Development

The 2019 SASE’s Alice Amsden Book Award goes to ‘The Specter of Global China’ by Ching Kwan Lee

Published by Anonymous (not verified) on Thu, 26/12/2019 - 5:44am in

The winner of the inaugural Alice Amsden Book Award of the Society for the Advancement of Socio-Economics is The Specter of Global China: Politics, Labor, and Foreign Investment in Africa, by Ching Kwan Lee, Professor of Sociology at the University of California, Los … Continue reading →

Econofides: CORE in French high schools

Published by Anonymous (not verified) on Mon, 16/12/2019 - 7:40pm in

In France many economists have been asking for a long time how we can make the economy exciting for high school students. But, then again, so have the teenagers who toil to learn about it, and the teachers who want to teach it. And France isn’t unusual.

The magic fortress of economic concepts often seems too abstract for the people aged between 15 and 18, who are discovering the economy for the first time. Understanding the economic structure of the world we live in will be essential for the next generation of citizens and policymakers. What if we could adapt CORE’s resources to high school and develop radically new ways of teaching it. This is the challenge that the Econofides project, launched at the beginning of the school year to 260,000 high school students in France, took up.

The genesis of Econofides

France is an ideal setting for anyone who wants to experiment with new ways of teaching economics in high school. All second students follow the same curriculum: 90 minutes a week of introduction for everyone in Seconde (Year 11), then 4 hours in Première (Year 12) and 6 hours in Terminale (Year 13), for those who decide to specialise in economics.

The program is directive too. Seconde students must learn how economists reason. Those in Première focus on markets, how they function and their imperfections. The Terminale program is much broader and embraces major issues in the contemporary world. It takes in sources of economic growth and instability, globalisation, sustainable development, labour markets and unemployment.

But this framework does not always fit the CORE paradigm on how to teach economics. An example: unlike CORE, students have to learn the perfect competition framework before they learn that in reality markets are mostly imperfect, and then study externalities, monopolies and public policies. But we felt that the diversity of the themes, and the possibility of making them alive and exciting, made it worth adapting the resources of CORE, and developing new resources especially for high school.

Hence, we created Econofides for trust (‘fides’) in the economy.

Who are we? A team of talented students and project managers from Sciences Po, led by me, who are working with the Académie de Versailles and a team of high school teachers. We are also partnering with Artips, a company committed to the democratisation of culture that specialises in micro-learning with short stories. The project is supported by the Ile-de-France Region, the Axa Fund for research and the Banque de France.

The Econofides platforms

This collaboration is creating several digital resources that are adapted to the new programs.

There are open access ebooks for the Première and Terminale students, which adapt the content of CORE and its teaching resources, such as the interactive diagrams, videos, and quizzes, such as our “Introduction to Markets and Prices” for Première students:

For the Seconde students we will create a micro-learning platform, plus a platform for all high school students wishing to discover the economy:

The platforms are full of accessible ideas, situations and anecdotes. The idea is to propose a concrete economy in which students recognise themselves. For example, the first chapter is devoted to the question “How do economists think?”. An important point is to explain the difference between correlation and causality, but these concepts are very difficult to digest for 14- and 15-year-olds. But they become much easier to digest when explained to them using the history of the strange relationship between the students’ spelling and the size of their feet!

Using this anecdote, we can explain the difference between correlation and causality and apply it to a contemporary economic situation, such as the relationship between growth and global warming. They make sense of causality and understand the role of omitted variables (in this case of course, their age explains both feet size and number of spelling errors, as in the image on the right).

Immediately they are given a quiz on the correlation between the level of chocolate consumption in countries and the number of Nobel prize winners. We finish off with anecdotes that explain the concepts of natural experiments and randomised trials, and one of the stories is about to reducing class size and academic achievement (in tribute to Esther Duflo, our French Nobel Prize winner).

Through the content of the courses, students project themselves into—and interact with—the economic principles that govern their lives, often without them knowing it.

After months of work, our Econofides project is finally launched. The courses contribute to the democratisation of the economy, but also offer new educational opportunities: reverse pedagogy, teamwork on case studies, individualisation of student follow-up, while respecting the teaching freedom of teachers. And French high school students who now have a much better introduction to the complex world of economics.

Yann Algan (yann.algan@sciencespo.fr) is dean of the School of Public Affairs at Sciences Po, Paris.

The post Econofides: CORE in French high schools appeared first on CORE.

International aid will, under the Tories, become just another migration bargaining chip

Published by Anonymous (not verified) on Tue, 10/12/2019 - 7:54pm in

The FT has reported this morning that:

Boris Johnson is planning to fold the UK’s Department for International Development into the Foreign Office if he wins this week’s election, as he tries to flesh out his promise to build a post-Brexit “global Britain”.

It adds:

Mr Johnson wants Britain’s £13.4bn overseas aid budget to be used more effectively and thinks putting it under the control of the Foreign Office would better align it with the country’s political and business objectives.

And:

However, some Dfid officials fear that the revamp — described as “a rumour” by a close ally of Mr Johnson — could be used as a pretext to cut Britain’s overseas aid budget, which has long been criticised by the rightwing of the Conservative party.

Before noting:

Some in Number 10 have suggested that Britain should set its own rules for what counts as “overseas aid” — including more defence and embassy spending — rather than using the OECD definition.

None of this is surprising, of course. The Brittania Unchained crowd, and most especially Priti Patel, have long hated international development. To them aid is a sign of market failure and so has to be ended. Unless that is, it provides support to British business, or rather, British profits.

I strongly suspect that this merger will happen if the Tories win and that aid will just become another bargaining tool for a desperate country. And by that I mean it will be used to buy off migration claims from these making trade deals with the UK. Pardon my cynicism, but institutionalised racism will be the Whitehall norm under another Tory government.

Behind Chile’s political crisis

Published by Anonymous (not verified) on Thu, 31/10/2019 - 6:24pm in

More than one million people marched in Santiago on October 26 to protest the Government’s security response to Chile’s current political crisis and to demand structural economic reforms to reduce inequality and increase social services. In this post I analyze these grievances from a quantitative perspective and explore what it would take to translate them into policy.

This is my fourth inequality-related post. I use the same sources of data and framework of analysis as in my initial analysis focused on Canada, its update to include inequality/redistribution “models” and my analysis of inequality in Venezuela and encourage interested readers to refer to these for further conceptual and technical background.

Income Inequality

Chile has long been an economically unequal society.

Figure 1 shows that Chile’s market income inequality, as measured by the Gini coefficient, has been very high for as long as the data has been available, including for the last 40 years, as shown in Figure 1. For comparative purposes Figure 1 also includes two group averages (“LatAm-7” group: Argentina, Brazil, Colombia, Costa Rica, Mexico, Panama and Peru; “OECD-11” group: Australia, Canada, Finland, France, Germany, Italy, Japan, Norway, Sweden, UK and USA) and three other countries.

