Tuesday, November 21, 2017

The illusion of degrowth: Part II

I read Jason Hickel reply to my post on degrowth carefully, and I think that I can report some progress in the sense that, on some issues, Jason and I seem to agree.

In his reply Jason acknowledges that, if the present distribution of global income and thus absolute poverty of a quarter of humankind, is not to be maintained, and the overall GDP must not increase, then a significant reduction of Western incomes is inevitable. This was exactly what I stated in my original post.

But Jason does not believe that the reduction of rich countries’ incomes is  a big deal because people in Costa Rica are happy with an income level only one-fifth of the United States, and West European countries are no less prosperous and happy despite the fact that their per capita incomes are 40 percent lower than American. In other words, we can reduce Western incomes a lot and change the type of goods being produced (universal health care and nationalized housing instead of cars and airplanes) without major loss of welfare. Perhaps even with a gain as the new economy would make people work less and lead more interesting lives. For good measure, Jason would also cancel all debts, and (it seems) abolish all lending and fractional banking.

I do not think that this program is illogical. It is just so enormous, outside of anything that we normally can expect to implement, that it verges, I am afraid, on absurdity. It is simply impossible to put in practice, not only in democracies, but probably in North Korea either. I do not want to be impolite or insulting, but I think that only Kampuchea came up with anything similar. Many countries have lost large fractions of their overall income through wars or civil strife, but none has impoverished itself voluntarily. If put to test in real life, rather than at conferences and blogs, Jason’s program would receive support from almost no one.  

Capitalist societies, after several centuries of exposure to market ideology and way of life, are structured in such a way that populations have fully accepted, and reaffirm in their daily lives, the objectives that make capitalism thrive. We want more and newer “stuff” every year. The ideology of commodification and commercialization has never been stronger: it is as present in the UK and the United States as in China, Nigeria, Congo, Russia or Brazil. We are not only working for a wage, we are cheerfully renting our homes and cars for money, networking at our children’s birthdays, and having kids who beat each other to grab a new model of smart phone or shoes. In other words, we have global capitalism with a population that has internalized the objectives needed for capitalism to reproduce itself and to expand, by requiring an ever greater amount of saving, investment and output.

It is irrelevant whether I like or dislike this situation (as Jason seems to believe). It is just that I observe how the world functions while Jason appears to me to live in an unreal world. If he looked at the real world he would have seen that up to 50 immigrants from Sudan are often found squeezed in the tiny electric compartments of French trains while crossing the border in order to live better lives and buy more “stuff”; he would have noticed that people, as they will doubtlessly do on this Thanksgiving too, get up at 4 in the morning to line up in front of Walmart’s and engage in fistfights so that they can buy the new model of “stuff”; he would have noticed that professors at many, and probably his own, universities fight endless battles over 1 or 2 percent salary increases; he would have noticed that families go into debt just to show off with a new model of a car etc. etc.

So his program may in words be accepted by those who would have travelled 10,000 miles to attend the conference where the program is presented; who would use AC while sitting in the conference hall and eat meat during the conferences meals, but they too would not vote for it.  

For if the proponents of such a program really believed in it, they should start (or should have already started) a political movement that would promise to implement it and save the planet. They should explicitly promise continuous annual income declines of several percentage points, lower wages, pensions and social transfers, a work week of 20 hours or fewer, closure of most gas stations and many airports, home production of key food items, picketing of factories that work longer hours or supermarkets that sell meat. They should put this program on their flag and see how many people will vote for it.

Saturday, November 18, 2017

The illusion of “degrowth” in a poor and unequal world

I have recently had Twitter and email discussions with a couple of people who are strong proponents of “degrowth”. From these exchanges I got the  impression that they were unaware of just how unequal and poor (yes, poor) the world is today and what would be the trade-offs if we really were to decide to fix the volume of goods and services produced and consumed in the world at the current level.

This is just an attempt to present some back-of the-envelope calculations that should be improved very much in a serious attempt to examine the alternatives.

Let us suppose, for the sake of the argument, that we interpret “degrowth” as the decision to fix global GDP at its current level (assuming for the time being  that the amount of emissions is also fixed at the current level). Then, unless we change the distribution of income, we are condemning to permanent abject poverty some 15 percent of world population that currently earn less than $1.90 per day and some quarter of humankind who earn less than $2.50 per day. (All dollar amount here are in PPP terms, that is in dollars of equal purchasing power across the world, based on the 2011 International Comparison Project.)

Keeping so many people in abject poverty so that the rich can continue to enjoy their current standard of living is obviously something that the proponents of degrowth would not condone.  One of my correspondents explicitly rejected that scenario. So, what are we to do then? We can of course, they say, increase incomes of the poor and reduce incomes of the rich so that we stay within the envelope of the current global GDP. So, let’s suppose that we decide to “allow” everybody to reach the level of median income currently existing in Western countries, and as people who are below that level move toward the target, we gradually reduce incomes of the rich (which for simplicity I shall assume to be all living in the West).  

