Tim Worstall wrote, “The economic policies of the last 30, 40, years have led to the greatest reduction in absolute poverty in the history of our species.” This sounds about right, but on its own the assertion will not convince the types of people I might want to persuade towards my way of looking at the world, the people who accept the litany that inequality is increasing and that must mean that the rich are making the poor poorer. A lot of these people are not Marxist true believers, they just imbibe the world-view of the BBC by default. To them, a claim such as “poor people are richer than ever before” sounds like a strong claim that needs strong evidence.
I often point people to Human Progress. Its headline evidence is often a bit specific, though. Today’s headlines are about malaria, seafood consumption, China’s environment, primary school attendance and teenage pregnancy in Africa. These are all good wealth indicators but I could be accused of cherry-picking.
Then I found a graph showing absolute numbers of people living in extreme poverty since 1820. Extreme poverty means living on less than $1.90 per day, adjusted for price differences and inflation. The graph is made by combining a 2002 (peer-reviewed!) study and numbers from the World Bank. It does leave the question of how many people are living on other, similarly low incomes. Another chart has a green line showing “poverty” being $25 per day of income. The trend is in the right direction. There are many more charts along these lines put together by Max Roser.
Mr. Worstall also recommends Branko Milanovic’s blog, and an article by him presenting data about who is getting richer and who is not.
The real surprise is that those in the bottom third of the global income distribution have also made significant gains, with real incomes rising between more than 40% and almost 70% [between 1988 and 2008]. (The only exception is the poorest 5% of the population, whose real incomes have remained about the same.)
Those 5% must live in some truly awful places.
I have ideas for future study. I want to correlate increased economic freedom with poor people getting richer in a way convincing to people with the default BBC world-view. And I heard somewhere that fewer people than ever are less than one failed harvest away from starvation. That is a compelling image; it would be useful to be able to back it up.
Between watching other things last night my television briefly showed me Ross Kemp in Africa talking to a park ranger about elephant poachers armed with AK-47s. In voiceover he said that in the last 10 years 1000 park rangers have been killed. I looked it up. The Game Rangers Association of Africa are quoting the same figure. The International Union for the Conservation of Nature are saying the same thing, adding that the numbers are as reported by co-operating countries to the International Ranger Federation.
My first thought was to wonder how the nature conservationists think it is worth that much human life to protect some animals.
But as David Moore succinctly puts it in response to a Tim Worstall post about “waste [disposal] crime”, this is really another case of “government regulations creating massive incentives to bypass government regulations”.
Now there are objections. A one-off legal ivory sale intended to reduce the price of ivory apparently increased demand for poached ivory because researchers Prof Solomon Hsiang at the University of California Berkeley and Nitin Sekar at Princeton University, “think the legal sale reduced the stigma of ivory, boosting demand, and provided cover for the smuggling of illegal ivory, boosting supply”. This strikes me as a problem with one-off sales specifically, which are distinct from the long-term balance of supply and demand seen in a free market.
A couple of years ago Simon Jenkins argued in favour of ivory farming, and Will Travers responded with some impertinent arguments and some teenage emotional outpourings echoed by the commentariat that seem to amount to little more than “why can’t we all just get along?” Case in point:
I think Simon Jenkin’s proposal is wrong & morally offensive. Surely we need to banish forever the premise that animals on this planet are for here for the purpose of human beings’ exploitation & use – that their body parts are commodities to be farmed & harvested!
It does sound awfully easy when typed by a middle-class Guardian reader coddled in his air-conditioned public-sector office or a newly-vegetarian thirteen-year-old girl.
Here is how this middle-class libertarian blogger would solve it from his air-conditioned office: Abolish Cites, legalise the trade, and privatise the reservations so that the owners have an incentive to keep producing ivory, therefore preserving the species. There will still be poachers, but at least the profits could fund some proper security.
Addendums: Ivory is in the news very recently and I commented there; we do seem to talk about ivory a lot here; this is a small problem compared to, say, mosquito borne illness (which I am planning to write about soon).
