Here are some
notes on the environment, as discussion fodder beginning Monday, April 22:
In his new book of this title (Cambridge 2001), Bjorn
Lomborg of Denmark begins with a quotation from Julian Simon, Professor of
Business Management at the University of Maryland, who died in 1998 (just after
I had met him):
“This is my long-run forecast in brief:
The material conditions of life will continue to get
better for most people, most of the time, indefinitely. Within a century or
two, all nations and most of humanity will be at or above today’s Western
living standard. I also speculate, however, that many people will continue to think
and say that the conditions of life are getting worse.”
Lomborg was an environmentalist, a member of Greenpeace.
Then he met Julian Simon, and - convinced that Simon was wrong - he parceled
out Simon’s many statements about the environment to his students, asking them
to do the research to prove Simon wrong. Instead, the students reported that
they had found Simon correct in case after case. So Lomborg became skeptical
about his former beliefs. As a scientist, he makes up his mind on the basis of
evidence (not hearsay or ideology), and he will change his mind if the evidence
shows he was wrong. Not many of us will do that.
“These environmentalists, led by such veterans as Paul Ehrlich of Stanford University, and Lester Brown of the Worldwatch Institute, have developed a sort of “litany” of four big environmental fears:
• Natural resources are running out.
• The population is ever growing, leaving less and less to eat.
• Species are becoming extinct in vast numbers: forests are
disappearing and fish stocks are collapsing.
• The planet's air and water are becoming ever more polluted.
Human activity is thus defiling the earth, and humanity may end up
killing itself in the process.
“The trouble is, the evidence does not back up this litany.
First, energy and other natural resources have become more abundant, not less
so since the Club of Rome published ‘The Limits to Growth’ in 1972. Second,
more food is now produced per head of the world's population than at any time
in history. Fewer people are starving. Third, although species are indeed
becoming extinct, only about 0.7% of them are expected to disappear in the next
50 years, not 25-50%, as has so often been predicted. And finally, most forms
of environmental pollution either appear to have been exaggerated, or are
transient—associated with the early phases of industrialisation and therefore
best cured not by restricting economic growth, but by accelerating it. One form
of pollution—the release of greenhouse gases that causes global warming—does
appear to be a long-term phenomenon, but its total impact is unlikely to pose a
devastating problem for the future of humanity. A bigger problem may well turn
out to be an inappropriate response to it.” (END OF QUOTATION FROM THE
ECONOMIST).
Furthermore, all the trash that the
entire world will generate over the next century would (according to Lomborg’s
estimates) fit within a landfill eighteen miles square and 100 feet deep. In
1997, the Worldwide Fund for Nature stated that two-thirds of the world's
forests are lost forever. The truth is nearer 20%, and much of this occurred in
Europe during the first millennium CE. The land covered by forests has actually
increased since World War II.
For decades we have been concerned with overpopulation. Now
we discover that Europe, Russia, Japan, and other countries are deeply
disturbed about loss of population. Population is growing in the Third World,
where however the growth rate is decelerating and is expected to reach zero by
2050.
The Washington Post is enthusiastic about Lomborg.
Here is a quotation (“Book World,” 10/21/01):
Why do many Americans continue to believe the litany? Maybe the story of the five monkeys will help us understand that. Start with a cage containing five monkeys.
Inside the cage, hang a banana on a string and place a set of stairs under it. Before long, a monkey will go to the stairs and start to climb towards the banana. As soon as he touches the stairs, spray all of the other monkeys with cold water.
After a while, another monkey makes an attempt with the same result: all the other monkeys are sprayed with cold water. Pretty soon, when another monkey tries to climb the stairs, the other monkeys will try to prevent it. Now, put away the cold water. Remove one monkey from the cage andreplace it with a new one. The new monkey sees the banana and wants to climb the stairs. To his surprise and horror, all of the other monkeys attack him.
After another attempt and attack, he knows that if he tries
to climb the stairs, he will be assaulted. Next, remove another of the original
five monkeys and replace it with a new one. The newcomer goes to the stairs and
is attacked. The previousnewcomer takes part in the punishment with enthusiasm!
Likewise, replace a third original monkey with a new one, then a fourth, then
the fifth. Every time the newest monkey takes to the stairs, he is attacked.
Most of the monkeys that are beating him have no idea why they were not permitted to climb the stairs
or why they are participating in the beating of the newest monkey. After
replacing all the original monkeys, none of the remaining monkeys have ever
been sprayed with cold water. Nevertheless, no monkey everagain approaches the
stairs to try for the banana. Why not? Because as far as they know that's the
way it's always been done around here. And that's how company policy begins...
Do you believe that story? Would you tell it to someone else
as true? I asked my source if the experiment had been ever done, and he did not
know. So far as he knew, it was just a story that makes a lot of sense. If
repeated enough times, soon “everybody” will believe it, and it will become
part of the culture. Is that the way popular acceptance of the litany came
about?
If you had lived in Caesar’s time (d. 44 BCE), would you have believed in Roman gods because “everybody” did? (Actually, not everybody did).
If you had lived in France in 1572 (Bartholomew Massacre), would you have believed that everyone had to adhere to the same religion, or the nation would fall apart?
If you had lived in Italy in Galileo’s time (1564-1642), would you have believed the sun moves around the earth?
If you had lived in Salem, MA, in 1692, would you have believed in witchcraft?
So, what’s different about 2001?
The Skeptical Environmentalist may be obtained (paperback) from amazon.com for $19.56 plus shipping. This is not a commercial.
_____________________________________________________________________________________________________
Global warming is so technical (and I am not a techie) and
the experts disagree, so that I feel like the selection committee for the
Little Minister in J.M. Barrie’s book of the same name. One member was so
impressed by whoever was called for a visiting sermon that he voted for the one
selected only because he was the latest to speak. I find myself agreeing with
whoever last argued global warming, pro or con.
