Sunday, July 1, 2018

On growth and people: my reply to Kate Raworth's reply


Let me focus on two most important issues on which Kate Raworth and I differ.

(My original review of Kate Raworth's very good and challenging Doughnut Economics can be found here; Kate’s response is given here.)

Growth

When Kate allows that growth is necessary for poverty reduction and that countries with income levels less than $12,500 per capita should be “allowed” to grow, she fails to either tell us up to what level they should be “allowed” to grow or to provide an estimate of how much the world GDP would have to increase in order to accommodate such growth. As I mentioned in my review, any back-of-the-envelope calculation shows that “allowing” everybody in the world to live at an income level that is today considered barely acceptable in the rich countries  involves a tripling of global GDP. Kate should show us what are, according to her, correct numbers. But the reason why I think she prefers not to do so is because it allows her to leave the whole issue in an area of deliberate vagueness where poor countries are “allowed” to grow but the issue of “unsustainability” of that growth is elided.

Now, in the next stage of vagueness, it is acknowledged that perhaps the space for future growth of poor countries can be provided by voluntary restraint of growth in the rich world (“high-income countries and individuals have a moral obligation to create ecological space so that others have the chance to lead lives free of deprivation”). Technically, it should imply a voluntary reduction of rich countries’ real GDP (that is, negative growth) in order to create the “space” into which poor countries can grow. Is this realistic? I already wrote about that in my discussion with Jason Hickel and I do not think that it is necessary to repeat the arguments here or to highlight the obvious fact that no rich country (or rich countries’ populations) display any observable inclination either to degrow (for if they did, they should have been cheerfully accepting the Global Recession) or to share their income with poor people (for if they were, they would not be creating right now such a fuss with migration both in Europe and the US).

So, we can take it as given: (1) if poor countries are “allowed” to grow, today’s GDP envelop will have to be expanded severalfold, and (2) rich countries’ populations will not voluntarily immiserate themselves nor will they share, out of the goodness of their heart, their income with poor countries.

People

The second issue is less amenable to such (in my opinion) clear cut conclusion. It is the issue of human behavior under conditions of hyper-commercialized global capitalism.
I have already explained my views (and will do so  further in my forthcoming Capitalism, alone), so those interested can find them here.

Let me make just two paints.

The fact that people cooperate does not invalidate at all that people are motivated by self-interest alone. Self-interest can often be more effectively realized in cooperation than by trying to do everything alone. This is why companies, clubs and mafia (indeed, mafia) do exist. If accomplishment of self-interest required that one do everything alone, there will be no society, no family, and everybody would be self-employed. None of that is true. But none of that invalidates the notion that cooperation will be  a form in which, at times, self-interest will be best realized.

The next point has to do with human nature under hyper-commercialized global capitalism. Here I respectfully decline to be moved by the results of any of  the “games” that Kate cites and that are supposed to reveal human nature. These games are indeed games; they are not the way people behave in real life.  Games are good in generating publishable papers but they tell us nothing about how the same people would (or do) behave in real life. There, if Kate wants to convince me and others of our “improving” nature and greater willingness to share, I would like to find the evidence that we are becoming less engaged in market transactions, that we contribute more to charity, that we care less about income, wealth and prices…

But all the real world evidence I see goes exactly in the opposite direction. And for a reason. Globalized capitalism has to create new goods and services and it moves into what was hitherto a personal sphere (homes, cars, leisure hours). It pushes us to exploit these in order to make more money (because money is the sole indicator of success). Thus marketization (and numeracy which goes together with marketization) is greater than ever in history, and the more developed a society, the more marketized and money-conscious it is.

What we observe is that people have become ever more aware of small differences in incomes and prices. This is why Internet has brought such fierce competition between airline companies, hotels, restaurants, retailers. People consider the tiniest differences in prices. They go to stores, take a picture of an item, and then purchase it on the Internet from Walmart or Amazon. If people  were less commercially motivated, Walmart and Amazon would not be the behemoths they have become: people would have been happy to purchase the same item for a higher price in their local store. But they are not.

Professors, claiming altruism in their writings, bargain (as Kate must know) to the last possible cent when it comes to their salaries and fees. I have not noticed many of them foregoing higher income or altruistically declining higher fees. The same behavior is prevalent in all professions. I would like to be given examples of academics  (among others) who have seriously discarded the pecuniary motivation. The majority of them are like the real-world people depicted in “Inside Job”. I wrote before that out of almost 80 top economists who are recipients of the Nobel Prize, I understand that only Jan Tinbergen donated about a half of his prize. Everybody else kept it in full. And here we are talking about a group of old, very rich, extremely successful people. Yet they hoard the money. What can be expected from those who are less rich?

Again, this does not mean that we care only about money (income). Other considerations certainly do play a role. But the key consideration is that of money.

Thus, on this point I see close to zero evidence that Kate’s picture of today’s Homo Sapiens is accurate. Actually, for the reasons that are intrinsic to hyper-commercialized capitalism, I see us moving further away from the idealized picture that Kate depicts. 

Finally, let me mention that at times I think  a peculiar hypocrisy creeps into people’s discussion of human behavior because the authors seem to think that by claiming that humankind is altruistic they are thereby showing their own munificence. I think that this feeling was not entirely absent even in Adam Smith’s explicit critique of Mandeville—even if Smith himself gives us in The Wealth of Nations innumerable examples of the behavior fully consistent with the view of human nature advocated  by Mandeville.