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Book Review: Decadent Developmentalism: The Political Economy of Democratic Brazil by Matthew M. Taylor

Published by Anonymous (not verified) on Mon, 25/01/2021 - 11:03pm in

In Decadent Developmentalism: The Political Economy of Democratic Brazil, Matthew M. Taylor advances a comprehensive account of Brazil’s decades-long boom-and-bust development trajectory. Taylor pierces through the ideology of developmentalism to offer an institutional and policy examination of the country’s ‘low growth equilibrium’ in order to explain a series of disappointing developmental outcomes, including a social security system that concentrates income and labour market regulations that effectively divide society between privilege and exploitation, writes Mark S. Langevin.

Decadent Developmentalism: The Political Economy of Democratic Brazil. Matthew M. Taylor. Cambridge University Press. 2020.

Book cover of Decadent DevelopmentalismFind this book (affiliate link): amazon-logo

Decadent Developmentalism is as sober as it is provocative, offering an institutionalist analysis of Brazil’s decades-long boom-and-bust development trajectory. Thread by thread, Taylor weaves a tapestry of institutional and policy evaluations that explain how this exceptional nation has fallen short of its promise. The book sets out to explain the ‘low growth equilibrium’, or the sustained patterns of below-average economic growth, educational achievement, infrastructure investment and productivity – along with pervasive inequality – since the transition to democracy in 1985.

Taylor pulls from the comparative political economy literature to offer up an explanatory framework, anchored to the notion of ‘institutional complementarities’, revealing an incentive structure that leads firms and politicians to pursue strategies that are ‘individually first-best, but collectively suboptimal’. While the book is an ‘unabashedly single country study’, its theoretical contributions merit just as much attention as its examination of Brazilian political economy.

Decadent Developmentalism baits a much needed political debate in Brazil, after a lost decade marked by disappointing economic development, world-class corruption, the impeachment of former President Dilma Rousseff and the emergence of a populist-authoritarian movement headed by President Jair Bolsonaro. The title of the book may inflame partisan passions across Brazil’s political spectrum, but its contents represent a well-intentioned examination of those institutions that may be most responsible for Brazil’s developmental paralysis. The author conceptualises institutional complementarities and then applies the notion to an explanation of how they unfold to sustain and reinforce a perverse set of incentives for domestic firms and political factions. Taylor does not discard path-dependency and interest group-based explanations, but he seeks to encompass these theoretical approaches within his explanatory framework.

The book proceeds to detail the five primary domains through which institutional complementarities tend to sustain Brazil’s morass of economic disappointments and political corruption, as well as propel a few steps toward progress. These include: the developmental state; an autonomous government bureaucracy; weak regulatory control; coalitional presidentialism; and what Taylor theorises as the ‘developmental hierarchical market economy’ (DHME). These can be interpreted as attributes of standard variables in comparative political economy, but the author employs them to distinguish Brazil and offer a critique of the shortcomings of Brazil’s ‘neo-developmentalist’ paradigm. A quick glance at Figure 1.2 on page 13 shows the dozens of possible relations or complementarities that can be operationalised from these institutional spaces. Taylor treats each domain by dividing the book into two parts: the first part examines the complementarities within the economic sphere, and the second focuses on the state and its economic, legal and political underpinnings.

Night-time city traffic, Terminal Bandeira, São Paulo, Brazil

Taylor respects Brazil’s intellectual history by offering a rich discussion of the ‘developmental state’, thereby setting up his evaluation of its institutional and policy impacts on economic and social development. He critically examines the relations between firms and the government, with a focus on Brazilian private sector companies with close economic and political ties to the federal government, state-owned enterprises (SOEs) and public sector pension funds. Taylor’s focus on Brazil’s ‘investor state’ reveals the institutional complementarities that allow private interests to become embedded within public institutions.

Much of his examination pivots on ‘cross-shareholding’ and weak regulation wherein successive administrations, begged on by congressional leaders, have chosen to favour influential Brazilian enterprises with favourable public financing, often through the Brazilian Economic and Social Development Bank (BNDES). Taylor illustrates the effect with repeated references to the Brazilian animal protein company JBS, whose owners successfully extracted a fortune in favorable BNDES financing to reach the commanding heights of the global market, but without providing much in return. The book accounts for the case of JBS, as well as the major construction firms that were implicated (and their executives convicted) in the Lava Jato corruption scandal, as the product of complementarities between the economy, the structure of firms and the institutional contours of the federal government, namely coalitional presidentialism and weak regulatory control. These cases also illustrate the segmentation found between firms (domestic versus transnational) and within the labour market (formal versus informal) to frame and sustain what Taylor calls the DHME that has failed to deliver since the promulgation of the 1988 constitution.

The book effectively diagnoses Brazil’s institutional maladies with precision and overwhelming evidence, even if the notion of institutional complementarities is underdeveloped as a comparable concept. While Taylor falls short of erecting a comparable analytical framework, he nonetheless offers a persuasive argument. In sum, the federal government’s propensity to force public finance in political directions and its poor regulatory performance cause suboptimal collective outcomes, including a social security system that concentrates income and labour market regulations that effectively divide society between privilege and exploitation.

In Chapter Six, ‘Rents, Control, and Reciprocity’, Taylor pinpoints the causal mechanisms that trigger the low growth equilibrium and the other elements that poison Brazil’s economic and social development. He applies his analysis across a diverse set of critical, or least illustrative, cases, including the Plano Brazil Maior stimulus programme, the Manaus Free Trade Zone, the INOVAR automotive manufacturing scheme and the ethanol fuel policy, demonstrating the willingness of successive governments to offer generous rents to firms without effective regulatory control or the type of strategic policy management needed to compel firms to become more productive and competitive. For Taylor, the persistence of ‘lackluster control’ stems from politics, the fragmented party system and its corollary, coalitional presidentialism, along with weak strategic coordination across executive branch agencies. More than any other element of the book, Chapter Six provides the most convincing argument that successive Brazilian governments have been ‘ineffective at the essentially political act of controlling the distribution of rents in ways that channel business energies in strategically productive long-term directions’ (192).

Taylor’s evaluation is both careful and conciliatory, but it leaves most of the problem at the doorsteps of Brazil’s political institutions and their feeble capacity to aggregate broad, national interests in the face of the competing private interests of Brazil’s wealthy and well-connected.

Although his book examines labour market segmentation, it does not fully account for the debilitating effects of informal, and often repressive, labour regimes upon developmental outcomes. The mere fact that around half of Brazilian workers labour in the informal sector, far from institutional protections including the constitutional rights to worker association and collective bargaining, explains much about a political system that cannot, or will not, offer strategic economic management and sustained income redistribution. Most Brazilians simply cannot afford to articulate their collective, broad-based interests in Brasília, leaving a well-organised plurality, composed of Brazilian business leaders and professional associations, to squabble over rents and dodge the demands of state-society reciprocity.

Decadent Developmentalism provides an impressive policy evaluation toolkit for understanding, and perhaps even eliminating, the incentives that propel private interests above national policy goals. Taylor’s book teaches us about good governance, but a majority of Brazilians still need to discover how best to articulate and safeguard their collective, national interests to secure formal employment, progressive taxation and equal protection under the law.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. The LSE RB blog may receive a small commission if you choose to make a purchase through the above Amazon affiliate link. This is entirely independent of the coverage of the book on LSE Review of Books.

Image Credit: Photo by Vanessa Bumbeers on Unsplash.


Exemplary governance: Which countries should high-COVID nations follow?

Published by Anonymous (not verified) on Tue, 01/12/2020 - 3:04am in

Connecting illness, death and governance in a COVID world

Image by Frauke Riether from Pixabay

By Ian Inkster

As much of America, Europe and many anglophone nations face the welter of possible choices of action available to them as they enter what is understood to be a “second wave” of COVID-19, their media repeatedly mention a small group of nations that might best be copied—examples of good COVID governance.

Two points at the outset. For some time now it has been unclear whether this new wave was a direct function of mutation among the many DNA of the virus itself, or mainly a man-made cycle following the ups and downs of civil societies’ adherence to the regulations. Are the spikes resulting from civil laxity? The second point follows from this civil laxity argument—it may well be claimed that a nation’s ability to dampen COVID incidence and mortality is a sign of its existing power of governance. Good COVID management then becomes a measure of strength and scope of policies, of a government’s firmness in convincing its citizens to adhere to regulations, and of its own power to adapt to externally induced changing circumstances. From this, it may be argued that good COVID results act as an indicator of how well a government will lead its nation into post-COVID economic recovery. So, there can be quite a lot at stake here.

Thus, choosing the best example may well reflect an underlying belief among large numbers of people that a particular country has high status among the comity of nations. That is, successful COVID results may be seen by many people throughout the globe as exemplifying both successful governance and a firm moral economy. Contrariwise, failure over COVID in the “second wave” may now be considered a sign of a failing state. We have witnessed the ousting of Donald Trump.

Clearly enough, notable exemplars cannot be so small as to be clearly outliers, else such varied places as the Falklands or Greenland would take the lead. This puts to the side nations that have, indeed, been applauded, such as Hong Kong and Singapore. This applies also to isolated islands and vast territories with very low population densities such as Iceland, Madagascar, Finland, or even Norway. On more direct reasoning, those seeking exemplars should surely omit nations that do not report tests per million, such as Burkina Faso with a population of over 24 million and impressive Cm (cases per million) of 122 and exceptionally low Dm (deaths per million) of only 3, but which does not report test numbers. Of course, there will be nations that have actually had so few hospitalised cases or deaths that they have not instituted tests at all, but they are difficult to clearly separate from ones where cases would be high if thorough testing had been instituted.