I believe that in a subject as important as this one, a scientist should be able to explain his or her position to a lay audience in nontechnical terms. I have been reading all the scientific articles I could find and understand; most I could not find or understand. I have consulted as many scientists as I could. I had luncheon with Kevin Tremberth, one of the top scientists at the National Center for Atmospheric Research (NCAR, fortunately located in Boulder), and have spoken at length with Jack Herring of Boulder Meeting, another NCAR scientist, and Roger Conant, a scientist friend of mine.
From all of that, here is what I think. (1) The earth is
warming, but how much is anthropogenic (caused by human activity) and how much
is natural cycle I do not know. Neither do the scientists. (2) Most of the
evidence of anthropogenic warming resides in mathematical models. As an
economist, I am familiar with mathematical models, and I know how wrong they
can be. (3) Scientists have measured warming at different times, at different
parts of the earth, at different heights above the surface, and at different
depths of the ocean. The measurements do not all agree. (4) Those scientists
who argue that global warming will be small say that the models used to prove
its occurrence were fine-tuned: if they did not come out the way the
model-maker expected, some of the inputs would be adjusted to conform.
(5) The majority of scientists around the world, including
many at NCAR, believe anthropogenic is a principal force. (6) I never accept a
position just because the majority believes it. (At one time the majority of
scientists thought the sun revolved around the earth.) (7) The media have given
much more exposure to scientists who tout anthropogenic warming than to those
not believing in it. Why? I think because it makes better copy. (8) I’m
strongly influenced by Walter Roberts (died 1990), founder of NCAR and a
personal friend, who told me that global warming is occurring and we cannot
stop it. We should be more concerned about what to do about it than to avert
it, he said.
Richard Lindzen, the Alfred Sloan Professor of Meteorology
at MIT and the principal proponent that global warming will be small, is a
friend of a friend of mine. He reports (through my friend) that his principal
evidence is that the temperature in the stratosphere has not changed. While
scientists who emphasize anthropogenic warming say it is caused by increased
carbon dioxide (the principal greenhouse gas outside of water), Lindzen argues
that the increased warming causes ocean evaporation, and the eventual effect of
the increased water vapor is a cooling that offsets the warming. He has
switched positions on this, and then switched back again, each time with new
evidence.
Lindzen, a member of the Inter-Governmental Panel on
Climate Change, wrote the following about press reports (Wall Street
Journal, 6/1/01):
“Last week the National Academy of Sciences released a report on climate change, prepared in response to a request from the White House, that was depicted in the press as an implicit endorsement of the Kyoto Protocol. CNN's Michelle Mitchell was typical of the coverage when she declared that the report represented "a unanimous decision that global warming is real, is getting worse, and is due to man. There is no wiggle room." As one of 11 scientists who prepared the report, I can state that this is simply untrue. . .
“Our primary conclusion was that despite some knowledge
and agreement, the science is by no means settled. We are quite confident (1)
that global mean temperature is about 0.5 degrees Celsius higher than it was a
century ago; (2) that atmospheric levels of carbon dioxide have risen over the
past two centuries; and (3) that carbon dioxide is a greenhouse gas whose
increase is likely to warm the earth (one of many, the most important being
water vapor and clouds). One reason for uncertainty is that, as the report
states, the climate is always changing; change is the norm. Two centuries ago,
much of the Northern Hemisphere was emerging from a little ice age. A
millennium ago, during the Middle Ages, the same region was in a warm period.
Thirty years ago, we were concerned with global cooling. Distinguishing the
small recent changes in global mean temperature from the natural variability,
which is unknown, is not a trivial task. . .
“We simply do not know what relation, if any, exists
between global climate changes and water vapor, clouds, storms, hurricanes, and
other factors, including regional climate changes, which are generally much
larger than global changes and not correlated with them. Nor do we know how to
predict changes in greenhouse gases. This is because we cannot forecast
economic and technological change over the next century, and also because there
are many man-made substances whose properties and levels are not well known,
but which could be comparable in importance to carbon dioxide. What we do know
is that a doubling of carbon dioxide by itself would produce only a modest
temperature increase of one degree Celsius. Larger projected increases depend
on "amplification" of the carbon dioxide by more important, but
poorly modeled, greenhouse gases, clouds and water vapor.
“My own view, consistent with the panel's work, is that
the Kyoto Protocol would not result in a substantial reduction in global
warming. Given the difficulties in significantly limiting levels of atmospheric
carbon dioxide, a more effective policy might well focus on other greenhouse
substances whose potential for reducing global warming in a short time may be
greater.” (END OF LINDZEN QUOTATION).
Lindzen is but one of many scientists who have criticized
the mathematical models. In “The Human Impact on Climate,” Scientific
American 281(6):100-5, Karl and Tremberth open with "How much of a
disruption do we cause?The much-awaited answer could be ours by 2050, but only
if nations of the world commit to long-term climate monitoring now."
As Lindzen says, all scientists agree that the earth has gone through natural warming and cooling cycles. Kevin Keigwin, an oceanographer at Woods Hole (MA) observatory, prepared a 3,000 year record of the temperatures of the Sargasso Sea “through analyzing thermally dependent oxygen isotopes in fossils on the ocean floor. He discovered that temperatures a thousand years ago . . . were two degrees Celsius warmer than today’s. Roughly confirming this result are historical records - the verdancy of Greenland at the time of the Vikings, . . .” (from The American Spectator, May 2001). During the last few centuries preceding the birth of Christ annual temperatures began to decline. The two succeeding millennia in the AD period have seen temperatures substantially lower than the two preceding millennia, again with considerable variation.During this latter period the decline bottomed out roughly between AD 500 and 700. They then rose again reaching a high between 900 and 1200 AD. At the end of the 14th Century temperatures again began to decline. By the beginning of the 16th Century this change started to be noted in writings of the time. The period of this ‘Little Ice Age’ lasted well into the 18th Century. By the 19th Century, things started to warm again, and have been doing so ever since, with considerable short term variation, of course, but have never approached the temperatures prevalent in ancient times The causes of these changes have nothing to do with the burning of fossil fuels.
