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Two cheers for Piketty: Or, why both he and the OECD and nearly everyone else are wrong on growth. Part 1

16 February 2015
by Guest author

Post-growth projectToday’s post is the first of two articles by Rupert Read, Reader in Philosophy in the School of Politics, Philosophy and Languages at the University of East Anglia, Chair of Green House and parliamentary candidate for Cambridge for the UK Green Party. Part 2 will appear tomorrow

Piketty’s alleged-updating of Marx, Capital in the 21st century, is taking the intellectual world by storm. I’m delighted that such an improbable happening can occur in our rather-impoverished public sphere, and pleased to cheer him on.

Piketty’s proposal for a global wealth tax to counteract the literally-insane levels of inequality now generated in our world is most welcome.

Piketty’s prior analysis of the importance of wealth-inequality (and not just income-inequality, on which Wilkinson and Pickett focussed in their epochal work The Spirit Level) is of course equally welcome.

That’s two thumbs-up. But sadly, I can’t give Piketty anything like a full-throated ‘three cheers’.

Piketty argues that if growth in a capitalist economy is higher then, other things being equal, wealth will be more evenly distributed. (I am extremely doubtful as to whether he has proved this; causation is of course not proven by mere correlation. The data are equally compatible with the claim that there has been a lucky partial correlation between high economic growth and periods of democratic regulation, reform and governance of the economy, and that it is the latter that have been more responsible for the relative evenness of wealth-distribution at times of higher economic growth.)

However, his claim in any case only applies to present-day people. Piketty fails almost completely to think about future people. If economic growth will lead to future generations suffering, then it is not egalitarian – provided that we take seriously that future generations matter, that they ought to be included as among our equals. Now, economists will counter that all people from now to the end of time are in their equations as if they live in a discounted present: but that it is the point. Rashly – madly – assuming that growth will continue forever, and additionally assuming that humans are selfish and don’t really care about their offspring, standard economists standardly discount the future: the further into the future one looks, the less the people living there matter, so far as economists are concerned. This is unacceptable.

I suggest that, at a time when it is ever clearer that humanity is running up against the limits to growth (the climate crisis being only the most large-scale of these phenomena), it is delusional and in fact disgraceful to seek to make an ‘egalitarian’ argument in favour of growthism. Growthism is causing the undermining of the living conditions of all our children and grandchildren: for it is above all economic growth that is to blame for our collective breaching of planetary limits. This alone is enough to completely undermine Piketty’s case for economic growth. For if we can’t take care of our descendants, what good are we? The first virtue of any decent society is to not destroy the conditions of possibility for its children, the conditions of possibility for their flourishing.

But there’s more. Piketty makes the assumption that our economy must remain fundamentally capitalist (and in this fundamental respect it is more than presumptuous of him to seek to don the mantle of Marx). But given the looming contradiction between capitalism and the planet, he ought not to have done so. Stopping doing so would mean that the truth, if such it is, that growth is necessary in a capitalist economy to help allegedly equalise the distribution of wealth no longer carries much weight: for we have to start to think beyond a capitalist economy.

A post-growth ‘steady-state’ economy by definition would not be one in which the growth imperative of capitalism was allowed to let rip: in such a post-growth economy/society, humankind would continue to develop culturally, but would no longer seek to expand the amount of economic activity and would seek to reduce to one-planet levels the amount of material throughput (i.e. of resource-use and pollution).

A post-growth society will be forced to face the question which growthist ideology – with its promise of an ever-growing pie – allows one endlessly to evade: how shall we share what together we have? So Piketty’s claim that a ‘stalling’ of growth is bad for the majority may well be exactly wrong. Not just because the capture of all growth by the elite is happening right now. But also because once one considers the future, and once one considers that we need in any case to be thinking beyond capitalist political economy, and once one considers especially the way in which growth functions as a rhetorical device to shield from view the necessity for sharing out the wealth more fairly, then it is simply no longer convincing.

I would submit in fact that a ‘stalling’ of growth – or, better, a facing up to living in a post-growth society – and a willingness to see that we simply can’t keep growing the pie now that the ingredients are running out, will finally be what force the majority to take back some of the wealth currently being hoarded by the rich.

Useful links

Some portions of this article appeared previously in my Green economics versus growth economics, available here

OECD work on green growth and sustainable development

OECD work on income inequality and poverty

Does income inequality hurt economic growth? From the OECD Directorate for Employment, Labour and Social Affairs

IFF only they’d spent it on the poor

13 February 2015
by Patrick Love
DRC miner

Lifting his bosses and rulers out of poverty

Over the past fifty years or so, Africa has received about a trillion dollars in Official Development Assistance (ODA) from OECD Development Assistance Committee (DAC) donors. If you look at the excellent data sets we’ve produced on ODA over the years, you can work out what percentage or actual sum of that went to different purposes (education sector, health sector…) and who gave it and got it. If that’s too time consuming, here’s a simpler one I’ve prepared for you. Over the same period, Africa gave around a trillion dollars, mainly to developed countries, and almost 100% to the financial sector in the form of illicit financial flows (IFF).