A perfectly justified question to put to John McDonnell in the light of this report from the Telegraph:
John McDonnell welcomed the financial crash and called himself a Marxist, newly found footage shows
John McDonnell, Labour’s shadow chancellor, welcomed the financial crash that wrecked Britain’s economy and insisted he was a Marxist, newly uncovered footage shows.
Mr McDonnell, who is Jeremy Corbyn’s closest political ally, is seen in the 2013 video saying that the economic upheaval proves the faults with modern capitalism.
At one point Mr McDonnell, who was a backbencher at the time, says of the crisis: “I’ve been waiting for this for a generation!”
The comments are documented in a YouTube video viewed less than 60 times which was posted on the website on March 16, 2013.
Here is that video: John McDonnell MP Speaking at communities against the cuts meeting 16-3-13. The relevant extract is between 07:10 and 07:35.
In a video entitled “John McDonnell MP Speaking at communities against the cuts meeting”, the man now in charge of Labour’s economic policy is seen discussing the crisis.
“We’ve got to demand systemic change. Look, I’m straight, I’m honest with people: I’m a Marxist,” Mr McDonnell is seen saying at one point.
“This is a classic crisis of the economy – a classic capitalist crisis. I’ve been waiting for this for a generation!
“For Christ’s sake don’t waste it, you know; let’s use this to explain to people this system based on greed and profit does not work.”
Most of the comments I have read seem to think that his “welcoming” the financial crash of 2008 is the main story. I don’t see it that way. He could reasonably claim (added later: he has claimed) that it was said as a self-mocking joke about the way Marxists have been predicting the imminent demise of capitalism for years and only now, it seems, has it finally happened. No, I think the damning part is “I’m honest with people: I’m a Marxist.”
My title for this post was also intended as a historical joke. There is no doubt about what party Mr McDonnell belongs to, the Labour Party. The doubt that arises in many people’s minds is whether under Jeremy Corbyn’s leadership this is still a party normal people can vote for without going the full Venezuela. We know he is now and has long been a member of the Labour party, but someone will inevitably now ask Mr McDonnell, “Are you a Marxist?”
In 2013 his straight and honest answer was “Yes”. If he answers “No” three years later, will people believe him? When did he change and why?
If he answers “Yes”… this man is Shadow Chancellor of the Exchequer.
Update: Mr McDonnell appeared on Question Time last night. He was asked by David Dimbelbly if he was a Marxist, in the light of that video. Watch the first half minute of this clip to see how he responds. At 15 seconds in we have:
Dimbelby: “Are you a Marxist?”
McDonnell: “No, I’m a socialist.”
Dimbelby: “Well, why say, ‘I’m a Marxist'”?
McDonnell: “Because actually I was trying to, I was demonstrating, a prediction of the capitalist crisis at the time.”
Anna Soubry’s lengthy attack on him afterwards becomes tedious, but she got a solid round of applause for her initial indignant restatement of fact in the face of this farrago: “You said, ‘I’m a Marxist'”.
The middle classes in the UK and America are getting richer again. Inequality is diminishing. There are many problems, of course, but they are primarily down to the fact that the impact of the Great Recession ended up dragging on for years, with the previous misallocation of resources and capital wiping out a decade’s worth of productivity gains.
– Allister Heath
So why the rise of populism? While wages are finally improving, there has been no return to boom times. Millions of younger people are despairing at exploding housing costs, fuelled by government-created low supply and rock-bottom interest rates; older workers are facing a nightmarish pensions crisis, also created by ultra‑loose monetary policy.
Voters feel culturally disconnected; they rightly voted for Brexit because they realised that democratic control was being destroyed by technocratic unaccountability. The welfare state’s inherent defects mean that people feel caught up in a Hobbesian war for resources – school places, hospital beds – of all against all, especially with high levels of immigration. But the middle classes should direct their ire towards politicians and central bankers, not free markets or technology.