The Harvard-Smithsonian Center for Astrophysics has asserted that the increase in greenhouse gases has been spread over the last century and most of the small earth temperature rises since 1880 occurred before gases from human activity were being emitted. ‘The eco-system itself dwarfs human activity in generating or absorbing carbon dioxide.’ The eleven-year sunspot cycle has been blamed by some scientists. Sallie Balliunas, an astrophysicist with the Harvard-Smithsonian Center, and her co-workers studied records of the past 120 years and found the Sun responsible for much of the Earth’s temperature shifts. Charles Harper, planetary scientist at Harvard, criticized the inter-governmental report for being based more on deficient computer models than on ground-based temperatures during the period in which greenhouse gases were mainly omitted. (Quoted from my book, The Moral Economy, p. 63.)
In The Skeptical Environmentalist, Bjorn Lomborg reports that “a recent Atmosphere-Ocean General Circulation Model showed that the increase in direct solar irradiation over the past 30 years is responsible for about 40 percent of the observed global warming” (p. 276), but he also notes that “the connection between temperature and the sunspot cycle seems to have deteriorated during the last 10-30 years . . . Most likely, we are instead seeing an increasing signal, probably from greenhouse gases like CO-2. Such a find exactly underscores that neither solar variation nor greenhouse gases can alone explain the entire temperature record” (p. 278).
Also, Lean & Rind (Journal of Climate,11,1998,3069) show that while “solar radiation changes may have been the predominant climate forcing during the seventeenth and eighteenth centuries, . . . according to simple linear parameterization of surface temperature anomalies and solar irradiance based on this preindustrial relationship, less than one third of the earth's's surface warming since 1970 is attributable to changes in solar radiation.''
In “The Coming Climate,” in Scientific American (May 1997), Karl, Nevills, and Gregory spend many pages on the inadequacies of mathematical models predicting that climate change is caused by global emissions of greenhouse gases, aerosols, and other relevant agents. Yet they conclude that these must be watched as probable causes.
In his book, The Skeptical Enviromentalist, Bjorn Lomborg writes (p. 317): “Temperatures have increased over 0.6C over the past century, and it is unlikely that this is not in part due to an anthropogenic greenhouse effect, although the impression of a dramatic divergence from previous centuries is surely misleading.” He argues that fighting the warming earth would be enormously expensive, and we would better spend those trillions of dollars in adjusting to the change, as generations in the past have always had to do, but in a less technological world.
The chief difference between scientists and economists seems to be that scientists do not calculate the costs of whatever action they propose, while economists (like me) often do not understand the science. So, where does this leave us?
We must indeed be concerned about anthropogenic global warming, but we should calculate the costs and benefits of trying to stop it and compare them with the costs and benefits of not doing so. A benefit of trying to stop it would be, “if we are totally successful the climate will warm only to the extent that nature determines.” The cost of doing that would be “what all the people of the earth must suffer to make it happen.” That could include a much lesser life style than we are accustomed, as well as slowing the growth of the poorest of the world. There are also costs and benefits of not stopping the global warming, which I leave to your imagination.
In each calculation, we must take account of the probability that whatever we propose or think would indeed occur. (We should not pay a high cost to prevent something that is very unlikely, say billions of dollars to ward off a meteor.)
We should also consider the costs versus benefits of doing it part way. While most governments have agreed to the Kyoto protocol (except the United States), they have not put it into effect, and I am dubious that anyone will. A benefit would not be that it would stop global warming, but that it would delay it by a short period (some scientists say no more than seven years). We may also consider that the costs would be so high that, for political reasons, they would never realistically be paid. Should we devote our efforts to fighting this recalcitrance, or to adapting to the circumstance, or part one and part the other? I do not have the answer, only the question. Unfortunately, not enough of us have been asking the question.
How would we adjust? I do not trust the government to take the initiative. Any government or inter-governmental body, with its defense of power bases, its “all-must-be-alike” thinking, its attempt to please everybody (or at least the majority of voters, who also don’t count costs), and with its bureaucratic squabbles, would never be able to coordinate the effort of adjustment.
Instead, millions upon millions of individuals would do the adjusting, calculating their own private costs and benefits. Some would insulate their houses, some would sell their farms and move father north; some would inoculate against new diseases; some would give up farming and take other jobs, some would install air conditioning, some would irrigate, some would move farther from the seashore. And so on. Fortunately, the warming will be so gradual that each generation would bear only a small part of the long-run cost.
On a few points we should all be
agreed. Global warming or no, we should decrease automobile and factory
emissions, fouling of rivers, and other kinds of pollution. The benefit might
not be to stop global warming but merely to make our Earth a more pleasant
place to live. How much cost are we willing to pay for that?
Now come the negative reviews, primarily in Scientific
American, January 2002; the web pages of the Union of Concerned Scientists
and the World Resources Institute; and the December 12 issue of an online
journal, Daily Grist. There are many more, but these cover the ground
very well.
The statement by the Union of Concerned Scientists is
representative of the whole: “The heavily promoted book, published in September
by Cambridge University Press, has received significant attention from the
media and praise from commentators writing in The Economist, The New York
Times, and Washington Post. . . Does this book merit such positive
attention? Does Lomborg provide new insights? Are his claims supported by the
data? . . .
“To answer these questions, UCS invited several of the world's leading experts on water resources, biodiversity, and climate change to carefully review the sections in Lomborg's book that address their areas of expertise. We asked them to evaluate whether Lomborg’s skepticism is coupled with the other hallmarks of good science – namely, objectivity, understanding of the underlying concepts, appropriate statistical methods and careful peer review. . .
