural resources in the world. Instead there is an ever increasing manufacturing of scarcity by the ruling elite.

An excellent contemporary example of this trend is the retirement of land from production. "Green Capitalism" points out that almost 19m square kilometres of land, more than the combined area of China and South-East Asia, are classified as protected. This amount has grown more than sevenfold since 1962.

Heartfield argues that this is the main cause of rising food prices. It is a problem of an artificial constraint on supply rather than growing consumer demand. The increasing area of land devoted to growing crops for biofuel is tiny in relative terms. If even a small proportion of "protected" land were harnessed for agricultural production, it is likely food prices would fall dramatically.

The trend towards organic food also helps to exacerbate rising prices. Since yields from organic farming are low - by definition it shuns modern farming methods - land cannot be used efficiently. Although the total consumption of organic food is relatively small, its popularity illustrates the disdain of the green elite for economic efficiency.

A particular irony is that the richest people in the world, in other words those who consume the most resources, tend to be the greenest. In Britain this includes the likes of Zac Goldsmith of the Ecologist magazine (an Old Etonian and an heir to the Goldsmith family fortune) and Lord Peter Melchett (another Etonian, and director of the Soil Association). In America the mould is set by Al Gore (the son of a senator and the owner of three homes, including a 20-room mansion).

It is tempting but misleading to accuse such people of hypocrisy. It would be closer to the mark to describe them as elitists. Their objection is not to consumption itself but to mass consumption. They see no problem with their own considerable appetite for resources but they believe that popular consumption is constrained by natural limits.

Indeed, this elitist view of consumption, Heartfield argues, is embodied more generally in green consumerism. The main role of green products - whether organic tomatoes or GM-free soya - is what he calls "status affirmation". It is to mark the green consumer out from the bulk of society. In that way the green consumer can happily use resources while distancing himself from the consumption of the mainstream. Such expressions of ethics are in reality declarations of moral superiority. Their importance is symbolic rather than practical.

Another common expression of disdain for ordinary people, in Heartfield's view, is the attitude greens typically take to the most valuable resource of all: human time. Their admonitions to recycle, not use standby buttons and save energy are free of any concerns for the time such actions take for the average household. Ordinary people are expected to expend enormous amounts of their energy on useless gestures.

It is a shame that "Green Capitalism" is not more widely available. Although its arguments are often counter-intuitive they represent a powerful critique of the pervasive outlook of environmentalism. An unexpected bonus is that it also provides insights into practical issues such as the surge in food prices.

Fortunately, through the power of the internet, it should be possible for those readers who are interested to get hold of a copy.

Labels: book, consumption, economics, environment, review

Dolan Cummings of the Institute of Ideas has an astute review essay on the Culture Wars website on contemporary capitalism and anti-capitalism. He argues that:

“That the defence of capitalism takes the form of an apology is nothing new, but the critique made today is very different from that of traditional anti-capitalism. While in the last century the pragmatic case for capitalism was made in opposition to calls for social change, in this case it is the opposite: it is capitalism that threatens to transform society and critics who seek to conserve the status quo, talking in terms of resisting change rather than taking control of it. Rather than debating which changes are or are not desirable, from more convenient shop opening hours to GM food, we are presented with a binary opposition: for or against this single relentless force, variously described as ‘neoliberalism’, ‘globalisation’ or simply ‘capitalism’? Worse, critics rarely expect to prevail anyway: ‘anti-capitalism’ has become a moralistic posture rather than a political challenge. Significantly, this almost-emotional critique has become mainstream only with the passing of the political alternative that once had capitalism on the defensive.”

Cummings touches on similar themes to me in my critique of growth scepticism. Among the authors he cites are Benjamin Barber, Daniel Bell, Frank Furedi, Clive Hamilton, Eva Illouz, Oliver James and Brink Lindsey.

Labels: book, economics, review

Frank Furedi has written a generally positive but critical review of James Heartfield’s Green Capitalism for the February spiked review of books. On the positive side he praises Heartfield’s critique of green consumerism. Furedi endorses the view that the critics of consumerism are as obsessed with consumption as the most ardent brand junkies:

“Ironically, green protest against consumerism doesn’t represent the rejection of consumption, but rather its moralisation. From a sociological perspective, green consumption can be seen as a new form of conspicuous consumption. This is consumption for effect. Consumption apparently must no longer be an impulsive act of buying – rather it has become a massively over-examined experience, and both a moral statement and an affirmation of status and identity. In the nineteenth century, theories of commodity fetishism noted the growing tendency for people to live through things – commodities appeared to acquire a life of their own through the working of the market. In the world of green consumerism, the fetish of commodities acquires an unprecedented significance. Things are assigned human and ethical significance. Thus we have the stigmatisation of certain foods as ‘evil’ and the rendering of other products as ‘ethical’.”

