I don't write a lot here about environmental and resource issues, mostly because I feel I lack the required expertise to say something valuable. But I recently looked at this piece by an Australian philosopher named Rowan (E. Loomis linked to this which in turn linked to it), and it raises some questions that need to be discussed more widely. As Rowan points out, even the most resource-efficient, 'clean' versions of economic growth are not sustainable propositions in the long term: eventually the world will run out of physical space (for the "stuff" that people are using plus the non-bio-degradable "stuff" they have thrown out), and well before that happens raw materials will have been depleted. The way to avoid this is to transition over time to a non-growth, steady-state global economy, while ensuring, or so one would hope, that it is also marked by considerably less poverty and more material equality than the present system. Sounds like a tall order, but the alternatives if it doesn't occur will be very unpleasant. Such a transition might (probably will, I suspect) require the wealthy and the upper-middle-classes in the 'developed' world to give up some of the "stuff" that they currently view as either necessary or desirable props of their existence.
The alternative to thinking about these issues and doing something about them will be an eventual (note "eventual" not "imminent") collapse of civilization. If it does happen, it will occur, I would guess, several hundred years after I am no longer around. But that isn't too much consolation. Humans, probably uniquely among animals, have the capacity to think about the long-term future, and that really is something more of us should do more often.
Showing posts with label economic history. Show all posts
Showing posts with label economic history. Show all posts
Wednesday, May 28, 2014
Wednesday, May 16, 2012
The mantra of growth; or, Bhagwati vs. Pogge
Given the nature of the news cycle, the debate sparked by Pres. Obama's (successful) nomination of Jim Yong Kim to head the World Bank has long since been eclipsed by a spate of fresher stories. But I wanted to write this post before the Kim story faded into complete oblivion, because the debate over Kim raised again some fundamental questions about economic growth, inequality, and poverty.
In a column published last month criticizing the choice of Kim, Jagdish Bhagwati asserted that the Obama administration has the wrong view of development. He wrote:
A 2008 article by Thomas Pogge suggests that the answer is yes.* Pogge used China to illustrate his case. He argued that although poverty in China has gone down substantially, "it is likely that more equitable growth," i.e., growth accompanied by less income inequality, "would have been much better for the Chinese poor." Pogge pointed out that although China's gross national income (GNI) increased dramatically from 1990 to 2004, the relative income share of the bottom ten percent (decile) of China's population decreased from 30.8% in 1990 to 16.0% in 2004. This decrease in its relative share meant that the absolute income of the poorest decile increased "by only 75 percent" at a time when China's GNI was going up by a whopping 236 percent (see section 5.3 of the article as reprinted in Pogge's Politics as Usual, pp.100ff.).
What if China had preserved the income distribution as it existed in 1990, even if that meant sacrificing some growth? Pogge assumed, for the sake of argument, that preserving the existing income shares would have cost China 2.3 percentage points in per capita GNI growth from 1990 to 2004. Under this assumption, the poorest decile "would have done much better..., ending the period [in 2004] at an average income of $715, rather than $500, thus with a gain of 150 rather than 75 percent." (p.101) Slower, more equitable growth also would have caused less environmental degradation, a consideration that, coupled with equity, suggests that "all countries should conceive growth much more from the standpoint of their poorer population segments" (p.102, italics in original). He also pointed out that economic inequality is much easier to create (or generate) than to reverse, because the better-off are able to change the relevant rules in their favor (ibid.). There are, in other words, lock-in effects (though Pogge does not use that phrase).
Pogge also highlighted the growth in global income inequality from 1988 to 2002, with the relative share of "the poorest 30 percent of humanity" down by about 20 percent during that period, "from 1.52 to 1.22 percent of global household income" (p.106). Again, inequality translates into differential influence over the rules that shape the distribution of global income and wealth (p.107).
These are the sorts of considerations one should keep in mind when reading the celebratory assertions of Bhagwati and others about rapid economic growth in 'the emerging countries' and its effect on poverty. Of course such growth has reduced poverty, in some cases substantially, but poverty would have been reduced even more if that growth had been more equitable, even if less rapid. Neoliberal globalization, heralded by its supporters for reducing poverty, has likely not reduced poverty as much as a more equitable form of globalization would have, and it has perpetuated the unequal structure of influence in global institutions. The appointment of Kim to the Bank will obviously not drastically change this, since no single appointment could have such an effect and the institution will no doubt exert its organizational pull over any leader. But Kim's critical stance toward neoliberal globalization -- or what was his critical stance some years ago, at any rate -- perhaps offers a bit of hope. In any event, Bhagwati's critique was completely off the mark.
