Joseph Joyce, professor of economics at Wellesley College wrote and interesting piece to day on capital liberalization and inequality.
I’m glad to see that so much attention is being fawned on Piketty’s most excellent book, “Capital in the 21sr Century.” It’s sure to go down as a classic in the economics literature, but the debate and discussion surrounding the book couldn’t come at a better time.
I don’t think it’s an accident that Piketty’s book, would top the NYT best seller list just a week after appearing, that a sitting President of the US would mention that inequality is one of the most important issues of our time, or that Christine LaGarde, head of the IMF would make a case that we need to address inequality at a global level.
They (Florence Jaumotte, Subir Lall and Chris Papageorgiou) analyzed the effect of financial globalization and trade as well as technology on income inequality in 51 countries over the period of 1981 to 2003. They reported that technology played a larger role in increasing inequality than globalization. But while trade actually reduced inequality through increased exports of agricultural goods from developing countries, foreign direct investment played a different role. Inward FDI (like technology) favored workers with relatively higher skills and education, while outward FDI reduced employment in lower skill sectors. Consequently, the authors concluded, while financial deepening has been associated with higher growth, a disproportionate share of the gains may go to those who already have higher incomes.
This is a scenario we’re all mostly familiar with, though the broad effects are still debatable. Increasing investment by giants like the US in overseas manufacturing push down wages on domestic unskilled labor, but it’s hard to say whether this had a major effect on overall employment. Unemployment remained steady even after Clinton signed NAFTA, and continues to remain well under European levels today, though the lowest level of workers feel the worst pain. I’m not sure if I can really advocate for protectionist measures to keep capital at home or dissuade foreign investment on principle alone, but it is true that the worst effect of foreign competition has been the erosion of labor’s political power.
Jayati Ghosh of Jawaharlal Nehru University of New Delhi has examined the role of capital inflows in developing countries. She maintains that the inflows appreciate the real exchange rate and encourage investment in non-tradable sectors and domestic asset markets. The resulting rise in asset prices pulls funds away from the financing of agriculture and small firms, hurting farmers and workers in traditional sectors. Eventually, the asset bubbles break, and the poor are usually those most vulnerable to the ensuing crisis.
Well, this is somewhat more interesting. Foreign investment in developing countries appreciates the exchange rate, leading domestic investors to put their money into, say, real estate assets. This is certainly the case all over Africa. Land and building developments are occurring at a breakneck pace, with the hopes that expensive properties will be bought up by foreign companies and individuals. It’s certainly the case that no common African could ever afford some of these places (or would even want to buy them if they could). Nairobi, Dar es Salaam and Luanda, Angola are all in the middle of a real estate bubble. The problem, of course, is that domestic investors are hoping to make a quick buck, rather than attempting to create long term, profitable industries. No wonder Africa imports the lion’s share of it’s manufactured goods. No local will invest in the infrastructure to create it locally since urban real estate is so absurdly profitable right now. This, of course, means that money flows directly into the pockets of the urban elite and then sent back out to bank accounts and retailers in France and England, further entrenching the poorest of the poor.
Without the development of local industries, domestic economies can’t function and opportunities for revenue collections are missed. and countries like Tanzania and Kenya, for example, will continue to be beggar economies which depend on the good graces of the international community to support domestic social programs.
Today’s interview is with my friend, advocate for the poor and downtrodden and purveyor of loudness, Greg Pratt. Greg’s a great guy in just about a billion ways. This interview should tell you why. You can learn more about the group he works with MISSION A2, here.
Who are you and what do you do?
Greg Pratt. I am a social worker by training, an organizer and movement worker by necessity. The two primary foci of my work are material and political support.
I help people with resources for living outside, so propane, water, socks, tents, sleeping bags, batteries etc. I also help them organize politically [internal and external]. Sometimes, that manifests in a camp community [internal] other times that manifests in local ordinances like the Good Neighbor Amendment to the Ann Arbor Parks Ordinance [external]. This amendment waives the fee for organizations handing out free material goods to folks in A2 public parks.