“These separately written expert reviews unequivocally demonstrate that on closer inspection, Lomborg’s book is seriously flawed and fails to meet basic standards
of credible scientific analysis. The authors note how
Lomborg consistently misuses, misrepresents or misinterprets data to greatly
underestimate rates of species extinction, ignore evidence that billions of
people lack access to clean water and sanitation, and minimize the extent and
impacts of global warming due to the burning of fossil fuels and other
human-caused emissions of heat-trapping gases. . .”
So, was I “taken in” by Lomborg? Possibly, and I will eat
humble pie if I deserve it. Before doing so, however, a few points disturb me.
First, while I respect these scientists and am influenced by them, I also know
of other scientists who disagree with them. For example, Richard Lindzen, the
Alfred P. Sloan Professor of Meteorology, Department of Earth, Atmospheric and
Planetary Sciences at M.I.T., finds that the earth has ways of offsetting
temperature changes. While he believes that global warming is occurring, he
finds it to be a natural phenomenon, since the earth has warmed and cooled many
times over the centuries. “Sallie Baliunas, an astrophysicist with the
Harvard-Smithsonian Center, and her co-workers studied records of the past 120
years and found the Sun responsible for much of the Earth’s temperature shifts.
The scientist critics reply that most students of this
subject believe the sun cannot be responsible for the warming of 1970-2000(Some
say it is responsible for 30%, Lomborg says 40%).
Charles Harper, planetary scientist at Harvard, criticized
the inter-governmental report for being based more on deficient computer models
than on ground-based temperatures during the period in which greenhouse gases
were mainly omitted.”
Second, some of these same scientists made predictions about running out of resources by the year 2000, which turned out not to be true. Lomborg cites these predictions.
Third, from United Nations data, as interpreted by
Nicholas Eberstadt, demographer with Brookings Institution, and William
Nordhaus, economist at Yale, I am persuaded that population in the more
developed areas is already decreasing, and in the less developed countries the
growth rate is declining, so much so that world population growth will probably
level off to zero by 2050. The world’s agricultural capacity to feed such a
population will be more than sufficient. However, the scientists criticize
Lomborg for saying just that.
Fourth, scientists and environmentalists frequently do not
take costs into account. It is here that economists would be of help, but they
are generally ignored. Scientists would explain the environmental facts as best
they know them, and together with economists (and other social scientists) they
would propose policies, of which the economists would calculate the costs. This
would be a cooperative enterprise.
I wish scientists and economists jointly would write a
book as easily read by lay people as Lomborg’s is, to explain all environmental
problems in lay language, covering the disagreements among them and the
uncertainties. The anti-Lomborg reviewers write of a “consensus” among
scientists (theirs), when in fact there is no consensus. Yet they appear to be on
more solid ground than Lomborg. If any of you know of such a book, I would
appreciate your telling me.
2. Global warming is indeed occurring, but no one knows how much is anthropogenic (human induced) and how much is the natural cycle in which the earth warms and cools. The vast majority of scientists believe that anthropogenic warming is serious (more than Lomborg does), and they have persuaded me. But they do not agree on how much so.
3. We should already be thinking more about how to adjust to the effects of global warming than how to prevent it. To the extent that global warming is part of the natural cycle, it cannot be prevented. To the extent that it is anthropogenic, prevention will be politically difficult (or impossible) because peoples not directly affected will refuse to pay the cost.
4. Given that world population is now as large as it is (and we do not want to take lives through war or starvation), biotechnical seed breeding probably saves many lives, as Lomborg points out. Potential ill effects - such as the spreading of “monster seeds” - should be controlled as best we can.
5. While Lomborg points to only a small decrease in the land devoted to forests, he does not distinguish between primeval forests and tree plantations. The primeval forest is needed to promote a desirable diversity of species. I am persuaded by the scientists that Lomborg has underestimated the extinction of species.
6. Policies should be formed to conserve water and energy and to inhibit the pollution of air and water if only because doing so creates a more desirable world, regardless of whether it prevents global warming. These policies should be implemented as far as is politically possible, but we should not attempt the impossible. Scientists have not adequately addressed the political and cost aspects That is not their field, but they have not sufficiently cooperated with those whose field it is.
7. Governments are not satisfactory agencies for implementing these policies, since governments represent polluters as well as environmentalists. Instead, we should seek market-type instruments for controlling pollution. The tricky point is that governments may be necessary to develop the market-type instruments. Political activists, get to work!
8. Following the Clean Air Acts in the United States, among the market-type instruments are pollution permits. Determine a maximum permissible amount of any type of pollution, and issue permits for that amount, according to some political process. The permits would be salable. Those who can reduce pollution more cheaply than the market value of the permits would sell their allotments to others for whom pollution reduction would be more expensive. Thus pollution would be limited to the permissible amount at least cost.
9. Martin Feldstein, professor of economics at Harvard, has offered a similar plan to reduce dependence on foreign oil. Determine the maximum amount of gasoline that should be permitted, and issue permits for it. Those who buy gasoline would pay the pump price, plus the cost of a permit. Having to pay for both would constitute an increase in price.
10. But energy prices should be allowed to rise anyway, because only then will renewable energy sources, such as windmills, fuel cells, and photo-voltaic cells become cost-effective.
11.
If we wish to protect the poor against increases in energy
prices, we should give them money. If they decide to spend it on other things
than energy, so much more energy will be conserved.
Here is an article from Prospect Magazine (UK), March 2002, on global poverty:
Are
global poverty and inequality getting worse?
