Realsociology

A hyperreflexive blog focussing on critical sociology, infographics, Buddhism and extreme early retirement

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‘Summary’ of Why Nations Fail

Posted by Realsociology on 15th October 2014

71obsqEDYbL._SL1199_Why Nations Fail: The Origins of Power, Prosperity and Poverty (2013) by D. Acemoglu and J.A. Robinson

Overall Summary

Developed countries are wealthy because of ‘inclusive economic institutions’ – Basically a combination of state and free market in which

  1. The state creates incentives for people to invest and innovate – (through guaranteeing private property rights and enforcing contract law)
  2. The state enables investment and growth through providing education and infrastructure, which private business uses, and
  3. The state is controlled by its citizens, rather than monopolised by a small elite. Crucially, there needs to be a democratic principle at work in which people in politics establish institutions and laws which work for the majority of people, rather than just working to make them rich.
  4. The state also needs to maintain a monopoly on violence.

The authors come to this conclusion through a number of comparative studies of countries which are in close geographical proximity to each other such as

  • Mexico/ America
  • South/ North Korea
  • Botswana/ Zimbabwe

They argue that the only factor which can explain why one of these countries is poor and the other rich is because of the institutional infrastructure which has been established through the last few decades/ centuries.

In contrast to the above ‘inclusive economic institutions’ which encourage development, the authors suggest the opposite ‘extractive economic institutions’ (think corrupt dicator and his clique sucking money into a Swiss bank account) can generate growth in the short-term, but in the long term result in poverty.

They also suggest that there has been ‘a vicious circle’ at work in many underdeveloped countries over the last three to four centuries – With their globalised history starting off with extractive institutions established by a colonial power (typically built on already existing internal extractive institutions), which, on independence, became even more extractive under postolonial rulers, which in turn lead to civil war as competing factions fought for control over the extractive institutions – which then led to a decent into chaos and failed states. The authors see little hope for such countries.

In contrast, developing countries such as the US and the UK have benefitted from three to four centuries of a virtuous circle in which institutions have become gradually more inclusive, which has created increasing incentives for entrepeneurialism and economic growth.

The gist of the book is, handily enough, covered in the intro and chapter one….

Introduction

Countries such as Egypt are poor becuase they have been ruled by a narrow elite that have organised society for their own benefit at the expense of the vast mass of people. (This also applies to North Korea, Sierra Leonne, Zimbabwe)

Countries such as Great Britain and The United States are wealthy because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to its citzens and where the great mass of people could take advantage of economic opportunties. (This also applies to Japan and Botswana).

 

Chapter one – so close and yet so different

Starts with a comparison of the two sides of Nogales, half of which lies in Arizona, in the US, the other half in Mexico.

In the Arizonan half the average income is $30 000 U.S dollars, the majority of adults are high school graduates, the roads are paved, there is law and order, most live until over 65. In the Southern half, the average income is three times less and everything else is similarly worse.

The authors point out that the difference cannot be because of environment or culture, it must be because of politics and economic opportuntities.

They also argue that in order to understand the difference, you need to go right back to early Colonialism in the 16th and 17th centuries.

Mexico was the first to be colonised, under a system of slavery and extraction. In the 15th century, the Spanish basically used already existing systems of slavery to their own benefit and extracted mountains of gold and silver, leaving a legacy of elite-governance and a dearth of politcal rights for the majority.

In North America, settled by mainly the English 100 years later, the absence of slavery amongst indiginous populations and much lower population densities meant that slave systems simply would not work, although this didn’t stop them trying for the first twenty years or so. Eventually, however, the orginal settler company (The Virginia company) back in England realised the only way colonialism was going to work was to provide incentives for the settlers – So they offered them land in return for work. It was this that set the basis for the democratic constitution and congress of the US, which then went on to create problems for the English government.

The rest of chapter goes on to argue that the next 300 years of history are crucial to understanding why the US is now so wealthy, and why most of Latin America is so poor.

America has had 300 years of political stability, where poltical institutions control economic institutions, at least to an extent (the authors cite the breaking up of the Microsoft Monopoly as an example) broadly making them work for everyone. Other factors such as the patent system, credit systems, and education provide opportunities for anyone to make it rich and enjoy the benefits of the wealth.