Measuring COVID experience and selecting models

Table 1 below lists details for 10 nations, 5 of which are quite commonly exemplified across the world, and 5 others that are not, but whose records are worth serious consideration. World data is included in the last row. Coronavirus Worldometer

Table 1 offers a great many cautionary tales. Cm measures total COVID cases per million, Dm total deaths per million, D/C is deaths as a proportion of total registered cases, which we take as a good indicator of the effective mortality rate; Tests/m is the number of tests for COVID per million of the population. Figures are derived from totals for the period from January 13, 2020, the day of the first confirmed case in Japan, to November 11, 2020.

The five common exemplars are in bold, and they in fact offer very varying COVID experiences according to their own official registered data across the whole period. It seems clear that Germany and Sweden are exemplars, especially in Western nations because they have good records in fighting COVID-19 in comparison to other major European nations (e.g., the UK or Belgium with Dm figures of 719 and 1,112, respectively) and the USA (a Dm of 734). They also have highish results for tests per million, especially Sweden. But the latter’s principal drawback as an exemplar is its much smaller size of population, and the unusual characteristics for Europe of its relative spatial isolation when compared to high-COVID nations such as Italy. In addition, Sweden’s D/C or mortality rate at 3.6 per cent is actually the highest of the 10 nations in this table, despite a high testing rate. This could suggest either a fault in the procedures for effective hospitalisation after tests prove positive, resulting in greater mortality, or it could be a result of its relatively high proportion of older citizens—at 20.3 per cent of its population over 65, compared to say around 16 per cent for Australia and the USA. However, this case is severely weakened when we note that Germany has a ratio of 22.2 per cent of its population in this older grouping, and Japan an even greater proportion of 28.2 per cent. Both have D/Cs of 1.7 per cent. Given the small population of Sweden, this would throw some doubt on it as an obvious exemplar in terms of actual COVID results to date.

Within Europe, this leaves Germany as probably the better case, especially as, unlike Sweden, it is bordered by high-COVID nations such as Belgium, France, and the Netherlands (Dm measures of 1,185,  651, and 484, respectively).

Outside of Europe—problems

But at first glance, neither of the European contenders can match the non-European Australia, Japan and Taiwan, each with exceptionally low Dms (Taiwan with its unmatched 0.3 per cent) and much lower Cms. The seeming weakness of the Japanese and Taiwanese cases is their low levels of tests per million. Other things being equal, this means that lower numbers tested leads to lower “cases registered” if a nation is relying on test results as its principal COVID source, rather than official collections of data from hospitals and general practitioners of patients diagnosed as having the virus. This is not a resounding rejection by any means. It is very possible, certainly understandable, that a nation with actual low covidity would not feel the same need for mass testing as nations with obviously severe problems. It is notable that both the USA and the UK have the highest proportional testing ratios of any large nations—at around 50 per cent of their respective populations tested. Given that numbers of tests say little of the quality of the testing procedures there seems some good reason for holding Taiwan and Japan in high regard as exemplars.

Australia has no such problem, its rates of testing being amongst the highest in the world and notably above those of Germany. Its Dm is exceptionally low. The only problem area here is the unusual character of its demography (a huge proportion of the population live on the massive coastlines), its absence of land borders, its overall relative isolation from all high-COVID hot-spots, and its ability to close itself off despite high numbers of tourists and business connections. These features cannot simply be emulated, yet they may be more determinate of its success as a dampener of the virus than any single element of policy or of any special sequence of official interventions.

There is more to be said about why some nations appear as exemplary and others not, despite their directly COVID-related data. This is broached in three rows of Table 1. Pol-FrR provides an indicator of political freedom within nations, as measured over the years since 1973 by Freedom House, Washington, DC. The figures are an Index with 100 (Sweden) at the top among all major nations. Our Table 1 also indicates—with an * by the names of the 10 nations—all those that are labelled by Freedom House as “electoral democracies,” and it can be seen that all 5 of the major exemplary nations are in this category, and each is highly ranked on the Pol-FrR index, ranging between 93 and 100.The exemplary 5 are a free democratic group, sharing a series of status markers, attributes of a political culture, with many of the nations that regard them as exemplary.

Even though Taiwan with its amazing COVID history is not officially recognised as an independent nation by the other 4 within this select group, its characteristics fit perfectly with those of that group, as a whole. The PPP column shows that these nations are among the richest, most established industrial nations in the world, and estimates of their exemplary character by the major media outlets of the world must surely reflect something of a cultural club. The PPP column is a World Bank measure of purchasing power parity per capita, which adjust simple per capita income comparisons to account for cost-of-living differences by replacing normal exchange rates with those designed to equalise the prices of a standard “basket of goods” and services.

The index is based on the USA as 100. It seems clear enough that the chosen exemplars are seen as ones appropriate to emulate—democratic and free—and this is what is fastened on by the media that create the mantras of “lessons to be learnt,” or “following the science,” and so on. This is confirmed in column Econ-Fr, which provides an index of political freedom for 2020 calculated by the Heritage Foundation, Washington, DC,  in its huge and freely available 2020 Index of Economic Freedom, where Singapore tops the world at 89.4, Australia appearing 4th with 82.6, Sweden appearing at rank 22 with 74.9, and so on. That is, this group is considered exemplary, despite the great differences in COVID performance within it, on grounds of a global culture in which, through an international media, market-based liberalism at high incomes is awarded the highest status among the nations of our world. With status comes notions of veracity, probity and high trust, the secondary rewards of high income.

It may thus be argued that the notion of what might be an exemplary nation in a COVID world, is not principally founded on the COVID record but on some evidence of COVID achievement plus much evidence of high national status among the other nations of our world. So, despite all the caveats and drawbacks noted in this paper, it would appear that the seemingly very different nations of the group will persist as exemplary.

Beyond the pale: Another perspective on best COVID performances

Our other 5 nations are a different cup of tea altogether. Although Poland and India are both parliamentary democracies, they share with this second group much lower income per capita, with Ethiopia being one of the most impoverished nations on earth. They all have lesser degrees of economic and political freedom, but they all also have very good COVID performances as measured in columns Dm and D/C, and generally reasonable numbers for tests per million (the worst being Angola which actually exceeds the figure for Taiwan!). These are not small countries demographically, and to that extent deserve some attention as possible exemplary cases.

With its large Cm measure, Poland looks at first an unlikely candidate, but note that its figure is equal to that of Sweden, and much lower than those of Spain (29,692), or France (26,769), or the huge Belgian figure of 42,547. Its tests per million exceed those of Japan. Its D/C ratio is very low, much below those for the UK, Italy, France, and even Germany. It borders 7 nations of high or uncertain covidity, such as the Czech Republic. And, of course, it is European. We might suggest that it has never been seen as exemplary in the West because of its cultural distinction of having low per capita income, equal to that of Malaysia, and its lower degrees of economic and political freedom than those found among the accepted exemplary group. And, of course, the same must be said of Ethiopia and Angola. The most likely causes of their low COVID measures is a lack of the infrastructure for effective testing and the low number of the elderly in their populations, primarily a result of low incomes. As noted already, this alone would tend to bring down the mortality rates. India and Malaysia are by far the more likely examples for others to follow. India’s massive population and extreme poverty, both noted in Table 1, has not inhibited low Cm and especially low mortality measures. As a well-established parliamentary democracy, India has a relatively high level of political freedom, although its determination to continue to plan high economic growth (an annual growth rate of GDP of over 7 per cent from 2012) means that government does not let market forces rule the production and distribution of goods and services. Aided by its age distribution but remembering the enormity of its population, India might well be seen as among an exemplary group of low-COVID nations.

Malaysia as best practice?

As an exemplary case in many senses, Malaysia has been the most neglected by international mass media commentators. Yet with highish levels of economic freedom, it has achieved remarkable COVID statistics based on a reasonable level of testing. In this, it has been aided by being bordered by nations of low covidity, such as Indonesia (Dm of 55) or Thailand (Dm of 0.9 and total cases of only 3,861!). Its Dm and D/C levels are remarkable. Moreover, its history of COVID defence shows a great deal more alacrity and intelligence than most nations in the West. Screening was adopted at all airports after the first case in Thailand was made public on January 13, and Malaysia only reported its own first case on January 25–well after Japan, South Korea, the USA and Taiwan. Thermal scanners were adopted early. Under the Movement Control Order of March 18, the government, with good cooperation from the media, actively spread the “#stayhome” instructions, NGOs and prison inmates fabricated PPE for those on the frontline, and initial financial stimulus to prevent full economic downturn had been initiated in February. Very early on, Malaysia accepted that China had proved that by isolating the infected group of individuals and practising social distancing, the pandemic could be contained. In order to fund new hospitals and create stocks of medicines, the Ministry of Health and Tenaga Nasional Berhad (TNB) established an “action coalition” to obtain financial aid from corporate companies, government-linked companies (GLCs), and other organizations in Malaysia, a form of private-public sector funding that the West has yet to truly exploit. Government dampened any division between private and public sectors, enlisting help directly from the social media, and NGOs (not private companies) were used early on to provide protective masks, disinfection chambers, and to educate citizens on COVID-19. By April 11, Malaysia had reported a total of 4,346 cases and a total of 1,830 recovered, a proportion of 42 per cent. Today the numbers are 32,969 and 45,095, a proportion of 73 per cent.