The Camp Take Notice Good Neighbor Subcommittee worked on this from April 2013 until the ordinance passed its 2nd reading on November 18, 2013. The Subcommittee was comprised of 7-8 individuals and I believe everyone but myself was homeless or recently emerging from homelessness.
You have done a lot of work with homeless people in the Ann Arbor area. How did you get started doing that work?
I am an alcoholic. On December 31, 2001, I had my last blackout and was charged with my third DUI.
On July 3, 2001, I was sentenced to six months in Oakland County Jail. The first five days were spent in the middle section of a three-section holding tank area of the Oakland County Jail. Each section was 10’ X 15’, separated by plexiglass, and had anywhere from 10-15 individuals in each section at any given time. There was one toilet per section. We were let out once per day to eat.
After I got out of there I was transferred to the County Barracks across the street for the work release program. This was basically an army style, bunk bed living quarters. We paid weekly rent [I think mine was something like 160-70 per week] and were allowed out of the barracks, at most, 5 days/week. I was only fortunate enough to get out 4 days/week.
After getting out of jail, I spent six months on tether [house arrest]. At the same time, I began my probation which included many hours of community service.
I chose to do my service hours at SOS Community Services at the River St. Location in Ypsilanti, MI. I did their “empathy training” to become a volunteer crisis counselor. At the time, the River Street SOS location served as a place for people to get referrals to other services in the area, food distribution, and a 24-hour crisis hotline which people used for information or just to talk when things were getting a bit to much to handle. I only had one suicide call [fortunately] while we still had the phone lines in place. I continued on in my volunteer capacity at SOS for a year after I got my hours for probation completed. I really enjoyed the work and the community I was a part of as a result of being there two to three times per week.
Anyhow, that is how I became involved. My first social work mentor, from SOS, was Christina Oliver. She still works in the area as a disabled-persons’ advocate.
I haven’t had a drink of alcohol since February 19, 2001. My higher power is the collective consciousness of all living beings. I am not anonymous, but I practice the principles in my daily life.
Do you find that the situation for homeless people in Ann Arbor is getting worse or better? Is Ann Arbor becoming increasingly closed?
I think you may be asking the wrong person on this one.
I am going to give an answer that is the best I can with the information I have from the friends [I don’t use the word client or consumer] with whom I work.
On the one hand Ann Arbor is great because of its manifold set of resources for low-income people struggling with mental/physical health, addiction, and unemployment. On the other, it has very little in the way of low-income housing that is near places of low-income employment. The bus system is ok, but has limited evening hours during the week [M-F] and pretty much zero hours on weekend nights. So, if you live in Ypsilanti and work in Ann Arbor and have no car, your options for hours to work are limited as a result of these limited transportation options. If you talked to the current VP of MISSION, Jimmy Hill, you may get a more comprehensive version of what it is like trying to navigate one’s way out of homelessness in Ann Arbor.
Is is getting better? I hope that in the wake of the forum hosted by the Ann Arbor District Library last week it will. Camp Misfit A2 [one of the groups interdependent with MISSION] has, through their activism and public actions, put the issue of lack of affordable, low-income housing on the radar of local politicos as well as the local human services industry. I am cautiously optimistic right now.
Ann Arbor, as a small and somewhat well to do area, likely does not have the social space or will to accommodate an underclass, but at the same time, would not like to be seen as exclusionary. Do you think that Ann Arbor will ever be able to rectify these competing problems?
Good question. For me, change will have arrived when “our” kids can play with “their” kids.
I don’t think that we will ever correct the problem given the current system of resource distribution in our society, Capitalism.
Capitalism is a system that is framed to encourage economic growth. In this system, there are winners and losers. It is not “survival of the fittest” that determines winners. It is more like a complex gambling system that is weighted toward those with more wealth.
So, I think for Ann Arbor to rectify these problems, we would have to end capitalism as it is practiced now.
Here is another point I want to make. This one is predicated on our capitalist system of resource distribution. Homelessness is not a pond we can drain, but rather a river that flows on beyond our time here on this earth. We can dam up the river and provide bridges at certain sections of the flow, but regardless of our actions to “stop the flow” it continues on just like the wind.
