Tagged: international policies

Asia’s next revolution

The Economist devotes this week’s cover, and its main leader, to a story about the expansion of social protection in Asia. One of the main unsung tales of the last ten years has been the massive development of social protection in developing economies like South Africa, Mexico, India, Indonesia, China and Brazil – Barrientos and Hulme call it a “quiet revolution”. The Economist article focuses mainly on health care, and Asia has come late to the party. The Economist is probably right to argue that “every country that can afford to build a welfare state will come under mounting pressure to do so.” But then, I would say that: I have argued the case in The Welfare State (Sage, 2000) and some other papers.

The Economist’s leader does, however, make a common mistake. They write: “Europe’s welfare states began as basic safety nets. But over time they turned into cushions.” They didn’t begin that way, and they haven’t finished that way either. The origins of many welfare states lie in the development of solidarity and the mutuals; the state became involved much later. See Peter Baldwin’s book, The politics of social solidarity, Cambridge University Press 1990. The extension of health care, which they focus on, is essential to the maintenance of any modern labour force.

It was the English Poor Law that began as a safety net. The accusations that the British system had become excessively generous can be dated back to the criticisms of the monasteries before the Reformation, but it became a regular part of complaints about welfare from the mid-18th century onwards; it continued in the accusations that workhouses had become ‘pauper places’; and it continues now in the assertion, contrary to all the evidence, of generations who have ‘never worked’. The system is neither generous at an individual level, nor collectively unaffordable. There is extensive evidence of the relationship of welfare to economic performance: there isn’t one. See A B Atkinson, 1995, The welfare state and economic performance, in Incomes and the welfare state, Cambridge University Press, and the entry on my website.

Poverty, democratic governance and poverty reduction strategies

I have given a presentation today at an International Symposium in Istanbul, Turkey, organised by Fatih Sultan Mehmet Vakif University and Sosyal Politikalar Dernegi.  The argument was this:

The Poverty Reduction Strategy Papers have become a significant experiment in world governance.  Poverty is a complex, multidimensional phenomenon, and responses to poverty need to be adapt to a wide range of circumstances.  In the belief that deliberative democracy is the route to prosperity, international organisations have directed governments around the world to undertake a process of strategic planning, based on participative development and negotiation of policy with stakeholders. However, the emphasis in the PRSPs seems to have fallen more on the methods they use than the substance of the strategies.  Democracy is not valued only for its process; it matters what it achieves.   If PRSPs are to help the poor, they need to extend their focus, moving beyond procedural issues towards substantive policies that stand to benefit the poor.

Here is a copy of the slides and a copy of the paper.

Symposium in Istanbul

Good news from Africa

This table is drawn from a recent study looking at the fall of mortality in Kenya. It points to a general trend: across Africa, more children are surviving.

Under 5 mortality (per 1000 live births)
Previous studies (1998-2007)

Most recent study (2005-2009)
Benin

160 (2001)

125 (2006)
Ethiopia

166 (2000)

124 (2005)
Ghana

111 (2003)

80 (2008)
Kenya

115 (2003)

74 (2009)
Liberia

110 (2007)

114 (2009)
Madagascar

94 (2004)

72 (2009)
Mali

229 (2001)

191 (2006)
Namibia

62 (2000)

69 (2007)
Niger

274 (1998)

198 (2006)
Nigeria

201 (2003)

157 (2008)
Rwanda

152 (2005)

103 (2008)
Senegal

121 (2005)

85 (2009)
Tanzania

147 (1999)

112 (2005)
Uganda

152 (2001)

128 (2006)
Zambia

168 (2002)

119 (2007)
Zimbabwe

102 (1999)

83 (2006)

Stephen Radelet, in Emerging Africa?, claims that the factors behind this improvement are

  • “more democratic and accountable governments
  • more sensible economic policies,
  • the end of the debt crisis and major changes in relationships with the international community
  • new technologies that are creating new opportunities for business and political accountability, and
  • a new generation of policymakers, activists, and business leaders.”

There are problems – such as the recent (hopefully short term) increase in mortality in Liberia. But the trend is clear, and it is very good news indeed – especially for those who are concerned about population increase, because there is a clear and strong association between infant survival and the number of children a woman must have.

Flat tax in Kazakhstan

Following other work on tax, I have just been listening to a student paper about the flat tax in Kazakhstan.  Most earned income is subject to a flat tax of 10%, one of the lowest rates in the world, but the incomes of some groups are exempt.  They include soldiers, police, veterans of the second world war, fire services, some disabled people and their families, the victims of a nuclear accident and lawyers.