Far quicker than countries such as the UK, the Malaysian authorities recognised the key problem of the elderly in care homes. As early as March 27, the Malaysian government introduced the Prihatin Rakyat Economic Stimulus Package (PRIHATIN) with RM 25 million allocated to provide assistance for aged care homes, including cash disbursement, food supply and healthcare items, as well as an RM 250 one-off payment for government pensioners. Malaysia was directing a much higher proportion of its very limited resources to helping the elderly than did most of the Western nations and at a much earlier date, and this was evidently rewarded through its very low Dm and D/C statistics.

Beyond casual statements—selecting with mindfulness

The Malaysian example details the variety of positive responses that have been made in nations not hitherto considered exemplary yet showing very superior COVID results over far more wealthy nations. In itself, this sort of evidence cannot pick an exemplar for all. Picking an exemplar by looking at single cases is unlikely to help very much. But what seems clear is that global exemplars do not have to look the same in terms of political structures, incomes, or economic ideology. Better that any nation looks at its own circumstances and selects elements considered appropriate. The best option might be to consider the more global picture but allow especially for differences in income and age distributions, the character of borders, densities and levels of urbanism, and degrees of air pollution. Such elements may guide selection towards countries or a country of similar circumstance, and the best COVID performer amongst them may well be your best exemplar. But just do not jump too soon!

Elements such as age structure or borders may be reasonably recognisable and objective measures. Political systems and policies are quite the opposite, these alter with regimes (we can look forward to developments in the US). The only way out of the seeming conundrum is to first admit that COVID incidence and mortality is only very partially related to any one nation’s official management policies. In fact, to date, only the dimmest light has been shed on what is the relationship between illness, death and governance in a COVID world. For this reason alone, a great COVID exemplar may not be a great example of political and civil life, especially as defined by decision-makers in parliamentary democracies. Perhaps choosing between Australia and Japan, between India or Malaysia, ought not be so normative. Perhaps it should carefully weigh up seeming COVID performance in the context of all the elements, admitting that the policies of governance may not be foremost amongst them.

Professor Ian Inkster is a global historian and political economist at SOAS University of London, who has taught and researched at universities in Britain, Australia, Taiwan and Japan. He is the author of 13 books on Asian and global dynamics with a particular focus on industrial and technological development, and the editor of History of Technology since 2000. Forthcoming books are Distraction Capitalism: The World Since 1971, and Invasive Technology and Indigenous Frontiers. Case Studies of Accelerated Change in History, with David Pretel. Follow him on Twitter at @inksterian

Book Review: Good Economics for Hard Times: Better Answers to Our Biggest Problems by Abhijit V. Banerjee and Esther Duflo

Published by Anonymous (not verified) on Mon, 23/11/2020 - 11:18pm in

In Good Economics for Hard Times: Better Answers to Our Biggest Problems, Nobel-Prize winning economists Abhijit V. Banerjee and Esther Duflo carefully lay out evidence to provide a grounded approach to tackling today’s most pressing global problems. With a focus on alleviating inequality and poverty, Banerjee and Duflo’s book clears a path for more interdisciplinary work centred on improving citizens’ wellbeing and protecting human dignity, writes Shruti Patel

If you are interested in this book, you may like to watch a video of the authors speaking at an LSE event recorded on 17 June 2020. 

Good Economics for Hard Times: Better Answers to Our Biggest Problems. Abhijit V. Banerjee and Esther Duflo. Penguin Random House. 2019.

It’s rare for economists to highlight how little is known about which policies and institutions fuel economic growth and prosperity. But in their latest book, Good Economics for Hard Times, Nobel Prize-winning economists Esther Duflo and Abhijit V. Banerjee do exactly that. And it’s this quality of humility and courage, espoused throughout their writing, that inspires confidence and curiosity in what they have to say about other, potentially more important, issues.

Each chapter of the book tackles a big question of global relevance – many of which the reader has likely pondered or even debated over the dinner table. Questions like: should people vote for politicians that favour immigration? How might we avert climate Armageddon? Does welfare or cash handouts make people lazy? And what impact will automation have on jobs and welfare? Despite the contentious and divisive nature of these topics, the authors manage to orchestrate a balanced debate, engaging with the entire spectrum of research, evidence and public opinion.

Their approach is to synthesise the results of empirical work on these topics primarily through randomised controlled trials (RCTs) and natural experiments. These are studies in which people are allocated at random to either receive an intervention (usually a product or service) or be part of a control group that receives no intervention at all. The aim is to measure and compare the outcomes of those that did receive the intervention and those that didn’t. The findings of these studies are then compared to what is predicted by economic theory, often revealing stark differences. Whilst this would probably not surprise those acquainted with the study of economics, the implied nullification of key economic concepts and theories calls for a marked shift in the way economics is taught, studied and interpreted.

On immigration, for example, the authors show that contrary to the law of supply and demand, the influx of low-skilled workers hasn’t really affected local wages in most countries. The chapter on trade more or less debunks a foundational economic model — Ricardo’s Law of Comparative Advantage, which describes how countries are better off under free trade. Particularly compelling is the narration of India’s response to massive trade liberalisation in the early 1990s. Contrary to the purported uniformly distributed ‘gains’ from trade, there were sharp variations in the way liberalisation impacted poverty in the country – some benefitted far more than others.

This divergence between actual experience and economic models or theory is explained by ‘stickiness’ – a concept which theoretical models assume away:

Economics imagines a world of irrepressible dynamism. People get inspired, change jobs, turn from making machines to making music, quit and wander the world […] Manchester is reborn as Manchester digital, Mumbai turns its mills into upmarket housing and shopping malls, where those who work in finance spend their newly fattened pay-cheques.

However, ‘stickiness’ suggests that people and processes are slower in adapting to change than we might think or want. Old habits die hard and money can influence some types of behaviours – but not all, not instantly and certainly not for everyone.

The repercussions of ‘stickiness` are so profound, the authors argue, that an entirely different approach to economic policy formulation is needed – one that relies on experiments and real data more than on theoretical models and prediction. This is not surprising given that the authors are strong proponents of RCTs as a tool for designing economic and social policies. The other major implication is that the ultimate objective of policies themselves, at least in developed countries, needs to change too. Today, even in the Global North, when one hears of a certain policy recommendation in political and public spheres, it is almost always justified on the grounds of economic growth. This is ‘bad economics’, write the authors, not least because little is known about what causes growth. ‘Good economics’, on the other hand, especially in hard and uncertain times, places much greater emphasis on policies that tackle inequality and support resilience.

This attention to equality and justice is also notable in the authors’ responses to the other big questions the book addresses. On how to tackle climate change, they write about the inadequacy of clean technology and green growth to solve what is at heart an ethical – not a technical – question: shouldn’t rich countries consume fewer luxuries so that citizens in poorer countries can have some of life’s essentials? On that basis, they emphasise the role of policy in influencing individual behaviour, habits and norms. Specifically, they call for interventions that marry psychology and economics. A carbon tax, for instance, combined with simpler measures such as better labelling, has proven effective in gently nudging people towards more preferable behaviours and decisions.

The chapter on social welfare, cash transfers and universal basic income delves into the recent history of the US welfare system, explaining how the topic is heavily politicised and showcasing once again the huge contrast between popular ‘wisdom’, what economic theory predicts and actual experience. The evidence referred to is borne out of the large number of studies looking at the experience of 1 billion people in over 100 countries that have received either conditional or unconditional cash transfers since 2014. The authors write that: ‘There is no evidence that cash transfers make people work less.’

Many might find this surprising – why would you work if you did not need the money to survive? In fact, economic theory provides explanations for effects in both directions. However, as the authors highlight, much attention has focused on the possible negative effect on labour supply. It’s assumed people will ‘spend’ any extra income they receive on leisure by working less. Poorly acknowledged is that transfers can increase work by giving households a basic living standard which enables them to be productive workers, and by reducing credit constraints so that businesses can open and grow. By therefore comparing theoretical predictions with real-world experience, the authors illustrate how a fallacy has pervaded media and rhetoric, and they use this to once again make a case for evidence-based policymaking.

On AI and robot-induced fears, we learn that while economists’ views on the impact of automation diverge greatly, the real challenge is for governments to put in place policies that help those who are most at risk to adapt. Some answers are provided – certain types of training programmes, for example, but this seems beside the point. Instead, a careful recollection of the history of technological progress, its interplay with politics and the ultimate effects on inequality and poverty is enough to drive the point home.

Filled with personal anecdotes and experiences, the book provides a grounded bird’s-eye view of policy debates that are shaping the discourse on today’s most pressing global problems. Furthermore, in carefully laying out the evidence and not preaching dramatic solutions, the book imparts an important lesson to anyone engaged in scholarly work: be less strident with your views. Every question has multiple answers. And new findings can easily overturn well-established ‘knowns’.