-----
*T. Pogge, "Growth and Inequality: Understanding Recent Trends and Political Choices," Dissent (Winter 2008), reprinted (in slightly different form) in his Politics as Usual: What Lies Behind the Pro-Poor Rhetoric (Polity Press, 2010), pp.93-109.
In a column published last month criticizing the choice of Kim, Jagdish Bhagwati asserted that the Obama administration has the wrong view of development. He wrote:
...perhaps the most compelling factor in Obama’s choice [of Kim] seems to have been a fundamental misunderstanding of what "development" requires. Micro-level policies such as health care, which the Obama administration seems to believe is what "development" policy ought to be, can only go so far. But macro-level policies, such as liberalization of trade and investment, privatization, and so forth, are powerful engines of poverty reduction; indeed, they are among the key components of the reforms that countries like India and China embraced in the mid-1980’s and early 1990’s....Now, there's no question that economic growth in India and especially in China has enabled millions of people to improve their living standards and leave the ranks of the extremely poor. And it's also true that economic growth generates revenues that governments, if they have wise priorities and some administrative resources, can use for public-health, education, and similar purposes. But Bhagwati failed to ask an important question: Could 'emerging countries' have reduced poverty even more by following a different, more equitable growth path?
[I]t is the rapid acceleration of economic growth in the major emerging countries that has reduced poverty, not only directly, through jobs and higher incomes, but also by generating the revenues governments need to undertake the public-health, education, and other programs that sustain poverty reduction – and growth – in the long term.
A 2008 article by Thomas Pogge suggests that the answer is yes.* Pogge used China to illustrate his case. He argued that although poverty in China has gone down substantially, "it is likely that more equitable growth," i.e., growth accompanied by less income inequality, "would have been much better for the Chinese poor." Pogge pointed out that although China's gross national income (GNI) increased dramatically from 1990 to 2004, the relative income share of the bottom ten percent (decile) of China's population decreased from 30.8% in 1990 to 16.0% in 2004. This decrease in its relative share meant that the absolute income of the poorest decile increased "by only 75 percent" at a time when China's GNI was going up by a whopping 236 percent (see section 5.3 of the article as reprinted in Pogge's Politics as Usual, pp.100ff.).
What if China had preserved the income distribution as it existed in 1990, even if that meant sacrificing some growth? Pogge assumed, for the sake of argument, that preserving the existing income shares would have cost China 2.3 percentage points in per capita GNI growth from 1990 to 2004. Under this assumption, the poorest decile "would have done much better..., ending the period [in 2004] at an average income of $715, rather than $500, thus with a gain of 150 rather than 75 percent." (p.101) Slower, more equitable growth also would have caused less environmental degradation, a consideration that, coupled with equity, suggests that "all countries should conceive growth much more from the standpoint of their poorer population segments" (p.102, italics in original). He also pointed out that economic inequality is much easier to create (or generate) than to reverse, because the better-off are able to change the relevant rules in their favor (ibid.). There are, in other words, lock-in effects (though Pogge does not use that phrase).
Pogge also highlighted the growth in global income inequality from 1988 to 2002, with the relative share of "the poorest 30 percent of humanity" down by about 20 percent during that period, "from 1.52 to 1.22 percent of global household income" (p.106). Again, inequality translates into differential influence over the rules that shape the distribution of global income and wealth (p.107).
These are the sorts of considerations one should keep in mind when reading the celebratory assertions of Bhagwati and others about rapid economic growth in 'the emerging countries' and its effect on poverty. Of course such growth has reduced poverty, in some cases substantially, but poverty would have been reduced even more if that growth had been more equitable, even if less rapid. Neoliberal globalization, heralded by its supporters for reducing poverty, has likely not reduced poverty as much as a more equitable form of globalization would have, and it has perpetuated the unequal structure of influence in global institutions. The appointment of Kim to the Bank will obviously not drastically change this, since no single appointment could have such an effect and the institution will no doubt exert its organizational pull over any leader. But Kim's critical stance toward neoliberal globalization -- or what was his critical stance some years ago, at any rate -- perhaps offers a bit of hope. In any event, Bhagwati's critique was completely off the mark.