The “problem” is that the median after-tax income in the West (about $14,600 per person per year) is at the 91st percentile of the global income distribution. Clearly, if we let 90 percent of people increase their incomes to that level, this would “burst” our GDP envelope several times over  (2.7 times to be exact).  We cannot be this “generous”. Let us suppose next that we let everybody reach only the income level that is slightly higher than the Western 10th percentile, exactly that of the 13th Western percentile ($5,500 per person per year).  Now, by a “lucky accident”, Western 13th percentile coincides with the global mean income, which is at the 73rd global percentile. We could bring up all the bottom 72 percent,  but we also have to reduce incomes of everybody above so that the entire world lives at the global mean.

How much of a reduction would this imply for the global top 27% (those with incomes above the global mean)? Their incomes would have to be cut by almost two-thirds. Most of them, as we have said, live in the West. The immizeration of the West would not take place through transfers to the poor: we have “allowed” them to produce and earn more. The immizeration of the West would take place through gradual and sustained reduction of production and income until everybody who is “rich” loses sufficiently so that they drop to the level of the global mean. On average, as have seen, this is about two-thirds, but the very rich would have to lose more: the global top decile would have to lose 80%; the global top ventile (richest 5%) would have to lose 84%: and so on. Factories, trains, airports, schools would work one-third of their normal time; electricity, heating and hot water would be available for 8 hours a day; cars may be driven one day out of three; we would work only 13 hours per week (to make Keynes happy to have guessed correctly in his “Economic possibilities for our  grandchildren”)  etc.—all in order to produce only a third as many goods and services that the West is producing now.

Stop for a moment to consider the enormity of what is being proposed here. The global Gini should go to zero, from the current value of 65. The world would have to move from an inequality level that is higher than that of South Africa to complete equality that has never existed in any recorded society. Countries have difficulties implementing policies that reduce Gini by 2-3 points, and we are proposing here to shave off 65 Gini points.

On top of this, world population is projected to increase by several billion. Our envelope which is fixed in the absolute amount will have to sustain more people; in other words, the mean income will have to drop.

On the positive side, however, such a dramatic squeeze of income distribution will change consumption patterns. We know that the rich have higher average emission per dollar spent (AED) than the poor. This is because they consume emission-intensive services and goods like airplane trips and meat much more than the poor. Squeezing everybody to the same level would mean that the total emissions produced by the new GDP (that would remain the same in value but whose composition would change) would be less. There would be thus some “slack” in our envelope which might allow us to either let some people be a bit better off than the rest, or move everybody to a mean income slightly above that of the Western 13th percentile.

Say that the increase in population and the decline in AED just offset each other: we are then back to the original scenario described before when everybody would  have to live at the point of the current Western 13th percentile and the rich world have to lose about two-thirds of their income.

It does not seem to me that this outcome, however much we may tweak the assumptions, is something that is even vaguely likely to find any political support anywhere including from the proponents of degrowth themselves many of whom would have to cut their consumption by perhaps 80 to 90 percent. It would make more sense, if we want to think seriously about how to reduce emissions, not to engage in the illusions of degrowth in a very poor and unequal world but to think how the most emission-intensive goods and services could be taxed in order to reduce their consumption.  The increase in their relative prices would cut real income of the rich (who consume them) and would reduce, even if slightly, global inequality. Obviously, we need to think about how new technologies can be harnessed to make the world more environment-friendly. But degrowing is not the way to go.

Wednesday, November 8, 2017

The background of my discussion with Adam Tooze re. the origin of World War I

Adam Tooze on his Website today presented his version of our recent disagreement on the origins of World War I. Perhaps as an example of a more general difficulty of establishing “the truth”, we have two slightly different versions of the events. I propose mine here.

After reading and reviewing Adam’s important book “Deluge”, we agreed (at Adam’s initiative) to meet and have a drink. Adam kindly accepted to come all the way to mid-town New York. We had drinks and while discussing both his book and my ongoing project on pre World War I inequality and foreign investment with Thomas Hauner and Suresh Naidu, to be released in a couple of days (and on which Adam could give us valuable advice), Adam offered to send me two of his recent papers.

One of them dealt with the July crisis. The paper is here. I was quite surprised by Adam’s uncritical support of,  I would have thought,  discredited thesis of Chris Clark on the origins of the war. I will not go here into the dissection of Chris Clark who, without knowledge of the language or archives, decided to discuss Serbia’s pre-war politics  based mostly on the official dispatches of Austrian military attachés in Belgrade (as if one were to write a history of German militarism, without knowing the language, and  basing himself on uncritical reading of French military attachés dispatches from Berlin!).  For a brilliant dismantling of Clark’s book see Miloš Vojnović’s review here.