Undoubtedly, though, the authors’ biggest contribution stems from a recurrent critique levied throughout the book against the economics profession’s obsession with growth. They repeatedly underline the shortcomings of using financial incentives to influence behaviour. Many a time, they illustrate how the line between economics, psychology and communication, as well as the distinction between micro- and macroeconomics, is an unhelpful construct. ‘Economics is too important to be left to economists.’ In making this argument, Banerjee and Duflo clear a path for more interdisciplinary work centred on improving citizens’ wellbeing and protecting human dignity.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics.

Banner Image Credit: Photo by Daniel Hansen on Unsplash.

In-text Image Credit: Photograph of Esther Duflo, co-author of Good Economics for Hard Times and joint winner of the 2019 Nobel Prize in Economic Sciences, speaking at LSE for the Stamp Memorial Lecture (LSE in Pictures, copyright LSE).


Aid is to be cut, just when it is going to be needed more than ever

Published by Anonymous (not verified) on Tue, 17/11/2020 - 7:13pm in

Slipped into the Politico newsletter this morning was this, which I have not seen in other media as yet:

The PM is considering a “temporary cut” to Britain’s aid spending, the Times‘ Francis Elliott, Steve Swinford and Lucy Fisher report. “Ministers have drawn up plans to reduce the proportion of Britain’s gross national income spent on aid from 0.7 percent to 0.5 percent, saving billions.”

The Daily Express must be wetting itself with joy.

The Little Britainers are taking their chance just when the rest of the world faces food crises, increasing poverty, the impact of climate change and, of course, the need for coronavirus vaccines. Or, in other words, just when the need for aid is growing.

It's at moments like these that you see the real, callous, meanness that underpins right-wing thinking. We can afford to give aid. But the Tories don't want to do so. They would rather people suffered.

Review Essay: Exposing the Costs of Uncounting

Published by Anonymous (not verified) on Wed, 04/11/2020 - 10:58pm in

What does it mean to be ‘uncounted’? It means that the uncounted – an event, an individual, a group – is invisible, absent from a world built on data. In this review essay, Mariel McKone Leonard examines two recent books, Invisible Women by Caroline Criado Perez and The Uncounted by Alex Cobham, that take up the task of documenting the true extent of uncounting and make a compelling moral argument for addressing the consequences of the data gap. 

Exposing the Costs of Uncounting

Invisible Women: Exposing Data Bias in a World Designed for Men. Caroline Criado Perez. Penguin. 2019.

The Uncounted. Alex Cobham. Polity. 2020.

What does it mean to be ‘uncounted’? It means that the uncounted – an event, an individual, a group – is invisible, absent from a world built on data. The maxim ‘absence of evidence is not equal to evidence of absence’ is not applicable in official statistics. Rather, absence of evidence – or at least documented, recorded evidence – means that officially, and thus legally and politically, the uncounted something or someone does not exist.

Nearly every day of 2020 has laid bare the habits and systems that perpetuate patterns of uncounting, from the erasure of a female US presidential candidate from news coverage, to the ‘exceptions for me but not for thee’ treatment of Dominic Cummings by the UK government. Likely no example is as explicit as the Trump administration’s attempt to – literally – not count undocumented immigrants in the 2020 census, in violation of the US Constitution. The consequences of a failure to count are tragic, both in the sense that they are extremely upsetting as well as their roots in an intrinsic moral flaw. We – society – do not have to limit production of personal protective equipment to ‘standard’ men’s sizes, thus leaving countless medical professionals hampered and exposed. We do not have to disproportionately police people of colour for ‘violating’ COVID-19 lockdowns or push to reopen schools and businesses too soon since ‘only’ ethnic minorities and the elderly are at elevated risk. These are choices, and we can choose differently. But first we must acknowledge that choice.

Two recent books, Invisible Women by Caroline Criado Perez and The Uncounted by Alex Cobham, take up the arduous task of documenting the true extent of uncounting as well as proposing solutions. In this, the two studies complement each other well: Invisible Women is written for the general public with accessible writing and facts, while The Uncounted is more academic and policy-oriented, but both are extensively researched.

Both books make compelling and forceful arguments for fully counting everyone. Invisible Women, as its title suggests, focuses on the half of humanity ignored by policy, science and society. The Uncounted is both more general than Invisible Women – Cobham considers all members of the global uncounted, not only women – but also more focused; rather than enumerating the many, many ways in which women are excluded, he examines the discounting of billions from a political and economic perspective. Both seem prescient in their consideration of those overlooked by data.

Criado Perez begins Invisible Women with a discussion of how so-called ‘women’s issues’, such as basic healthcare, safety and accessibility, are dismissed as narrow ‘identity politics’ (23). Far too often, we are told that the male perspective is ‘the absolute truth’, as Simone de Beauvoir noted in 1949. When women’s experiences do not match this ‘reality’, we are told the flaw is in us. How cathartic it is then to read Invisible Women and to realise that so many problems – of too large tools, protective gear, iPhones and seatbelts, of medical care that ignores our symptoms and pain, of voice recognition software and automated assistants that don’t recognise women’s voices, don’t understand the meaning of the sentence ‘I was raped’ and cannot locate abortion providers (162, 176) – are not ours, but those of a world that is quite literally not designed for us. For a time, my Twitter feed appeared full of nothing but highlighted passages from the book, evidence perhaps that many other women also experienced Invisible Women as a revelatory moment.

Criado Perez moves methodically from private life (Chapters One and Two) to public life (Chapters Twelve to Fourteen), with stops in ‘the workplace’ (Chapters Three to Six), design (meaning here ergonomics) in Chapters Seven and Eight, before ‘going to the doctors’ (Chapters Ten and Eleven). Page after page, Criado Perez presents overwhelming evidence that addressing the concerns of women saves money (not to mention lives; see pages 31, 51, 122-26, 155 and 186, for a few examples), expands the economy (women’s labour is often excluded from GDP and other indicators, 75-78) and improves governance (266). Through the course of the book, Criado Perez provides bountiful evidence of her thesis that there are three primary data gaps endangering the health and wellbeing of women: the physiology of female bodies, the care burden placed almost entirely on women and experiences of violence.

Furthermore, these three data gaps interact to exacerbate the daily risks to women. In Chapter Two, Criado Perez discusses how lack of access to toilets increases the likelihood that women will be sexually assaulted, which in turn leads women to instead risk infections and other health complications by holding their urine, defecating outside or changing menstrual products too infrequently. In Chapter Six, she notes that the UN estimates that between 40 and 50 per cent of women in EU countries have experienced sexual harassment at work. Nurses – most of whom are women – are particularly vulnerable, with some studies finding they are subjected to more violence than police officers or prison officers (138).

At over 300 pages, I wish I could say Invisible Women is exhaustive in its coverage and facts, but how could it be? That it is not, is, at some point, simply exhausting. Example after example – at times with little apparent connection between them – is presented in a seemingly endless array of information. In this, The Uncounted is in some ways the more pleasurable book to read of the two, despite, or perhaps because of, its academic focus; here, the examples provided are at least broken up by policy analysis. The Uncounted is more readable in one other respect as well: its endnotes, which follow proper citation guidelines. In contrast, the endnotes provided in Invisible Women consist almost exclusively of URLS with no proper citation. While the author or title of the source may be noted in the main text, the lack of adherence to basic reference standards renders the endnotes effectively useless.

These differences are no doubt due to the books’ intended focus and purpose; if Invisible Women is the call to arms to address uncounting, full of the human stories necessary to inject pathos into what could otherwise be characterised as a statistical problem, The Uncounted is the battle plan. The Uncounted attempts to answer the question posed by Invisible Women: why does a data gap exist? Cobham argues that the idea of a ‘data gap’ is in fact overly simplistic: the problem is not always that data doesn’t exist, but that even when it does, it cannot be trusted to be of any reasonable accuracy or reliability. This second gap, of data quality, is the more insidious, because exposing poor data quality is often more difficult than exposing a lack of data. Poor quality data instead provides a false sense that we can draw conclusions from data.

The Uncounted addresses the consequences of both the missing data gap and the poor data quality gap over the course of three sections: the uncounted in the bottom income/wealth brackets (Chapters One to Three); the uncounted in the top income/wealth brackets (Chapters Four to Six); and a final short manifesto to rectify uncounting.

Part One is where Invisible Women and The Uncounted overlap as, unsurprisingly, women and ethnic minorities comprise the bulk of the economically, socially and politically disenfranchised. However, as the chief executive of the Tax Justice Network and a member of Scotland’s Poverty and Inequality Commission, Cobham’s primary focus throughout the first part is understanding how uncounting those in poverty interferes with the achievement of global economic development goals. Here, Cobham reasserts Criado Perez’s statement that women’s work, particularly in subsistence agriculture and familial care, is notoriously uncounted, such that women’s participation in the global labour force is 26 percentage points lower than men’s. However, time-use studies prove that women habitually work longer hours due to unpaid care and domestic work (20). In yet another example of 2020 tearing away the veil of social equality, women still perform the bulk of childcare and housework despite the fact that there has been a general increase in time spent at home due to COVID-19 restrictions.

In the second part of the book, Cobham’s expertise in tax policy is put to full effect, as he explains how the global elite use power and money to remain uncounted: that is, untaxed. His writing is nuanced and informative, without pedantry. I found myself enjoying this section most of all. In Chapter Four, Cobham thoughtfully and carefully explains the misincentives of global tax policy, touching on profit shifting, financial secrecy and tax transparency. In Chapters Five and Six, he links the uncounting of the global elite – including multinational corporations – to the underdevelopment of the Global South.