However, in his criticism of the book, Furedi argues that Heartfield is guilty of reading history backwards. Furedi says that it is wrong to portray the capitalist elite as deliberately setting out to engineer scarcity:

“What Green Capitalism characterises as the ‘engineering of scarcity’ could be more usefully described as the creation of new demands. Indeed, what is most striking today is not simply the rise of the celebration of scarcity, but the growing tendency to marketise every aspect of life. Under the banner of green capitalism, more and more features of economic life are being reorganised and restructured. Everything from the emission of carbon to the air we breathe to the water we drink has been transformed into a commodity. Arguments for protecting nature are really a demand for the gradual securitisation of the environment. Powerful forces insist on transforming every object of possible use into a value, in an attempt to subject them all to the influence of market transactions.”

When I get a chance I will read Green Capitalism and make my own mind up.

Labels: book, consumption, economics, environment, review, spiked

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

Labels: affluenza, book, happiness, review, spiked

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

Labels: media appearances, review, spiked

spiked has published a review by me of John Kenneth Galbraith’s Affluent Society. I argue that the book, which was first published 50 years ago, anticpates many of the key themes of contemporary growth scepticism.

Labels: book, consumption, economics, growth, review, spiked

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Spiked has run my review of Gregory Clark’s A Farewell to Alms in its monthly review of books.

Labels: Africa, book, Malthus, progress, review, spiked

There follows my review of Fantasy Island by Larry Elliott and Dan Atkinson (Constable & Robinson 2007) in the 10 September issue of Fund Strategy.

Larry Elliott and Dan Atkinson see Tony Blair as having turned Britain into a "fantasy island" during his decade in office. The two economics editors, Elliott at the Guardian and Atkinson at the Mail on Sunday, argue that Britain's apparent economic and social health is largely illusory. New Labour has, in their view, simply disguised problems and stored them up for the future.

Fantasy Island sees New Labour as responsible for five minor fantasies and two master fantasies. The minor fantasies relate to inflation, the knowledge economy, the public sector, work and defence. The master fantasies relate to debt and the environment. Behind all these fantasies is a common theme of excess. As Elliott and Atkinson argue: "There is a surfeit of consumption, a surfeit of speculation and a surfeit of deceit".

Before examining these fantasies in more detail it is important to note that this is a broadly sympathetic critique of New Labour. The two authors, who are not members of any political party, praise the organisation for its record on civil partnerships and the minimum wage. They also endorse its overseas record in relation to the Good Friday agreement, Kosovo, Sierra Leone and African development.

What they object to is Labour's habit of pretending two opposites are not opposite. For example, on the one hand New Labour preaches the virtue of people living within their means. On the other hand, it has presided over a huge build-up of household debt. Yet New Labour denies there is any contradiction between the two.

It is certainly possible to sympathise with Elliott and Atkinson's charge of self-delusion against New Labour. Its pronouncements are riddled with inconsistencies. Fantasy Island's strength is that it outlines many of these contradictions well. For instance, New Labour says it is against privatisation but, in its own covert way, has played a big role in privatising welfare services. The Private Finance Initiative has involved private companies in welfare provision at the cost of saddling the public sector with a heavy debt burden.

But the characterisation of New Labour's outlook as "fantasy island" in a way misses the point. If anything defines the party it is a lack of a broader vision of how to run society. It is the Ideas Lite party. To the extent it believes in anything it is regulating individual behaviour and imposing restraint on society. Labour has given up on taking control of the "commanding heights" of the economy and instead wants to tell people how to recycle their rubbish or what food to eat.

It is New Labour's lack of any principles that helps explain why it can take up apparently contradictory positions with such ease. Beyond its avid belief in social regulation it is highly pragmatic. All its leaders care about are the perpetuation of their own cliques and the survival of the party's electoral machine.

What Elliott and Atkinson are really saying is that Labour should be more consistent in its campaign against excess. Their starting point is the old environmentalist canard of limited resources: "living within our means has to start with acknowledging what the planet can and cannot bear." From this premise they go on to argue that it is necessary to start planning for a more frugal future.

Yet this underlying assumption is false. There is no finite amount of resources on the planet or limit to the extent to which humanity can exploit the Earth. The richer and more advanced we are the better able we are to utilise the planet to our advantage.

The pattern is clear in relation to energy but it could equally apply to other natural resources. Pundits have for decades predicted the exhaustion of oil supplies yet new sources of crude keep on being discovered. New fields are found, extraction technology improves and new sources, such as tar sands, are utilised. When oil does eventually run out there is no reason why it cannot be replaced with other sources of energy such as nuclear power or hydroelectric power. There is no fixed amount of energy in the world.

The same approach can be applied to climate change. For Elliott and Atkinson, as with so many others, this is seen as the ultimate factor limiting consumption. But much of the technology needed to tackle the problem already exists. There are already many sources of energy that do not emit greenhouse gases. There are also other technologies, such as modern flood defences, that can protect humanity against the impact of rising sea levels. What is missing is the resources for this technology to become widely used. More economic growth and prosperity should provide us with such resources.