Douglas Carswell makes some excellent points about the perils of any post-Brexit trade agreements with the EU:
So let’s spell it out. Access to the single market means being able to trade with single-market countries. Membership means being bound by single-market rules.
Why is this difference so important?
Because access is consistent with the vote to leave the EU. Membership isn’t.
Access clearly doesn’t require membership. Countries around the world trade with the single market. Many do so freely, with no tariff barriers, via bilateral free-trade agreements. Britain can do the same. We don’t need to be part of the single market to trade freely with it.
In fact, we will have freer trade once we leave the single market. Because the single market doesn’t enable commerce, but rather restricts it.
The single market is a permission-based system. It stops suppliers from selling things people want to buy unless they conform to standards set by bureaucrats in Brussels. Rather than remove trade barriers, the single market creates them. Not between countries, but between producers and consumers.
The effect is to limit competition. Big corporations with expensive lobbyists rig the rules to shut out disruptive innovation from upstart rivals. Economic progress is impeded.
Indeed, and as Peter Lilly wrote not all that long ago:
How important are trade deals? As a former trade minister it pains me to admit – their importance is grossly exaggerated. Countries succeed, with or without trade deals, if they produce goods and services other countries want. Thanks to the Uruguay Round, tariffs between developed countries now average low single figures – small beer compared with recent movements in exchange rates. So the most worthwhile trade agreements are with fast growing developing countries which still have high tariffs.
Quite so. The sooner we are out of the EU the better.
Globally, therefore, adoption of American farming techniques could increase agricultural productivity so much that a landmass the size of India could be returned to nature, without compromising the food supply to our apparently “peaking” global population – the world’s population is likely to peak at 8.7 billion in 2055 and then start to decline. Last, but not least, tens of millions of agricultural laborers in Africa and Asia will be freed from back-breaking labor, migrate to the cities and create wealth in other ways.
– Marian L. Tupy & Chelsea Follett
There is nothing new about this; it mostly started fifteen years ago, in 2001, and again the Irish were the main target. Ireland in the early 1990s had a high general corporation tax rate of 40%, but it introduced a special low 10% rate for finance companies in its Dublin-based International Financial Services Centre (IFSC). The Commission ruled that this was effectively an improper subsidy to the finance industry under the State Aid rules, and ordered its abolition.
That was really the root cause of the EU’s current row with Ireland, because the Irish response to the IFSC being declared illegal was to reduce all its corporation tax to 12.5%. Because that wasn’t targeted at a particular company or industry sector, it wasn’t illegal State Aid and so the EU Commission could do nothing to stop them, much as it wanted to.
So the EU Commission’s current action against Ireland over Apple is largely “Round Two”, a repeat of what it did fifteen years ago.
– Richard Teather
Private businesses very seldom mount a principled defence of their behaviour. This is why libertarians like to stress that they are pro-market and not pro-business. Business people, being self-interested like anybody else, will attempt to make the most of the circumstances and the majority of them won’t hesitate in accepting legal privilege; indeed many lobby aggressively for it.
– Alberto Mingardi
I have been buying coffee beans from Has Bean for several years. Their unique selling point is they ship the beans on the same day they are roasted, so they are really fresh. They also cater to coffee geeks by letting us choose beans by country of origin, plant variety and processing method. And they do not roast the beans too much so it is possible to taste the difference all these things make.
A coffee roaster, complete with custom Has Bean modifications.
On Sunday they had an open day at their facilities near Stafford. They simply opened the doors and did coffee cupping (i.e. tasting), brewing demonstrations, talks and tours. They threw in some real ale and nibbles for good measure. I went along.
The story goes that the boss, Steve Leighton, got fed up with his job as a prison guard and decided to turn his coffee roasting hobby into a business. After trying to sell coffee on Stafford market, he became exasperated when a customer came back to complain that the ground coffee would not dissolve in the water. It was after this that a friend suggested he tried selling coffee on the Internet.