I took the numbers from a report just published by the African Union and UN Economic Commission for Africa called Track it! Stop it! Get it! IFF (pdf). The Commission defines IFF as “Money that is illegally earned, transferred or utilized. These funds typically originate from three sources: commercial tax evasion, trade misinvoicing and abusive transfer pricing; criminal activities, including the drug trade, human trafficking, illegal arms dealing, and smuggling of contraband; and bribery and theft by corrupt government officials.” Nigeria is the worst offender, at $217 billion over 1970-2008, with Egypt coming second at $105 billion over the same period.

Most of the means used to get this money are probably familiar to you, although some of the terminology may not be, “unequal contracts” for instance. The report illustrates this term using iron ore mining in Guinea. As the world economy started to recover from the Great Recession, a commodities boom pushed up the prices of raw materials, and competition among mining companies to buy concessions was fierce. Guinea’s iron ore deposits are estimated to be worth $140 billion over the next 20 years, and multinationals from various countries were bidding to exploit them. In 2008, the government sold a concession for this ore for an astonishingly low $165 million. The lucky buyer promptly resold half the concession to another company for $2.5 billion. A new government terminated the contract and sold the concessions for $20 billion, so they may be right to suspect corruption in the original deal.

That commodities boom is one reason behind optimistic opinions about Africa. In a report called “The New Africa” (pdf) published at the end of last year, the Financial Times said that: “Africa is enjoying an era of economic promise that has survived war and famine, dictatorship and corruption”. The African Economic Outlook 2014 from the OECD, African Development Bank and UN announces “steadily progressing economic and social conditions that bode well for the immediate future.”

But the number of people living on less than $1.25 a day in Africa rose from 290 million in 1990 to 414 million in 2010 according to the UN’s 2013 report (pdf) on progress towards the Millennium Development Goals (MDGs). And as the IFF report points out, poverty isn’t just a question of money, it’s “multidimensional”, meaning that access to health care, education, potable water and housing are unsatisfactory too, or what the OECD calls “inequalities in incomes, health outcomes, education and well-being” in its Initiative on Inclusive Growth.

The $50 billion a year siphoned off through IFF could for example cover the extra $30 to $50 billion the African Development Bank estimates the continent needs to invest in infrastructure each year. That’s looking at the broad picture. Here’s what it means to the people that money was stolen from. If you follow the blog regularly, you may remember that at the end of last year I wrote about a panel discussion on Ebola I chaired here at the OECD.

One of the articles I read to prepare the meeting was an account by Peter Piot of his journey back to the town of Bumba 40 years after identifying Ebola, then an unknown virus. Bumba was in Zaire then and now it’s the Democratic Republic of Congo (DRC). Reading Piot’s account, you get the impression that apart from the country’s name, not much else has changed. Bumba’s population has grown to 150,000 but there still isn’t a single paved road, no running water and no electricity network. There are hardly any patients in the hospital because the government hasn’t sent any drugs for over two years and most sick people can’t afford to pay for treatment. The hospital pharmacist buys drugs at the local market and resells them to help pay for the hospital. Patients who can’t pay cash leave their bicycle or some other valuable in the pharmacy as security.

As its title suggests, an OECD report on Illicit Financial Flows from Developing Countries: Measuring OECD Responses (pdf) looks at what some of the countries receiving the money have done. OECD countries returned $147 million in 2010-2012 and froze almost $1.4 billion of stolen assets. The African Union-UN report calculates how long it would take countries to reach MDG 4 (“Reduce by two thirds, between 1990 and 2015, the under-five mortality rate”) with and without IFF. If the DRC had the tens of millions it loses to IFF each year to spend on services, it could reach Goal 4 by 2054, which is not great, but is 90 years sooner than if illicit flows continue at current rates.

Useful links

OECD work on economic and financial crime

OECD work on tax and development

 

Happiness at work

11 February 2015
by Guest author

BLI InitiativeToday’s post is by Gaël Brulé and Alexandre Jost of la Fabrique Spinoza

The Spinoza Factory, together with Campagne Première Productions, have organised the Happiness at work days (journées du Bonheur au travail), in Paris from February 12-14. This three-day conference will include round tables, debates, and interventions by business leaders, psychologists, researchers, trade unions and employees.

