Real news and fake scandal

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A great deal of fuss – shock-horror fuss – is being made of the revelation this morning that the combined wealth of the eight richest people in the world is as much as the assets of the poorest 3.6 billion people in the world. This is according to the charity Oxfam.

What does this mean in real terms ? Probably relatively little of moral consequence. In moral terms what really matters is what way any or all of those eight are living their lives, what they do with their wealth – good, bad or indifferent. When someone gives us that information we will then be able to point or wag our fingers at these plutocrats – if that is want we feel obliged to do.

Who owns what is of relative importance. Surely what is of moral or even serious economic significance is what use we make of what we own. We have, hopefully, got over the silly worry of who buys into what industry and whether ownership of British-based car manufacturing is in the hands of Indians, Germans or Chinese.

It has proved far more beneficial to workers in Britain that the industry in which they work is run and managed efficiently and that they have good jobs as a result. With globalization there is obviously a certain loss of local political control and a certain taint of colonization. But by and large the benefits which have accrued to ordinary people through global competition far outweigh the disadvantages.

The reality is that the number of people living on less than $1.25 per day has decreased dramatically in the past three decades, from half the citizens in the developing world in 1981 to 21 percent in 2010, despite a 59 percent increase in the developing world’s population.

This does not deny the fact, as a recent World Bank analysis has pointed out, that extreme poverty is still the lot of 1.2 billion people on the planet. Despite all the progress made, Sub-Saharan Africa still accounts for more than one-third of the world’s extreme poor. But beware of false or pseudo scandal. A silly response to this real scandal would be to point the finger at these eight billionaires or trillionaires.

Equally silly would be the response which patronizingly wags the finger at the populations of Sub-Saharan Africa and tell them that they can solve their poverty by having fewer children. We have yet to see the consequences which that kind of a solution to poverty is going to have in China. The signs are not good.

Five years ago Thomas Piketty’s book, Capital, took the world by storm. But really it was a storm in a teacup. It is not much talked about now. It was in fact little more that a reworking of Karl Marx, the original disaster-economist, who can probably blamed for bringing more misery to the world than anyone in history – even Genghis Kahn.

After the initial ‘excitement’, criticism of the book began to bite and it was suspected that Piketty’s policy recommendations were more ideologically than economically driven and could do more harm than good. Mr Piketty’s focus on soaking the rich smacks of socialist ideology, not scholarship. That may explain why “Capital” is a bestseller. But it is a poor blueprint for action. That was a verdict in The Economist.

Hopefully the shock and awe of the current ‘scandal’ of the super-rich will not give his theory a new lease of life.

Calling All Grumbletonians

Are you a “grumbletonian”? The word – if you can call it that – looks new but is in fact at least 200 years old. You can check it out in Francis Grose’s 1785 Classical Dictionary of the Vulgar Tongue. It describes, obviously enough, a person who is constantly dissatisfied with life and everything else. We would all rather not be described as such but in the present climate, national or international, it is hard not to succumb to grumbletonianism.

But the trouble with this condition is that it produces a severe partial blindness – we see only the bad and the ugly and miss out on the good. Our current preoccupation with the Great Recession and the political turmoil it has brought in its wake has infected too many of us with this virus. For example, if we were asked to give a summary of the economic developments in the world over the past five or six years what would we come up with? Or if asked to compile the top ten headlines of world news over the same period what would the list look like? It would be replete with economic chaos stories, power-shifts deemed to be of an ominous kind, debt and dropping standards of living. Certainly, there would seem to be very little to cheer about.

But in fact there is a great deal to cheer about. The dramatic changes of the past few years have not all been bad. Indeed, perhaps, the dominant and potentially more permanent change has been very good news indeed. Two fellows of the Brookings Institution in Washington, Laurence Chandy and Geoffrey Gertz, in a recent article in the Financial Times, have drawn our attention to one very good piece of news. In the years between 2005 and 2010 more people have been lifted out of poverty than has ever been done before in the history of the world, over such a short period.

Poverty has been defined by the United Nations and the World Bank as the condition of those people who are living on less than $1.25 a day. In 2005 that left a total of 1.37 billion people across the world below the poverty line – about one third of them in China and about 208 million in India. The World Bank has not updated its figures since then but the Brookings Institution has now produced a report which updates the picture and the change is, to put it mildly, very encouraging.

Their estimate is that between 2005 and 2010, nearly half a billion people escaped extreme hardship, as the total number of the world’s poor fell to 878 million people. “Never before in history”, Chandry and Gertz maintain, “have so many people been lifted out of poverty in such a short period. The U.N. Millennium Development Goals established the target of halving the rate of global poverty between 1990 and 2015; this was probably achieved by 2008, some seven years ahead of schedule. Moreover, using forecasts of per capita consumption growth, we predict that by 2015, fewer than 600 million people will remain poor. At that point, the 1990 poverty rate will have been halved and then halved again.”

Now, should we not call that progress?

This decline in poverty is universal. It is happening in all the world’s regions and most of its countries, though at varying speeds. The emerging markets of Asia are recording the greatest successes; the two regional giants, China and India, are likely to account for three-quarters of the global reduction between 2005 and 2015. Over this period, Asia’s share of the world’s poor is anticipated to fall from two-thirds to one-third, while Africa’s share is expected to rise to nearly 60 percent. Yet Africa, too, is making advances; they estimate that in 2008 its poverty rate dropped below the 50 percent mark for the first time. By 2015, African poverty is projected to fall below 40 percent, a feat China did not achieve until the mid-1990s.

“These findings are likely to surprise many, but they shouldn’t,” they conclude. “We know that growth lies at the heart of poverty reduction. As the growth of developing countries took off in the new millennium, epitomized by the rise of emerging markets, a massive drop in poverty was only to be expected.

“With few exceptions, however, those who care about global development have been slow to catch on to this story. We hear far more about the 64 million people held back in poverty because of the Great Recession than we do about the hundreds of millions who escaped impoverishment over the past six years. While there is good reason to focus public attention on the need to support those still stuck below the poverty line, there is also reason to celebrate successes and to ensure that policy debates are grounded in reality.”

If all this is a by-product – in part anyway – of emerging economies unsettling the global status quo, and consequent power-shifts, perhaps we should be happy to set aside our silly and self-centred worries about loss of hegemony and start cheering again. So, let us all ease up on the grumbling. There is some really good news out there .