The chief roaster, Roland Glew, after explaining exactly how the roasting is done by smell and sound of cracking, and how roasting for ten seconds too long can ruin the product, told us how speciality coffee buyers interact with farmers. Steve Leighton visits farms, gets invited into the farmers’ family homes and treated like family. Whereas once upon a time their coffee would be thrown into a bag labelled “coffee” and they would get a fixed price, Leighton can work with them to explain what people want, get them to change their methods, try new varieties of plant or different processing methods, divide up the farms differently, and generally get them to make better coffee because he is able to pay a premium for it. He is able to make assurances about how much coffee he will buy so they can safely make the needed investments, and continue to buy coffee if a farmer has a bad year because it is in his interests to keep the farm in business. Has Bean are even experimenting with what would otherwise be waste: cascara and coffee flowers.
Roland demonstrating the sample roaster.
This is what innovation leading to economic growth looks like. It is largely made possible by the dis-intermediation of the Internet. Geeks are all but buying coffee directly from farmers. The Internet also has a way of bringing people with weird hobbies, like getting all serious about coffee, together. An individual becomes part of a global buying market who otherwise might have been the only weirdo in town.
It is a completely different way of making poor people richer than Fair Trade, which a Department for International Development report found does not even work. Steve Leighton is not very impressed with Fair Trade, either.
Steve doing his party trick of telling a story about any coffee variety you point to.
I asked Steve how much import tariffs affect his business. He said not a lot. Thinking about it, this makes sense. Possibly one reason coffee prices are in general so low is that other things farmers could grow are hit by trade barriers. Only coffee is left. He was much more worried about the exchange rate movements since the Brexit vote.
Steve seems particularly fond of Bolivia. On the visit I heard a lot about how life is hard for Bolivian coffee farmers because the president Evo Morales is more interested in supporting coca farmers. He also told a great story about the Yungas Road, which he travels on. It was the most dangerous road in the world because vehicles would fall off of it. Then a bypass was built, but travelling on the bypass was expensive because bribes would need to be paid at checkpoints. So now Steve uses a company who run bicycle tours for tourists to get down the road.
More pictures from me, here. See and hear more from Steve in his fascinating “In My Mug” videos, like this latest one from Bolivia. You can hear more about his most recent trip to Bolivia in this Tamper Tantrum podcast.
In an astonishing EU ruling, Apple is being told the pay the Irish state €13 billion(!!!) in retrospective taxation that the Irish state never asked for. And the reply from Apple is very well crafted. It is clear they are not going to take this shakedown by the European Commission lying down.
I found this quite interesting:
On the face of it, China’s central bank has room to cut interest rates to try to lift the economy, but sources say evidence companies and banks are hoarding cash has reinforced policymakers’ view there is no major benefit in easing policy further.
The reluctance has also been shaped by the experience of Japan and the European Union. Despite much more aggressive easing policies than China, including negative interest rates, they have struggled to lift their economies out of the doldrums, these sources said.
And my reaction was to marvel… can it be true ‘Communist’ China is the only state to finally figure out the absurdity of modern mainstream thinking regarding interest rates? Every time Bank of England Governor Mark Carney opens his mouth, I am reminded of Albert Einstein’s purported definition of insanity. Is China really the only place the
penny fen has finally dropped?
And the idea that is the bedrock of all economics is the understanding that complex economic order emerges spontaneously, without central design or guidance, when private property is secure and markets are at least reasonably free – when, in short, there reigns what Adam Smith called the “the obvious and simple system of natural liberty.”
Too many economists today, busy mastering mathematical technique or striving to make their work relevant for current holders of political power, lamentably never learn – much less master – these and other foundational ideas. But no amount of mastery of the idea of the likes of Nash equilibrium or of the Stolper-Samuelson theorem is worth a damn without a mastery of these older, less sexy, yet foundational ideas.
– Donald Boudreaux