No doubt technology will improve further still as long as science and experimentation are encouraged. One way to see the history of humanity is of ingenuity enabling it to overcome what were previously seen as insurmountable problems. In the longer term it may even be possible to use advanced technologies to control the climate.

Yet Elliott and Atkinson's starting point is the mistaken idea of natural limits rather than having a positive vision of creating a better society. Although they are reluctant to spell out the consequences of this world view it presumably means more austerity and restraint. It means curbing the growth in living standards and perhaps even cutting them in absolute terms.

From this perspective it is possible to see the true content of the authors' critique of New Labour. For them its problem is that it is not New Labour enough. It should not just preach austerity but follow it through in practice. Gordon Brown, until recently known at the "Iron Chancellor", does not have enough mettle.

What Elliott and Atkinson propose in place of Fantasy Island could be called Nightmare on Fleet Street. Their vision is even more bleak and limited than that of New Labour. In that sense Fantasy Island is a remarkable achievement.

Labels: book, debt, economics, Fund Strategy, review

My review essay on “Towards an age of abundance” has made it onto the Arts & Letters Daily website.

Labels: book, media appearances, review, spiked

My review essay on “towards an age of abundance” is the lead article in this month’s spiked review of books. It discusses four recent American books on the theme of growth scepticism.

Labels: book, review, spiked

Spiked has published my review of The Bottom Billion by Paul Collier. For earlier discussions of this book see posts of 14 May, 6 June and 1 July.

Labels: Africa, aid, book, development, review, spiked

This week’s Fund Strategy included a review by me of David Smith’s new book on China and India.

A few years ago David Smith, the economics editor of the Sunday Times, was giving a talk on the world economy to a group of businessmen in London. After someone asked a question about China and India it emerged that the audience had a downbeat attitude towards the rise of the Asian giants. It was in response to this pessimism among business types, in the West overall rather than just Britain, that Smith wrote The Dragon and the Elephant.

Smith succeeds admirably in his aim of providing an overall assessment of the rise of China and India. He concedes at the start that he cannot match the local knowledge of those who have spent many years specialising in the two countries. Instead he brings to bear the relatively detached perspective of a seasoned Western journalist with a strong overall grasp of the world economy.

Smith's approach is essentially chronological. After a brief introduction he starts by examining how China and India fell from their historical position of being leading economic and technological powers. From 1820 to 1914 the European powers were dominant in the world while the rest of the twentieth century belonged to America. In the subsequent chapters he examines how China and India finally set themselves on the path to development. He ends with a chapter comparing China with India and a conclusion on 10 ways the rise of the two countries will change the world.

The Dragon and the Elephant avoids many of the common pitfalls in writing on China or India. For example, he shows both the growing importance of the Chinese economy in absolute terms and its relative poverty. Although China is one of the world's largest economies it is only 107th in the world in terms of income per head. The explanation is that China's GDP has to be divided between 1.3 billion people. But many commentators find it hard to reconcile the two facts,

Where there is a well-publicised debate relating to a country's development the book tends to give both sides of the argument. In relation to India, for instance, many commentators argue that the economic reforms of 1991 were a watershed in the country's development. But other influential voices point out that India's growth rate first accelerated in the 1980s rather than the 1990s.

Smith is also good at bringing out the contrasts between the two countries. China's growth record is much more impressive than India's. China's development is primarily industrial while India depends heavily on services. India's population is, on average, substantially younger than China's. Nevertheless the two countries are still both, at least in population terms, largely rural.

If there is a problem with Smith's book it is a corollary of his project of summarising the received wisdom on the two countries. It is usually the case that the mainstream ideas on any subject are flawed. That is true of perceptions of China and India.

An important example is the exaggerated importance attached to demographics. Many commentators claim that, over the long term, India has an advantage over China because of its younger population. But a key lesson of economic development should be that the more productive an economy becomes the less demographics matter.

Comparisons between those of normal working age and those outside working age reveal little about the character of an economy. As an economy becomes more advanced it becomes possible for fewer people to support a larger number at a higher standard of living than previously. Dependents could be people outside the working age or alternatively they could be individuals who are unemployed or in education. As technology becomes more advanced and health improves it also becomes easier for the elderly to work too.

The problem India has with a huge pool of unskilled, agricultural workers is economic rather than demographic. It needs to promote a form of development that can bring these workers into the industrial and service sectors. The challenge is one of underdevelopment rather than of too many people.

Smith also wrongly takes it as given that economic development necessarily brings environmental problems. He says: "The nightmare, for the global environment and demand on the world's energy resources, would be a rise in Chinese car ownership towards American levels". That would certainly amount to several hundred million more cars on the road but it is not clear that it should necessarily be a problem. A lesson of economic history should be that economic development allows humanity to harness resources more efficiently. A richer society should have the necessary means to build a transport infrastructure able to handle so many cars. Technological development should also mean they are cleaner and more efficient than the present generation of vehicles.