A
DEBATE BETWEEN ROBERT WADE VS MARTIN WOLF
Dear Martin
22nd January 2002
You have written eloquently in
the Financial Times about globalisation. You make three main
points. (1) Poverty and
inequality on a world scale have both fallen over the past two decades
for the first time in more than
150 years. (2) These falls are due to greater global economic
integration. (3) The
anti-globalisation movement encourages countries to adopt policies that
will in fact only intensify their poverty and inequality.
Let us take the first point about
trends in poverty and inequality. If you are wrong here, the rest
of your argument begins to wobble
and, in fact, there are reasons to doubt what you say. On
poverty, the World Bank is the
main source of numbers. Bank researchers have found that the
number of people in absolute
poverty (with incomes less than about $1 per day) was roughly
constant in 1987 and 1998, at
around 1.2 billion. Since world population increased, the
proportion of the world's
population in absolute poverty fell sharply from around 28 per cent to
24 per cent in only 11 years.
This is good news.
But recent research on where the
Bank got the 1.2 billion suggests that the method for
calculating the numbers is
questionable. The effect is probably to understate the true numbers in
poverty. How much higher than 1.2
billion we do not yet know.
So what is happening to global
inequality? It is widening rapidly, if we compare the average
incomes for each country and
treat each one as a unit (China = Uganda). Yet income inequality
among countries has become more
equal, since around 1980, if we compare the average
incomes for each country and
weight each one by its population. However, this result comes
from fast growth in China and
India. If they are excluded this measure of inequality shows no
obvious trend since 1980.
In any case, this measure-using
the average income of each country weighted by population-is
interesting only as an
approximation to what we are really interested in, which is the income
distribution among all the
world's people or households, regardless of where they live. The
problem is that we do not have
good data for the incomes of all the world's people. You say
that global inequality amongst
households has probably fallen. But the most comprehensive data on world
incomes, based on household income and expenditure surveys, find a sharp
increase in inequality over as short a time as 1988 to 1993. Some of this may
be statistical error; but the results do mean that the balance of probability
falls in the direction of increasing global inequality among households.
This conclusion is strengthened
by the trends in industrial pay inequality within countries. Pay
inequality within countries was
stable or declining from the early 1960s to 1982, then sharply
increased from 1982 to the
present. The year 1982 was a dramatic turning point towards
greater inequality within the
world's countries.
Doesn't the fast growth of
populous China and India create a presumption that world income
distribution is becoming more
equal? No. At low levels of income, growth has to be fast for a
long time before the absolute gap
with slow-growing, high income countries begins to fall. The
absolute income gap between a
developing country with an average income of $1,000 a year,
growing at 6 per cent, and a
developed country with average income of $30,000, growing at 1
per cent, continues to widen
until after the 40th year. China and India are not reducing the gap
between their average incomes and
the averages of the countries of western Europe, North
America and Japan. They are,
though, closing the gap with the faltering, middle-income states
like Mexico, Brazil, Russia and
Argentina, which is why average inequality among countries has become more equal since
around 1980. But this reduction in the gap between China and India and the
middle-income states is probably offset by widening income inequality within
the two giants.
Perhaps all the thunder and
lightning about the trends diverts attention from the main issue: the
sheer magnitude of poverty and
inequality on a world scale. The magnitude is unacceptable,
regardless of the trend, and the
world development agenda should make inequality reduction
(not only poverty reduction) a
high priority. Roughly 85 per cent of world income goes to 20
per cent of the world's
population and 6 per cent to 60 per cent of the world's population. Can
this meet any plausible test of
legitimacy? It is difficult to see how it could meet the Rawlsian
principle that a given degree of
inequality is acceptable if it is necessary for the worst off to
become better off.
Integration/globalisation is
nothing like the engine of development you say it is. The engine is the advance
of technology and the diffusion of technical capacities of people, firms and
governments. Some forms of
integration may help this, others may hinder it, depending partly on a
country's stage of development.
Regards Robert
Dear Robert
25th January 2002
All data on incomes and income
distribution are questionable, above all those generated in
developing countries. But,
contrary to what you say, World Bank researchers have calculated
the numbers in extreme
poverty-less than $1 a day-on a consistent basis, in recent studies.
The data shows a decline since
1980 of 200m people in the category of the absolutely poor.
This is a fall from 31 per cent
of the world's population to 20 per cent (not 24 per cent, which is
the proportion in developing
countries alone). That is a spectacularly rapid fall in poverty by
historical standards. It makes a
nonsense of the idea that poverty alleviation has been blighted
by globalisation.
Now turn to the even murkier area
of inequality. Here you argue that if we exclude China and
India, there is no obvious trend
in inequality. But why would one want to exclude two countries
that contained about 60 per cent
of the world's poorest people two decades ago and still
contain almost 40 per cent of the
world's population today? To fail to give these giants their due
weight in a discussion of global
poverty alleviation or income distribution would be Hamlet
without the prince.
You then write that changes in
relative average incomes across countries are not what we are
really interested in, "which
is the income distribution among all the world's people or
households." This is wrong
in itself. If a country's average income rises rapidly, it does also
possess greater means for
improving the lot of the poor. Maybe the government refuses to use
the opportunity, but a successor
government could.
In any case, we do possess data
on relative household incomes. In a Foreign Affairs article,
David Dollar and Aart Kraay of
the World Bank report a big decline in world-wide income
inequality since its peak in
about 1970. The study builds on work that goes back to 1820. The
underlying method is to calculate
the percentage gap between a randomly selected individual
and the world average. The more
unequal the distribution of world income, the bigger that gap
becomes. They report that this
gap peaked at 88 per cent of world average income in 1970,
before falling to 78 per cent in
1995, roughly where it was in 1950.
The chief driver of changes in
inequality among households is changes between countries, not
within them. This was also the
finding of Branko Milanovic's study of global household income
distribution between 1988 and
1993, which you cite approvingly. You rely on this study to
support the thesis of rising
household inequality. But it contains at least four defects. First, there
are well-known inconsistencies
between data on household expenditures and national accounts.