The Greek tragedy

The continuing crisis in Greece has been presented in questionable terms. First, we have been told that the alternative to ‘austerity’ is a disorderly default. Defaults do not have to be disorderly. New York and Cleveland, both members of a different currency union, have defaulted on their debts in the past; the dollar was unharmed, and they were not forced to adopt a new currency.

Second, we are told that Greece will have to leave the Euro. Greece cannot be forced not to use the Euro. Money is what people accept as a unit of exchange, and if people in Greece opt to trade in Euros, they cannot be stopped. Some countries use other countries’ currencies informally; some (like Ecuador, which uses the US dollar) do it formally. Germany might have more success in insisting that Greece should use a different currency from them if Germany itself was to leave the Euro, but that seems unlikely.

The economic policy that the EU, and Germany and France in particular, are forcing on Greece has led to a major depression – and the problem does lie in that policy, not in Greece’s deficit. Austerity is the worst possible answer to an economic depression; and austerity which is targeted on the poor is indefensible morally as well as economically. If France and Germany want to ensure that Greece does not default, to protect their own banks, they need to take steps to shore up the Greek economy. At present, they are doing the opposite.

Limits to growth, again

More than 200 years ago, Malthus argued that the world was going to run out of resources, because population inevitably increased faster than our ability to provide for it.  The argument has been disproved time and again, but its adherents  remain convinced that it must be true sooner or later.  It doesn’t seem to matter how often the arguments are shot down in flames – there is always someone ready to pick up the standard.  This week’s New Scientist has four pages praising The Limits to Growth, the book that argued that come what may, we were going to run out of the things we need.  Part of the problem is the flakiness of the predictions – the birth rate has not followed the projected path, and nor will most of the consequent projections.

The NS article comments that economists claimed that “Limits underestimated the power of the technological fixes humans would surely invent.”   If you can’t counter an argument, misrepresent it.  The basic objection from economists is not that new technologies will inevitably appear – even if they might.  The point is that many alternative technologies  already exist, and costs are relative. If a resource becomes scarce, it will cost more, and other technologies which are initially too expensive become  preferable.

The fundamental economic mechanism is one which pushes people to use substitutes. As coal has become more expensive, options for producing energy which once seemed unrealistic – nuclear power, bio-fuels – start to be feasible.  As wood has become more expensive, plastics have expanded.  If food production through conventional methods becomes unsustainable, there is a range of viable technologies, such as hydroponics, which stand in readiness.  There is, certainly, an incentive to develop new technologies, such as electric cars, water purifiers or solar power, and many will be developed, but that is not the central mechanism. We will never use the last piece of coal, the last drop of oil, or the last lump of copper; long before then, it will cost too much.  The argument that we are about to run out of resources is just plain wrong.

Population and resources

Thomas Malthus, at the end of the eighteenth century, argued that increasing population must inevitably lead to disaster. We were going to run out of food. Malthus was wrong, but that has not stopped generations of neo-Malthusians from claiming that it was going to be true next time. In the 1970s, The limits to growth claimed that the world was going to run out of energy. It isn’t. What happens in an economic market is that as an item grows scarce, it becomes more expensive. As some sources of energy will become more expensive, we will be forced to switch to other sources. There is no point at which the last drop of petrol will ever be poured into the last car, while other drivers look on in fury. This is just not the way that the economy works.

The other side of the Malthusian argument is about population. Population does not grow exponentially: the birth rate falls as the economy develops. The reasons are complex. Part of the explanation is the changing role of women, who delay childbearing when they have options for education and employment. Some reduction may be attributed to contraception; some, perhaps, to the effect of urbanisation on the costs of raising a child. But a significant element must be the fall that most countries have seen in infant mortality over the course of the last forty years. The association is clear and strong (try this link, which opens a new window): once parents see that children have a realistic chance of surviving to adulthood, the number of children they have drops markedly. As an Indian minister once commented, “The best contraceptive is development”.

The American ideology

Somehow or other, people in the US seem to have convinced themselves that they are individualists. Everyone is out for themselves, people have no responsibility to each other, and everything that is social is immoral. Like many myths, this view of the world has the capacity to become self-fulfilling. The quality of public life in the US – the physical structure of towns, the condition of public roads, the absence of transport – is appalling. The world looked on with horror when, after Hurricane Katrina, the world’s richest nation abandoned its poor, its disadvantaged and dispossessed and blamed them for not making their own arrangements.