By contrast in Latin America (Mexico), up until the 1990s most countries saw political turmoil and a series of dicatorships where a series of small elites ruled for their own benefit. This instability has lead to the rise of monopoly power, and it acts as a disincentive for anyone to try and do well and become rich (the next dictator might just take all your money away), also lack of finance and education prevents competition anyway.

Crucially, historical good fortune appears to be central to explaining why a country is rich now, so figuring out how a current poor country can develop is not that straight forward if a culture of monopoly, corruption and lack of political rights are the norm…..

 

Chapter three – the making of prosperity and poverty

This chapter contrasts North and South Korea, divided along the 38th parellel after world war two. In the late 1940s these had similar levels of development, today, however, their economies have diverged.

South Korea has living standards 10 times higher than North Korea, the former being similar to Portugal, the later similar to sub-saharan African countries. People in North Korea also live ten years less than those in South Korea.

The differences cannot be explained by anything other than institutions.

In the South, private property and markets were encouraged (albeit by dictators initially) and thus investment and economic growth were encouraged. At the same time, the government invested in education and new industries took advantage of a better educated population.

In North Korea, privated property and markets were banned, and a centrally planned economy instigated. This simply led to stagnation.

Extractive and Inclusive economic instiutions

Countries differ in their economic success becasue of their different institutions – the rules influencing how the economy works and the incentives that motivate people. Crucial is private property rights – which needs to be backed by the state…. In South Korea, people know that they will be rewarded for their efforts, in North Korea, there is no incentive to innovate and invest because the state will expropriate the benefits of any such initiatives.

In order to develop a society needs to have ‘inclusive economic institutions’ – A state that guarantees prosperity for the massess – Such a state provides a degree of infrastructure that is necessary for economic growth – for example enforcing private property rights, contract rights for all, not just a minority, and providing education and physical infrastructure such as roads. Private enterprise uses and needs such institutions.

What doesn’t work for development is extractive insitutions – where the state is used to extract wealth from one subset of the population to another…. Such as slave and colonial systems (and the Tories in the UK today?)

Engines of Prospertity

Education for the masses is crucial for innovation in an advanced technological world – This is what all developed nations have, and what many undeveloped nations lack. Education needs to be well financed and parents need to have the incentive to send their kids to school.

Inclusive and extractive political institutions

A state needs to be inclusive for economic growth to occur – that is, it needs to both be chosen by its citizens and have a centralized control over legitimate violence.

Extractive political and economic insituttions tend to support eachother (which then means the masses don’t support them…. there is disincentive!)

Why not always choose prosperity?

The simple fact is that where technological change is the engine of economic growth, this means social change, and with change there are winners and losers… Thus existing elites may resist changes that make institutions more inclusive even if this means greater prosperity for all, because it will mean less prosperity for them. (Think industrial revolutions in Europe).

The long agony of the Congo

The Congo has not developed since independence because it has not been in the interests of the ruling elite to build a centralised state which includes all voices, or in their interests to use the state to provide public services which will benefit the masses – instead the institutions remain extractive.

As an independent polity, Congo experienced almost unbroken economic decline and poverty under the rule of Jospeh Mobutu between 1965 and 1997. Mobutu created a set of highly extractive economic insitutions. The citizens were impoverished but Mobutu and the elite around him (known as the Grosses Legumes or The Big Vegetables) became fabulously wealthy. Mobutu built himself a palace at his birthplace, Gbadolite, with an ariport large enough to land a supersonic Concord jet, a plane he frequently rented from Air France for travel to Europe. In Europe he bought castles and owned large tracts of the Belgian capital Brussels.

The simple truth is that if Mobutu had introduced more inclusive economic institutions he would not have been as rich.

Growth under extractive institutions

Growth can occur under extractive instiuttions – as in Russia and South Korea at first and China today but this is unlikely to be sustained unless both economic and political insitutions become inclusive.

 

Chapter twelve – the vicious circle

The authors paint the vicious circle as starting off with extractive institutions established by a colonial power (which builds on previous extractive institutions), which, on leaving, becomes even more extractive under corrupt post-colonial rulers, which in turn leads to civil war as competing factions fight for control over the extractive instittions – which then leads to a decent into chaos!

