Tag Archives: World Bank

The Haves and the Have Nots

Since I have recently been struggling to find the time for longer posts, I thought it worthwhile to occasionally do a short post on a chart that caught my eye. And here is one taken from an article in The Financial Times by John Gapper (click for larger image):

Winners and losers jpeg

As an aside, the chart is taken from the work of Branko Milanovic, an economist with the World Bank. Branko is one of the world’s leading authorities on global inequality and recently wrote the wonderful book “The Haves and Have Nots“, which I highly recommend.

The chart captures the winners and losers from globalisation and the spread of neoliberal economic thought. For those living in the advanced Western democracies, globalisation over the last two decades or so—which rather simplistically can be reduced to the entry of China and India into the free market capitalist system—has been a mixed bag of benefits. A small minority have seen their income and wealth explode, but the majority have experienced stagnating incomes and far more job insecurity (and for that matter health, pension and education insecurity as well).

Yet the neoliberal claim that globalisation in aggregate is a good thing is undoubtedly true—up to now. Even through the Great Recession started in 2008, global GDP kept motoring along at around 3% on the back of super-charged growth in developing countries led by China. This had continued a trend that stretches back to the rise of the Asian Tigers and the waking of China with Deng Xiaoping’s reforms in the late 70s. And the wealth has not just stuck to a small elite, but has also trickled down to produce an emergent middle class. It is this middle class that occupies the middle hump of the chart above: a hump that has seen its real income rise by 80% between 1988 and 2008.

I often feel the need to add the caveat that GDP and real income growth are not directly translatable into happiness. Nonetheless, they are strong determinants of happiness according to survey data, especially when growth is coming off low levels. Moreover, levels of income and wealth in China and India in the 1960s and the greater part of the 1970s frequently coincided with famine, TV images of which I can still remember from my childhood. Basically, the starving and impoverished aren’t happy. So globalisation has undoubtedly, in aggregate, increased the stock of human happiness.

That is the good news. The bad news is that the technology revolution that allowed globalisation to take place—through, for example, the management of long and complex supply chains and outsourcing abroad—is progressing apace. The same technology trend that destroyed well-paid manufacturing jobs in advanced economies is now replacing workers carrying out similar jobs in developing economies.

Imagine a large technology-driven jackboot crushing the hump in the chart above. That is my forecast for the coming decades unless we move beyond the global neoliberal consensus.

Links for Week Ending 26th of January

  • The San Francisco Chronicle has a must-read article for anyone exposed to low-lying U.S. real estate (here). 
  • On my bookshelf is a wonderfully written book by science historian and physicist Spencer Weart called the Discovery of Global Warming. Via The Big Picture, I find that The American Institute of Physics is hosting a user-friendly hypertext accompaniment to the book that tells you everything you need to know about the discovery of global warming.
  • Bjorn Lomborg is in the news again with an Op-Ed piece at the Wall Street Journal. Climate Science Watch does the debunking here. Lomborg, like Matt Ridley, appears to have open access to the Wall Street Journal’s pages. If you come to his writings with no background in the subject nor knowledge of primary sources, he appears persuasive. I must admit to having given a copy of “The Skeptical Environmentalist” to my mother as a Christmas present many years ago (before I saw the error of my ways). His arguments contain one part truthfulness, to one part falsehood to one part misrepresentation. At the end of the day, you have to rely on what mainstream climate scientists say about Lomborg’s views—which is that much of what Lomborg says is plain wrong.
  • I recently came across the Weatherdem blog. My type of blog: solid, concrete analysis coupled with a call to action. I am currently trying to get my head around the IPCC’s new Representative Concentrations Pathways (RCPs)—the CO2 emission projections commensurate with a certain level of greenhouse gas warming; Weatherdem has a good post explaining the emission paths here.
  • The two Bretton Woods institutions have been missing in action when it comes to climate change. Fortunately, one now “gets it”. The World Bank’s “Turn Down the Heat” report released in November 2012 is a watershed. Even more encouraging is that the president of the World Bank Jim Young Kim has thrown his authority behind the awareness raising. This article by him in the Washington Post could not be more clear. And it’s personal: ‘My wife and I have two sons, ages 12 and 3. When they grow old, this could be the world they inherit. That thought alone makes me want to be part of a global movement that acts now.” Bravo. Now if only the IMF could get on board (it’s current coverage of climate risk is desultory).