There is, though, another USA. There is a USA where people live in families and neighborhoods, where people go to school with other people, where they worship collectively and give to charity. The word for this kind of behaviour, in Europe, is “solidarity”. People are in relationships of solidarity when they accept responsibility for each other. There are many Americans who are not part of patterns of solidarity – who are excluded. But most are not. The US seem torn between an image of its itself as a frontier populated by isolated individuals, and the reality that people experience day to day.

Most of the people I have talked to from the US seem to fall immediately into talking about state action. People are either “liberal”, by which critics seem to mean “interventionist” (the term in the UK means the opposite), or “conservative”. These positions are mainly defined in terms of how much state intervention there should be. The test for America is not how to build a welfare state, or even how to develop social welfare by other means. It is how to use the solidarities which exist effectively, for the benefit of its citizens.

The European social model has grown as a way of developing the links between disparate communities and traditions, and it might just be extendable to another rich, highly complex, culturally diverse, nation. The model is based on three core elements. The first is the development of solidarity – developing the things that tie people together, like family, community and culture. The second is the extension of solidarity, making sure that people have the opportunity to be part of solidaristic networks. And the third is the process of social inclusion, making sure that people who are excluded are brought into the net through a combination of obligation and rights. The idea of an “inclusive America” – a phrase once used by Pope John Paul II – has been raised by some religious and racial groups; but if anyone, either Democrat or Republican, was talking about this in the recent elections, I missed it.

Climate change

The Stern review on the economics of climate change presents an argument for preventative action, intended to stop the world from getting warmer. I don’t have the scientific background to judge whether or not the arguments about global warming are justified, or whether the predictions in the report are accurate. But I can tell that the proposals in the Stern report don’t follow from the analysis of the problems.

Assuming that Stern is right about the problems, the first question to ask is whether mitigation will work. The analysis in the report depends on the idea that there is a critical range of carbon emissions. If carbon emissions continue at more than that level, the situation will continue to worsen. If they reach that range, they might stop. I say “might”, because that is as far as Stern is ready to go. The estimates he cites suggest a probability of up to one in five that even if the reduction falls well below that range, the global temperature will still increase by 3 degrees – enough, according to the report, to displace 150 million people, and to put up to 500 million people at risk of starvation. What we are being offered, then, is a preventative approach that may not have any effect at all.

The second problem is that even if prevention is possible, it requires the cooperation of every nation. Stern is clear that any measure that fails to engage most of the world’s economies will fail to mitigate global warming. To justify any major investment on the part of a single country, we need to know that that nation’s contribution would make a difference proportionate to its expenditure, or at least some difference. There is no indication that it would.

The third problem is that the solution that Stern proposes – a global market for carbon emissions – could make things worse. Countries in the process of development will be fettered; they can develop under constraints, or they can sell their rights, which offers a short-term return but traps them in dependency. The main way out of the dilemma will be to develop nuclear power – a paradigmatic case of the West willing the end while denying developing countries the means. Stern’s world will be underdeveloped, unjust, and dangerously unstable.

Stern’s central argument rests on the idea that prevention, or “mitigation”, of climate change is possible, and cheaper than “adaptation”, or trying to deal with the consequences. The cost of mitigation is about 1% of GDP per annum over fifty years. There is no real attempt to assess the cost of adaptation, and because Stern says very little about the process, it is difficult to know what the comparison is based on. Two criticisms have been made of Stern. One is that he does not discount adequately – he gives far too much weight to an uncertain future, counting future generations as worth nearly the same as present generations. Because future generations always outnumber the present, this kind of argument can always be used to show that prevention of unpredictable, remote events is worthwhile. The second problem is that he gives far too little weight to the poor, both now and in the future. Stern does accept that the poorest people will be hit first, and hit hardest. If Stern is right, there are major issues looming relating to water supply, agricultural production and the migration of 200 million deprived people. I do not know how much they will cost either, but a forty or fifty year programme of development, resettlement and relief could do a great deal to reduce the harm that the report foresees, and if the numbers of people are those outlined in the report, the money earmarked by Stern for “mitigation” should be more than enough to lift those people out of poverty. It might be prudent to start paying a little more attention to those issues now.

Further note, 1st April 2014:  I returned to this blog entry  following the publication of the IPCC’s draft report, snappily named WGII AR5.   I’m pleased to say that the IPCC have started, at last, to take ‘adaptation’ seriously.