The Dragon and the Elephant can also be faulted for its adherence to what could be called the "revelation" theory of economic development. Smith implicitly accepts the view that rapid development came to China and India because their leaders finally accepted free market principles. Until then, so the argument goes, they were enmeshed in socialism in China or Fabian dogma in India.

But the development process in the two countries was never as simple as that. In the decades following the second world war there was relatively little foreign investment or trade available for developing countries so correspondingly little incentive to liberalise. In any case the state still plays an enormous role in China's economy today and an important one in India.

Nevertheless, as an introduction to the rising economies of China and India The Dragon and the Elephant works well. It should provide a good starting point to anyone who wants a lucid primer on the subject. However, working out the real significance of developments in China and India is beyond the scope of the text.

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

Niall Ferguson, a professor of history at Harvard, had a review of Paul Collier’s The Bottom Billion in today’s New York Times (also see posts of 14 May and 6 June). Ferguson argues that the most high profile recent debate on Africa has been between Jeffrey Sachs of Columbia University and William Easterly of New York University – both white men based in New York. Sachs argues for government intervention to help solve the problem whereas Easterly is sceptical about the benefits of aid.

Ferguson goes on: “Now comes another white man, ready to shoulder the burden of saving Africa: Paul Collier, the director of the Centre for the Study of African Economies at Oxford University. A former World Bank economist like Easterly, Collier shares his onetime colleague’s aversion to what he calls the “headless heart” syndrome — meaning the tendency of people in rich countries to approach Africa’s problems with more emotion than empirical evidence. It was Collier who pointed out that nearly two-fifths of Africa’s private wealth is held abroad, much of it in Swiss bank accounts. It was he who exposed the British charity Christian Aid for commissioning dubious Marxist research on free trade. And it was he who pioneered a new and unsentimental approach to the study of civil wars, demonstrating that most rebels in sub-Saharan Africa are not heroic freedom fighters but self-interested brigands.”

Collier argues there are four traps into which the poorest countries tend to fall:

* Civil war.
* The resource curse.
* Being landlocked.
* Bad governance.

His preferred solution, which Ferguson supports, is more Western intervention. This can take the form of the growth of international law and military intervention where necessary.

David Chandler, professor of international relations at the University of Westminster, also refers to Paul Collier, although in passing, in a review article on liberal interventionism in spiked this week. Chandler points out that Collier was the head of a World Bank team on conflict studies which influenced, among others, Paddy Ashdown. Chandler also cites a 2000 book by Collier and a World Bank paper (PDF) he co-authored in 2001.

Meanwhile, William Easterly has an article in the latest issue of Foreign Policy (July / August) attacking “the ideology of development”. His argument is straightforward: “like Communism, Fascism, and the others before it, Developmentalism is a dangerous and deadly failure.” His target is not increasing prosperity as such but the idea it can be promoted by the authorities from above. He names Jeffrey Sachs and Thomas Friedman of the New York Times as key proponents of the developmentalist approach.

Labels: Africa, book, development, review, spiked

James Heartfield has written a characteristically astute review article on technophilia and technophobia for the latest spiked review of books. Rather than attempt to summarise the whole thing I will point to a few snippets:

* “Post-Fordist Britain makes more cars than ever before, and the weight of car production remains firmly in the developed world.” I have long suspected this was the case but had not tracked down the reference to prove it. Heartfield cites The Shock of the Old by David Edgerton.

* American Cold War intellectuals played a key role in developing technophile. For example, Walt Rostow, the author of The Stages of Economic Growth, reworked Marxist theory to make industry the blind agent of history. This is discussed further in Imaginary Futures by Richard Barbrook.

* The New Left led the attack against the technocratic society. Arguably they were the forerunners of today’s environmentalists and therapy addicts. Key thinkers in this tradition included John Kenneth Galbraith, Herbert Marcuse and Reinhold Niebuhr. Theodor Adorno’s Dialectic of Enlightenment was a widely taught anti-technology manifesto of the time. All this is evidently examined by Barbrook.

* Heartfield also gives examples of how the victory of technophobia is damaging industrial growth right now.

Labels: book, review, technology

James Surowiecki, a staff writer on the New Yorker, has written an unfairly critical review of Indur Goklany’s The Improving State of the World for Foreign Affairs. Surowiecki concedes that “Goklany's rebuttal to the environmental doomsayers is both welcome and convincing”. But he then goes on to argue that: “Goklany's account leaves out too much that matters and pretends that incredibly complex phenomena can be explained away with a few catch phrases.” Surowiecki then goes on to argue that political struggle and the state have played a greater role in human progress than Goklany suggests. Surowiecki then suggests that economic development is a complex business and future advance is not inevitable.