Adam, as he says in his today’s blog, seems to rejects towards the end of his paper Clark’s thesis. This was not, nor is it now, fully evident to me. He mentions Clark, always approvingly, no fewer than twenty-eight times in a 50-page paper. I then wrote to Adam the two emails shown below (plus a third one giving some data on Serbia’s trade prior to 1914 that Adam, citing the work of yet another author, says are unavailable: the data by the way show that 2/3 of Serbia’s trade was with the Central Power which I suppose might have been an uncomfortable fact).

The first email was sent the day after our meeting (on 20 October), the second, more detailed, several days later. I have not heard a word from Adam since, that is, until yesterday (7 November). That is almost three weeks. The least you can say is that it is a very impolite reaction. If after having had drinks with somebody and having given him your papers for comments, you just ignore his friendly comments simply because he disagrees with some parts of your paper is neither nice nor is it an academically appropriate reaction. Had Adam cared to explain his position regarding Clark’s “orientalism” our discussion would have gained much in clarity, and perhaps there would have been no discussion at all.

Here are the emails:

My email No. 1 (October 20)
Dear Adam,

Two quick comments (I may come back with some Qs later) on your "July crisis revisited".

You quote with agreement Clark's rather bizarre association between "The Young Bosnia", "Black Hand" ("Union or Death") organizations and Al Qaeda. Obviously, we can say that there is a similarity between OAS and AQ, or Irgun and AQ,  or IRA and AQ or whatever but we need to understand the logic and ideology of these organizations which I think Clark does not.

"The Young Bosnia" was not even a Serbian nationalist but Yugoslav nationalist organization, as clearly stated by Princip during his trial when he referred to himself as a "Yugoslav nationalist". So if one wants to find similarities, it is rather with the Carbonari; and it was not for nothing that they took the name of the "Young". The organization had, among its members, Serbs, Croats and Muslims (all three religions were among 7-8 people who planned the assassination). Obviously, the objectives of the Serbian Military Intelligence which supplied the weapons were different; they were pan-Serb nationalists and they looked very warily to what was for them the Viennese-Zagreb idea of South Slav unification. But for a while, between 1908 and 1914, the two ideologies had the same objective: getting A-H out of Bosnia. Clark fails to note the difference and to place the Young Bosnia squarely within the context of European unification movements.

I can also get you the data on Serbia's exports and imports. Up to the Customs crisis with A-H in 1906, some 80% of Serbia's exports went to Austria-Hungary (import figures were probably similar). During the Austrian embargo (up to 1910), Serbian exports diversified significantly toward France, Italy etc., so that the A-H share went down to (I guess) a half or less of what it was in 1906. And I do not think that it recovered before 1914. But it does not seem to me that Bulgaria which was much more integrated with the Ottoman Empire and became fully independent only in 1908 is at all a good proxy here.

My email No. 2 (October 25)
Here are my comments on your July crisis paper. You are unlikely to agree with them, but here they are.

For Suresh and Thomas (who is the coauthor of our paper; cc-ed here), the interesting part is, I think, what I argue is the unified feature of imperialist theories. We do not even mention in our paper that they apply (in my opinion) equally well to the Balkans, but it is reassuring to know that they do (or at least that the argument can be made that they do), and hence that they are more generally valid.

With the attachment:

Dear Adam,

As I mentioned before, here are some reactions on reading your piece on the July crisis.

Let me start with the end. I could not agree more with you statement that the “democratic peace theory” can hold only when there is a hegemon, relatively benign over its domain (not outside the domain thought) which keeps in check other rivalries. This is why  think the West had had no war within itself since 1945 and is unlikely to have one so long as the US remains the hegemon.

What is wrong, in my opinion, with other theories you discuss (except globalization à la Williamson and O’Rourke which really pertains to North Atlantic only)? The fundamental problem is that they see  the war as the conflict of the already formed European states whereas the trigger for conflict lies in Austrian imperialism. They are misled because imperialism (colonialism) in this case took place in Europe. If Bosnia were in Africa, they would surely attribute the origin of the war to imperialism and then to the struggle for national liberation. But because the conflict is in Europe, they are blind to that obvious fact. (Lieven however is not.) It is in fact the same issue that played again in 1941 in Germany’s attempted conquest of the Soviet Union: colonialism applied to Europe, as Mazower and Aimé Césaire point out.

In this case, Austria, not being strong enough to expand overseas (also because all the territories were already taken), saw the only way to maintain its Great Power status through European imperial conquest. That explains why it annexed Bosnia and even (wildly) entertained plans of expansion all the way to the Aegean. But imperial conquests in Europe were more difficult because the gap in power and technology between the conqueror and the colonizer was less and the countries were more thoroughly enmeshed into alliances. And the stakes were greater.