Chile joined the OECD in 2010 and is currently the Latin America country with the highest GDP per capita, currently (2018) at USD $25,000. The data for the OECD-11 and Chile are from the OECD’s Income Distribution Database, supplemented with the Standardized World Income Inequality Database (SWIID), which is the main source of data for the LatAm-7.

The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. The Gini is one of a number of ways in which inequality may be measured. Other measures include the proportion of income flowing to the 1% or 10% of the population with the highest income. I use the Gini because it is more conducive to redistribution-related policy analysis and is more broadly available than other measures.

Market income Gini coefficients measure the distribution of “market” income from the labour and capital markets and differs from “disposable” (sometimes referred to as “net”) income, which measures income after the payment of direct taxes and the receipt of public cash transfers/benefits. The difference between “market” and “disposable” income inequality reflects the extent to which Governments reduce market income inequality by direct taxes and cash benefits.

Starting at group averages, Figure 1 shows that market inequality was significantly higher (almost 0.10 Gini points) in Latin America than in the OECD in 1980. Inequality in both groups started to climb in the mid-1980’s until the early-2000’s, at which point inequality in Latin America began to decrease.

Chile’s market inequality has remained very high and is now well above the LatAm-7 average. For comparative purposes I have included Canada, France and the USA, which are representative of three types of inequality/redistribution country “models”. Market inequality in Canada, France and the USA has increased by 0.07, 0.05 and 0.10 Gini points, respectively, with France and the USA now reached levels similar to Chile. Figure 1 also presents the year in which each country reached Chile’s current GDP per capita and shows that they generally had lower or similar inequality than currently, indicating that Chile’s high market inequality is not related to its relative or absolute GDP per capita, but rather to other factors, including the distribution of human and financial capital and other structural elements, including the extent to which markets have been designed and/or regulated to benefit the elite.

Redistribution

Chile has
historically had very low economic redistribution.

The difference between the market income Gini and the disposable income Gini is referred to as “fiscal redistribution” or just “redistribution”. Figure 2 shows that Chile’s redistribution has been similar to that LatAm-7 but is well below that of the OECD-11 and Canada, France and USA. Readers will note that these countries have chosen very different levels of redistribution to counteract their underlying market inequality. France and the USA are high-inequality countries, but each chooses a different level of redistribution, with France having about twice that of the USA. Canada is a low-inequality country with the same low level of redistribution as the USA. Figure 2 shows that the level of redistribution is not related to GDP per capita: redistribution was similar to current levels in all countries when they had GDP/capita comparable to that of Chile today. Redistribution is fundamentally a political choice with real societal and welfare consequences.

To be clear, redistribution is not designed to, nor does it generally have an immediate or large impact on the underlying determinants of market inequality, including the distribution of human or financial capital. Rather, it is principally designed to moderate market inequality to politically-acceptable levels – it is a form of “social contract”. As added economic bonus, as I noted previously, the recent economic evidence is that redistribution tends to (slightly) increase economic growth. That is, there is no “efficiency-equity trade-off” that proponents of neoliberal policies used to justify a minimalist State. And that a minimalist State is certainly what Chile has had.

Figure 3 shows Government (all levels) taxation revenues as a percentage of GDP (data from the OECD Global Revenue Statistics database), which is my preferred widely-available indicator to use as a proxy for the comparative economic weight of the State. Figure 3 shows that since comparable data has been, available starting in 1990, Chile’s taxation revenues have been only about half of those in the OECD-11. Figure 3 shows that the level of taxation revenues (as a proxy) is not related to GDP per capita. Comparing Figures 2 and 3, readers will note the direct relationship between tax revenues and redistribution – in modern democracies, citizens choose, generally indirectly, to have higher/lower levels of redistribution, including by having higher/lower taxes.

The composition of taxation revenues in the OECD-11, with a relatively heavy weight on personal and corporate income taxes, are relatively progressive and account for about one-third of redistribution (measured in Gini points). In contrast, Chile mostly relies on value-added taxes (VAT) and hence taxes have little or no redistributive impact (Chile also receives non-tax revenues – royalties – from copper and other mining).

The remaining two-thirds of the distributive impact in the OECD-11 is the result of cash benefits, which will depend on their quantum and degree of targeting at low-income households (“efficiency”). Based on the most recent data (2015) from the OECD’s Social Expenditure database, cash benefits account for 5% of GDP in Chile, compared to 9% for Canada and USA, 13% for OECD-11 and 19% for France.

Disposable
Income Inequality

Figure 4 shows disposable income inequality. Because Chile has chosen very low redistribution, Chile’s disposable income inequality remains very high, with a Gini coefficient of about 0.44. In contrast, the two countries that had similar market inequality as Chile, France and USA, both moderate their disposable income inequality by different degrees, USA to a Gini coefficient of about 0.39 and France to such an extent that it ends up having a Gini coefficient similar to Canada’s (and the OECD-11) of about 0.30.

To see how these Gini coefficients relate to other income inequality measures, the OECD estimates that for 2015 a very large 36% of disposable income goes to the highest 10% in Chile; that figure is 29% in the USA, and 24% in Canada, France and OECD-11.

Public financing and privatization of Social Services and Education

A key demand of the Chileans marching in the streets is increased public financing of social services, including for education, health and retirement. In keeping with the neoliberal model of a minimalist state, in each of these sectors Chile has established parallel public/private systems.

The publicly-financed systems are designed to be universal and have relatively modest or no user fees/contribution charges, depending on the level of service selected and income level of the user. In practice, however, many middle-income and almost all high-income Chileans “opt out” of the perceived lower-quality public systems by subscribing into a health or retirement “plan” offered by a user-fee-based for-profit private provider that make up the private systems. In fact, many of the grievances of the marchers are directed at these health plan providers (“ISAPRES”) or the retirement plan financial entities (“AFPs”), or the for-profit universities.

This system perpetuates Chile’s high market inequality because it relegates lower-income households to generally lower-quality public systems that are less conducive to building (education) and maintaining (health and retirement) human capital to participate in labour markets. At the same time, the privatized systems allows for the creation of financial capital, which is predominantly held by higher-income households to which the investment income flows.

Figure 5 shows how comparatively little public financing Chile provides for social expenditures (e.g. health, retirement, etc.) and education, reaching about 15% of GDP, compared to 22-23% for Canada and USA, 28% for the OECD-11 and 37% for France.

This ranking of public financing generally corresponds to the ranking of taxation revenues in Figure 3, which puts back the question into political economy terms of the choice between low/high public provision of services and low/high taxes. Chile is a prime but not the only example that the demand for “public” services, whether it be education, health or retirement security, is independent of their public provision and how private systems can be designed to complement or even substitute them.

Financing of Health and Education Sectors

Figures 6 and 7 show the relationship between the public and private systems in the health and education sectors.