Second, the methods used generate
no increase in rural real incomes in China, which is
inconsistent with most views of
what actually happened. Third, the period of five years is very
short. Fourth and most important,
this was an atypical period, because India had an economic
upheaval in 1991, while China's
growth was temporarily slowed by the Tiananmen crisis.
My conclusion is that the last
two decades saw a decline not just in absolute poverty but also in
world-wide inequality among
households. The chief explanation for this was the fast growth of
China and, to a lesser extent, of
India. This progress was not offset by rising inequality within
them. In the case of India there
was no such rise. In China there has been a rise in inequality in
the more recent period of its
growth, largely because of controls on the movement of people
from the hinterland to the
coastal regions.
Unfortunately, you muddy the
waters on inequality by raising the question of growing absolute
gaps in incomes between rich and
poor countries. If the income of the poor rises faster than the
income of the rich, inequality
falls, even if absolute gaps rise, since the standard measures of
inequality describe relative, not
absolute, differences in incomes.
This is vastly more than just a
question of definition. China's average incomes per head are only
a tenth of those of the US. They
would have to grow at around 20 per cent a year to match the
absolute increases now prevailing
in the US. I see no point in bemoaning the failure to achieve
what is impossible. Unless you
are suggesting implausibly huge income transfers from taxpayers in rich countries to the
world's poor, or complete freedom of migration, absolute gaps in living
standards will rise for many decades, even if poor countries now grow very
quickly. This is the tyranny of history: we can only start from where we are.
The trends in pay inequality you
bring in to support your arguments further cloud the issue. Few
of the world's poor earn wages
that anybody reports. They work as subsistence farmers or do
casual work in informal
activities. Almost all reported wage earners are in the upper half of the
global income distribution.
Yet this debate is, as you say,
not just about measuring poverty and inequality, but about what
these trends mean. You write that
the magnitude of poverty and inequality are unacceptable. I
agree on the former. That is why
raising average incomes in poor countries and of poor people
in both poor and less poor
countries is an urgent goal of public policy.
But your position on the
unacceptability of inequality also amounts to saying that the world
would be a better place if the
rich countries of today had never started rapid development in the
19th and 20th centuries. Maybe
you do think this. But almost all citizens of advanced countries
do not. They have no intention of
doing without what they now have. So bemoaning the
magnitude of global inequality,
as opposed to the low standards of living of large parts of the
world, is just empty rhetoric. It
has no significance for action.
Today's global inequality and
continuing, though also declining, mass poverty are the outcome
of deep-seated historic processes
that can be reversed only with vast and sustained
improvements in poor countries,
supported by rich ones. A start was made in the 1980s and
1990s. But the huge worry
concerns those poor countries where there is now no sustained rise
in living standards.
Yours Martin
Dear Martin
29th January 2002
On absolute poverty, you take the
World Bank figures at face value, I say that they cannot be
so taken. On inequality, you cite
the work of World Bank economist David Dollar as the main
evidence that world income
inequality has declined over the past 20-25 years. But his method
gives too much weight to what
happens in the middle swathe of world population and too little
weight to what happens towards
the lower and upper ends of the distribution.
Contrary to what you say,
inequality in India-rural-urban, intra-urban, intra-rural-increased over
the past two decades. And
everyone agrees inequality in China has risen rapidly. In a recent
year, the ratio of the richest to
poorest state or province was 1.9 for the US, 4.2 for India and
for China, 7 in the early 1990s,
11 in the late 1990s.
You place too much trust not only
in David Dollar's methodology, but also in the Bank's data
set on inequality to which it is
applied. Anyone applying the "laugh test" would have grounds for
doubt: according to the Bank, Spain is the most equal country in Europe; France
is much more
unequal than Germany; India and
Indonesia are in the same equality league as Norway. The
data is based on uncoordinated
sample surveys, separated in time and space, often conducted
by unofficial researchers, in
countries with differing concepts of income and differing attitudes
towards revealing income to
strangers. The Milanovic data based on household income and
expenditure surveys around the
world also has its problems, as you say, but is not obviously
inferior to the Bank's national
income data; and it suggests sharply rising inequality.
You say that "bemoaning the
magnitude of global inequality, as opposed to the low standards of
living of large parts of the
world, is just empty rhetoric." No. If the magnitude of inequality is as
large and difficult to justify as it seems to be, this greatly fortifies the
case for public policy
actions-some national, some
international-to "tilt the playing field" in favour of the lagging
regions. A significantly more
equal world is likely to be more stable, peaceful and possibly more prosperous.
Also, there's no reason for you to reject measures of absolute income gaps just
because these are not relevant to
the standard measures of inequality. We should be concerned
with both absolute and relative
gaps, for both relate to important ethical values, both are
relevant to feelings of
disempowerment and deprivation. Absolute gaps between, say, the top
quintile and the bottom quintile
of the world's population, you have to agree, are rising sharply.
So far, all this has been about
your first point to do with trends in poverty and inequality. Your
second point is about
globalisation (or increased economic integration) as the world's best
means of reducing poverty and
inequality. I doubt it. The most powerful engine of development
is the diffusion of technical
capacities. This is proceeding at a furious rate in China, more
sedately in India, at a snail's
pace in most of Latin America, and slower, if at all, in sub-Saharan
Africa and much of the middle
east. China and India are likely to experience a shift towards
more income equality when they
come near to full employment, five to ten decades from now.
But any such shift in Latin
America, sub-Saharan Africa and the middle east will be even further away.
The World Bank studies on which
you rely for your conclusions about the benign impacts of
globalisation are shot through
with problems. They distinguish "globalising" countries from
"non-globalising"
countries, and find that the former have much better economic performance
than the latter. They measure
globalising by changes in the ratio of trade to GDP. So globalising
countries are ones that had a big
rise in their trade/GDP ratio.