Or in more detail… The British Colonial Authorities built extractive instititions which many post independence African politicians were only too happy to continue in order to enrich themselves. This happened in countries such as Sierra Leone, Ghana, Kenya and Zambia. The postcolonial rulers used their wealth to build personalised security forces which were answerable to them and also to rig elections – money thus became essential to maintain power, with only those who have money able to maintain power. This creates incentives among the opposition to depose the existing leaders in order to gain power and wealth themselves, and to protect themselves from being killed off by the said existing leaders. The point here is that power has become an end in itself rather than as a means to developing a country.

This is best illustrated through the example of Sierra Leone -

All of the West African nation of Sierra Leone became a British colony in 1896. The British identified important rulers and and gave them a new title – paramount chief. In Eastern Sierra Leone, for example, they encountered Suluku, a powerful warrior king, who was made Paramount Chief Suluku.

In 1898 the British tried levying a hut tax of five shillings, which resulted in a civil war known as the hut tax rebellion. It started in the north, but was strongest and lasted longest in the South.

In 1904, the British stopped construction of a railway line from Freetown to the North East and instead diverted it south, to Bo, in Mendeland, to give them quick access to put down this rebellion.

When Sierra Leone became independent in 1961 the British handed power to to the SLPP, which attracted support from the South, and in 1967 this party lost the election to the opposition party, the APC which drew support from the North.

Though the railway line was initially established to rule SL, by 1967, its role was economic – it allowed transportation of the country’s exports – coffee, cocoa, and diamonds, which came mostly from Mendeland in the south.

The then leader of the APC, Siaka Stevens, who drew his political support from the north, ripped up the railway line and sold off the track and rolling stock in order to weaken the oppostion in the south and consolidate his political power. This decimated the SL economy, but when it came to a choice between consolidating power and economic growth, the consolidation of power won out. Today, you can’t take the train to Bo anymore.

There is continuity between Colonial rule and Steven’s government – both extracted wealth from the people.

The Colonial rulers did this through agricultural marketing boards – farmers had to sell their goods to these boards, which typically paid much less than the market price (impovershing farmers and enriching the elite). When Stevens took power, he kept these marketing boards in place, but it got worse – under colonial rule, the colonialists extracted about 50% of the value of agricultral products, under Stevens, the rate of extracting rose to 90%.

Along with marketing boards, the old system of Paramount Chiefs remain in place today…. They control local politics at the village level, and local land rights and taxation – Paramount chiefs are elected, but only members of the ruling house can stand – and in 2005 the victor was Sheku Fasuluka, King Suluku’s great, great grandson.

The combination of these two institutions means there is very little incentive for farmers to increase productivity – because they have insecure land rights due to the paramount chief system and are the victim of extractive insitutions in the form of the marketing boards.

Thirdly, there was the control of the diamond mines – The British essentially set up a monopoloy for the entire country and handed it to DeBeers in 1936, and shortly after independence, Stevens simply nationalised this arrangement, through which he effectively personally controlled 51% of the diamonds in SL.

Stevens used his vast fortune to buy political influence and to set up his own private security forces – the ISU (known locally as the ‘I Shoot You’ and the Special Security Division – known as Siaka Steven’s Dogs).

All of this set the scene for the brutal civil war, outlined below….

Chapter 13 – Why Nations Fail Today

In the year 2000 Zimbabwe held a national lottery for everyone who had kept more than 5000 Zimbabwean dollars in their bank account (following a period of hyperinflation). The fact that it was Robert Mugabe who won this lottery just goes to show the extent of his control over Zimbabwe’s institutions and just how extractive those institutions had become.

The most common reasons nations fail today is because they have extractive institutions – and Zimbabwe illustrates the economic and social consequences of these…. By 2008 its per capita income was half that when it gained its independence, and 2009 the unemployment rate stood at 94%.

The roots of the political and economic instiututions lie in the colonial period. Orginally apartheid institutions were establised for a white elite to extract wealth from the country, but when Zimbabwe gained its indendence, these institutions were simply maintained by Mugabe. Eventually (because of lack of inclusivity) his support waned until by the year 2000 he had to find further resources to buy political support – so he expropriated the farms owned by white people and when that wasn’t enough he printed money, which led to massive hyperinflation.