The OECD collects detailed health statistics, including on public and private expenditures, including out-of-pocket medical costs. Figure 6 presents the relative size of privately-financed/funded expenditures and shows that Chile’s system is highly privatized. Chile is similar to the USA, at around 50%. The slight decrease in the USA in 2014 and 2015 are the result from the coming into force of the ACA (“Obamacare”). In contrast, Canada, France and OECD-11 are around 25-30% private.

Total (public and private) health expenditures are highest in the USA (16% of GDP) and lowest in Chile (8%) with Canada, France and the OECd-11 at between 10-11%.

Similarly, based on detailed OECD education financing statistics, Figure 7 presents the relative size of privately-financed/funded education expenditures. It shows that Chile has long been a highly privatized system, even higher than that of the USA, and much higher than Canada, OECD-11 and France.

The reason is that while a number of OECD-11 countries have a high private participation in tertiary education comparable to Chile (60-70%) none of the comparator countries also have Chile’s relatively high private participation in primary and secondary education (20%), which makes up three-quarters of overall expenditures (which are between 5-6% of GDP for the comparator countries).

Concluding Thoughts

The structural economic reforms that are being demanded by the millions marching in Chile are simply those that most advanced democracies have long implemented: policies to substantially moderate income inequality and to finance high-quality universal social services.

These policies are relatively simple to administer and have been implemented by dozens of countries with national incomes well below that of Chile. There is no administrative or economic constraint. But that has never really been the issue in Chile (or elsewhere). Rather, until the last two weeks, the political equilibrium in Chile appeared to be one of incremental reforms to the neoliberal policies imposed during the military dictatorship of 1973-1990.

So assuming the political equilibrium in Chile is more responsive to demands for structural reforms, what would it take to have such demands translated into policy?

For example, Chileans could decide to increase redistribution. Based on the analysis above, I estimate that matching the levels of redistribution in Canada and USA would require about 5% of GDP to finance, while matching those of the OECD-11 about 8% of GDP. Similarly, Chileans could decide to increase public financing of high-quality and universal social services and education, which to match Canada and USA levels would require about 5% of GDP, and to match OECD-11 levels about 7% of GDP.

Behind Chile’s political crisis

Published by Anonymous (not verified) on Thu, 31/10/2019 - 6:24pm in

More than one million people marched in Santiago on October 26 to protest the Government’s security response to Chile’s current political crisis and to demand structural economic reforms to reduce inequality and increase social services. In this post I analyze these grievances from a quantitative perspective and explore what it would take to translate them into policy.

This is my fourth inequality-related post. I use the same sources of data and framework of analysis as in my initial analysis focused on Canada, its update to include inequality/redistribution “models” and my analysis of inequality in Venezuela and encourage interested readers to refer to these for further conceptual and technical background.

Income Inequality

Chile has long been an economically unequal society.

Figure 1 shows that Chile’s market income inequality, as measured by the Gini coefficient, has been very high for as long as the data has been available, including for the last 40 years, as shown in Figure 1. For comparative purposes Figure 1 also includes two group averages (“LatAm-7” group: Argentina, Brazil, Colombia, Costa Rica, Mexico, Panama and Peru; “OECD-11” group: Australia, Canada, Finland, France, Germany, Italy, Japan, Norway, Sweden, UK and USA) and three other countries.

Chile joined the OECD in 2010 and is currently the Latin America country with the highest GDP per capita, currently (2018) at USD $25,000. The data for the OECD-11 and Chile are from the OECD’s Income Distribution Database, supplemented with the Standardized World Income Inequality Database (SWIID), which is the main source of data for the LatAm-7.

The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. The Gini is one of a number of ways in which inequality may be measured. Other measures include the proportion of income flowing to the 1% or 10% of the population with the highest income. I use the Gini because it is more conducive to redistribution-related policy analysis and is more broadly available than other measures.

Market income Gini coefficients measure the distribution of “market” income from the labour and capital markets and differs from “disposable” (sometimes referred to as “net”) income, which measures income after the payment of direct taxes and the receipt of public cash transfers/benefits. The difference between “market” and “disposable” income inequality reflects the extent to which Governments reduce market income inequality by direct taxes and cash benefits.

Starting at group averages, Figure 1 shows that market inequality was significantly higher (almost 0.10 Gini points) in Latin America than in the OECD in 1980. Inequality in both groups started to climb in the mid-1980’s until the early-2000’s, at which point inequality in Latin America began to decrease.

Chile’s market inequality has remained very high and is now well above the LatAm-7 average. For comparative purposes I have included Canada, France and the USA, which are representative of three types of inequality/redistribution country “models”. Market inequality in Canada, France and the USA has increased by 0.07, 0.05 and 0.10 Gini points, respectively, with France and the USA now reached levels similar to Chile. Figure 1 also presents the year in which each country reached Chile’s current GDP per capita and shows that they generally had lower or similar inequality than currently, indicating that Chile’s high market inequality is not related to its relative or absolute GDP per capita, but rather to other factors, including the distribution of human and financial capital and other structural elements, including the extent to which markets have been designed and/or regulated to benefit the elite.

Redistribution

Chile has
historically had very low economic redistribution.

The difference between the market income Gini and the disposable income Gini is referred to as “fiscal redistribution” or just “redistribution”. Figure 2 shows that Chile’s redistribution has been similar to that LatAm-7 but is well below that of the OECD-11 and Canada, France and USA. Readers will note that these countries have chosen very different levels of redistribution to counteract their underlying market inequality. France and the USA are high-inequality countries, but each chooses a different level of redistribution, with France having about twice that of the USA. Canada is a low-inequality country with the same low level of redistribution as the USA. Figure 2 shows that the level of redistribution is not related to GDP per capita: redistribution was similar to current levels in all countries when they had GDP/capita comparable to that of Chile today. Redistribution is fundamentally a political choice with real societal and welfare consequences.

To be clear, redistribution is not designed to, nor does it generally have an immediate or large impact on the underlying determinants of market inequality, including the distribution of human or financial capital. Rather, it is principally designed to moderate market inequality to politically-acceptable levels – it is a form of “social contract”. As added economic bonus, as I noted previously, the recent economic evidence is that redistribution tends to (slightly) increase economic growth. That is, there is no “efficiency-equity trade-off” that proponents of neoliberal policies used to justify a minimalist State. And that a minimalist State is certainly what Chile has had.

Figure 3 shows Government (all levels) taxation revenues as a percentage of GDP (data from the OECD Global Revenue Statistics database), which is my preferred widely-available indicator to use as a proxy for the comparative economic weight of the State. Figure 3 shows that since comparable data has been, available starting in 1990, Chile’s taxation revenues have been only about half of those in the OECD-11. Figure 3 shows that the level of taxation revenues (as a proxy) is not related to GDP per capita. Comparing Figures 2 and 3, readers will note the direct relationship between tax revenues and redistribution – in modern democracies, citizens choose, generally indirectly, to have higher/lower levels of redistribution, including by having higher/lower taxes.