-----
*T. Pogge, "Growth and Inequality: Understanding Recent Trends and Political Choices," Dissent (Winter 2008), reprinted (in slightly different form) in his Politics as Usual: What Lies Behind the Pro-Poor Rhetoric (Polity Press, 2010), pp.93-109.
Thursday, January 19, 2012
Sovereign debt in historical perspective
The recent focus on sovereign debt crises has reinforced our understandable tendency to associate national debt with state weakness. Originally, however, the incurring of debt was a sign not of state weakness but of state strength. A government could not borrow until it could convince lenders that it had the ability and intent both to pay interest and (eventually) to repay the principal.
The French king Francis I, who reigned from 1515 to 1547 and presided over a period of relative growth, borrowed and ran a budget deficit. [1] Francis I's contemporary Henry VIII also incurred crown debts (or so I recall; too lazy to find a cite for this). So did Charles V, who "financed his campaign [to be elected Holy Roman Emperor in 1519] through loans from the banker Jacob Fugger, which saddled him with significant debts." [2]
Borrowing by monarchs happened even before that. In his discussion of sovereign lending in Sovereignty: Organized Hypocrisy, Stephen Krasner notes that "Edward III of England repudiated his debts in 1339 precipitating a financial crisis in Italy and leading to the first clearly recognizable business cycle in Europe" [3] Desmond Seward writes: "Edward III...raised vast loans from Lombard bankers,...from merchants in the Netherlands, from English wool merchants, pledging either English wool or the duties on Guyennois wine as security. Almost everyone who lent him money went bankrupt." [4]
These rulers all had their problems, and some had more serious problems than others. But those who lent them money must have thought that they were good risks. If a monarch was viewed as weak, or where there was "uncertainty of succession" [5], state borrowing was close to impossible. Only a relatively strong sovereign, or at least one perceived as such, could be an indebted sovereign. Eventually borrowing would contribute -- under certain specific conditions and in certain cases -- to severe weaknesses. But there was a long period in which sovereign borrowing tended to go hand-in-hand with economic growth and state-building.
Does this little bit of history have any implications for how one views today's financial crises? Probably not. But I've had this post hanging around in draft for a long time, and I figured I might as well put it up.
Notes
1. I. Wallerstein, The Modern World-System v.1 (1974), p.138, citing M. Wolfe, "Fiscal and Economic Policy in Renaissance France," Third Int'l Conference of Economic History, Munich 1965 (Paris: Mouton, 1968).
2. D. Nexon, The Struggle for Power in Early Modern Europe (2009), p.141.
3. S. Krasner, Sovereignty: Organized Hypocrisy (1999), p.129.
4. D. Seward, The Hundred Years War (pb. ed. 1999), p.33.
5. Wallerstein, op. cit., p. 138.
The French king Francis I, who reigned from 1515 to 1547 and presided over a period of relative growth, borrowed and ran a budget deficit. [1] Francis I's contemporary Henry VIII also incurred crown debts (or so I recall; too lazy to find a cite for this). So did Charles V, who "financed his campaign [to be elected Holy Roman Emperor in 1519] through loans from the banker Jacob Fugger, which saddled him with significant debts." [2]
Borrowing by monarchs happened even before that. In his discussion of sovereign lending in Sovereignty: Organized Hypocrisy, Stephen Krasner notes that "Edward III of England repudiated his debts in 1339 precipitating a financial crisis in Italy and leading to the first clearly recognizable business cycle in Europe" [3] Desmond Seward writes: "Edward III...raised vast loans from Lombard bankers,...from merchants in the Netherlands, from English wool merchants, pledging either English wool or the duties on Guyennois wine as security. Almost everyone who lent him money went bankrupt." [4]
These rulers all had their problems, and some had more serious problems than others. But those who lent them money must have thought that they were good risks. If a monarch was viewed as weak, or where there was "uncertainty of succession" [5], state borrowing was close to impossible. Only a relatively strong sovereign, or at least one perceived as such, could be an indebted sovereign. Eventually borrowing would contribute -- under certain specific conditions and in certain cases -- to severe weaknesses. But there was a long period in which sovereign borrowing tended to go hand-in-hand with economic growth and state-building.
