Thursday, February 28, 2019

It’s Localized Supra-National Organizations via the United Nations That’s Working, Not the Free Market

Disclaimer:  I am now retired, and am therefore no longer an expert on anything.  This blog post presents only my opinions, and anything in it should not be relied on.

I have many things I should be doing rather than writing this, and many things I’d rather be doing.  I’m writing this because I think it needs to be said.

There is a debate going on between, essentially, Steven Pinker on the one hand and Jason Hickel the anthropologist on the other about the nature and extent of poverty, and to what we should ascribe its effects.  To support the case for, essentially, “enlightenment” plus today’s economic system, Pinker points to a chart showing that extreme poverty has decreased from 95% of the world’s population to 10% over the 200 years from 1820 to now.  Hickel challenges that rosy view by pointing out that (a) extreme poverty is not the right metric, since people in “poverty” are also struggling to survive, and there the picture is much more mixed, (b) that because of population growth, while the percentage of people in extreme poverty has gone down drastically, the actual number of people in extreme poverty is increasing, and (c) the metric itself (money) is flawed, since a pre-monetary society may actually become worse off when switching to money, wiping out the gains accrued once the monetary society is established.

To my mind, the key takeaway from the chart is none of the above.  What it shows (and other related charts here and in Sachs’ Age of Sustainability also show) is that there is a sharp break around 1950.  Before, extreme poverty was headed towards a reduction to about 60% of the world being extremely poor by now.  Beyond that inflection point, extreme poverty, vaccinations, education, literacy, and health take a sharp dip or start climbing much more rapidly.  

So what’s causing this?  We can eliminate Pinker’s main suspect right off the bat.  It’s not the Industrial Revolution.  It’s not the free market, because that has not resulted in any faster rise in global productivity and hence GDP from 1950 to 2019 than from 1870 to 1950 – in fact, since the late 1970s productivity improvement rates in developed economies have been decreasing.  And “Unruly Waters” makes it clear that the positive effect of the Green Revolution on India’s and China’s well-being – India and China are responsible for a major chunk of the improvement in extreme poverty percentage, partially because of their population sizes – was much less than is typically portrayed.

Sachs and “Unruly Waters”, among other sources, paint a picture in which better health, more education, and potentially empowerment of women (two of which slow the growth rate of population that can undercut improvements in individual living standards) directly impact extreme poverty.  These seem to be far more persuasive immediate reasons for the dip.  But where do these improvements come from?  There have certainly been efforts at improved literacy and better global health before 1950, and free-market products that promised both, and even individual and government efforts in the same direction.

It’s the UN, NGOs, and Local Governments Working Together, Stupid

The history especially of U.S. foreign aid is very clear on this point.  US foreign aid has typically been driven both by internal political considerations and by the needs of US corporations.  Its ideas, typically born of scant knowledge of local considerations, have failed far more than not.  International economic investment mechanisms, such as the IMF and the World Bank, have a very poor record at enabling economic takeoff.  Economic self-interest in places ranging from Puerto Rico to Indonesia has resulted in over-dependence in many developing countries on commodities like coffee, which over the years has resulted in wild swings in country economic performance and hence living standards.  And, of course, the aid that is targeted at education and health has typically come with prescriptions such as “force everyone to plant this way” or “teach abstinence in sex education” that fly in the face of the evidence.  

To succeed in causing such a dip, an approach must be (a) global, (b) coordinated, (c) evidence-based and not just technology-based, and (d) able to get buy-in from a wide variety of governments and localities.  The only plausible set of actors that meet these criteria are the UN and certain NGOs.  Since 1950, but not very much before that, they have been acting on a world-wide basis to tackle these problems, and the metrics that the UN has adopted starting before 2000 are evidence of just how evidence-based these interventions are.  The UN’s modus operandi emphasizes local “driving” and modification of global prescriptions, and many NGOs have learned to follow suit.

And the contrast is especially marked in the poorest countries of all, in Africa and Southeast Asia – where despite all the handicaps there really is clear improvement in extreme poverty and all the other criteria at least since 2000, where there wasn’t before.  It is wrong to ascribe this to cell phones, because first you have to get the cell phones to people, and even local businesses and microlending can only do so much.  The extension of these services to beyond the easy targets and the smoothing of the path with local and national governments can only be done via mechanisms like the UN-NGO alliance.  

I don’t mean to overemphasize this.  It is certainly true that in both India and China, national-government efforts to pursue certain types of “directed” free markets also played a major role.  I simply want to emphasize that the evidence I see suggests that even in those cases, the positive effect of both the national-government efforts and the free market is much less than we tend to think, and the effect of non-market, non-national-government efforts aimed at health, education, and poverty much greater, partly because they were more effective.  And they were more effective because they communicated to all parties good metrics and effective strategies.

The ”stupid” here, I think, is aimed more at Pinker than Hickel.  I think Hickel is oblivious to the possibility that the population growth he appears to be worrying about can be effectively targeted, and is being targeted, not by coercive “colonialist” programs, but by empowering women financially to make their own reproductive choices and by removing the ever-present worry in extreme poverty that the next generation will not survive to adulthood, hence the added births “in case”.   But Pinker gives the impression that he does not see the role of the UN and NGOs at all, since they don’t fit neatly into his paradigm of “enlightenment” such as is exemplified by scientific organizations and market forces.

It’s Not About Crises, It’s About Long-Term Efforts

And one final point.  We emphasize too much, when looking at long-term effectiveness, war, crises, and particular “bad” governments.  I believe that what the graph referenced above, and many others, shows is that what matters in making a big positive change is the ability to target the right factors and then globally change one’s tactics and goals based on the evidence.  National governments and even global firms are almost universally bad at this, the governments because they do not “mark to market” frequently enough without input from the rest of the world, global firms because they are often too small to leverage the kind of global resources to make a dent and because they continually veer off the right factors into “making money.”  I view what is happening in climate change, with the UN and the IPCC taking the lead in sounding the alarm and most countries lagging behind their metrics, is another example of this, where we overemphasize our concerns with the UN’s effectiveness in handling wars and bad governments, and fail to adequately appreciate or support its coordinating efforts.

Let’s stop the poor economic and political theorizing that fails to realize there is a shining example of the long-term effectiveness of organizations that fit neither “economics rules all” nor “politics rules all.”  No, I’m not recommending global government; but I am certainly not recommending today’s underestimation of the effectiveness of supra-national authorities by the likes not only of Pinker but just about everyone I hear commenting about these matters.  On the contrary.