The composition of taxation revenues in the OECD-11, with a relatively heavy weight on personal and corporate income taxes, are relatively progressive and account for about one-third of redistribution (measured in Gini points). In contrast, Chile mostly relies on value-added taxes (VAT) and hence taxes have little or no redistributive impact (Chile also receives non-tax revenues – royalties – from copper and other mining).

The remaining two-thirds of the distributive impact in the OECD-11 is the result of cash benefits, which will depend on their quantum and degree of targeting at low-income households (“efficiency”). Based on the most recent data (2015) from the OECD’s Social Expenditure database, cash benefits account for 5% of GDP in Chile, compared to 9% for Canada and USA, 13% for OECD-11 and 19% for France.

Disposable
Income Inequality

Figure 4 shows disposable income inequality. Because Chile has chosen very low redistribution, Chile’s disposable income inequality remains very high, with a Gini coefficient of about 0.44. In contrast, the two countries that had similar market inequality as Chile, France and USA, both moderate their disposable income inequality by different degrees, USA to a Gini coefficient of about 0.39 and France to such an extent that it ends up having a Gini coefficient similar to Canada’s (and the OECD-11) of about 0.30.

To see how these Gini coefficients relate to other income inequality measures, the OECD estimates that for 2015 a very large 36% of disposable income goes to the highest 10% in Chile; that figure is 29% in the USA, and 24% in Canada, France and OECD-11.

Public financing and privatization of Social Services and Education

A key demand of the Chileans marching in the streets is increased public financing of social services, including for education, health and retirement. In keeping with the neoliberal model of a minimalist state, in each of these sectors Chile has established parallel public/private systems.

The publicly-financed systems are designed to be universal and have relatively modest or no user fees/contribution charges, depending on the level of service selected and income level of the user. In practice, however, many middle-income and almost all high-income Chileans “opt out” of the perceived lower-quality public systems by subscribing into a health or retirement “plan” offered by a user-fee-based for-profit private provider that make up the private systems. In fact, many of the grievances of the marchers are directed at these health plan providers (“ISAPRES”) or the retirement plan financial entities (“AFPs”), or the for-profit universities.

This system perpetuates Chile’s high market inequality because it relegates lower-income households to generally lower-quality public systems that are less conducive to building (education) and maintaining (health and retirement) human capital to participate in labour markets. At the same time, the privatized systems allows for the creation of financial capital, which is predominantly held by higher-income households to which the investment income flows.

Figure 5 shows how comparatively little public financing Chile provides for social expenditures (e.g. health, retirement, etc.) and education, reaching about 15% of GDP, compared to 22-23% for Canada and USA, 28% for the OECD-11 and 37% for France.

This ranking of public financing generally corresponds to the ranking of taxation revenues in Figure 3, which puts back the question into political economy terms of the choice between low/high public provision of services and low/high taxes. Chile is a prime but not the only example that the demand for “public” services, whether it be education, health or retirement security, is independent of their public provision and how private systems can be designed to complement or even substitute them.

Financing of Health and Education Sectors

Figures 6 and 7 show the relationship between the public and private systems in the health and education sectors.

The OECD collects detailed health statistics, including on public and private expenditures, including out-of-pocket medical costs. Figure 6 presents the relative size of privately-financed/funded expenditures and shows that Chile’s system is highly privatized. Chile is similar to the USA, at around 50%. The slight decrease in the USA in 2014 and 2015 are the result from the coming into force of the ACA (“Obamacare”). In contrast, Canada, France and OECD-11 are around 25-30% private.

Total (public and private) health expenditures are highest in the USA (16% of GDP) and lowest in Chile (8%) with Canada, France and the OECd-11 at between 10-11%.

Similarly, based on detailed OECD education financing statistics, Figure 7 presents the relative size of privately-financed/funded education expenditures. It shows that Chile has long been a highly privatized system, even higher than that of the USA, and much higher than Canada, OECD-11 and France.

The reason is that while a number of OECD-11 countries have a high private participation in tertiary education comparable to Chile (60-70%) none of the comparator countries also have Chile’s relatively high private participation in primary and secondary education (20%), which makes up three-quarters of overall expenditures (which are between 5-6% of GDP for the comparator countries).

Concluding Thoughts

The structural economic reforms that are being demanded by the millions marching in Chile are simply those that most advanced democracies have long implemented: policies to substantially moderate income inequality and to finance high-quality universal social services.

These policies are relatively simple to administer and have been implemented by dozens of countries with national incomes well below that of Chile. There is no administrative or economic constraint. But that has never really been the issue in Chile (or elsewhere). Rather, until the last two weeks, the political equilibrium in Chile appeared to be one of incremental reforms to the neoliberal policies imposed during the military dictatorship of 1973-1990.

So assuming the political equilibrium in Chile is more responsive to demands for structural reforms, what would it take to have such demands translated into policy?

For example, Chileans could decide to increase redistribution. Based on the analysis above, I estimate that matching the levels of redistribution in Canada and USA would require about 5% of GDP to finance, while matching those of the OECD-11 about 8% of GDP. Similarly, Chileans could decide to increase public financing of high-quality and universal social services and education, which to match Canada and USA levels would require about 5% of GDP, and to match OECD-11 levels about 7% of GDP.

Pluriverse: Book Launch

Published by Anonymous (not verified) on Tue, 08/10/2019 - 12:24pm in

Pluriverse: A Post-Development Dictionary

Book Launch | Gleebooks | Wednesday 9th October, 6:00pm for 6:30pm

RSVP: HERE

After decades of so-called ‘development’, the world is in crisis. Crucial conditions for life on Earth are failing, and people’s expectations for their own and children’s futures are uncertain. The dimensions of this crisis are environmental, economic, social, political, ethical, cultural, spiritual and embodied. Rational alternatives to capitalism, colonial, and masculinist domination are needed urgently.

The Post-Development Dictionary offers over 100 essays as resources for a just and ecological peace. Some authors expose the contradictions of reformism and ‘eco-modernist greenwash’. Others explain life-affirming insights and practices from Buen Vivir, Buddhism, Eco-Theology, Commoning, sense of Country, Deep Ecology, De-Growth, Eco-Anarchism, Eco-Feminism, Eco-Socialism, Eco-Villages, Energy Sovereignty, Environmental Justice, the Gift Economy, Hinduism, Islamic Ethics, Jain Ecology, Judaic Tikkun Olam, Kyosei, Latina Feminisms, Nature Rights, New Matriarchies, the Water Paradigm, Pacifism, Permaculture, Queer Love, Swaraj, Slow Movement, Social Ecology, Solidarity Economies, Tao, the Transition Movement, African Ubuntu, and many others. The book initiates a global collaboration among communities to explore their convergences. It proposes a political radicalization that starts at everyday life and moves on to an Earth Democracy.