Does this little bit of history have any implications for how one views today's financial crises? Probably not. But I've had this post hanging around in draft for a long time, and I figured I might as well put it up.
Notes
1. I. Wallerstein, The Modern World-System v.1 (1974), p.138, citing M. Wolfe, "Fiscal and Economic Policy in Renaissance France," Third Int'l Conference of Economic History, Munich 1965 (Paris: Mouton, 1968).
2. D. Nexon, The Struggle for Power in Early Modern Europe (2009), p.141.
3. S. Krasner, Sovereignty: Organized Hypocrisy (1999), p.129.
4. D. Seward, The Hundred Years War (pb. ed. 1999), p.33.
5. Wallerstein, op. cit., p. 138.
Sunday, May 1, 2011
The dignity of labor
The 150th anniversary of the start of the Civil War, which occurred last month, has occasioned much reflection about the war’s legacy. While many of the specific antebellum debates about slavery may seem somewhat remote, the persistence of race and racial inequality as issues in American life means that the collective ear is still primed, from time to time, to pick up certain echoes of those debates. Many other echoes, however, have grown very faint; for instance, few non-historians today recall the antebellum controversy over ‘free labor’ versus slavery.
Some southern apologists for slavery argued, among other things, that free labor in the North amounted to ‘wage slavery’ and that northern factory workers and hired hands were actually worse off than African-American slaves in the South. In this respect these defenders of slavery, notably George Fitzhugh, "seemed to speak in Marxist accents," as Dennis Wrong notes.[1] But other defenders of slavery evinced a very un-Marxist contempt for manual labor in general. James McPherson draws attention to some revealing quotations (italics in original):
What of the dignity-of-labor ideal in ‘post-industrial’ societies? In an economy dominated by services in which a relatively small proportion of the population is engaged in direct production of tangible goods, it is still possible to speak of people taking pride in their work, irrespective of its nature, even irrespective of whether it is remunerated. But the ideal of the dignity of labor has slipped out of public discussion. Competitiveness is the lodestar of contemporary political-economic discussion in the U.S., along with debt and deficits. Attention is paid to the high unemployment rate, but as much for electoral considerations as any others. An attack by a right-wing governor on the right to collective bargaining sent thousands of people into the streets in Wisconsin, but that action was framed (quite understandably) as a defense of rights rather than primarily as a defense of the dignity of labor. And all sides use the discourse of rights. Thus laws restricting the prerogatives of unions are called right-to-work laws, and states where they are in force are known as right-to-work states -- as if the primary motive of such laws were to guarantee rights rather than to weaken unions. Ultimately, the meaning of 'rights' is determined by political struggles. As Samuel Bowles and Herbert Gintis put it: "Elements of a political lexicon – such as the discourse of rights – do not…have essential meanings…. Making history is often a matter of making language. But discourses are more often borrowed or stolen than created de novo. Faced with a restricted political vocabulary, political actors appropriate and transform tools that even hostile forces have labored to develop." [5]
Once slavery ceased to exist in the U.S., free labor had no polar antithesis to give it luster by comparison, and it tended to become, at best, just a fact rather than something to be widely celebrated. Critics of wage labor as exploitation could pursue their critique, secure in the knowledge that the surface similarities of their position to that of a George Fitzhugh probably would no longer be flung in their faces. This liberation, so to speak, of the critics of industrial capitalism arguably counts as one of the Civil War’s less-noticed consequences.
P.s. I had intended this post to have a broader, less U.S.-centric focus, but that proved beyond my capacities at the moment.
----
Notes
1. Dennis H. Wrong, The Problem of Order (1994), p.32.
2. James M. McPherson, Battle Cry of Freedom (1988), p.197.
3. Eric Foner, The Fiery Trial (2010), pp.115-16.
4. Quoted in McPherson, p.198.
5. Samuel Bowles and Herbert Gintis, Democracy and Capitalism (1986), pp.161-62.
----
See also two books by Jonathan A. Glickstein: American Exceptionalism, American Anxiety: Wages, Competition, and Degraded Labor in the Antebellum United States (2002) and Concepts of Free Labor in Antebellum America (1991).
