Inequality - Adjusted for time and place

Branko Milanovic, Peter Lindert and Jeffrey Williamson, economists from the World Bank have been doing some comparative studies of inequalities of wealth. They have found

... that income distribution within a modern society is much the same as income distribution in imperial Rome, or England and Wales at the time of the glorious revolution. It’s not that there is no variation at all, but that modern societies are as different from each other as from ancient societies.

For example, imperial Rome’s income distribution looks like that of the modern US; China in 1880, like Sweden today, was rather equal; England in 1688 was more unequal than imperial Rome, but modern Brazil is worse still.

This is unexpected, not least because modern societies have the potential to be far more unequal than anything the Romans could have dreamed of. That’s because the richer a society is, the more unequal it could be without its working class starving to death. Prehistoric societies were, by necessity, fairly equal: there wasn’t enough societal wealth to make anybody very rich.

Modern Tanzania seems more equal than modern America, but Milanovic and his colleagues point out that it is as unequal as it could possibly be without mass starvation. The Democratic Republic of Congo is about as unequal as the US, but that is far more than the country can stand – hence the enormous loss of life through war, malnutrition and disease.

What keeps the rich rich and the poor poor?

You will have heard this put in other ways (rule of law, trust, education) but a recent study by the World Bank has sought to quantify it (there's an article about it here). If their figures are in any way credible, the difference made by those factors is incredible.

Put it this way. If you were Mexican, you'd be mad not to make a break for the border. It's not so much that the average American has more money in his bank account; it's the "intangible capital" that the American can draw on that makes the difference: $418,000 compared to $34,000.

The "intangibles" are broken down into the rule of law, which accounts for 57%, and education, 36% of the total. Countries are then rated on each. On the rule-of-law index, for example,

The members of the Organization for Economic Cooperation and Development—30 wealthy developed countries—have an average score of 90, while sub-Saharan Africa's is a dismal 28.

The article quotes the development economist Peter Bauer who in 1972 wrote a book called Dissent on Development (Currently unavailable on Amazon UK). In it, he said

If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid.

I've got no idea how the World Bank came up with these figures, and I probably wouldn't understand it if they told me, but the basic insight seems irrefutable.

It's war (again)

'A war economy is needed' to reduce global warming emissions, according to the EU's environment chief [Stavros Dimas] who said new measures will be tabled 'shortly' to tackle car pollution and expand the carbon trading system.

That is ominous. War economy, huh? Run from above under the benevolent and enlightened guidance of the EUtopians of Brussels. Just the sort of hysteria they have been waiting for. At last, they can galvanise the lethargic EUropeans into EUropean action to Save the Planet (and tell them what to do, how to live and how to think correctly about the environment, etc).

"Damaged economies, refugees, political instability, and the loss of life are typically the results of war. But they will also be the results of unchecked climate change," Dimas said.

"It is clear that the fight against climate change is much more than a battle. It is a world war that will last for many years."

Another world war? But no, this is a EUro war, much more about stifling than killing, shrinking rather than growing, more aimed at EUropeans than anyone else (the Enemy is Within).

EUrope doesn't come too well out of world wars. All it does is put a bit of fire into other people's economies (the American, Chinese, Indian).

Ecobites

Exports up to record levels. Private companies up from 8,000 three years ago to more than 35,000 today. Number of luxury cars imported up from a few hundred in 2002 to more than 20,000 this year. Civil-servant salaries up by almost 30 percent, with a further 30 percent rise due to come into effect early next year.

It doesn't sound like Iraq.

The Camorra - Working for you

I've just been watching Roberto Saviano on YouTube. It's a hour-long direct-to-camera summary of his book Gomorra about the Camorra and its business activities. He wants to correct the normal assumptions made about how the organisation (which is actually a large number of independent groups) does business.

Criminal activities per se make up just a small part of their activity. Mostly, they invest and reinvest in legitimate business. One example that struck me was that of new hotel and restaurant construction in Aberdeen (yes, Scotland). He doesn't give any names, but says that the hotels are top-class and the restaurants likewise, the menus featuring in Good Food guides. Another example is the distribution of genuine high-tech goods from the Far East through Eastern Europe into the West, which he says is controlled by the Camorra. The market in fake designer clothes has been transformed iin the last few years; now they are manufactured by the very same factories that do the genuine ones and sold in the same shops. They do not differ in the slightest from the legitimate article save for the single step of illegally applying the label. Why do the genuine brands not make a fuss? Because the Camorra control or own the means of distribution and often the retail outlets.

The big point is that, if you follow the movements of their money, only one, or maybe two of the ten or twenty steps involved are illegal, and often the only illegality present is corrupt or violent means to suppress competition. The economic and political implications of this criminal presence at the heart of the system are enormous. It spreads far out of Italy into all parts of Europe and to many parts of the world. Yet it seems there is very little political awareness and/or will to act against it.

The videos are all in Italian and there are five parts. The first is here.

Better and better (I have to admit it's getting)

It doesn't feel like it and I haven't heard anyone say it on a news programme for quite some time, but things are getting better. According to Indur Goklany in his book The Improving State of the World, we have never been better off, where we does not mean us middle class pigs and oppressors, but humans, rich and poor, from North and South. A sample, just concentrating on the South, from a review in The Spectator

The daily food intake in poor countries has increased by 38 per cent since the 1960s to 2,666 calories per person per day on average

The rate of chronic undernourishment has halved to 17 per cent, compared with a little over a third 45 years ago

The number of people subsisting on $1 a day has declined from 16 per cent of the world population in the late 1970s to 6 per cent today, while those living on $2 a day dropped from 39 per cent to 18 per cent. (In 1820, 84 per cent of the world’s population lived in absolute poverty; today this is down to about a fifth.)

Life expectancy in China has surged from 41 years in the 1950s to 71 years today; in India it is up from 39 years to 63 years, almost doubling the average lifespan of 2 billion people

By the early 1950s a child born in a wealthy country such as Britain could expect to live 25 years longer than a child born in a poor country such as Algeria; today the gap has closed to 12.2 years

Before industrialisation, at least 200 out of every 1,000 children died before reaching their first birthday. Infant mortality globally is now down to 57 per 1,000

In 1960 a quarter of all children aged ten to 14 were in work, a share which has fallen to a tenth today.

The global illiteracy rate has declined from 46 per cent in 1970 to about 18 per cent today.

All of these improvements are the consequence of the spread of Western technology and scientific knowledge as well as economic globalisation. Where in developing countries, these have been accompanied by good governance, the rule of law and economic liberalism, the benefits are felt most strongly.

This will never be enough for the drama queens that would smother everything under regulation just to resolve one problem: carbon emmissions. Sir Nicholas Stern shouts out for crisis management. Goklany has done his own projections.

In fact, equally rigorous modelling using different assumptions suggests that, for the next 80 years at least, the benefits of faster economic growth in further improving quality of life across the developing world will outweigh any cost of global warming. Some reductions in carbon emissions may eventually be needed, Goklany says, but in most cases it would be cheaper to adapt to higher temperatures than to try to stop them.

Our best bet, therefore, is to allow technology, trade and the global economy to continue growing unimpeded. Such is Goklany’s plea: if the present rate of improvement continues, he argues, we could soon be living in a world where ‘hunger and malnutrition have been virtually banished; where malaria, TB, Aids and other infectious and parasitic diseases are distant memories; and where humanity meets its needs while ceding land and water back to the rest of nature ... even in sub-Saharan Africa infant mortality could be as low as it is today in the United States, and life expectancies as high’.