Edited by Ashish Kothari, Ariel Salleh, Arturo Escobar, Federico Demaria, and Alberto Acosta

The post Pluriverse: Book Launch appeared first on Progress in Political Economy (PPE).

People's Landscapes: Living in Landscapes

Published by Anonymous (not verified) on Tue, 23/07/2019 - 7:01pm in

A roundtable discussion explore landscape as a space for living, considering the pressures on land from population growth and discussing questions of preservation vs. development. People's Landscapes: Beyond the Green and Pleasant Land is a lecture series convened by the University of Oxford's National Trust Partnership, which brings together experts and commentators from a range of institutions, professions and academic disciplines to explore people's engagement with and impact upon land and landscape in the past, present and future. The National Trust cares for 248,000 hectares of open space across England, Wales and Northern Ireland; landscapes which hold the voices and heritage of millions of people and track the dramatic social changes that occurred across our nations' past. In the year when Manchester remembers the 200th anniversary of the Peterloo massacre, the National Trust's 2019 People’s Landscapes programme is drawing out the stories of the places where people joined to challenge the social order and where they demonstrated the power of a group of people standing together in a shared place. Throughout this year the National Trust is asking people to look again, to see beyond the green and pleasant land, and to find the radical histories that lie, often hidden, beneath their feet. At the third event in the series, Living in Landscapes, panellists explore landscape as a space for living, considering the pressures on land from population growth, discussing questions of preservation vs. development, and asking: who should decide how we live in landscape?

Speakers: Alice Purkiss | National Trust Partnership Lead | University of Oxford (Welcome)

Lucy Footer| National Public Programme Producer| National Trust (Introduction)

Dr Ingrid Samuel| Historic Environment Director | National Trust (Chair)

Crispin Truman | Chief Executive | Campaign to Protect Rural England

Dave Lomax | Senior Associate | Waugh Thistleton Architects

Professor Caitlin Desilvey | Associate Professor of Cultural Geography | University of Exeter

Dr David Howard | Associate Professor in Sustainable Urban Development | University of Oxford

For more information about the People’s Landscapes Lecture Series and the National Trust Partnership at the University of Oxford please visit: www.torch.ox.ac.uk/national-trust-partnership

Income Inequality and Redistribution in Venezuela

Published by Anonymous (not verified) on Mon, 18/02/2019 - 9:10am in

I had been waiting for last month’s publication of the book “Confronting Inequality” before preparing my annual update on income inequality and redistribution in Canada. I am glad I did because the book presents new and exciting empirical findings that shed light on the age-old equity/growth debate (more on that below), but also introduced me to the Standardized World Income Inequality Database (SWIID). Data comparability and granularity has been a challenge for inequality researchers looking at countries outside the OECD and EU. Specifically, the lack of inequality data for market income did not allow researchers to measure and analyze the redistributive effect of Government policy. In contrast, the most recent version of SWIID provides historical estimates of Gini coefficients for disposable and market income for 192 countries generally to 2016. Keen to make use of this new database, I’ve decided to turn my attention south to my birth continent of Latin America and focus on Venezuela.

There is of course much to be analyzed (and debated) about and in Venezuela from a foreign policy/intervention, constitutional legitimacy, humanitarian, political and economic perspective. My objective here is narrow: to present evidence-based analysis of Venezuela’s income inequality performance, from a historical (1990 to 2015) and comparative (other Latin American countries) perspective. I use the same framework of analysis as in previous posts and encourage interested readers to refer to these for further conceptual and technical background. The most recent SWIID data for Venezuela is 2015 and therefore my analysis does not cover the current period of deep economic contraction or hyperinflation, although in the Epilogue I do hypothesize how these severe macro-economic shocks have likely impacted income inequality.

Market Income Inequality

Figure 1 presents market income Gini coefficients for Venezuela, four other selected countries in Latin America and two group averages: the “LatAm-17” group – Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela – and the “OECD-14” group – Australia, Canada, Denmark, Finland, France, Germany, Italy, Japan, Netherlands, New Zealand, Norway, Sweden, UK and USA.

The data for the OECD-14 is from the OECD’s Income Distribution Database and generally available to 2015 or 2016 and is reasonably comparable to the SWIID data methodology used for the LatAm-17 group. The Gini coefficient varies from 0 to 1.00, with higher values representing higher inequality. Market income Gini coefficients measure the distribution of market income (from employment and investments), before any taxes or Government cash benefits.

Starting the analysis at the group averages, Figure 1 shows that market inequality was significantly higher (0.07 Gini points) in Latin America than in the OECD at the beginning of the study period. Inequality in both groups increased over the 1990’s until the early-2000’s, at which point the groups started to diverge. Latin America, which has traditionally been the must unequal region in the world, suddenly bucked the global trend of increasing inequality and started to see sustained decreases in inequality, so much so that by 2014/15 it had about the same average income inequality as the OECD. This continental decrease in market income inequality is still the subject of ongoing analysis, but is likely due to a “winding down” of past inequality-increasing shocks, together with conducive macro-economic conditions and activist Government policies of social investment.

In addition to the group averages, Figure 1 also shows Venezuela and four other LatAm countries, Brazil, Mexico, Colombia and Uruguay. I wanted to include other countries to provide national context. I chose Brazil, Mexico, Colombia because these are the three most populous countries in the region (Venezuela is sixth). Colombia and Brazil are also neighbouring countries with Venezuela. Mexico is the northern-most country in the region. I chose Uruguay because it one of the Southern Cone countries.

Figure 1 shows that over the study period Venezuela always had lower income inequality than the LatAm-17 average. Indeed, it had the lowest average market inequality in the region, with Costa Rica (not shown) a close second. Venezuela had the same inequality trajectory as the regional trend, with inequality increasing in the 1990’s then stabilizing until the mid-2000’s, before decreasing until 2015.

Market income inequality is driven by a complex combination of trends and policies, both international and national. One of the reasons I am writing this blog is to understand what effect, if any, did the self-styled “Bolivarian Revolution” (“BR”) that began in 1999 with the administration of President Chavez that lasted until his death in March, 2013 (“BR-I”), have on Venezuela’s economic inequality? And how about under the administration of President Maduro for the three year period 2013-2015 (“BR-II)?

Looking only at Venezuela one concludes that both BR-I and BR-II lowered market income inequality in Venezuela. But that conclusion is unsatisfactory because it allocates all changes in inequality to national conditions and specifically to Government policies. A more nuanced analysis would try to differentiate between the international and national effects and allocate changes to each. There are a number of methodologies for such a task (including component analysis, etc.). In this blog I use a simple comparison-to-the-mean analysis.