There are people who are “chronically” homeless. But, most folks struggle with this for a matter of months. At our camp out on Wagner Rd [RIP], the average stay was just under three months. The Delonis Center has a similar statistic, although I think stays have been increasing over the last couple of years there.
I’m finding it interesting that Ann Arbor is having discussions about whether to create and improve public spaces, based on a perception that homeless people will use them (like this is a bad thing). How much of these concerns is based on alarmism, and how much is justified?
I think that we need to plan those spaces in an inclusive way, all stakeholders at the table. If we were to take that tack as a community I think we might reduce some of the alarmism. But ultimately, I think the folks with capital to invest in this area would rather see sunshine and lollipops and yellow brick roads, than help people who are struggling to make it in our community.
What do you see ultimately happening?
For the time being, more sunshine and lollipops and yellow-brick roads to nowhere for the poor and to increased wealth for Rick Snyder and his Carpet Bagger Finance Capitalists.
You’ve also done work with the unions, specifically during the push to bring GSRA’s into GEO. What’s your history working with labor?
Ugh. What a nightmare campaign that was. Before that disaster, I helped nontenure track faculty at MSU and EMU build their unions.
Yes, I worked for AFT Michigan [American Federation of Teachers]. I was a member of GEO as a grad student at the UM School of Social Work and was interested in learning labor/political organizing. I became a member of the GEO Organizing Committee just as our 2008 contract campaign was ramping up in December 2007. This was the contract campaign wherein we shut down both the UM Stadium and Business school renovation projects. I was picket captain for the business school site.
That summer, I was hired by AFT to work on a campaign with non tenure track faculty at MSU. After we won that campaign, I was sent to EMU to help bring the part time lecturers into the existing full time lecturer union. EMU has about 120 full time lecturers and about 500-600 [depending upon the semester] part time lecturers. In order to accomplish this, we conducted a few well-attended sit-ins at President Martin’s office. Paul Horvath [Math Lecturer at EMU] was one of the key lecturers involved in that effort. Good times.
After that campaign, I went to work with GEO leaders on bring the GSRAs into the union. In the wake of that Rick Snyder signed a law that prohibited GSRAs from joining a union. I believe this law has since been found unconstitutional and is in some sort of legal limbo on appeal.
That battle was eventually lost. It seemed like a really not so controversial idea. What do you think was going on to make it blow up as big as it did?
I think that conservative anti-union folks in Michigan watched AFT organizing at many of the colleges and some community colleges across the state. Grad Students, Lectures and even some faculty were joining unions in large numbers through the dedicated work of organizers like Jon Curtiss and Lynn Marie Smith between the years 2003-2010. When Rick Snyder was elected, the republicans had every lever of our state’s government under their control. I think they saw an opportunity and put a lot of resources toward blocking this campaign.
That describes what happened on their side. I think it is more telling, what happened on our side [labor]. Our leaders, when planning this campaign, did not listen to the suggestion of leaders on the ground in GEO and in general on campus. We were internally divided. That made it easier for the Mackinac Center to pick us apart and stop the momentum we had while out talking to hundreds of researchers like yourself.
You eventually left. What happened?
Unions are great at the local level. But, as they get bigger, the organizational structure mirrors the organizations they are meant to regulate or keep in check. I didn’t want to compromise my organizing style in order to get a paycheck. I decided that the work needed to be done was the work for which there is no paycheck.
I had been teaching at UM School of Social Work in Winter 2012. I continued on as a lecturer there and at EMU until December 2013.
I am currently unemployed, but doing the work for which there is no paycheck.
What’s up with your radio career? How does radio figure in to your worldview as champion of the poor and marginalized?
You are very kind to call it a career 🙂
How does it figure in? Well, I grew tired of complaining about the media and decided to become a part of it instead. Viva Jello!
What’s up for the future?
1) Kicking ass for the working class!
2) Getting a job with a paycheck.