To me this is a classic case of arguing that an author should have written a different book rather than reviewing the one that he did write. It is true that Goklany can occasionally be cavalier in attributing growth and technological development. But his main point is surely right: there is a strong correlation between an increasingly prosperous economy and improvements in human well-being. Explaining economic development in different countries is an immensely complex task. But that is not what Goklany is trying to do.

Labels: book, development, environment, review

Spiked has published a review by me of a book on Africa in its new monthly review of books. I argue that Giles Bolton’s Poor Story embodies what has become a typical combination of grandiose pronouncements and low horizons

Labels: Africa, book, review, spiked

There follows my latest book review for Fund Strategy. It is on Diane Coyle’s The Soulful Science.

Diane Coyle is annoyed. She argues with considerable justification that economics, the subject in which she has immersed herself for her entire adult life, is caricatured by critics. Those who attack the discipline often do so from a position of ignorance. They are unaware of the huge advances economics has made in the past 20 years.

The Soulful Science is Coyle's attempt to set the record straight. It is essentially an overview of the key developments in economic thought over the past two decades. With a PhD in economics from Harvard she has the theoretical background to understand often arcane debates. And as a former economics journalist she has the ability to translate them into lucid language.

Summarising, what is itself, a summary of a huge range of ideas is a difficult task. But much of the book focuses on the core idea of "rational economic man". Neo-classical economy theory was based on the idea that humans were utility maximising, unremittingly rational and had access to perfect information. In other words, humans were assumed to be Vulcan - or at least half-Vulcan - like Star Trek's logical Mr Spock. Coyle explains how each of these core assumptions has come under attack in the new economics.

The idea of utility maximisation is an old one. It assumes that humans are motivated by a desire to maximise their wealth. As a result of this drive, it is argued, society benefits.

Coyle shows how this core assumption has come under attack in recent years. Environmentalists argue that measures such as GDP do not take into account environmental damage to the economy. Some economists, such as America's Robert Frank and Richard Layard in Britain, argue that rich countries should pursue happiness rather than further affluence. Others, such as Barry Schwartz, have argued that individuals suffer as a result of the vast amount of consumer choice available.

The idea of human rationality has also been called into question. Economists have increasingly drawn on insights from psychology which show that humans often do not behave rationally. This insight has opened up behavioural economics as an important new field of study with behavioural finance as a key sub-branch. In 2002, Daniel Kahneman and Vernon Smith were awarded the Nobel price for research in this area.

Research into the economics of information has also yielded Nobel prizes. In different ways Joseph Stiglitz, George Akerlof and Michael Spence examined the implications of some people having access to better information than others. Their insights have helped governments to create new markets, such as those involved in trading carbon.

While Coyle is right to argue that critics need to be aware of these developments, it does not follow that the discipline is beyond reproach. On the contrary, both the new-style economists and the old-style neo-classical economists share many key assumptions, despite their differences.

The idea of "economic man" illustrates this point. Both accept as a starting point the idea that the economy, and society more generally, is essentially an aggregate of individuals. Different generations of economists differ over the exact character of the individuals involved but all sides tend to be imbued with this individualistic starting point.

In contrast, classical political economy - including the likes of Adam Smith, Karl Marx and David Ricardo - had a much greater sense of the social. It viewed society as more than a collection of individuals - the human world had to be understood in terms of the web of social relations around which life is organised. For example, organising society around the principle of profitability had direct consequences for the operation of laws that govern social interaction.

The current generation of economists use the word "social" a lot, but the sense in which they use it is limited. In contemporary parlance the term "social" refers to interpersonal relations. For example, "social networks" means the personal relationships between individuals. In contrast, "social" in the older sense of the term referred to the set of relations around which production and consumption were organised.

This diminished sense of the social helps to explain why contemporary economics tends to be so ahistorical. Economists can happily make generalisations about the operation of institutions 10 years ago, 1,000 years ago - even 10,000 years ago. They fail to see what is specific to market relations and underestimate the importance of changes over time.

Coyle's discussion of utility is a perfect example of this lack of sensitivity to historical shifts. The shift away from emphasising utility to one focusing on happiness is not primarily the result of theoretical development by economists. The economists' discussion reflects a broader disaffection with economic growth and prosperity in society at large. Since the 1970s it has become increasingly common for the benefits of mass affluence to be called into question. This anxiety about popular prosperity then, itself, has to be explained in terms of broader social changes.

From this wider perspective it is clear that Coyle is wrong to portray the emphasis on happiness as more human than the focus on economic growth. On the contrary, the immense benefits of a society based on affluence have made it easier for humans to realise their potential. In contrast, the happiness agenda reduces humans to the level of cows chewing grass in a field. The advocates of happiness would have us pursue individual contentment in the narrowest sense of the term rather than more demanding objectives.

The Soulful Science should be read by anyone who wants a lucid and authoritative introduction to contemporary economic thought. But the limitations of the new economics have themselves to be fully investigated.

Labels: book, economics, review

Spiked has published my review of Affluenza by Oliver James. It argues that it is more likely that Oliver James is mentally disturbed rather than, as he implies, the rest of us.