For example, inequality increased during the 1990’s for LatAm-17 and OECD-14 and all countries in Figure 1 except Brazil. Regional inequality was going up but Brazil was bucking the trend; national developments were more than countering international trends. In this instance, I say that during the 1990’s Brazil was an “above-average” performer in reducing market income inequality. Further much more detailed analysis would be required to try to allocate this above-average performance between national trends and Government policies. Along these lines, I also say that since the mid-2000’s Mexico has been a “below-average” performer because inequality increased there while it was falling everywhere else in the region. All the rest of the countries (Venezuela, Colombia and Uruguay), however, are all “average” performers with upside-down “U” trajectories and lower inequality in the mid-2010’s than the early 1990’s. In this broader context, therefore, Venezuela’s inequality performance, including during the BR period, was average for the region.

Redistribution

Disposable income is defined as market income after payment of direct taxes and receipt of Government cash benefits (e.g. unemployment, govt. pensions, social assistance, etc.). Disposable income does not cover “in kind” Government expenditures such as free education, free school lunches, subsidized housing, etc. Inequality of disposable income is measured by the “Net” Gini coefficient. The difference between the Market Gini and the Net Gini is referred to as “fiscal redistribution” or more generally “Redistribution” and reflects the extent to which Governments, either as a deliberate effort or as a consequence of other policies, reduce market income inequality by direct taxes and cash benefits.

Figure 2 shows that the OECD-14 has more than five times the amount of Redistribution as LatAm-17 (0.16 versus 0.03 Gini points). This difference reflects a number of political economy and administrative factors. That the amount of redistribution is pretty constant in all the countries shows how politically and, in Latin America, administratively challenging it is significantly change the amount of redistribution.

Uruguay and Brazil are all above the LatAm average, while Mexico and Colombia well below it. Venezuela’s redistribution, at about 0.03 Gini points, was relatively steady and slightly below the LatAm average. In this respect, Venezuela was a comparatively “average” performer. Nor did the level of redistribution increase during the BR, a surprising result given its reformist narrative. There are a number of possible explanations for this. One is that the SWIID Gini coefficients mis-measure redistribution for Venezuela. While SWIID does include standard errors, that of Venezuela (0.025 Gini points) is only slightly higher than that for the LatAm-17 average (0.021 Gini points).

A more likely reason is the level and composition taxes and expenditures in Venezuela were not conducive to high levels of redistribution. As many other large oil-producing states, Venezuela has traditionally had relatively low levels of taxation revenues, averaging around 15% of GDP over the 2010-2015 period. Oil royalties made up another 10% of GDP. In comparison, taxation revenues average about 25% for LatAm and 35% for the OECD. (All tax-related data from the OECD’s Revenue Statistics in Latin America and the Caribbean). Neither was the composition of taxation revenues in Venezuela progressive, with the large majority (10% of GDP) coming from value-added-tax (VAT). Thus personal and corporate income taxes (PIT, CIT) accounted for only 4% of GDP in Venezuela (compared to about 13% in the OECD). Given this relatively small CIT/PIT, it is likely that the taxes had no redistributed impact in Venezuela. Further, “disposable income” and the Net Gini coefficient are before the payment of indirect taxes such as a VAT (that requires a another level of granularity of data) and so therefore, “post-tax inequality” (that would include direct and indirect taxes) would be proportionally higher in Venezuela than in other LatAm countries because of its relatively high VAT.

The BR did not change this relatively regressive taxation composition in Venezuela. Indeed, Venezuela was one of the countries in the region that in the late 1980’s started to implement tax reforms that shifted the tax burden from the CIT/PIT to the VAT. In 1990 VAT only accounted for about one tenth of tax revenues, after which it grew steadily to about two-thirds by 2000. The BR maintained and increased this reliance on the VAT, did not increase PIT/CIT and did not implement any sizeable wealth or property tax.

Net Income Inequality

Even though market inequality in the OECD and LatAm where similar in the mid-2010’s, Figure 3 shows how the larger redistribution in the OECD lowers net inequality well below that of LatAm over the same period. Figure 3 shows that over the study period Venezuela had 0.06 Gini points lower net inequality than the LatAm-17 average. Over that period it had the lowest average net inequality in the region, after Uruguay. However, from a comparative perspective, Venezuela was an “average” performer.

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Social Spending

So from a comparative perspective I conclude that with respect to income inequality and redistribution Venezuela was an “average” performer in the region. This assessment includes the period of the BR adminstrations. But how about social spending?

Figure 4 shows Government social expenditures (education, health, housing, social assistance, etc., including in-kind and cash transfers) as a percent of GDP (figures from the UN’s Economic Commission for Latin America and the Caribbean (CEPAL for its acronym in Spanish) Social Investment Portal). Starting at the averages, LatAm countries spent about half that of OECD countries. Figure 4 shows Venezuela’s relatively large social spending relative to LatAm countries (tied for second place with Uruguay and Brazil, with Chile in first over the whole study period). We can see the BR in Figure 4, showing an uptick in 2001 for BR-I and then a very significant increase in 2013 and 2014 for BR-II.

Comparing Figures 4 and 2 allows us to analyze the effectiveness of social expenditures in reducing income inequality. For example, Uruguay and Brazil’s relatively high social expenditures result in relatively high redistribution. In effect, the social spending/redistribution “multiplier” was about 0.8 for these two countries, meaning that they for each GDP percentage point of social spending resulted in an increase in redistribution of about 0.8 Gini points. In contrast to these “efficient” redistributive countries, Venezuela, Mexico and Colombia had multipliers of only 0.2. Means that a percentage point of GDP in social spending resulted in only 0.2 Gini points of redistribution. Such differential performance is likely due differences in the composition of spending (in-kind vs. cash transfers) or more likely the progressivity of that social spending. For political and/or administrative reasons Uruguay and Argentina are able to target their social cash benefits to the lower income households. The social spending/redistribution “multiplier” in Venezuela was relatively constant during BR-I but declined during BR-II.

Epilogue

The Venezuelan economy contracted moderately in 2014 and in 2015 before contracting by more than 10% each year over the 2016-2018 period and likely another 10% in 2019, resulting in a cumulative GDP decrease of over 50% since 2014. Venezuela would have dropped from having the second-highest GDP per capita in the region in 2014-2015, to the middle of the pack by 2018-2019. Venezuela’s relatively high inflation increased dramatically in 2016 and spiked into hyperinflation in 2017, which continues into early 2019.

There are a number of inequality-related issues in this economic crisis scenario. One relates to the relationship between inequality and economic growth and the other is how the crisis has affected inequality.

On the first point, it is first worth summarizing some of the new findings from the “Confronting Inequality” book published last month. One is that across time and across countries, lower income inequality tends to increase the duration of economic growth spells. The other is that redistribution (as defined here) tends to (slightly) increase economic growth, with the possible exception of very high redistribution. Venezuela was a low inequality country so the first finding suggests that statistically, inequality was not likely to have been a contributing factor to the current economic contraction. And the second finding leads to a similar statistical conclusion with respect to Venezuela’s low redistribution. There are other contributing factors to the current economic crisis in Venezuela.

