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Jason Hickel — A Letter To Steven Pinker (And Bill Gates For That Matter) About Global Poverty

Jason Hickel writes:

Dear Steven,

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Your argument is that neoliberal capitalism is responsible for driving the most substantial gains against poverty.  This claim is intellectually dishonest, and unsupported by facts.  Here’s why:

The vast majority of gains against poverty have happened in one region: East Asia.  As it happens, the economic success of China and the East Asian tigers – as scholars like Ha-Joon Chang and Robert Wade have long pointed out – is due not to the neoliberal markets that you espouse but rather state-led industrial policy, protectionism and regulation (the same measures that Western nations used to such great effect during their own period of industrial consolidation).  They liberalized, to be sure – but they did so gradually and on their own terms.

Not so for the rest of the global South.  Indeed, these policy options were systematically denied to them, and destroyed where they already existed.  From 1980 to 2000, the IMF and World Bank imposed brutal structural adjustment programs that did exactly the opposite: slashing tariffs, subsidies, social spending and capital controls while reversing land reforms and privatizing public assets – all in the face of massive public resistance.  During this period, the number of people in poverty outside China increased by 1.3 billion.  In fact, even the proportion of people living in poverty (to use your preferred method) increased, from 62% to 68%.  (For detailed economic data and references to the relevant literature, see Chapter 5 of The Divide).

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In other words, the imposition of neoliberal capitalism from 1980 to 2000 made the poverty rate worse, not better.

Since 2000, the most impressive gains against poverty (outside of East Asia) have come from Latin America, according to the World Bank, coinciding with a series of left-wing or social democratic governments that came to power across the continent.  Whatever one might say about these governments (I have my own critiques), this doesn’t sit very well with your neoliberal narrative.

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Trinity Colleagues Pay Tribute To Robert Neild, 1924-2018

Hashem Pesaran, Partha Dasgupta and Gregory Winter remember Robert Neild.

Dasgupta:

Robert Neild was the last surviving member of a triumvirate that shaped the intellectual climate of economics at Cambridge in the 1970s. That influence lasted for over two decades. Together with Brian Reddaway (Professor of Political Economy) and Wynne Godley (Director of the Department of Applied Economics), Robert encouraged an approach to economics that was in sharp contrast to the then growing attention given in the leading university departments of economics in the UK and USA to economic theory and econometrics. The latter approach drew on mathematical techniques not only because they enabled one to reach conclusions with clarity, but also because they allowed one to trace those conclusions to the underlying hypotheses and data on which the studies were based. In modern economics policy is often kept at a distance. In contrast, the approach that Robert favoured insisted on a tight and constant link between analysis and policy; so much so that the separation between analysis and policy was wafer-thin.

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Ashoka Mody: Kaldor’s Ghost Is Stalking The Eurozone

Ashoka Mody has done excellent historical work in his book Eurotragedy — A Drama in Nine Acts. Excerpt from his interview with Spiked, reminding us of the wonderful prediction of Nicky Kaldor from 1971:

spiked: When I’ve been to Italy recently I’m struck by the instances of anti-German grafitti. Do you think that one of the greatest ironies of this project of supposed economic and political integration is that it has actually fostered enmity among European nations, rather than unity?

Mody: As I said, Nicholas Kaldor predicted exactly that in 1971. He said that a single currency will amplify existing economic divergences, and, if it does that, it will deepen political divisions. He even quoted Abraham Lincoln: ‘A house divided against itself cannot stand.’ Kaldor’s ghost is stalking the Eurozone.

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Pierre Kohler And Francis Cripps — Do Trade And Investment (Agreements) Foster Development Or Inequality?

A recent UNCTAD/GDAE working paper. Abstract:

This paper proposes to revisit the debate on trade and investment agreements (TIAs), development and inequality, looking at the role of Global Value Chains (GVCs) and transnational corporations (TNCs). It first presents stylized facts about trade and investment (agreements), declining global economic growth and rising inequality under the latest round of globalization. It then provides a long-run perspective on the mixed blessings of external opening, summarizing some key contributions of the mainstream literature, which are converging with long-standing research findings of more heterodox economists, and the eroding consensus today. Based on this stock-taking, it takes a fresh critical look at the TIAs-GVCs-TNCs nexus and their impact. Using data on value-added in trade and new firm-level data from the consolidated financial statements of the top 2000 TNCs going back to 1995, it examines whether the fragmentation of production along GVCs led to positive structural change or rather stimulated unsustainable trends in extractive and FIRE sectors. It then turns to the role of TNC-driven GVCs as a vehicle for economic concentration. Finally, it presents evidence linking TIAs and their correlates to rising inequality. Key findings include the fact that the ratio of top 2000 TNCs profits over revenues increased by 58 percent between 1995 and 2015. Moreover, the rise in top 2000 TNCs profits accounts for 69 percent of the 2.5 percentage points decline in the global labour income share between 1995 and 2015, with the correlation coefficient between annual changes in both variables as high as 0.82. The paper concludes by calling for a less ideological policy debate on TIAs, which acknowledges the mixed blessings of external financial and trade opening, especially their negative distributional impact and destabilizing macro-financial feedback effects, which both call for policy intervention. As an alternative to short-sighted protectionism, it further discusses possible options for anticipating undesirable effects arising from TIAs (e.g. rising carbon emissions, economic instability, inequality, etc.) and addressing those in TIAs themselves.

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Jason Hickel Features On Citations Needed

The latest episode Neoliberal Optimism Industry of the podcast Citations Needed features Jason Hickel, who has done a lot of work to bust the narrative of the World Bank on poverty.