Let us accept that the countries
the Bank calls globalisers did, indeed, have fast economic
growth. The question is: why? At
best, the Bank studies show that countries that start being
closed, with very low trade/GDP,
can have fast growth if they take policy steps that yield more
trade/GDP. This sounds plausible,
and it matches the experience of South Korea and Taiwan in
the 1950s. But the finding does
not support the policy prescription that all developing countries
should liberalise their trade
regimes in order to experience faster growth.
For two decades, the Bank's
official view about development has been: adopt a liberal trade
policy (low tariff and non-tariff
barriers), deregulate markets, privatise state enterprises,
welcome foreign firms, maintain
fiscal balance and low inflation. The trouble is that there is no
evidence that opening to trade
does generally result in subsequently faster growth, holding other
things like macroeconomic
conditions constant.
The best examples of globalising
countries are China and India, which are hardly
poster-children for
globalisation. They have certainly both had fast rises in trade/GDP in the
recent period, and also fast
economic growth. But the onset of fast growth occurred about a
decade prior to their
liberalising trade reforms. And the Bank would now be denouncing their
trade policies and internal
market-restricting policies as growth and efficiency-inhibiting-if they
had not been growing so fast.
Their policies remain far from those that the Bank seeks to get its
borrowers to adopt; in fact,
their trade barriers remain amongst the highest in the world. Their
experience, and that of Japan,
South Korea and Taiwan earlier, shows that countries do not
have to have liberal trade
policies in order to grow fast. It shows only that as countries become
richer they tend to liberalise
trade, which is not the same thing. The sensible ones liberalise in
line with the growth of domestic
capacities-they try to expose domestic producers to enough
competition to make them more
efficient, but not enough to kill them. China and India suggest a policy regime
that is not close to what the Bank says, but nor is it
"anti-globalisation."
The China-WTO agreement shows the
dangers of pressing free trade upon developing
countries. The agreement makes it
difficult for China to adopt one of the most powerful
inequality-mitigating measures:
agricultural subsidies. In Japan, South Korea, Taiwan and, of
course, Europe and the US,
agricultural subsidies have been an important means of
redistributing the fruits of
industrialisation. China has had to sign away its rights to all but very
low subsidies, with consequences
that, given the degree of regional inequality, could be quite
explosive. Likewise, China's
agreement to give equal access to foreign companies will mean
that it cannot protect
"inefficient" labour-intensive industries that serve to equalise
incomes. It is worrying for the whole world that the Chinese government itself
now seems to think it can
maintain an urban-rural apartheid
state by means of the pass laws, while opening the economy
at a pace so fast that
unemployment will shoot upwards from its already high levels.
The point is more general. Under
WTO rules, developing countries face constraints which
prevent them from adopting the
measures that already-developed countries (including East
Asian ones) deployed to nurture
their technological learning. This is outrageous. WTO rules and the Bank's
official view need to be revised, soon, in the self-interest of the west, as
well as the bulk of the world's population.
Regards Robert
Dear Robert
3rd February 2002
A significant decline has occurred in the proportion of the world
population in absolute poverty
over the past two decades. I
think we agree on this. Whether there has been a fall in absolute
numbers is less certain, though
also, in my view, highly plausible. Your denial of this latter
proposition rests on the view
that any data or analyses from the World Bank must be tainted.
Yet you rely on another Bank
study for the proposition that inequality increased between 1988
and 1993. Your position is that
any study which comes to a conclusion you dislike must be
rejected (and vice versa).
You stress that absolute gaps
between the world's richest and poorest people are rising. I
agree. But so what? Even if poor
countries grew far faster than rich ones, absolute gaps in living
standards would rise for many
years. This is the result of two centuries of differential growth.
Why bemoan what cannot be helped?
What is needed, you then suggest,
is "to tilt the playing field" in favour of lagging regions. There
have been many attempts to do this, from carte blanche for protection to
substantial aid. None has been notably successful. So what are you proposing?
Huge transfers to the world's poor,
free migration into rich
countries, or a permanent depression in the north? I look forward to
your attempts to sell any of
these. Yet the very notion that impoverishment of the north might be a good
thing shows the absurdity of your obsession with equality in itself. World
income
distribution was far less unequal
two centuries ago, when perhaps 80 per cent of its population
lived in extreme poverty. Did
this make 1800 better than today?
The only sensible goal must be to
raise the standards of living of the world's poorest people as
quickly as we can. What is needed
for this is faster growth. Look at China and India's own
data. Indian data gives a decline
of about 100m in absolute poverty between 1980 and 2000.
China uses a lower poverty line
but reports that the number of extreme poor in China declined
from 250m in 1978 to 34m in 1999.
Unfortunately, these successes have been offset by
calamitous failures elsewhere,
notably in sub-Saharan Africa.
I assume you support the need for
faster growth in poor countries. Presumably, you also
endorse the need for open markets
in the north. After all, Taiwan and South Korea developed
through exploitation of access to
world markets. Yet many in the anti-globalisation movement
are against trade liberalisation
by the north. Many of them also say that foreign direct investment (FDI)
impoverishes the poor. You say that China is not a "poster-child for
globalisation." But China has been the biggest recipient of FDI in the
developing world. Malaysia, to take another example, has received roughly as
much inward FDI as the whole of sub-Saharan Africa.
The causes of developing country
growth are complex. But your technological determinism is
even more simple-minded than your
caricature of the so-called Washington consensus. Many
countries devoted much effort to
upgrading technological capacity, but have failed to sustain
rapid development: the Soviet
Union was one and India another. One cannot separate
technology from the context in
which it is applied.