The event will open with the screening of the 90 minute documentary “Le Bonheur au travail” (Happiness at work) by Martin Meissonnier. This movie explores a new vision of the working environment and shows creative ideas to improve the daily life of employees. The event will include innovative round tables, for instance, one where business leaders meet trade union leaders around the theme of happiness, or another one on how to find happiness at work in media organisations. A range of workshops will look at the work place, for example one around the so-called “fish philosophy” – which aims to introduce gaming in work – on how to renovate the working methods; or one lead by the “bienveilleurs’” (the benevolents), a network of employees committed to keeping an eye on each other’s well-being at work.

Well-being at work is a topic that has increasingly received attention, especially in post-materialistic societies. Since basic needs are largely fulfilled for most people in these societies, the hedonic treadmill has been turned on and expectations have risen. As a consequence, employees are increasingly asking for meaning and purpose at work. Extrinsic motivation alone is no longer sufficient for a growing number of employees. Intrinsic rewards and good working conditions are required, in a sort of upward movement on Maslow’s pyramid (a sociological theory establishing a hierarchy of needs from basic physiological requirements to higher ones, such as sense of self-realisation). As a consequence, companies have to be able to provide conditions for self-growth to be able to keep the best employees, as this will become a basic requirement along with a decent salary or health insurance.

The Spinoza Factory has – among other topics such as education, gender inequality or beyond-GDP indicators – led a study carried out by more than 20 citizens and experts on the different facets of well-being at work. An analysis of indicators as well as a proposal for a new analytical framework were presented in a report delivered in November 2013. This framework, or grid, encompasses 12 dimensions, partly derived from the best practices in well-being indicators such as the OECD Better Life Index, comprising 11 dimensions: housing, income, jobs, community, education, environment, governance, health, life satisfaction, safety and work-life balance.

This grid is dedicated to life in general and is not specific to the working environment. Using the framework but completing and adapting it to the work sphere, the Spinoza Factory has merged some of these indicators to create a composite grid specific to the professional environment. This framework includes 12 dimensions: working conditions, management, work organisation, governance, social capital, compensation and benefits, relationship to private life, nature of the work, relationship to time, ethics and values, training, and job security.

Useful links

The Spinoza Factory has created a wiki dedicated to well-being at work, WikiBET

The OECD mental health and work project

If the tortoise can do it, anyone can: greening household behaviour

10 February 2015
by Guest author
Tortoises rushing about the Galapagos

Tortoises rushing about the Galapagos

Today’s post is by Naazia Ebrahim of the OECD Environment Directorate

Please join me in an ode to the giant tortoise, recently confirmed to be back from near extinction on the Galapagos Espanola Island after conservation work that began forty years ago. The population currently stands at over 1000, a spectacular recovery considering that only 15 remained in the late 1960s, when they were summarily rounded up and placed into a breeding program. There are now enough adults and juveniles surviving and repopulating to be self-sustaining.

Although one can never say ‘giant tortoise’ enough times, the island still requires some habitat restoration. The tortoises should be able to help that along, because in addition to being long-lived, they are also superb ecosystem engineers. They disperse seeds and other organisms, stimulate recruitment of cactus trees (one of their primary food sources) by distributing pods as they eat, and also, under the right conditions, control woody plant growth, which helps maintain habitat for an endangered albatross that also nests on the island. One could almost call them “masters of the (island) house”. Whoever thought this waddly wild wonk would be a model for humans to improve environment through adept household behaviour?

If society is Espanola Island – in need of some major restructuring to achieve ecological health – then the tortoises are the epitome of small, incremental change-makers that eventually create a paradigm shift. Their localised, small-scale influences – grazing on cacti and spreading seeds in their home range – eventually combine to shift the entire ecosystem towards its natural equilibrium.

But the tortoises could not, and cannot, do it all on their own. Sound like a familiar cry? The population decline was not simply due to natural causes: feral goats introduced in the late 1800s chewed their way through the island’s vegetation, destroying the cacti and causing an explosion of woody plants, which further inhibited cactus regrowth – a disastrous combination for the tortoises. (This is of course a prime example of the dangers of invasive species. The next time border control stops you in case there are fruit flies in your cut mango, don’t complain!) The breeding program thus had to be paired with a concerted goat eradication effort, which itself took around 20 years. Even with population viability, a good deal more effort needs to be put into removing woody plants before the tortoises can be fully effective as ecosystem engineers.