Labels: affluenza, book, happiness, inequality, review, spiked

My review of Indur Goklany's Improving the State of the World (Cato 2007) for Fund Strategy magazine (15 January 2007) can be found below. An article based on an interview with Goklany should appear in spiked later on this week:

One of the great tragedies of contemporary life is that we are gripped by what could be called the "miserabilist tendency". There is a pervasive sense that things are generally worse than in the past and the outlook for the future is even more negative. This bleak view is embodied in popular books such as Steve Lowe and Alan McArthur's Is It Just Me Or Is Everything Shit? (Time Warner 2005). Unfortunately, it is not just them. The whiners, who would previously have been assigned the status of pub bore, have become hugely influential in policy making, the media and academia.

Under such circumstances Indur Goklany, an American policy analyst, has written a genuinely important book. From a careful analysis of masses of data he shows that life for human beings is better than ever before. Of course the world is far from perfect. But the combination of economic growth and technological development could make things better still in the future.

The inclusion of so many statistics does not make for easy reading but it is worth the effort. Statistics are not perfect but they are necessary to help overcome impressionism. Too many people rely on a vague sense of how they think life today compares with the past. Far better to look at the hard data. Perhaps the single most important set of statistics relate to life expectancy. It is staggering to realise the average life expectancy in the world before the industrial era was 20-30 years. In other words, the average person would be lucky to reach the age of 30. By 2003 the figure had risen to 66.8 years. So thanks to growing prosperity the average person had more than doubled their lifespan, with an extra 36.8 or more years of life.

Of course there remain inequalities between the rich countries and the developing world. The average person in the developing world today lives 63.4 years - although this is still more than double that in the pre-industrial era - compared with 75.6 years in the developed world. However, today's gap of 12.2 years between the two compares with 25.2 years in the early 1950s. Both sets of populations are living longer, although the gap between the two is narrowing.

A similar trend is apparent in relation to infant mortality. In the pre-industrial era it was more than 200 per thousand live births - more than 20% of babies died before reaching their first birthday. It was a common experience for parents to see their babies die. Today the global average figure is 56.8 and in the developed world it is 7.1

The single most important factor behind these improvements is the spectacular rise in agricultural productivity. Food is cheaper and more easily available than ever despite massive increases in the world's population. For example, average daily food supplies rose from a global average of 2,254 calories per person in 1961 to 2,804 calories in 2002. Whereas food supplies in the developed world rose by 24% over that period, the increase for developing countries was 38%.

The improving trend disguises some remaining tragedies. Globally more than 850 million people are undernourished - they cannot meet their basic needs for energy or protein. About 3.75 million deaths a year can be attributed to insufficient food supplies.

Under such circumstances, Goklany is strongly in favour of genetically modified crops. He argues that such technology could boost agricultural productivity still further, making it possible to feed more people better than ever before.

He also dismisses health and environmental concerns in relation to GM as unfounded. On health he points out that 300 million Americans and tens of millions of visitors have consumed GM food with no apparent ill effects since 1996. If there are any as yet undiscovered problems, they are likely to be hugely outweighed by the benefits of higher agricultural productivity.

The Improving State of the World also argues that greater use of GM crops could be better for the environment. If less land is needed to produce food then more will be available for forestry and other uses. This greater availability of unfarmed land could also bolster biodiversity.

Although Goklany's book is heavy in its use of figures it would be wrong to see it as a statistical almanac. It includes useful and insightful arguments too. For example, it argues that economic development is typically characterised by an "environmental transition". In the early stages of development, as countries industrialise and urbanise, their environments tend to worsen. But then, as they become more prosperous, the environment generally improves.

Most key indicators follow this trend. For instance, British cities were hellish places to live when Charles Dickens was writing in the mid-nineteenth century. Goklany quotes a passage from the The Old Curiosity Shop describing a London darkened by coal dust and factory smoke. It should also be remembered that at that time diseases such as cholera and typhoid, carried by polluted water, were rife. In contrast, London today is an immensely clean and healthy place. And even third-world cities are much better than Victorian London as they have learned from the experience of the developed world.

Goklany uses the concept of environmental transition to draw astute conclusions about future possibilities. He concedes that the world's fish stocks are currently on the wrong side of the environmental transition, with supplies dwindling through over-fishing. However, the conclusion he draws is the need to develop modern aquaculture - farming the sea using modern technology - just as agriculture was developed in the past. That way the productivity of food production from the sea could rise enormously.

The Improving State of the World is an excellent antidote to the painful whining of the miserabilist tendency. The world is far from perfect but complaining about how bad everything is only reinforces cynicism rather than opening the way to improving things further.

Labels: book, economics, Fund Strategy, health, progress, review, spiked

There follows a review by me of George Monbiot’s Heat (Allen Lane 2006) from the 13 November issue of Fund Strategy magazine. James Heartfield also did a particularly astute review of the book for spiked.