On the second point, the impact on economic inequality of such severe macro-economic shocks is not well understood or easy to measure. Venezuela is this century’s first country that has endured hyperinflation (compared to perhaps 25 over the 1970-2000 period), so there is not much recent evidence on the subject. Earlier econometric analysis suggests that income inequality spikes during hyperinflation. Inequality also tends to increase during economic contractions. A reduced labour share, increasing unemployment, differential wage inflation-protection, insufficient indexing of cash benefits, differential access to USA-dollar denominated assets and remittances would appear to be some of the drivers of what is likely drastically increased income inequality right now in Venezuela.

Kingsgrove Pharmacy/For Lease – Kingsgrove, NSW

Published by Anonymous (not verified) on Sat, 30/09/2017 - 5:03pm in

I’m sick and tired of the flood of emails I get week after week from people desperate to convince me that Kingsgrove Pharmacy wasn’t always Kingsgrove Pharmacy. Today, we set the record straight. I can’t really think of a more (over the counter) pharmaceutical suburb than Kingsgrove. You’ve got the surgery, the theatre-turned-huge Blue Cross […]

The Great Global Governmental-Philanthrocapitalist-Corporate Development Project

Published by Anonymous (not verified) on Wed, 16/03/2016 - 10:49am in

Tags 

Blog, Development

Who cares what celebrities think?

On 1st December 2015, Mark Zuckerberg and Priscilla Chan announced the intention to set up the Chan Zuckerberg Initiative, a limited liability company financed by infusions of shares from Facebook. A signatory of the ‘giving pledge’ (founded by Warren Buffet and Bill Gates) which encourages the super-wealthy to donate at least half of their wealth within their lifetime, Zuckerberg’s initiative represents another media-intense event in the rise of ‘philanthrocapitalism’. Philanthrocapitalism encompasses a set of overlaps, between super-wealthy individuals, political agents within global development organisations, some academics and scientists (but by no means a majority), and those celebrities who have committed themselves to some poverty- or welfare-related cause.

A prominent response to announcements like Zuckerberg’s or the media-prominent statements of Bill Gates or Bono is to debate the merits of their motives. Is he doing this for publicity reasons? Is this a way of avoiding tax? Or, conversely: isn’t Mark Zuckerberg nice? Good for him; we need more like him. This debate is rather limited and distracting because it falls into the trap that so much public discussion about celebrity does: an obsessional focus on the personalities of the celebrity.

In 2013, when teaching African Politics, I asked students for their response to the legal and ethical controversy surrounding Madonna’s attempts to adopt a Malawian child. I was expecting some thoughts or questions about the dubious legalities of her actions, the symbolism (even written into her name!) of the White Saviour that the public act provoked, or perhaps something about whether the act of ‘saving’ an individual has any relevance to Malawi’s pervasive poverty. Instead, students spontaneously started discussing the content of Madonna’s soul: ‘she means well…’; ‘she’s been doing this kind of thing for years so she must be serious’; ‘I hope she succeeds’ and so on.

This is what the phenomenon of celebrity is based in. A kind of emotional sovereignty in which the feelings of these individuals seem to have far broader social and political meaning. In some cases – most notably Bono – celebrity seems to entitle individuals to strive to ‘feel’ on the part of mass publics, to represent them emotionally. You might notice how effusive Bono always is about his feelings, even when doing so in ways that seem ostensibly modest or self-deprecating. He sometimes seems almost in pain in his efforts to broadcast his sentiments not only as heart-felt but also as a way to make great swathes of public opinion empathise. Once one is discussing the personality or the celebrity it does not matter if you wish to claim that they are being vainglorious or virtuous; you have already conceded the ground to the celebrity episteme: how can we judge the feelings of these people and thus make sense of a moral or political issue?

In this spirit, I want to say: forget you, Zuckerberg; I am not interested in you ‘as a person’ in the slightest. There is only one very obvious point to draw from the altruism of those on the spectrum of Bono, Madonna, Zuckerberg, Branson, Gates, Buffet and others: that they possess such massive amounts of wealth that they have it in their hands to influence the world in ways that now outweigh the agency of many states and even intergovernmental organisations. They vastly outweigh the collectivities and projects of labouring classes, civil society and social movements: those sources of democratic and progressive politics. In light of this, rather than concerning oneself with the moral motivations of philanthrocapitalists, we should rather address something more obvious and important: the broader structures of power that they create and the ways in which it influences how we understand mass poverty and development.

The corporate developmental Weltanschauung

The Foundations and Limited Liability Companies, wealthy donors, advisory groups of ‘experts’, and celebrity endorsers have constructed a global social project of philanthrocapitalism and they command a considerable amount of resource. The Gates Foundation has an annual spend in excess of that of the World Health Organisation. By virtue of their celebrity benefactors, they also have considerable influence over politicians, institutions, and broader publics. This influence is exercised through social events (private and public), connections to major international development campaigns, lobbying, and close connections to individual politicians. Philanthrocapitalism is also closely connected to a bundle of transnational corporations that have created ‘development projects’, given (small) amounts of money to ‘socially responsible’ activities and (less highly publicised on their glossy webpages) received public money from development budgets. Structurally, philanthrocapitalism looks as oligarchic and Putinesque as any Russian oil and property dynasty, or the military-industrial complex of the Cold War.

This oligarchy shares a broad vision of the meaning of development which can be summarised as follows.

  • Development is about the release of economic activities within free markets which promotes both growth and a reduction in poverty.
  • This process can be galvanised by ‘smart’ and ‘incentivised’ grant giving by privately-supported and managed foundations and companies. These organisations – contrasted with a supposed ‘bureaucratic’ intergovernmental institutionalism within the UN – use ‘business models’ to generate ‘value for money’ and ‘impact’.
  • Private business has the key – and up to recently neglected – role in promoting this kind of development.

Taken together, this development framing is a radical departure from previous development practices. It contrasts strongly with what one might call the liberal intergovernmentalism development practice which emerged in the mid 1950s under the auspices of the United Nations and World Bank, coming to be supported by a raft of governments and development agencies. It reformulates development as best promoted by private foundations and businesses. It is garbed in an ideology that profit and ‘good’ development are mutually-supportive: ‘frictionless development’ in Bill Gates’s phrase. It also argues that change is best achieved through the dynamism of entrepreneurialism, and that the technologies and expertise of large transnational corporations are the key to ‘unleashing’ development. To be clear: this is not simply the oft-repeated argument that a country needs to attract foreign private investment in order to grow. It is rather that foreign companies and private foundations should run the development project itself.

Good examples of this shift can be found in East and Southern Africa agriculture. Under initiatives like AGRA and the related Southern Agricultural Growth Corridor (SAGC) in Tanzania, one can easily identify heavy corporate involvement in what is increasingly rather misleadingly labelled as ‘development aid’ and ‘development projects’, both of which tend to suggest ‘official’ or governmental projects and programmes.

