Saturday, November 02, 2002

Remora

LI rather trailed off on our post before the last post -- as you might have noticed, LI is an incorrigible meanderer. This is, we suppose, a vice, but surely one of the salient differences between weblogging and real commentary, such as is published in a newspaper, is that the endings aren't so neat. The topics, too, are a bit more variegated. For instance, I imagine the local rag would not publish an op ed piece that begins with a consideration of Bishop Butler's Analogy. Yes, they are warned about such things by the marketing department.

In any case, we were talking about Diane Coyle's exhibition of the deficiencies of common sense and the excellencies of economics -- which exhibition, we claimed, was marred by a severe misconstrual of categories, and a parochial vision of economics. (Coyle's comments, on the Financial Times website, has now been closed off to non-subscribers). Ms. Coyle is a great one for tearing down tariffs and promoting the benefits of free trade. It is, in fact, her grand solution to the chronic problem of poverty. She explains this in an essay in the Guardian, the premise of which is that the anti-globalizers have it all wrong. Protestors should be out there demanding more free trade, liberalization on an international scale, rather than supporting the multitudinous corruptions of protectionism.

"If the moral outrage at the extent of poverty, hunger and disease in the world, and the political momentum for change generated by the campaign movement of recent years, are to achieve anything worthwhile, outrage will need to be informed by evidence on the economic effects of globalization. In many developing countries the best response to the problems that emerge because of globalization is hardly ever a retreat from global integration.

On the contrary, this would often harm growth and make the problems of poverty harder to solve.In our report we address the charges that command widespread support among anti-globalization protestors. A commonly held belief is that globalization has caused extensive poverty. While it is true that 1.3 billion people currently live on less than $1 a day, this number has not changed much since 1950 and has actually fallen sharply as proportion of the world population to 24% from 55%. The recent era of rapid globalization has improved the living standards of many of the poorest, not worsened it."

There are many things to say about the above paragraph. One of them is to ask about the absolute fetishization of the $1 a day standard. This is not a good standard for what the world population could live on. It skews the conversation about poverty and inequality to the cases on the bottom, and their miserable, incremental improvements, rather than to the cases on the top, and their baroque, excessive expropriation of resources.

But leaving that aside, we should note that that all the measures of world poverty are subject, at the moment, to heated debate, which tends to get very technical. The International Monetary Fund hosted a debate on the question of whether world inegality is rising between the left, middle and right which has been posted here. The neutral observer's first reaction to it is that much of the debate degenerates into much mumbo jumbo about methodologies. The right wing is represented by an Indian economist, Surjit Bhalla. Bhalla will surely be touted by rightwingers the way Bjorn Limborg achieved celebrity. Bhalla says, at one point, that the issue of inequality is basically driven by envy. This is the essence of the right wing polemical position. It is rather stupid, since the essence of the right wing polemical position about capitalism is that greed is good. The latter is a position that goes back a long way, in economic literature, to Mandeville's Fable of the Bees -- our individual vices are woven, by the mysterious work of the Invisible Hand, into public goods. Well, envy is as good an individual vice as any. More seriously, Bhalla contends that all around the world -- except for Sub-Saharan Africa -- the figures point to this conclusion:

"Essentially, regarding growth, what we find is that the developing countries grew at about one percentage point lower than the developed countries during 1960 to 1980, and the numbers are 2.1 and 3.3, respectively. But during 1980 to 2000, the developing countries far exceeded the growth rate of the industrialized West and grew at 3.6 percent rather than 2 percent for the West.So first piece of evidence, and these are national accounts data, which is what the World Bank uses, the IMF uses, the countries themselves use, that growth rates of the poor countries far exceeded the growth rates of the West during the so-called globalization period. So that's evidence number one.

"Number two, what happened to inequality? I find that inequality has been on a steady decline�world inequality has been on a steady decline, reversing almost a 200-year trend, peaking in the mid-1970s, and today inequality in the world is at its lowest level for possibly 100 years.What is the counter-evidence to that? There are two or three sets of studies, one which states that basically inequality flattened out during the last 30, 40 years, and another one from the World Bank which states that inequality increased at an absolutely unprecedented pace between 1988 and 1993. I find, as I said, just the opposite. "

Basically, Bhalla is claiming that the golden Keynsian era was a bad time for developing countries, whereas since the mid 70s -- since, that is, the beginning of the conservative rejection of Keynsian liberalism -- developing countries have been catching up. Partly, of course, as you can see from his figures, this stems from the developed countries slowing down -- the 2 percent growth rate for the West is much lower than it was in the 50s.

The transcript of the IMF debate is lively, but often veers off into incomprehensible disagreements about survey results and purchasing power comparisons. LI wants to make a simpler point about what Ms. Coyle has called living standard. I think the living standard, if properly fleshed out, gives us a sense of what is wrong with that version of globalization that emphasizes privitization and tearing down barriers to trade and capital flows.

If you will recall the post before last, we started with a quote from Adam Smith. Smith's idea has been a powerful one in economics. Here it is again:

"The rich only select from the heap what is most precious and agreeable. They consume little more than the poor, and in spite of their natural selfishness and rapacity, though they mean only their own conveniency, though the sole end which they propose from the labours of all the thousands whom they employ, be the gratification of their own vain and insatiable desires, they divide with the poor the produce of all their improvements." This is, by the way, from Smith's A Theory of Moral Sentiments, in Part IV, Of the Effect of Utility upon the Sentiment of Approbation

As Aristotle might put it, there's a sense in which Smith is correct, and there is a sense in which he is incorrect. What Smith meant was that dwelling in a costly pile was merely a highly ornamental way of keeping out of the rain. You can keep out of the rain, as King Lear learned, in a hovel for less cost. Similarly eating peacock's eyes and eating chicken eggs is eating; clothing yourself in silk, or in flannel, is clothing; etc.

However, this absolute way of looking at consumption was suspect even in Smith's day. From, say, the point of view of energy use, the rich consume vastly more than the poor. Smith felt that this was covered by the fact that the consumption of the rich is the employment of the poor -- which still doesn't make his precept true. What made Smith's general point plausible, however, is that, in a relatively technologically primitive society -- and the eighteenth century was still that -- the fine differences between rich and poor are evened out by the gross similarities. The rich in their Georgian mansions were apt to be as bothered by dampness and drafts as the poor in their hovels. They were apt to die of untreatable illnesses, like the poor, with only the advantage that their money hired the best chirugeons and doctors to torture them before that blessed terminal event. The food the nabob ate and the water he drank -- on those rare occasions when gin wasn't available -- was apt to be as contaminated as the beverages and victuals of the poor.

This is no longer the case. Ah, but I am going on and on, here. LI will continue this at some future point.

No comments:

Asking

Yesterday, I watched a very sparkly Biden official, who looked like he had just come from the Ken-at-High-School-UN box, answer questions fr...