It is almost possible to feel sorry for George Monbiot. The government's Stern report on the economics of climate change has overshadowed the climate campaigner and Guardian columnist's book on the same topic. The report is more thoroughly grounded in mainstream science and certainly more rigorous in its economics.

Nevertheless, there are reasons why it is worth reading Monbiot's book, Heat, alongside Stern. Whereas Sir Nicholas Stern is constrained by diplomatic considerations - he has to be guarded in what he says as his is a government report - Monbiot can be blunt.

Arguably Monbiot is more honest about the impact of a strategy based on curbing energy demand than Stern. Both Stern and Monbiot argue a broadly similar line, although the details and some of the conclusions they draw are different.

Monbiot's starting point is the incorrect assumption that there is a trade-off between popular prosperity and curbing climate change's impact. His premise leads to the conclusion that austerity and authoritarianism are needed to deal with global warming:

"For the campaign against climate change is an odd one. Unlike almost all the public protests which have preceded it, it is a campaign not for abundance but for austerity. It is a campaign not for more freedom but for less. It is a campaign not just against other people, but also against ourselves" (p215).

If humanity's survival depended on accepting austerity and dictatorship, perhaps these twin evils could be justified. But any such case would have to be incredibly strong since the strategy proposed by Monbiot, apart from anything else, would leave much of the world in dire poverty.

It should not be forgotten that, according to World Bank figures, a billion people still live on less than one dollar a day and 2.7 billion live on less than two dollars. Such poverty has terrible consequences for the health, longevity and well-being of the bulk of the world's population. In addition, rationing and curbing democracy are objectionable in principle.

As it happens, Monbiot's science is rather ropey. His argument that by 2030 the rich countries need to cut carbon emissions by 90% seems to be based on calculations by Colin Forrest, "who is not a professional climate scientist but appears to have done his homework" (p15-16). Monbiot does not say who Forrest is but, judging from a search on Google, he appears to be a member of Friends of the Earth in Scotland.

But even if the 90% figure is correct, it does not follow that Monbiot's strategy is right. Imposing austerity means, by definition, making the world poorer. But the reality is that the richer we are, the better a position we will be in to tackle climate change.

Monbiot is wrong to argue that global warming should be seen as a priority above all others. It is not an isolated challenge but linked to the more general struggle for social progress. Mass affluence is good in its own right, while also enabling humanity to have greater control over nature.

The need for more prosperity is particularly acute in the developing world. Not only would the abolition of poverty be good in itself but it would also put such societies in a better position to tackle global warming. They would have more resources at their disposal and more diversified economies.

But Monbiot uses the poor as an argument for austerity in the West. "By turning on the lights, filling the kettle, taking the children to school, driving to the shops, we are condemning other people to death. We do not see ourselves as killers. We perform these acts without passion or intent" (p22). Such moralising is unhelpful and off-putting.

Contrary to Monbiot's argument, it is both possible and desirable to promote prosperity and tackle climate change at the same time. Indeed, the two are inextricably linked.

The key challenge is to find ways of substantially bolstering energy supplies while controlling greenhouse gas emissions. Fortunately, such technologies already exist. Although no doubt they could be considerably improved, it is already possible to supply far more power with existing technology. Scientists and engineers are in the best position to identify the best mix of technologies, but an outline of possibilities is already feasible.

Nuclear power is likely to play a role. Although care must be taken when disposing of the waste, it has the potential to provide huge amounts of electricity without greenhouse emissions.

Further into the future, it might be possible to generate power from nuclear fusion (fusing together atoms) rather than fission (splitting atoms apart). Fusion's advantage is that its waste is water, not heavy radioactive materials.

Hydroelectric power is another existing form of energy that does not emit greenhouse gases. It has lost popularity in recent years as environmentalists have campaigned against it. But in many places it can provide abundant electricity.

Even fossil fuels can be made more green. Carbon capture and storage means emissions can be removed from power stations that use fossil fuels. They can then be stored underground or under the sea bed.

More prosperity would also provide the resources to help humanity adapt to climate change's effects. For example, Bangladesh could have modern flood defences similar to those already used in the Netherlands. Human settlements could be moved to higher ground if threatened by flooding in their present locations.

Monbiot's misanthropic outlook means he either downplays these possibilities or ignores them completely. He has a dim view of human beings and their capacity to use ingenuity to transform their environment for the better.

Rather than seeing the promotion of mass affluence and tackling climate change as contradictory, they should be viewed as part of the same challenge. The drive for popular prosperity puts humanity in a better position to deal with environmental problems.

Labels: book, energy, environment, Fund Strategy, health, review, spiked

Spiked has today published my review of An Inconvenient Truth. In it I argue that Al Gore’s dogmatic documentary embodies the worst possible response to climate change. It can be found by clicking on the appropriate link in the reviews section on the bar on the left hand side of this site.