Tremendous pressure has been exerted by Western countries and international donor institutions to root out corruption in countries in the Global South, without consideration of how companies evade taxes (Figure 4 on page 135 summarises this point nicely). Without adequate payment of taxes, governments have limited options for funding public goods such as health, education and infrastructure, yet deficit spending is routinely argued against by these same donors in favor of austerity, despite evidence of its destructive effects. Unfortunately for the uncounted at the bottom, in addressing the inequality caused by the uncounting at the top, ‘the question of inequality measures is a purely technical one, to be left to others to deal with. Which is, of course, just how things end up uncounted’ (154).

In the final section, Cobham outlines his ‘manifesto’ for how to count everyone: establish a baseline of the available data and most critical gaps; identify appropriate stakeholders for participation in future counting; develop a costed plan to address the gaps and ensure full data collection; and establish global tax transparency guidelines and unitary taxation to end profit sharing.

Cobham acknowledges that taking these steps to truly count the world will be difficult, expensive and time-consuming. It will require societies to fundamentally redesign data collection and storage regimes (it is worth noting that neither author discusses questions of data privacy or surveillance) as well as policymaking processes. It is not enough to collect data; the data must also be made to count. Will it be worth it?

Inequality is what happens when we are not looking. This is why going uncounted matters: if we don’t have the numbers we can’t look […]  if we’re not looking, the most likely outcome is a drift towards […] greater exclusion of people and groups that are already marginalized (157).

Women and minorities deserve better, and both books make a compelling moral argument for counting everyone and everything. But in an era where we find ourselves debating the human versus economic costs of reopening economies, just as convincing is the economic evidence. As Criado Perez notes, uncounting is ‘scientifically idiotic and a waste of money’ (207). Cobham calls it ‘a debt that keeps growing’ by hundreds of billions of dollars every year (169, 102). But without political demand for action, the likelihood of change is small. Will 2020 be the year that we ‘open our eyes’, as Cobham demands (173)? The growing number of protests worldwide – for democracy, for an end to violence against women, for an end to racism and police brutality, for climate change action – indicates that it might. Only time will tell.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics.

Image One Credit: Close-up of abacus (Image by Rudy and Peter Skitterians from Pixabay).

Image Two Credit: Multicoloured felt numbers on blue background (Image by _Alicja_ from Pixabay).


Book Review: The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century by Rodrigo Aguilera

Published by Anonymous (not verified) on Tue, 27/10/2020 - 10:48pm in

In The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century, Rodrigo Aguilera challenges the arguments of the ‘New Optimists’, showing their progress narrative to be a conservative defence of the status quo that is ill-equipped to deal with pressing socioeconomic problems. In making clear that we do not live in the best of all possible worlds, this deep analysis offers a refreshing perspective on complex political and economic phenomena, writes Elena Cossu

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century. Rodrigo Aguilera. Repeater Books. 2020.

What do the ‘alt-right’ and Bill Gates have in common? Apparently, according to Rodrigo Aguilera, it is a fondness for authors that use ‘irrefutable statistical evidence that the world is better than ever’ (5). This belief is also the main element of the movement that Aguilera terms ‘New Optimism’ in his book, The Glass Half-Empty. Quoting Oliver Burkeman’s 2017 Guardian article, ‘Is the World Really Better than Ever?’, Aguilera defines the New Optimists as ‘the loose but growing collection of pundits, academics and thinktank operatives who endorse this stubbornly cheerful, handbasket-free account of our situation’ (3).

The question posed in the title of Burkeman’s article is also the puzzle at the centre of The Glass Half-Empty, which is about progress. In the Introduction and Chapter One, Aguilera describes who has faith in the economic progress narrative, and why. He then reviews the concepts underpinning this way of thinking in Chapters One and Two, before exploring if these claims are statistically or philosophically true in Chapters Three, Five and Six. Aguilera also examines the way these ideas are exploited by modern political movements in Chapters Four and Eight. He concludes with some possible economic alternatives to the current status quo.

What does it mean to believe in progress? It means to ‘present statistical facts that demonstrate the material and moral improvement of humanity; imply that those who deny, or question progress have no rational claim for so doing; and attribute this progress to the causes that fit your beliefs’ (4). It consequently implies the defence of the status quo and the belief that science or liberalism can solve all of our human problems.

This culture of venerating progress can be divided into two groups. The first are ‘the libertarians who tend to attribute progress to capitalism, particularly in its more laissez-faire manifestations’ (4), like some centrist mainstream media (for instance, the Economist). The second are those who believe that Enlightenment values like science and reason are not only the sole causes of progress, but think that these are threatened by both the right (obsessed by authoritarianism) and the left (obsessed with feelings and social constructs rather than facts). The best representative of this way of thinking and the risks associated with it is Steven Pinker, who is mentioned more than 74 times throughout the book. A related group is composed of populist leaders, ‘alt-right’ movements as well as academics and media commentators like Jordan Peterson, Joe Rogan and Ben Shapiro, who manipulate Enlightenment values and science in different ways to achieve different political purposes.

The general problem with these groups is connected to the recent tendency in policymaking to reduce ‘complex inter-disciplinary problems to reductionist cost–benefit analyses’ (6). This tendency is in turn motivated by an increase in determinism in the social sciences, fuelled mainly by the mainstream economics discipline and its belief that we know what brings us prosperity. However, the misidentification of the paths to human progress might lead us to rationally commit self-annihilation by ignoring phenomena like climate change.

Another important problem regarding progress concerns its definition. We do not have a shared definition, but even if we define progress as an improvement in development indicators, as often happens, we should consider the following facts. First, progress has been slow for most of human history. Second, the reasons behind progress in the Global South are often misunderstood: ‘although progress has not been even, for enough people in enough countries it has been either visible throughout their lifetimes or just enough to lift them out of utmost squalor. Perhaps if we were to leave it at that, then the progress narrative would be easier to embrace. Unfortunately, it has been conveniently tied to a rather pernicious talking point: that this has been achieved almost entirely thanks to liberal capitalism’ (65).

In fact, Aguilera writes, ‘we cannot ignore that most of the reduction of global extreme poverty in the last half century has been in Asia. And specifically, in a single country: China’ (68). ‘Taking China out of the equation we have it that the global poverty rate barely budged: 56.7% to 50.3%’ (72). China is not exactly a big fan of liberal capitalism. As a consequence, it is incorrect and dangerous to believe that these improvements are caused by an increase in liberalisation, trade or foreign aid, or that we know what caused them at all.

There are similarly dangerous narratives regarding the Global North, which often exclude how the cost of education, healthcare and housing – and inequality overall – is increasing. These also often ignore how the ‘productivity growth in many Western countries has slowed down or even turned negative in the post-crisis years’ (59). In the very relatable words of Aguilera: ‘if you are a young professional in the Western and especially the Anglo-Saxon world without the benefits of a trust fund or a generous grandfather’s loan to kick start your real estate ambitions, you have a right to be angry’ (64).

In general, the main takeaway of the book is that there is no ‘rational’ way to look at facts and statistics. Theories are a constant act of ‘putting facts together’ based on heuristics and available information. Such a process should never be taken for granted. Many believers in progress do the opposite, creating an unbreakable echo chamber. To prove this point, Aguilera also takes time to summarise the different biases that we all have. If you believe you are superior to this discussion about biases, do not worry. You are probably affected by the ‘bias blind spot’, which is a bias that leads people to believe they are less likely to fall for cognitive biases than they actually are.

Alternatively, if you wholeheartedly agree with intellectuals like Pinker, you might be afflicted by the Just World Hypothesis (‘The belief that the world is fundamentally just and that people generally receive just deserts for their actions and behavior’ (48)), as well as other type of biases clearly explained by the author. There are in fact many mechanisms that prevent us from seeing complexity and being rational, and we should be especially careful to acknowledge what we do not know, instead of claiming we have a perfect solution for anything.

Aguilera gives us different answers on what could be done to change this dead-end, focusing particularly on the problems afflicting the West. First, we need to honestly check our biases and admit that liberal capitalism has a particular resistance to acknowledging its disenfranchising aspects, while being very good at overplaying its positive achievements:

capitalism is certainly efficient at producing things; which is why it was the driving force behind the rising material prosperity of the world in the nineteenth and twentieth centuries. But it is also very effective at creating scarcity in markets where rent can be extracted without moving a finger, such as land and housing (137).

Second, we need to start thinking differently about more sustainable alternatives such as social capitalism, changing the set of incentives that motivate firms, creating more employee-owned firms, property-owning democracy and participatory budgeting. Other solutions, relating to the problem of automation as an example, include Universal Basic Income, a negative income tax, Universal Basic Services or the idea of sovereign wealth funds. Aguilera overall believes in a future where a more compassionate form of capitalism is possible, but he warns us of the perverse effects of ‘woke capitalism’ (the belief you can change the world through your purchases) as a possible solution.

In conclusion, The Glass Half-Empty extensively shows us that no, we do not live in the best of all possible worlds, and neither liberal capitalism nor Enlightenment values are the sole reason for the improvements we may have experienced so far. Equally importantly, these are not the only things that will save us. This book is a deep analysis with no definite solution, as this would contradict the book’s own premise. However, what this book does is give us a perspective on complex political and economic phenomena, while engaging in a central debate about economic development. It is a refreshing take on a theoretical level regarding whether economics should focus less on results and more on understanding the links between cause and effect, and on a practical level for thinking about the future of populism and global governance.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 

Image Credit: Photo by manu schwendener on Unsplash.