Among the essential
pre-conditions for growth are: a stable state; security of the person and of
property; widespread literacy and
numeracy; basic health; adequate infrastructure; the ability to
develop businesses without
suffocation by red tape or corruption; broad acceptance of market
forces; macro-economic stability,
and a financial system capable of transferring savings to
effective uses. In successful
countries, these conditions emerge in a mutually reinforcing cycle.
There is also evidence, I accept,
that some initial equality in income and asset distribution helps.
The tragedy of Africa is that so
few of these pre-conditions exist. Do I believe that trade
liberalisation would fix this?
No. But trade is the handmaiden of growth. There is no country
that set out to reduce its
reliance on trade, as anti-globalisers propose, and subsequently
secured sustained growth. Even in
the inauspicious soil of Africa, countries such as Uganda,
which tried to exploit market
opportunities, have achieved faster growth and poverty reduction.
Finally, you argue that, under
WTO rules, developing countries are being forced to forgo their
ability to adopt
inequality-alleviating or growth-promoting policies. You assume that, in the
absence of external constraints
on their policy discretion, these countries would choose
well-targeted trade policy
interventions. This proposition does fail your laugh test. In any case,
developing countries can use
tariffs if they wish. China could have remained outside the WTO.
But the Chinese authorities
believed their country would do even better inside. I suspect this
judgement will be proved right.
I would invite you to subscribe
to the following three propositions. First, the biggest policy
challenge is to accelerate
economic growth in poor countries. Second, open markets in the
north and FDI make an important
contribution to such growth. Third, self-sufficiency is a foolish development
strategy. If you accept these points, you are on my side of the policy argument
with the anti-globalisers, like it or not.
Yours Martin
Dear Martin
4th February 2002
I agree with your three
propositions and have never argued anything different. You seem
wedded to simplistic
categorisations of "globalisers" and "anti-globalisers." I
am not an
anti-globaliser or a friend of
protectionist American unions. But there is a fundamental fudge in
your argument. It is contained in
your category of "globalising" countries-those with fast rising
integration into the world
economy, like China and India. You take their economic success as
evidence of the benefits of
integration. You also believe in liberal trade policy with low tariffs
and non-tariff barriers; in
particular, you believe that trade liberalisation is a powerful force for
higher growth, so poor country
governments should give high priority in the use of scarce
development funds to trade
liberalisation and WTO membership. But China and India (Vietnam
too) have reaped benefits of
integration without having anything like a liberal trade policy, as
also have Japan, South Korea and
Taiwan before them. So one cannot use their success to
support the case for
liberalisation.
The single biggest issue in the
trend of world income distribution is what has happened in China over the past
two decades. It makes a huge difference whether one takes the World Bank's
growth rate of 10 per cent at
face value, or uses a (more plausible) figure of, say, 7 per cent. If
one takes the former figure,
global inequality has not got much worse, may have remained
constant, and might even have
improved. If one uses the latter figure, virtually all the plausible
measures of world inequality show
a worsening. This underscores the point that the world is
ill-served by the Bank being the
main producer of development statistics. It has an official view
about how to do development and
is subject to arm-twisting by its major shareholders. It is
under constant pressure to fudge
its GDP data base, most glaringly in the case of China and in
the case of politically sensitive
numbers like the number of absolute poor in the world.
At the heart of our disagreement,
I think, is the question about how far rich countries in general
should go in using the power our
superior resources give us (a) to set the rules of the market so
that resource power is translated
into market power, and (b) to use that power to the maximum
when bargaining with people much
poorer than ourselves. You say, "China could have
remained outside the WTO."
But China faced a choice of taking American terms or facing
perpetual uncertainty about the
US export market. We need to press the rich country
governments to soften the
conditions they set for WTO membership, and not just for China.
In relation to countries like
China and India, whose ability to absorb and create technology is
such that they have a real
prospect of reducing the gap with the rich countries in the next five to
ten decades, the rich countries
should be more generous in making trade and investment
concessions to accelerate their
growth and allow them to grow in a manner according with their
own values. In relation to Africa
and the non-oil parts of the middle east and central
Asia-countries that lack much of
the social technology you list-there has to be more direct aid,
much of it in the form of World
Bank-type projects on the ground. The FT could help by
backing the modest increase of
$50 billion in western development aid that Gordon Brown is
proposing.
Regards Robert
Dear Robert
6th February 2002
You are convinced that the World
Bank has cooked the data on poverty and inequality. You
need to produce chapter and verse
to substantiate such a serious charge, but have failed to do
so. That is not good enough. All
you assert is that we do not know what has happened to
poverty and inequality, not that
they have become worse. I note also that you have not taken up
my offer to explain how we are to
reduce absolute gaps in living standards in the near future.
I accept that infant-industry
promotion, buttressed by trade restrictions, may occasionally
accelerate economic growth.
However, the record on the use of such policies in developing
countries is, with few
exceptions, dreadful. Yet even though liberalisation of protectionist trade
policy regimes is good for
developing countries, I don't claim it is a panacea.
I also fail to see why WTO
constraints on policy discretion should be good for rich countries,
as we know they are, but not for
poor ones. Governments of developing countries are, if
anything, more vulnerable to
capture by protectionist lobbies than those of advanced countries.
I do accept, however, that
developing countries have sometimes been forced to accept
inappropriate policies: the
trade-related intellectual property agreement is an example. I also
agree that the north should
liberalise in favour of the south and that more aid, targeted on
countries with governments that
know how to use it, is a moral and practical necessity.
Yet there is one fundamental
matter, in this debate, on which we do disagree. Economic growth
is, almost inevitably, uneven.
Some countries, regions and people do better than others. The
result is growing inequality. To
regret that is to regret the growth itself. It is to hold, in effect,
that it is better for everyone in
the world (or within individual counries) to remain equally poor.
You come close to saying just
that. It seems to me a morally indefensible and practically
untenable position.
Yours Martin