Some southern apologists for slavery argued, among other things, that free labor in the North amounted to ‘wage slavery’ and that northern factory workers and hired hands were actually worse off than African-American slaves in the South. In this respect these defenders of slavery, notably George Fitzhugh, "seemed to speak in Marxist accents," as Dennis Wrong notes.[1] But other defenders of slavery evinced a very un-Marxist contempt for manual labor in general. James McPherson draws attention to some revealing quotations (italics in original):
"The great evil of Northern free society," insisted a South Carolina journal, "is that it is burdened with a servile class of mechanics and laborers, unfit for self-government, yet clothed with the attributes and powers of citizens." A Georgia newspaper was even more emphatic in its distaste. "Free Society! We sicken at the name. What is it but a conglomeration of greasy mechanics, filthy operatives, small-fisted farmers, and moon-struck theorists?... The prevailing class one meets with [in the North] is that of mechanics struggling to be genteel, and small farmers who do their own drudgery, and yet are hardly fit for association with a Southern gentleman’s body servant." [2]Abraham Lincoln and the new Republican Party of the time responded with a vigorous defense of free labor. However, as Eric Foner observes, Lincoln saw wage labor as a stepping stone that young men would take en route to becoming independent artisans, shopkeepers or entrepreneurs, rather than as a permanent feature of the American economy, though it was already becoming that in many cities in the mid-19th century, a process that would intensify after the Civil War.[3] The notion that work has an inherent dignity and overarching societal purpose–that, as William Seward said, "the free-labor system…brings into the highest possible activity all the physical, moral and social energies of the whole State"[4] – fit most comfortably with the world of Lincoln’s youth and young adulthood. It was more difficult to reconcile that notion with the working conditions and standardized production methods of mass manufacturing.
What of the dignity-of-labor ideal in ‘post-industrial’ societies? In an economy dominated by services in which a relatively small proportion of the population is engaged in direct production of tangible goods, it is still possible to speak of people taking pride in their work, irrespective of its nature, even irrespective of whether it is remunerated. But the ideal of the dignity of labor has slipped out of public discussion. Competitiveness is the lodestar of contemporary political-economic discussion in the U.S., along with debt and deficits. Attention is paid to the high unemployment rate, but as much for electoral considerations as any others. An attack by a right-wing governor on the right to collective bargaining sent thousands of people into the streets in Wisconsin, but that action was framed (quite understandably) as a defense of rights rather than primarily as a defense of the dignity of labor. And all sides use the discourse of rights. Thus laws restricting the prerogatives of unions are called right-to-work laws, and states where they are in force are known as right-to-work states -- as if the primary motive of such laws were to guarantee rights rather than to weaken unions. Ultimately, the meaning of 'rights' is determined by political struggles. As Samuel Bowles and Herbert Gintis put it: "Elements of a political lexicon – such as the discourse of rights – do not…have essential meanings…. Making history is often a matter of making language. But discourses are more often borrowed or stolen than created de novo. Faced with a restricted political vocabulary, political actors appropriate and transform tools that even hostile forces have labored to develop." [5]
Once slavery ceased to exist in the U.S., free labor had no polar antithesis to give it luster by comparison, and it tended to become, at best, just a fact rather than something to be widely celebrated. Critics of wage labor as exploitation could pursue their critique, secure in the knowledge that the surface similarities of their position to that of a George Fitzhugh probably would no longer be flung in their faces. This liberation, so to speak, of the critics of industrial capitalism arguably counts as one of the Civil War’s less-noticed consequences.
P.s. I had intended this post to have a broader, less U.S.-centric focus, but that proved beyond my capacities at the moment.
----
Notes
1. Dennis H. Wrong, The Problem of Order (1994), p.32.
2. James M. McPherson, Battle Cry of Freedom (1988), p.197.
3. Eric Foner, The Fiery Trial (2010), pp.115-16.
4. Quoted in McPherson, p.198.
5. Samuel Bowles and Herbert Gintis, Democracy and Capitalism (1986), pp.161-62.
----
See also two books by Jonathan A. Glickstein: American Exceptionalism, American Anxiety: Wages, Competition, and Degraded Labor in the Antebellum United States (2002) and Concepts of Free Labor in Antebellum America (1991).
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