Excerpt:

Jason Hickel: So Gates is sort of the forefront of this aid narrative and the way that I see this as problematic is because it effectively ends up obscuring the real causes of the problems that are at stake. Right? So we’re all concerned about global poverty and human suffering, etcetera. But what’s really causing these problems? So the aid discourse makes it seem as though what’s needed is like little technocratic fixes here and there, some more malaria bed nets here and there, but it distracts our attention away from the fundamental structure of the international economy and you know, the rules that govern international trade and that’s really what needs to be addressed because effectively if you look into the way that that system operates, it’s effectively designed in such a way that facilitates the siphoning of wealth and cheap labor and resources from the South to the North.

I am not a fan of degrowth in the episode but the podcast is for an hour and worth your time. The title is the link to the audio and transcript. You can alternatively find the episode on iTunes.

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Angela Nagle — The Left Case Against Open Borders

Angela Nagle writing for American Affairs:

The destruction and abandonment of labor politics means that, at present, immigration issues can only play out within the framework of a culture war, fought entirely on moral grounds. In the heightened emotions of America’s public debate on migration, a simple moral and political dichotomy prevails. It is “right-wing” to be “against immigration” and “left-wing” to be “for immigration.” But the economics of migration tell a different story.

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Today’s well-intentioned activists have become the useful idiots of big business. With their adoption of “open borders” advocacy—and a fierce moral absolutism that regards any limit to migration as an unspeakable evil—any criticism of the exploitative system of mass migration is effectively dismissed as blasphemy. Even solidly leftist politicians, like Bernie Sanders in the United States and Jeremy Corbyn in the United Kingdom, are accused of “nativism” by critics if they recognize the legitimacy of borders or migration restriction at any point. This open borders radicalism ultimately benefits the elites within the most powerful countries in the world, further disempowers organized labor, robs the developing world of desperately needed professionals, and turns workers against workers.

[the title is the link]

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UNCTAD Trade And Development Report 2018

The United Nations 🇺🇳 Conference On Trade And Development, UNCTAD publishes a detailed trade and development report every year and this year’s is titled: Power, Platforms and The Free Trade Delusion.

It stressed how free trade and globalisation has led to protectionism and that although the latter is not the solution, free trade isn’t the alternative either. The report details how free trade has led to rising power for a small number of corporations.

From the Overview:

Arguably the greatest damage of all has been dwindling trust in the system. Here economists have no excuses, at least if they have bothered to read Adam Smith. In any system claiming to play by rules, perceptions of rigging are guaranteed eventually to undermine its legitimacy. The sense that those who caused the crisis not only got away with it but profited from it has been a lingering source of discontent since 2008; and that distrust has now infected the political institutions that tie citizens, communities and countries together, at the national, regional and international levels.

The paradox of twenty-first century globalization is that – despite an endless stream of talk about its flexibility, efficiency and competitiveness – advanced and developing economies are becoming increasingly brittle, sluggish and fractured. As inequality continues to rise and indebtedness mounts, with financial chicanery back in the economic driving seat and political systems drained of trust, what could possibly go wrong?

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IMF Paper On How Export Sophistication Is The Determinant Of Growth

Missed this working paper Sharp Instrument: A Stab At Identifying The Causes Of Economic Growth from May 2018 from three IMF authors with an impressive conclusion.

From the abstract

We find that export sophistication is the only robust determinant of growth among standard growth determinants such as human capital, trade, financial development, and institutions. Our results suggest that other growth determinants may be important to the extent they help improve export sophistication.

Note, not only is it saying that it is robust but that other factors are important as long as they improve export sophistication.

Cambridge Keynesians were clear on this. Here’s Wynne Godley in a 1993 article Time, Increasing Returns And Institutions In Macroeconomics, in Market And Institutions In Economic Development: Essays In Honour Of Paolo Sylos Labini, page 79:

… In the long period it will be the success or failure of  corporations, with or without active help from governments, to compete in world markets which will govern the rise and fall of nations.

and Nicholas Kaldor in Causes Of Growth And Stagnation In The World Economy, first published in 1996 and based on lectures given in 1984:

The growth of a country’s exports thus appears to be the most important factor in determining its rate of progress, and this depends on the outcome of the efforts of its producers to seek out potential markets and to adapt their product structure accordingly. The income elasticity of foreign countries for a particular country’s products is mainly determined by the innovative ability and the adaptive capacity of its manufacturers. In the industrially developed countries, high income elasticities for exports and low income elasticities for imports frequently go together, and they both reflect successful leadership in product development. Technical progress is a continuous process and it largely takes the form of the development and marketing of new products which provide a new and preferable way of satisfying some existing want. Such new products, if successful, gradually replace previously existing products which serve the same needs, and in the course of this process of replacement, the demand for the new product increases out of all proportion to the general increase in demand resulting from economic growth itself. Hence the most successful exporters are able to achieve increasing penetration, both in foreign markets and in home markets, because their products go to replace existing products.

[italics: mine]

The IMF paper is surprising, since the IMF believes in free trade in which market mechanisms work to achieve convergence in fortunes of nations, so exports is hardly important.

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Jayati Ghosh — The Real Problem With Free Trade

Jayati Ghosh writing for Project Syndicate: 

Globalization’s detractors are right that free trade has created serious imbalances. But a trade war completely misses the point. The problem is not that free trade has led to too much global competition, but rather that it has enabled a few companies to secure monopolies or near-monopolies. This has given rise to massive inequalities, blatant rent-seeking, and predatory behavior. Only by addressing these trends can the benefits of trade be increased and equitably shared.

She also reminds of the forthcoming UNCTAD report which discusses this. So watch out!