So, although the tortoises are powerfully influential in the aggregate, even they need a helping hand – or in other words, when the system has been flipped into a state unconducive to change, small-scale efforts can only take you so far. As found in a recent OECD study, greener household behaviour can combine to create major reductions in waste, as well as water and energy use. These actions may even form the vanguard of a wider societal transition, but these incremental moves are sometimes overpowered by larger structural failings. Moreover, evidence suggests that even when individuals are open to pro-environmental actions, including lifestyle sacrifices, they may not follow through due to societal pressures or perceived time, effort, and cost constraints – but they may accept political changes that will externally drive this behaviour.

Thus, for issues requiring large-scale reorganisation such as the energy or food supply systems, it is essential to create an enabling environment for society’s members to achieve their full potential. Taking a cue from Espanola Island, policy-makers may do well to foster top-down change, or barring that, to eradicate some of the “goats”. (No goats were harmed in the writing of this piece. The author would also like to clarify that she loves goats.)

Useful links

Greening household behaviour

OECD Environment Directorate on iSSUU, including Policy Highlights on water, food, transport, waste and energy

 

A big year for development

9 February 2015
tags: ,
by Brian Keeley
Click to see the 17 goals and 169 targets

Click to see the 17 goals and 169 targets

This will be “the mother of all years for summits on international development,” says Kevin Watkins, Executive Director of the UK’s Overseas Development Institute (ODI). He’s not wrong.

Over the next 11 months, international delegates will gather first in Addis Ababa in July to discuss how poorer countries can fund their development. Then, in September, attention will shift to New York, where the United Nations will sign off on the successors to the Millennium Development Goals (MDGs). Finally, in December, Paris will take centre stage when it hosts the latest edition of the global climate change conference, COP21.

The three events may be separate, but the topics under discussion are not. For example, the development financing conference in July will need to come up with ways to pay for the priorities identified in the new development goals. In turn, those goals will (probably) cite the need to help countries better prepare for climate change.

All three events will generate plenty of news and commentary, including, no doubt, here on the blog. But if we had to pick the one that’s likeliest to grab the lion’s share of interest, it might well be the new Sustainable Development Goals (SDGs).

In part that’s simply because of their rarity value. The first, and so far only, global development goals – the MDGs – were set down just over 15 years ago. When the SDGs are agreed in September, they will set the development agenda for the next 15 years. But the attention paid to the SDGs is also likely to reflect the fact that, like their predecessors, they’ll be a powerful campaigning tool for developing countries and the wider “development community”.

Indeed, some might argue that that’s been the most important role of the MDGs. The goals set at the turn of the century won’t be met in full by the time they reach their deadline at the end of this year, although there’s been important progress on a number of them. But, as The Economist noted some time ago, the mere fact they exist has forced world leaders to discuss “matters they might prefer to ignore”.

The MDGs have also become the way in which much of the development debate is framed. Describing them as “one of the best ideas for development either of us has ever seen” Bill and Melinda Gates argue that the MDGs “focused the world on key measures of how many people get the basics of a productive life: good health and a chance to get an education and make the most of economic opportunities.”

So what about the upcoming Sustainable Development Goals? Will they match or surpass their predecessors? That’s a question that many are currently debating, even though the SDGs are still only a proposal and will not be finalised until the UN General Assembly session in September.

Much of the discussion revolves around the scope of the SDGs. Are they, in other words, trying to do too much? The MDGs comprised just eight broad goals, each accompanied by at least one specific target (making 21 in total). So, for example, the overall goal of reducing diseases like AIDS and malaria came with the target of providing access to HIV/AIDS treatment for everyone who needed it. By contrast, the current proposal for the SDGs is to have double the number of goals, 17, and a whopping 169 targets. They are also designed to be truly global, setting goals for both developed and developing countries.

The breadth of the SDGs reflects in part the process that went into their making. As we’ve noted before, critics of the MDGs accused them of reflecting the priorities of donor over developing countries. Determined to avoid similar criticism of the SDGs, the UN has consulted widely. The SDGs’ broad scope also reflects growing recognition over the past 15 years that problems like environmental degradation and inequitable growth can undermine development, and that many of these can only be addressed globally.

But for some, such as Alan Beattie, the risk of such a broad agenda is that is that if “everything is a priority … nothing is a priority”. Similarly, Bjorn Lomborg argues that “having 169 targets is like having no targets at all.” Others are more upbeat: Nancy Birdsall believes 17 goals are “not too many” and reflect the reality that development needs “more about what both rich and poor countries can do together to address global challenges”.

What all can agree on is that the SDGs are ambitious. If they’re to succeed, careful work will be needed not just on their design and implementation but on how development is financed and on how progress is monitored. All that will make for a busy year indeed.

Useful links

OECD work on development

Development Co-operation Report 2014: Mobilising Resources for Sustainable Development (OECD, 2014)

Informing a Data Revolution (PARIS21)

OECD Insights: From Aid to Development (OECD, 2012)

 

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