Valuing Knowledge: The Impact of Human Capital Accounting on Global Economic Governance

Published by Anonymous (not verified) on Mon, 12/10/2020 - 5:14pm in

Since the 1990s, with the rise of endogenous growth theory, the internet and the new economy, knowledge – or ‘human capital’ – has been widely understood as the central factor underpinning growth and competitiveness in advanced post-industrial economies. There’s just one problem: no one has known how to measure it. Recent efforts to develop monetary estimates of human capital are deeply problematic, however, because they capture only a narrow measure of value, and push countries with supposed deficits of human capital towards market-oriented welfare and labour market policies.

Post-GDP accounting

Human capital measurements for a long time remained crude – unmonetized indicators of educational attainment, such as the % of the population with a college degree. Standardised comparisons of school pupils’ performance attempt to measure skill attainment directly, but still fail to measure the economic value of these skills. This means that, unlike the produced and financial assets that show up in the balance sheets in the national accounts, human capital has not had a monetary value and cannot enter growth accounting models or other types of economic analysis.

As I explored in a recent article published in RIPE, this has been changing over the last decade as global economic governance institutions have sought to develop a more formal accounting framework for estimating the monetary value of a country’s ‘human capital stock’. As a recent UNECE document indicates:

Understanding and quantifying human capital is becoming increasingly necessary for policymakers to better understand what drives economic growth and the functioning of labour markets, to assess the long-term sustainability of a country’s development path, and to measure the output and productivity performance of the educational sector.

We can situate this measurement agenda within a broader ‘post-GDP’ movement in global economic governance that has sought to adjust national accounting systems to better capture the realities of post-industrial economies and societies. Under this governance agenda, the ‘wealth accounting’ approach to sustainable development has emerged as dominant since the late 2000s, with the publication of a key UN, Eurostat and OECD report as well as the Stiglitz commission on the reform of global socio-economic statistics.

According to this framework, to account for all the non-produced assets and resources that modern economies increasingly rely on (‘natural capital’, ‘human capital’ and ‘social capital’), we should extend national balance sheets to show whether ‘total wealth’ across all asset classes is being preserved or depleted. A recent UN taskforce suggested that:

If these stocks are calculated using a common measure and assumptions are made about the substitutability of various capital stocks, changes in the total stock of wealth (per capita) will provide information on the sustainability of the development path of each country.

This is an elegant idea: a way for economic analysis to internalise the externalities that GDP growth relies upon, re-embedding the market economy in its ecological and social context.

Knowledge as capital

Regarding human capital, however, operationalising this framework is fraught with methodological difficulties. The way in which global governance organizations have confronted these valuation challenges is little understood, buried in technical accounting manuals and methodological appendices – but it exerts an ever-increasing influence on development discourse and policy.

Most notably, emerging international standards for valuing human capital – used by the UNECE and the World Bank – are heavily influenced by neoclassical capital theory first outlined by Irving Fischer in the 1900s. This views the accounting value of a capital asset as the discounted market income that its owner can expect during the lifetime of the asset.

The conceptual sleights of hand needed to translate this methodology to the valuation of human knowledge are heroic. For instance, we must assume that knowledge and skill are something separate from, and ‘owned’ by their bearer. This has meant that ‘knowledge’ is quickly reduced to formal qualifications in these frameworks, since these can (if one squints hard enough) be seen as something owned by the student, unlike informal skills gained on-the-job. Perhaps most bizarrely, cost-based estimates require accountants to assume that ‘like physical capital, human capital depreciates over time’, due to ‘the wear and tear of skills due to aging’, in a manner analogous to the deterioration of aging physical equipment.

Even with more commonly used output-based methods, which value knowledge based on discounted future wages, the human capital of the unemployed falls to zero (as this ‘asset’, the skills of the worker, is no longer generating an ‘income’ stream) and that of the elderly close to zero. They also assume that education spending is pure investment – that there is no intrinsic pleasure or ‘consumption’ aspect to learning and that it is something endured purely for the enhanced wage prospects it offers the student.

Human capital metrics and the commodifying of care

Methodological choices made on these issues would be of academic interest if monetary estimates of human capital were confined to experimental papers in economics journals. But increasingly they are used by global governance agencies to pathologise certain countries and judge which welfare regimes and labour market policies are deemed ‘sustainable’.

An illustration of this is the use of human capital wealth estimates by the World Bank, within its Human Capital Project (HCP) launched in 2018. Based around ‘using policy and results-based lending to support critical human capital reforms’, this agenda plays a central role in the Bank’s wider development strategy for poverty eradication by 2030. In 2019 the Bank launched human capital plans for the MENA region and Africa, to support the HCP. In MENA, human capital targeted financing is set to increase from $1.119bn in 2019 to $2.5bn by 2024, while in Africa it is set to reach $15bn by 2021-23.

In both strategies, these regions are pathologized on the basis of comparative analysis of their human capital wealth. For instance, the MENA human capital plan laments how ‘with the lowest percentage of human capital as a share of total wealth per capita of any region in the world (35%), MENA faces a severe human capital gap’. This is, moreover, linked explicitly to their relative lack of labour commodification and an insufficiently developed free market economy. By comparison, Bank analysis of human capital in China applauded the ‘very rapid increase in urban human capital from the mid-1990s, in part because of the transition to a market-oriented economy’.

In the MENA region as well as in Africa the World bank strategy outlines a number of ‘priority interventions that can help build, protect, and utilize human capital’. These involve using targeted funding and policy consultancy to adapt education systems to competitive job markets, encourage entrepreneurship and focus teaching on young people’s employability in the private sector.

An interesting feature of this agenda is the way in which it interacts with the Bank’s discourse on gender equality and female empowerment. Human capital estimates are used to justify the commodification of care work, by bringing female labor market participation up to parity with male workers. The MENA strategy prioritises ‘closing the gap in female employment by improving conditions that facilitate women’s insertion into the labor market to realize their potential as productive workers’.

This is not of course to suggest that moves towards gender parity in labour markets are unwelcome. Notably, however, human capital estimates render one particular means of achieving this (full-time employment for both genders in the context of commodified care provision) as a contribution to the national balance sheet, while other routes (for instance, job sharing and work redistribution or commons-based care networks) cannot.

As this case illustrates, currently dominant human capital accounting methodologies naturalise the assumption that ‘sustainability’ depends on a particular market-oriented development trajectory. These policy recommendations are a tautological result of methodological choices. Because the value of a nations’ human capital wealth has been made to depend upon its projected contribution to labour market income, countries with higher levels of de-commodified care provision will necessarily have lower human capital wealth.

Global governance discourse frames these policy recommendations as neutral, technical assessments of how to build human capital. However, by unpacking the black box of the concepts these valuations rely on, we see that they are based on highly contentious assumptions grounded in neoclassical wealth accounting theory.

Dr David Yarrow is Lecturer in International Political Economy at the University of Edinburgh. His research examines the impact of post-growth ideas on global economic governance, most recently by investigating the rise of alternative accounting practices in international statistical agencies. More broadly he is interested in how economic ideas frame the challenges of automation and post-industrialism in democratic politics.



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Book Review: The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All by Martin Sandbu

Published by Anonymous (not verified) on Tue, 29/09/2020 - 11:57pm in

In The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for AllMartin Sandbu seeks to address the extent to which many citizens of western democracies feel ‘left behind’ by recent economic changes, proposing a detailed plan for creating a just economy where everyone can belong. While finding this a highly readable and carefully argued book that offers a number of persuasive policy prescriptions, John Tomaney questions whether it provides a fully convincing programme for the left-behind. 

If you are interested in The Economics of Belonging, you can listen to a podcast of author Martin Sandbu discussing the book at an LSE event, recorded on 17 June 2020. 

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All. Martin Sandbu. Princeton University Press. 2020.

Over recent years, readers of Martin Sandbu’s thoughtful Financial Times column, ‘Free Lunch’, have watched his attempts to wrestle with the backlash against globalisation that has swept across liberal democracies. His ideas have now been brought together in The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All. In conceiving the political upheavals in the west in terms of ‘the end of belonging’ (8), Sandbu seeks to capture the way that many citizens of western democracies have been ‘left behind’ by recent economic changes, no longer feeling they have a place in the economy and consequently lending their support to a politics of ‘illiberalism’. Sandbu’s aim is to defend an open, liberal-democratic, market-based order against its detractors. While critical of recent policy directions, like John Maynard Keynes he comes not to bury capitalism, but to save it.

For Sandbu, the period after the Second World War in the west saw the extension of individual rights, the rule of law, free elections, the social market economy and political and economic ‘openness’, in ways that underpinned broadly rising living standards, declining inequality and assured security and social respect for the working class. Now we see rising inequality, declining incomes and slowing productivity growth. Within a generation, a radical redistribution of global income has occurred at the expense of western workers, providing the basis for a ‘populist’ politics of ‘usurpation’, which declaims that the right to earn a living has been stolen by ‘foreigners’. Sandbu’s purpose is to defend globalisation, claiming: ‘Economic openness is not just compatible with a domestic economics of belonging; with the right policies, more globalisation can make it stronger’ (208).