Which isn’t suprising, given that’s what he does for a living. The NYT this morning had an interesting interview with Milanovic this morning, where he discussed issues of inequality both within and between countries, globalization, national policy and the simultaneous rise of a global economic elite and growing populism around the world.
The context here is that while inequality is rising in wealthy countries like the United States, on a global level, inequality in incomes and lifestyles is shrinking quickly, most due to the rise of China and India.
Inequality calculated among all individuals in the world, as if they were part of one single nation, has been edging slightly downward over the past 10 to 15 years, mostly thanks to very high growth rates in China and India. These relatively poor giants (particularly India) have pulled quite a lot of people out of poverty and into something that can be called “the global middle class.”
That is the key factor behind the decline of global inequality: The distance between their incomes and the rather stagnant incomes of the middle class in rich countries has diminished. Yet global inequality is still extremely high by the standards of any single country. It is, for example, significantly higher than inequality in South Africa, which is the most unequal country in the world.
Obviously, we still have work to do. Many African countries, due to an unfortunate poor hand of geography, internal ethnic struggles and an unforgivable failure of government still sit in the same mess they sat in around the time of independence. For these countries, the future continues to look bleak.
The contrast is between a globalized economy that largely determines our employment and income level, and political systems that remain national. This contrast was not nearly as strong before the 1980s, when national economies were not as interdependent and capital could not flow easily across the borders. Then, countries could more or less design the economic policies that suited them. Today this is no longer the case.
The danger is that these dynamics could lead to populism — a sort of a Luddite reaction against globalization — or to plutocratic rule. We can already see some hints of the latter. Rule of the rich would ensure the continuation of globalization, but it would deprive political democracy of any meaning. If I wanted to be somewhat melodramatic, I would have said that the challenge is to navigate between the Scylla of populism, which would do away with globalization, and the Charybdis of plutocracy. Our defining challenge is how to maintain both globalization and meaningful national democratic systems.
I fear the erosion of political rights of low and middle class citizens that has occurred in the context of rising inequality. I believe that I fear populism and it’s myopic focus on short term solutions to complex problems even more. A response to rising inequality in the US or Europe is not to close the borders or embark on destructive protectionist policies which benefit only a small minority of people.
My feeling is that domestic (US) inequality is best handled through re-distributional policies such as income subsidies, the provision of health care and investments in education and infrastructure. International inequality should be attacked through a combined effort to increase opportunities of movement of people to areas which present economic opportunities, through the encouragement of policies of good governance which reduce onerous and bureaucratic restrictions on economic development within developing countries, an increase in access to capital by individuals and policies which encourage the granting of true democratic rights and protection for citizens, something we don’t see a whole lot of in African countries. Looking at this, I’m realizing the solutions to inequality in in wealthy countries seem much easier to implement.
Every year, Bill and Melinda Gates release a letter on the state of the Gates Foundation and the current situation of global development and health. This time Gates set out to dispel three common myths on development, namely that poor countries are doomed to be poor forever, foreign aid is a total waste and that development will just lead to overpopulation.
The first is the most cynical, but even for us development/public health folks, it’s easy to be discouraged. Pessimism aside, the data don’t bear out the assumption that developing countries are entrenched in poverty. Just about all Sub-Saharan African countries experience consistent economic growth throughout the 00’s and have seen rapid improvements in just about all of the common health indicators. People are living longer, fewer kids are dying and they’re making more money to pay for school and health care.
Over the past five years that I’ve been going to Sub-Saharan Africa I’ve seen this change on the ground. Cars are in better shape, there’s more goods on the shelves, kids are better nourished and security has vastly improved. Does this mean that all of the problems are magically going away? No, there are still vast challenges to infrastructure development, access to health care and affordable medications, educational quality, gender issues and basic business development. However, these improvements do signal that Sub-Saharan African countries are reaching a point where sustained development is possible.
I have a hard time disagreeing with Gates here, but I did find his “before” and “after” pictures of Nairobi a bit bizarre. Though Nairobi is currently going through a construction boom, I fail to see how it would look any different in 2014 than it did in 1969 after more than three decades of stagnation.