Thus the origins of the Balkan conflict that triggered the War is part and parcel of the same imperialist narrative that is frequently used only for the Great Powers struggle for territory in non-European spaces. This in my option a great plus for the theory of an imperialist origin of the war: it is unified: Sarajevo is no different from Fashoda or Amritsar.

Two other points. When Gartzke writes how European Great Powers did not go to war after 1870 and Balkan countries did, he totally misunderstands the facts. European powers did go to wars to effect national unifications as Germany did in 1866 and 1870 and Italy against Austria. And they did it despite trade links. This process was simply played out with delay in the Balkans where the formation of national states (or South Slav unification) took place over a longer period from around 1830 and was not completed until 1914 (and it may not be fully completed even now). Wars had nothing to do with trade integration or not, but with the delay, explained by relative underdevelopment, in the process of nation-formation.

Finally, on Clark, I already mentioned what I think. But the most extraordinary is his psycho-babble about Serbian “national psyche” which I find not only incomprehensible but totally “Orientalist”. Nobody would today dare to explain German politics by some elementary school psychology of the German Junkers’ problems adjusting to modernity. But because Clark knows very little of Serbian history, economics or politics and assumes that such lack of knowledge is shared by his readers he is allowed to engage in such childish psychoanalysis of a nation.

Hope you find some of this useful (even if you may not agree).

PS. There are many inconsistencies: if Vienna was a “laboratory of modernity” vs. Serbia how do we explain that Serbia had a constitutional monarchy (since 1903) with a government responsible to parliament and 98% male franchise and Vienna had neither? (In Hungarian part, the franchise was 2-3%, if I remember correctly).

And for better understanding of what I meant by Clarks’ pop psychology 101, quoted very approvingly by Tooze, whereby Clark explains Serbia’s history, politics and society in 1914, here is the text of his “Orientalism” in action:

 “the development of modern consciousness [in Serbia] was experienced not as an evolution from a previous way of understanding the world, but rather as a dissonant overlaying of modern attitudes on to a way of being that was still enchanted by traditional beliefs and values”.

That’s where the matter stood as of yesterday. But yesterday in response to somebody on Twitter who very highly praised “Deluge” I replied that I concur with that (as is evident from my review of “Deluge”) but that the book has several flaws. After not having reacted to my three messages over almost three weeks, Adam reacted very fast to this tweet (the power of Twitter!) saying that if I have critical comments on the book I should express them openly rather than by the way of “innuendo”. This seems a rather strong term for an off-hand remark and Adam and I then exchanged a couple of emails (out of which he has copied and pasted a paragraph on his website) which, in my opinion, is totally incomprehensible unless one reads his article, understand how this disagreement came about, and reads my previous (and I have to say, still unanswered) emails.

Yesterday Adam suggested that we “don't further pursue this exchange” but he seems to have decided that it would be more fun to continue it on the Internet and I am quite happy to oblige.

Now, what remains to be done is that I re-review Adam’s book pointing out to the parts that I do not find compelling (so that my comments are  no longer treated as “innuendos”). I will do so around Thanksgiving because I am off tomorrow on a two-week trip to Europe and I would prefer do the review with Adam’s book in front of me rather than with only copious (attesting to the quality of the book) notes that I took. But so that Adam knows what are, in my opinion, some “problems” with “Deluge” let me briefly mention them. They are of three kinds:

1. A chronicle-like approach that while abounding with facts fails to give to the reader a sense of these facts, why and how they line up, fails to provide  understanding of the facts, i.e., I would like more of histoire raisonée. Even the uptick in democracy around 1918-19, which provides a key theme of the book and is well documented in political terms (parties' share of the vote) is often discussed without addressing social factors leading to it. This weakness is at its most obvious in the Introduction and Conclusions.

2. Misunderstanding of the fact that the Soviet Russia was not a state like any other in 1917 but a state that had a double policy of being a beacon of the new world (and hence having an extremely strong ideological appeal across Europe and increasingly across the world) and a “normal state”. In 1917, you can argue, it was only the former but Adam treats it throughout the book as only the latter. Failure to see that and to correctly assess the ideological importance of the October Revolution (for those outside of Russia) leads  him to interpret wrongly, in my opinion, the Brest-Litovsk peace agreement, to underestimate the appeal of the Revolution in Europe and thereby to overlook the fear that the European elites had of left-wing take-overs, to minimize the importance of strikes and farm chaos in Italy on the rise of Fascism etc. So this serious failure permeates many parts of the book.

3. Economic chapters in the last part of the book seemed written in haste and a plethora of numbers, some given without sources,  expressed in nominal units (with no anchor to some more meaningful statistics) makes the reading and understanding of that part quite difficult.

I hope  to explain in greater detail each of these points around Thanksgiving.