Economic changes, rather than shifts in cultural attitudes, explain the rise of populism in this account. Being economically left-behind creates psychological stress that erodes personal control, propelling voters into the arms of populist leaders, which helps to explain why electoral revolt is concentrated in places vulnerable to restructuring. It is not globalisation that has driven these processes, according to Sandbu, but structural change and (national) policy. The shift to a service economy and the decline of collective bargaining has undermined the post-war social settlement, while tax reforms favoured higher income groups and the owners of assets. Economic risk was transferred to the individual and created the conditions for the emergence of a precariat. The global financial crisis of 2008 – the consequence of a bloated and poorly regulated financial sector – precipitated a steep fall in living standards, exacerbated by austerity, leading to the unravelling of the economics of belonging.

But globalisation, in Sandbu’s telling, is the scapegoat for other causes of our present predicament. Skill-biased technological change and the shift to a knowledge economy are a bigger cause of manufacturing job loss than trade; immigration has little impact on jobs and living standards; and financialisation, while destructive, is not constitutive of globalisation.

Sandbu offers a paean to the Nordic model, where the survival of collective bargaining limits income inequality, wage compression is the motor of productivity growth and high quality training facilitates shifts between jobs as industries expand and contract. While replicating this model in detail is impossible, extending its principles is realistic, Sandbu argues, making a case for implementing high minimum wages, universal basic income, limiting monopoly power and strengthening workplace rights. He proposes reforms to the banking system to enable a shift from credit lending to equity financing to encourage more productive forms of investment. For Sandbu, policymakers overlook the costs of weak effective demand, especially on the left-behind, and he accuses central banks of ‘learned helplessness’ in macroeconomic management (165). In the realm of taxation, he advocates net wealth taxes, more effective corporation taxes and higher taxes on negative externalities (notably, carbon emissions), and he proposes a trade regime based on common labour and environmental standards to promote ‘economic togetherness’ (8).

Particular attention is paid to ‘left-behind’ places where the populist revolt is strongest, and Sandbu calls for compensation for places affected by economic restructuring, measures to connect them to successful agglomerations and physical and financial investments to maintain aggregate local demand. In particular, he calls for targeted business extension measures, customised job training, new roads, public transport and better broadband, improved ‘social infrastructure’, investments in cities to attract knowledge workers and efforts to ‘globalise’ lagging regions by nurturing their export potential. He acknowledges that not all places will benefit from this approach, which raises the question of what happens to those that are left even further behind. The reference to ‘social infrastructure’ is undeveloped, but it is suggestive of debates about the ‘foundational economy’.

The Economics of Belonging is an important contribution to the debate about the ‘left-behind’. Sandbu offers a highly readable and carefully argued narrative, which marshals evidence adroitly and proposes a range of policy prescriptions, many of which are persuasive and deserve serious attention. But does it amount to a convincing programme for the left-behind? Among the obvious gaps, Sandbu has little to say about the contemporary geopolitics that are reshaping patterns of international trade. China and Russia currently present themselves as ‘civilisational states’ with strategic interests that may limit the effects of his proposed policies. Crucially, Sandbu never really presents a clear definition of belonging: the term does not appear in the index. In practice, his analysis rests on a methodological individualism in which utility-maximising individuals respond to (social) market signals. He overlooks the affective and collective dimensions of belonging and the complex ways people form attachments to place and the uses they make of them.

Sandbu’s analysis also rests on assumptions about the essentially ‘illiberal’ culture of left-behind communities arising partly from an overdrawn distinction between the economic and cultural. In fact, we lack deep, qualitative understandings of the complex interplay of cultural and political change in such places. Left-behind places come in many shapes and sizes and this will likely confound well-meaning technocratic solutions. Bruno Latour has argued recently that belonging to a territory is the phenomenon most in need of rethinking. That rethinking must include listening to what the ‘left-behind’ actually want from the economy and polity.

Image Credit:Image by MetsikGarden from Pixabay.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 


Book Review: Employment in India by Ajit Kumar Ghose

Published by Anonymous (not verified) on Tue, 29/09/2020 - 9:30pm in

In Employment in India, Ajit Kumar Ghose offers a concise guide to understanding different aspects of employment in India, written using accessible language for a general audience. With the book’s analysis supported by rigorous empirical work and up-to-date data, Varsha Gupta recommends it to researchers of labour economics. 

Employment in India. Ajit Kumar Ghose. Oxford University Press. 2020.

Employment in India by Professor Ajit Kumar Ghose is a primer to understanding the Indian employment scenario since Independence. Part of the Oxford India ‘Short Introductions’ series, it’s a concise guide to different aspects of employment in India, written using accessible language for a general audience. The insights and facts presented are up-to-date, using the 2016 employment data, while the epilogue provides statistics using the Periodic Labour Force Survey (PLFS) 2017-18 data.

The book is divided into five chapters, with the first two chapters introducing the various definitions and concepts used in the book to underline the nature and characteristics of employment. The third chapter is empirical and charts the trends for six decades using four sources of data: the Employment-Unemployment survey by the National Sample Survey Organisation (NSSO); annual data on employment by the Labour Bureau; organised sector data by the Directorate General of Employment and Training (DGET); and the Census. In the fourth chapter, the reasons behind the trends are explained, while the concluding chapter outlines an optimal strategy to meet the employment challenges of India and discusses the future.

The author begins by outlining the growth strategy since Independence, which has been more inclined towards the service sector and is driven more by domestic demand than exports. The Indian economy skipped the growth in manufacturing where returns to scale are higher and positive spillovers can be attained. Before delineating the employment patterns using data, the second chapter discusses the various terms often used in labour studies and this book, including the modern sector, the traditional sector, wage and self-employment as types of employment, the formal and informal sector, structural change etc. It provides the reader with clarity on these concepts before they are used in further analysis. Details on the Lewis model (which shows that as a country develops, there is movement of labour from agriculture to the modern sector), the interlinkages between the modern (formal) and traditional (informal) sector and the role of employment in connecting economic growth and development constitute the rest of the chapter.

In the third chapter, trends of employment indicators are brought out for the period 1950 to 2016, alongside a list of all the various data sources used. It is an exhaustive list for early career researchers in labour economics. It is highlighted that the low unemployment figures, which are often taken to be a positive reflection of the labour market, do not present a bright scenario in a developing country like India as it does not indicate full employment. Being unemployed is a luxury here, and only a few can afford it; the rest take up whatever employment is available to them. Three pieces of information emerge from the analysis; the unemployed in India are less poor and more educated; the rate of unemployment increases with education level; and it decreases with age as some individuals get employed while others leave the workforce altogether.

In addition, on pages 53-54, the author talks about low female employment and the reasons behind it. Reduction in distress participation (work undertaken in times of economic hardship) along with poor demand for female labour are major factors. The author mentions that ‘withdrawal from poor jobs did not have to mean withdrawal from the labour force’, pointing towards the unavailability of better jobs for women.

Furthermore, trend analysis on pages 57-80 draws out the structure of employment. Self-employment has gone down, while the share of wage employment has increased in total employment. This is in line with the iron law-importance of agriculture in employment declines and wage employment’s share rises as a country experiences economic growth. The share of formal employment in India went up until 1973 and declined thereafter. It went up again between 2005 and 2012. The Employment Quality Index, developed in the author’s previous work to statistically measure employment conditions, is calculated for the period 1955 to 2016 and on average presents a slight decline.

In the fourth chapter, the author explores the relationship between economic growth and employment. While growth hasn’t been poor in India, employment indicators reflect a poor scenario. Decent growth was experienced by the Indian economy, especially after liberalisation reforms in 1991 were introduced, due to overseas finance and remittances. The service sector took the lead: an enigma which is peculiar to India. The process of structural transformation, brought about by growth in the modern or non-agricultural sector, did not occur in India. This is reflected in the statistical indicator ‘employment elasticity’ (percentage change in employment associated with a 1 percentage point change in economic growth) of non-agricultural growth. It declined during the period 1978-2000 and 2000-12, implying that labour was not pulled out of agriculture at a fast rate. The failure of the manufacturing sector and the low employment intensity of the service sector are two factors behind this. Within the service sector, the skills-intensive areas of ‘communication, finance and business services’ led the growth. This eventually led to slow absorption of the abundant low-skilled labour available in the country.

After drawing out the employment situation in India and the explanations for it, the author provides a roadmap to achieve development via employment generation in the last chapter. India needs to create 12.5 million jobs per annum with a focus on low-skilled workers in order to enable the economy to reach the point where there are no surplus workers (the Lewis turning point). While research often highlights the significance of employment creation for the educated and the skilled, the author places emphasis on low-skilled employment. Employment generation in the non-agricultural modern sector and productivity increases in existing jobs in agriculture are required. A structural transformation process where growth is concentrated on manufacturing rather than service-led can bring the desired changes in the Indian job market (138-40). The concern regarding automation replacing low-skilled labour in manufacturing is also discussed. Up until now, this has occurred primarily in capital and skill-intensive sectors of manufacturing. So, the strength of manufacturing in employment remains, even in the twenty-first century.