Gates second point and the hardest myth to dispel is that of the alleged ineffectiveness of aid. Bill Easterly has made a career out of aid bashing, and, unfortunately, given cynical politicians looking for policy scapegoats a point to scream to their angry constituents. In a broader sense, the screaming over aid is really a questioning of developmental policies themselves. Certainly, there are development failures. The neo-classically informed structural adjustment policies of the World Bank and the IMF during the 80’s and 90’s were, on the surface, colossal failures (Read Beyond the World Bank Agenda: An Institutional Approach to Development by Howard Stein for a great analysis). On a smaller scale, we can easily cherry pick misguided but well meaning development projects or plans that simply went awry for any number of unforeseen reasons. The recent takedown of Jeff Sachs (The Idealist: Jeffrey Sachs and the Quest to End Poverty) and the massive problems of the Millenium Village in North East Province in Kenya is a great example of the challenges a development project can face.
However, in ever insular post Iraq America, the question that is most often asked is why we should even care and does our presence merely serve to make things worse. The truth is, and the point most often overlooked, is that most development projects are international collaborations. Many projects are conducted with partners in target countries and, more often than not, projects often make up for shortfalls that hobbled governments are unable (or sometimes unwilling) to provide. Health care is one example.
Jeff Sachs wrote a nice article this morning on how effective free insecticide treated nets have been in reducing malaria incidence and mortality in Sub-Saharan Africa. Nearly half a billion free nets have been given out worldwide as of 2014 and a lot of kids are alive today who would have been dead had they been born ten years earlier. Malaria is 100% associated with poverty. Wealthy people do not get malaria, even in malaria endemic countries. Though some of the decline in malaria incidence has been due to increased affluence and urbanization of African countries, a major percentage of this decline has been due to aid programs which provide bed nets and have expanded access to life-saving malaria medications. Certainly, not all aid works, but nothing works 100% of the time, particularly when humans are involved.
Which brings us to the most cynical and offensive of Gates’ three myths. Some people truly believe that saving African kids is a bad thing. One day there will be too many of them and they will suck up the ability for the world to sustain life. Honestly, this view couldn’t be more wrong.
The poorest parts of the world are the areas which are seeing the most rapid population growth. The average Malawian woman has 8 children in her lifetime, often starting when she isn’t even yet 15 years old. It has been said that if Malawi continues on it’s current trajectory, that it will have a population equivalent to that of Japan’s by 2050. Women in water and food constrained pastoralist communities can have ten or more children. The most affluent areas of Africa are the places with the slowest population growth.
Even more incorrect is the assumption that poverty is less harmful to the environment than development. Malawi is almost entirely deforested due to extensive use of charcoal for heating and tobacco cultivation. Deforestation not only robs the earth of potential carbon sinks, but also reduces need biodiversity and directly impacts precious water resources. Africa burns unclean fuels such as charcoal and coal for heating, and the poor condition of vehicles make it a major potential source of greenhouse gases. The air in Nairobi on any given weekday is so filled with exhaust that one can become dizzy just walking around town. It is, of course, unreasonable (and stupid) to deny Africans transportation and cooking fuel, but well meaning though poorly informed armchair environmentalists in the United States would happily suggest doing just that.
Which bring me to my final point. The case against development is one that assumes that the status quo is somehow preferable to anything that might come after. The assumption is that Africans were just fine without Europeans and their planet destroying ways. There is, of course, little data on what Africa was like before Europeans started extracting resources from the continent. We do, however, know a lot about underdeveloped areas of Africa. There is evidence to suggest that some do fine. There is however, much evidence to suggest that other simply do not. The worst parts of Africa are the parts which are the least developed. They are the areas where the market doesn’t function. The areas where there is little education, no access to health care, no roads, no economy, kids regularly die, where old people are a venerated since they are so rare, where there’s violence and instability and people are entirely marginalized from any level of political participation. While development likely will never solve the worst problems (like those in Somalia), there is no case to be made that the current state of the ultra poor is acceptable on any measure, even to the poor themselves!
Alright, off to bed.