However, as a critique of Gore’s pretentious style it is hard to do better than South Park. An Inconvenient Truth was ruthlessly lampooned in its episode on ManBearPig.

Labels: climate, film, review, spiked, television

My review of Deepak Lal’s Reviving the Invisible Hand from the 4 September issue of Fund Strategy magazine:

Deepak Lal, professor of international development studies at the University of California, Los Angeles, is an intellectual rarity nowadays. He understands society according to consistent principles - in his case adherence to what he calls "classical liberalism" - rather than examining each question on pragmatic grounds. This approach is both his strength and his weakness.

By classical liberalism he means that he supports both laissez faire and unilateral free trade. Laissez faire refers to a society in which the state provides essential public goods - for example, armed services, police, property rights, transport infrastructure - at the least cost from taxes. Lal rejects the idea that this conception necessarily means a minimal state as a caricature.

Unilateral free trade means not only that open trade is seen as beneficial but countries should welcome it even if other nations do not. Even if a country allows free trade while its competitors reject it the trading nation should, in Lal's view, gain. His model is 19th century Britain, a unilateral free trader, whereas contemporary America will only trade freely with countries that accept reciprocal arrangements.

Lal mentions as an aside that he is in favour of empires - a subject on which he has written another book. He says they provide the public good of order from which everyone can benefit.

From these premises he launches an attack on what he calls the "dirigiste dogma". He sees the state as being essentially predatory and rejects the view that it should play an extensive role in the economy. Lal also makes a useful distinction between traditional dirigisme - old-style socialism - and new dirigisme - new forms of state regulation. Advocates of the second form of dirigisme include cultural nationalists, environmentalists and non-governmental organisations (NGOs).

Lal is at his strongest when he shows how the more recent form of dirigisme involve new forms of regulation. For example, he shows those who support "capitalism with a human face" can hurt the poor. Even campaigns against child labour - which have an obvious emotional appeal - tend to be counter-productive. It is usually the most impoverished who send their children to work. Depriving them of their income is likely to worsen their plight. The real solution to child labour is economic development. Studies show it tends to disappear when GDP per head exceeds $5,000 (£2,600).

Another of Lal's strong points is his attack on environmentalism. He quite rightly portrays it as a misanthropic ideology with a hostility to development that condemns the mass of the world's population to poverty.

The fundamental flaw in Lal's argument is his lack of sufficient historical perspective. His hatred of dirigisme is so great he underestimates the significance of key differences between the two forms he identifies.
Old-style dirigisme was based on the idea, however flawed, that state intervention could help create a better society. Its forms varied enormously from radical socialism to the New Deal in 1930s America. The state was seen as a benign institution that could improve the lives of its citizens. It may not have lived up to its promise, but there was a positive impetus to state intervention.

Contemporary state intervention, in contrast, is entirely misanthropic. It is rooted in Margaret Thatcher's idea that "There is No Alternative" to the way contemporary society is organised. Instead, its main aim is to restrain human activity - whether by business or individuals. For example, the enormous emphasis on regulating individual behaviour in contemporary politics. Behaviour previously seen as in the private domain - such as drinking, smoking or eating fatty foods - has become seen as a fit area for state regulation. Although the days of old-style nationalisation have gone, the state is far more extensively involved in our everyday lives than ever before.

Lal also fails to see the fundamental change in what is considered radical. The traditional left-wing critique of society attacked capitalism on the grounds that it did not provide sufficient wealth for the mass of the population. Typically it was conservatives who were suspicious of mass affluence. Today, in contrast, it is environmentalism, with its hostility to mass consumption, that tends to be seen as radical. Yesterday's conservative ideas have become embodied in today's radicalism.

Lal misses this key distinction as he simply sees dirigiste ideas as part of a romantic reaction to the 18th century Enlightenment. For him there is little substantial difference between 19th century Marxism, America's New Deal of the 1930s and contemporary ecofundamentalism. He exaggerates the similarities between these outlooks and downplays the differences.

He also fails to explain convincingly why it is that new dirigisme has taken hold. For example, he is right to argue that environmentalism is more like a religion than a political outlook in that it is based on faith rather than reason. But he fails to explain why it is that the environmentalist dogma has attracted so many followers, including national governments.

Similarly, he describes well the growing power of NGOs, but not how they have come to play such a prominent role in international organisations.
Ultimately, then, Reviving the Invisible Hand fails as a critique of the new dirigisme. It is generally good at describing the main shifts that have taken place in relation to international economics and the role of the state over the past two centuries. But it does not provide an adequate explanation of why such changes have taken place.

Nevertheless, it would be wrong to be too harsh on Lal. His work embodies immense intellectual ambition - a quality that is rare today. Equally importantly, he tries to examine key questions from a rational perspective rather than rely on superficial impressions of events. His book is a useful start for those trying to understand the modern world, particularly third world development, but it should not be its end point.

Labels: book, development, economics, Fund Strategy,