This book offers a comprehensive analysis of employment in the Indian economy. The nature of the employment challenges faced by India and the growth pathway required to meet them are summarised. However, it’s a long read for a non-specialist reader. Since it touches upon the various aspects of employment using data, this can detract from the larger narrative for the reader. That being said, the information provided in various boxes is useful for researchers in labour economics, with definitions given for various concepts and indexes used in the analysis. Throughout the book, the analysis is supported by rigorous empirical work and the epilogue updates it with the latest available data. Employment in India is recommended for students in labour economics.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 

Banner Image Credit: Working professionals in a co-working space in Delhi. Copyright ILO/L. Mitul 2018 (ILO Asia-Pacific CC BY ND NC 2.0).

In-text Image Credit: Image by Nandalal Sarkar from Pixabay.


Book Review: Country Frameworks for Development Displacement and Resettlement: Reducing Risk, Building Resilience edited by Susanna Price and Jane Singer

Published by Anonymous (not verified) on Tue, 08/09/2020 - 9:39pm in

In Country Frameworks for Development Displacement and Resettlement: Reducing Risk, Building Resilience, editors Susanna Price and Jane Singer bring together contributors to offer a deep exploration of evolving national frameworks that seek to mitigate the risk and deprivation faced by vulnerable communities displaced by the global competition for land. The chapters in this thought-provoking and comprehensive book carefully build a rigorous documentation of policies and legal practice to form a vital resource for academics, students and specialists working with land rights, writes Indrani Sigamany.

Country Frameworks for Development Displacement and Resettlement: Reducing Risk, Building Resilience. Susanna Price and Jane Singer (eds). Routledge. 2019.

Susanna Price and Jane Singer’s edited collection, Country Frameworks for Development Displacement and Resettlement: Reducing Risk, Building Resilience, is a deep exploration of evolving national frameworks, such as safeguards, protection, laws and regulation, in response to the global competition for land by public and private sectors. The central question the book addresses is how countries use frameworks and legal norms to respond to and mitigate the risk and deprivation faced by vulnerable communities displaced by the expropriation of land. The inclusion of cases in the fifteen chapters covering Asia, Africa and Latin America contributes to the rigour of this thought-provoking and comprehensive book.

The cases contained in this book, drawn from around the world, are an attempt to answer questions regarding the necessity for states to have powers of eminent domain (the right of governments to expropriate private property for public use with compensation) as well as the human, social and environmental costs of economic development afflicted with poor financing and weak implementation. The stated objective for countries triggering forced migration is to take responsibility for the protection of their citizens with social and environmental safeguards. The three sections in the book address national challenges and conceptual frameworks, offering rich evidence through case studies to support the analysis.

The general agreement of all the authors is that country frameworks are important for accountability and national ownership around social and environmental safeguards for land displacement. They question, however, whether national standards of implementation strictly adhere to human rights. Currently, frameworks do not match implementation on the ground. The book points to the inaccurate assumptions made by the World Bank (WB) in 2017 when it based its conclusions regarding the readiness of countries to adopt national frameworks on poor evidence. The WB emphasised achieving ‘objectives materially consistent’ with WB policy, without acknowledging that regulatory frameworks on eviction and displacement are, as Price points out, ‘rarely able to achieve objectives materially consistent with the Environment and Social Framework (ESF)’.

One brutal conclusion is that existing safeguarding systems can exacerbate gender disparities, exclude indigenous communities and create poverty. Country frameworks are therefore unable to guarantee a fair or just outcome concerning livelihoods, or economic and tenure security for communities being forced to migrate. Price and Singer conscientiously connect their analysis to the United Nations Sustainable Development Goals. They advocate ‘pre-emption’ in relation to the ecological footprint of projects and policies; ‘equity’ in the choice of development strategies; and resilience for communities by strengthening social and natural capital.

In Chapter One, Ruwani Jayewardene points out the need for national laws to protect citizens against profit-oriented globalised industry which leaves citizens vulnerable. In the light of state laws being weak, however, and not protecting citizens, the author advocates for improving both national laws and access to international courts. Salamón Nahmad Sittón, in his chapter, highlights the importance of Free and Prior Informed Consent (FPIC) for indigenous peoples facing land dispossession, though this is often offset by unequal power relations and authoritarian bureaucracy. In Mexico, in lieu of mitigating laws and regulations on displacement that allow the violation of community rights, public policy has helped create a space for self-determination of indigenous communities.

Chris De Wet’s chapter argues that laws and policies should be country-specific and locally appropriate, and in South Africa, for example, they should be shaped by and have the buy-in of local government, civil society and multilateral development banks (MDBs). Russell Rhoads and Onesmus Mugyenyi similarly highlight community empowerment for the improvement of policy and country frameworks, stressing environmental and social risks and also the importance of local capacity building for implementation.

Sek Sophorn examines the clash between international and national legal norms in which national land laws take precedence and are not necessarily interpreted from a rights-based perspective. Forced displacement without FPIC has occurred with a loss of customary social, cultural and economic lives. Similarly, Jeanne W. Simon and Claudio Gonzáles Parra illustrate that international standards have no consequence when protecting customary land rights of indigenous peoples in Chile. Hydropower and energy infrastructure supersede customary land rights and human rights in a context of poor local legal protective frameworks. In Timor-Leste, as in Melanesian and neighbouring countries, customary land rights remain unrecognised. Bernardo Almeida refers to the 2017 Land Law in Timor-Leste, which has not yet begun to be implemented, and therefore only promises tenure security to certain groups, excluding informal urban dwellers and communities displaced in 1999 during the secession from Indonesia. Discussing safeguarding policies for infrastructure projects, Almeida concludes that international institutions provide better protection than the national government for displaced communities.

Examining the potential for national and international legal frameworks in Southeast Asia, Andreas Neef argues that in five Southeast Asian countries – Cambodia, Indonesia, Laos, Myanmar and the Philippines – legal frameworks have been designed to facilitate expropriation by corporations and political and economic elites, providing poor protections for customary landowners. Celine Salcedo-La Viña echoes this in her claims that liberal investment laws do the same in countries such as Tanzania and Mozambique. Price and Nicholas Tagliarino contradict this claim of compulsory acquisition in Indonesia and the Pacific and Lao PDR with examples of negotiated settlements, strong constitutional protections and landowners’ ownership of the process of development of their lands. Laos is used in this book as a contradictory example in separate chapters as having both strong protections and weak ones, which confuses the issue of compulsory displacement.

Price and Tagliarino stress that monitoring is vital for the sustainability of protections of land, livelihoods and wellbeing, as does Nadine Walicki, who emphasises government responsibility for monitoring the situation of people internally displaced (IDPs) and for building local capacity to compile data. Walicki’s focus is on country data informing national laws and policies, especially since figures on IDPs are difficult to compile or do not exist.

Asmita Kabra and Budhaditya Das point out that India’s Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR), ranks among the best country safeguard systems for land in the Global South. Kabra and Das highlight evidence from LARR’s implementation of national safeguards which are liable for local scrutiny and more rigorous accountability standards, proving that litigation and local judicial processes have resulted in a jurisprudence that has favoured communities vulnerable to development-induced displacement and resettlement (DIDR). India also has the Forest Rights Act 2006, which unfortunately is not mentioned in this book, and which has in place full legal and regulatory measures offering ownership and title rights, community forest rights, usufruct rights and rights to rehabilitation and relief, among others. Price and Singer’s claim that no ‘country has in place the full legal and regulatory measures to enhance the lives and livelihoods of those developmentally displaced’ disregards and contradicts the full legal measures of India’s FRA.

Salcedo-La Viña, writing on gender justice, discusses how inherent ambiguities in legal frameworks cause an intersectional discrimination which disproportionately violates women’s rights when dispossessed of community lands. Systemic patriarchy resulting in women not being named as heads of households excludes them from ownership rights to property and to FPIC. The three countries discussed in this chapter differ from India’s more equitable legal rights for women under the FRA; since this is not discussed in this book, this might skew the impression of women’s land rights in national frameworks.

In Sri Lanka, Sam Pillai writes about the Land Acquisition Act (LAA) which is still used as the benchmark. This is detrimental to the compensation of land loss, despite a gender equitable resettlement policy of 2001 being approved by the Cabinet, which unfortunately is non-justiciable. In Vietnam, Singer explains that legislation governing dam resettlement since 2014 appears more generous, but it is not comprehensive and falls short on livelihoods and benefit-sharing protection for IDPs. In China, similarly, the Land Administration Law (LAL) land compensation, using multiples of annual average output value, does not facilitate the re-establishment of livelihoods. Duan Yuefang, Brooke Wilmsen and Zhao Xu, engaging with state encouragement for urban resettlement, conclude that rural to urban resettlement entails risks of social disintegration, social unrest and impoverishment resulting from unemployment, food insecurity and debt.

The primary purpose of the volume is to introduce a topical arena that has had little attention or reflection from busy practitioners as a means for continuing discourse on these crucial issues. The combined fifteen chapters in the book carefully build a rigorous documentation of policies and legal practice and contribute to an eclectic discussion of country frameworks relating to DIDR. The book comprises a vital resource for academics, students and specialists working with land rights, and lays out powerful and clearly stated conclusions advocating development strategies being inclusive of displaced communities in order to circumvent impoverishment.

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics.

Image Credit: Uma Daro, one of the longhouses located in the Sungai Asap Resettlement Area at Belaga District, Sarawak, Malaysia (yukarifukui CC BY SA 2.0).