The UK government’s development agency, DFID, supports the SAGC by providing co-financing projects run by Unilever, Diageo, SAB Miller, Monsanto, Syngenta, Du Pont, and Yara. These are large international companies involved in chemical inputs into agriculture and brewing (the latter being a major demand for grass crops). They exercise immense power in global ‘chains’ of commodity production through their scale, control of retail, branding, and control of high value technologies.

The vision of SAGC is to transform agriculture into large-scale commercial farms to supply inputs into global industries, and to re-make smallholder farmers into contracted producers of specifically-selected cash crops. In the process, these smallholders become more strongly locked into the purchase of chemical inputs, proprietorial seeds (rather than seeds from their own crops) and fertilisers (which might be designed to ‘fit’ with the seeds). Genetic modification is the perfect instantiation of the commodification of agriculture: replacing a seed crop on-farm with an ‘intellectual property right’ encapsulated in a seed. Within the AGRA programme the Gates Foundation is supporting efforts to disseminate genetically modified seeds through the African Agricultural Technology Foundation. Private money goes into a rolling show of workshops and events to proselytise the model of entrepreneurial farmer investing in new seeds. This ideological work is based on the belief that, in the words of the Director of Communications at DSM (an health and nutrition chemical company), ‘we care about people, planet, and profit. We believe we possess the capacity to help others solve the world’s greatest issues.’ This world vision is now entirely accepted throughout elite development circles, as one could see in all of the announcements that emanated from the UK government hosted and revealingly titled Nutrition for Growth: Beating Hunger through Business and Science in 2013.

One can easily find a raft of messianic statements about the potential of philanthropcapitalism, a queasy mixture of aspirational business-speak and ersatz hippie-discourse. This is a discourse of dreams, hope, new tomorrows, an end to poverty forever. It is the discourse of a TED talk soundbite. In one sense these statements are easily critiqued or satirised; in another, they are the building blocks for a dominating corporate development strategy. In an age of relentless and vacuous irony, perhaps the strongest ideologies are those most easily laughed at.

Neoliberalism and the dynamics of indirect and direct rule

Neoliberalism is a term based in a critique of governance that highlights how public authorities have based their policies and programmes on the promotion of liberal capitalism. The sense of the concept is that governments and other intergovernmental organisations increasingly try to conform to market logic and the promotion of transnational capitalism. That a shift of this nature has taken place over the last thirty years or so is now so obvious as to be unremarkable and politicians happily declare that this is what the ‘business’ of government is about: more market in the economy and within government.

But, there is a potential shift in the governance of development implied in the philanthrocapitalist model. Private foundations and companies promote transnational companies as the key agent in global development, and they directly fund projects devised and managed by those companies. So do major Western donor states. Those international companies that declare that they have a developmental mission have become increasing habituated to intervening in the livelihoods of the poor. These are the practices of corporate social responsibility and partnership between companies, aid donors, and foundations. Private foundations, companies and governments also put money into nationally-based advocates of the corporate development model: think tanks, research centres, universities.

The trend is away from the indirect rule of neoliberalism in which governments allocate aid and loans to promote market-friendly macroeconomic policy and programmes, and towards a set of practices within which private companies are directly involved in development. Governments are still responsible for the promotion of capitalist development, but it is increasingly the case that transnational capitalists are also directly responsible for capitalist development. There is in the present-day a combination of indirect (policy-based) and direct (‘philanthropic’ investment-based) neoliberal rule.

What’s the problem?

The Great Global Governmental-Philanthrocapitalist-Corporate Development Project exists and is growing. And, it is not modest. Celebrity donors, politicians, and spokespeople from the development industry – notably some economists who have become public intellectuals – all offer praise for the new model. They do so because the article of faith that underpins this venture capitalism to transform the poor is that development is win-win. It is not people before profits but people and profits. Corporations get into new markets, development agencies get financial leverage and ‘value for money’, and the poor get new opportunities to improve their livelihoods. To use the hackneyed cliché: doing good by doing well.

To entrust the fates of the world’s poorest to the world’s wealthiest seems – to put it mildly – naïve: like trusting the welfare of lambs to eagles. Here are some reasons why the win-win logic needs to be questioned.

  • In agriculture, corporately-owned technologies and production contracts where smallholders commit to supply crops to transnational agricultural traders introduce substantial risk and market exposure to farmers. The evidence that GM seeds improve productivity and livelihoods is weak. The model of agrarian transition that ‘solving malnutrition through business and science’ relies upon is as generalised and abstract as the most vulgar state-based villagisation or modernisation programme.
  • Corporations remain motivated by profit seeking and as such will aim to generate as much cheap produce or advantageous contracts for services provided as possible. Within the ‘partnership’ logic that pervades the philanthrocapitalist approach, there is little space for governments of poor countries to push companies beyond voluntary ‘social responsibility’ commitments which are weakly monitored and not connected to a strong process of accountability. Also, in spite of the pizzazz about risk taking and dynamism, large corporations are risk-averse, often commit very small proportions of revenue, and have no intrinsic commitment to a project because they are accountable to no-one but their shareholders, credit-rating agencies, and boards of directors.
  • The development model itself assumes that properly-integrated small-scale livelihoods can thrive and promote development. This ignores the plain fact that small-scale livelihoods are structurally vulnerable and unlikely to generate the kinds of economic growth that transform economies. The kinds of processes that create the possibility (but no more) of transformational development have historically been based in state intervention and the rise of new ‘national capitalists’. Both of these possibilities are anathema to the philanthrocapitalist project. They want their happy and globally-disciplined mini-entrepreneurs in the countryside buying their chemical ‘property right’ inputs and growing their cash crops for corporately-dominated commodity chains. The result is that poor communities are locked into a life of contracted production, microfinanced small-scale investments, and social projects that aim for healthy and appropriately skilled workers.
  • The Great Global Governmental-Philanthrocapitalist-Corporate Development Project is only accountable to whom it wishes, in the ways it wishes, and for as long as it wishes. It is entirely based in a kind of naïve and fatalistic trust that foundations and companies have the ‘vision’ to re-energise the global development project. Unlike governments or intergovernmental organisations, there is no public deliberation about development practice, not external auditing or review of the institutions of development, and no clearly-defined constituency that can clearly endorse or reject its activities. If profit margins fall, share prices dive-bomb, or property bubbles burst, philanthrocapitalists and companies can simply change their minds.

As this development model expands, the practice of development becomes indistinguishable from the strategising of large international companies who have some interest in agriculture, health, and nutrition. This is the meaning of neoliberal direct rule. To call this a new development model is not only to define away issues of redistribution, social justice, and economic transformation; it is also to assume that many of the woes created by indirect neoliberalism are best resolved by encouraging a more direct version of the same.

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