Nations fail today because their extractive institutions do not create the incentives to save, invest and innovate. In many cases politicians stifle economic activity because this threatens their power base (the economic elite) – as in Argentina, Colombia and Egypt. In the cases of Zimbabwe and Sierra Leone this led to total state failure and economic stagnation. The countries in which this has happened include…

  • Angola
  • Cameroon
  • Chad
  • DRC
  • Haiti
  • Liberia
  • Nepal
  • Sierra Leone
  • Sudan
  • Zimbabwe

And the civil war, mass displacement, famines and epidemics that accompany them… in terms of development many of these countries are poorer today than they were in the 1960s.

A children’s crusade…

This section outlines the causes of the civil war in Sierra Leone. The authors put this down to decades of extractive institutions by the tyrannical APC government (the economy was collapsing by 1985, and they use the example of the TV transmitter being sold by the minister of information in 1987 and in 1989 the country’s main radio antena collapsed, ceasing radio transmissions.) By this point, the army had been dispanded because of the ruling elite feared it might overthrow them, which meant by the time Charles Taylor’s RPF crossed the boarder in 1991 there was no one there to stop them…. And then that brtual and chaotic civil war carried on for a decade – in which competing factions competed over resources in order to keep fighting eachother – diamonds/ children (soliders) and weapons.

So in summary, the historical precendent of the SL civil war is extractive institutions… the hollowing out the state to the point that was incapable of fending off rebels.

The authors now go on to outline three other countries which have suffered from different types of extractive institutions – Colombia, Argentina and Egypt, and then Uzbekistan…. a country languishing under the absolutism of a single family and the cronies surrounding them, with an economy based on the forced labour of children….

Cotton accounts for 45% of the exports of Uzbekistan. When the country was created in 1991, its first and still only president Islam Karimov, divided up the land among farmers, but each was required to devote at least 35% of their land to cotton, a valuable export crop. However, because the farmers themselves receive only a fraction of the world market price of the crop, they had no incentive to maintain, let alone invest in, cotton harvesting machinery.

No matter, however, because the country has turned to children to harvest the cotton, and every September-November the schools are emptied of approx. 2.7 million schoolchildren. Teachers, instead of being instructors, become labour recruiters.

Each child is required to pick between 20-60KG a day, depending on age, and the lucky ones who live close to their allocated farms can walk or bus to work, but the unlucky ones have to sleep over in sheds, with no toilets or wash facilities. And it’s BYO food.

While the market price for cotton was $1.40 in 2006, the children were paid somewhere in the region of $0.01 per kilo.

All of this has come to pass because Karimov has established a regime where opposition is repressed and there is no free media or NGOs allowed.

Why do nations fail?

What all of the countries loooked at in the book have in common is that they have an elite who have designed economic instiututions in order to enrich themselves and perpetuate their power at the expense of the vast majority of people in society.

Despite differences the bigger picture is that in each of these countries extractive political institutions that have created extractive economic insitutions which transfer wealth and power toward the elite.

The solution is to transform the extractive institutions into inclusive ones…

Chapter fourteen – breaking the mould

This chapter looks at three case studies – Botswana, The South of America, and China, which all managed to move from, or negotiate their way around (in the case of Botswana) extractive to inclusive political institutions which encouraged econonomic development.

Of particular interest to me is the case of Botswana – which today has the same level of development as some Eastern European countries, despite being as poor as most of the rest of Sub-Saharan Africa in the 1960s (at which time there were less than 100 graduates in the entire country).

What’s especially interesting about Botswana is that in that particular region of Africa a broadly inclusive political system was in existence pre-colonialsm – in the sense that any individual could rise up to become head of one the various different chiefdoms in the region, and so chiefdom was not hereditory, it was meritocratic, and someone could only be chief with the will of the people. Thus the principal of ruling with the will of the people, and on behalf of the people had been established for generations.

Another factor which promoted development was the fact that the English weren’t particularly interested in Botswana. In fact in the 1890s, three Twsana chiefs visited England and negotiated with the government to be part of a British Protectorate (different to a colony) – In return for protecting the region against Rhode’s South African expansionary policies (the guy who colonised Zimbabwe and Zambia, and look how they turned out!) all Enlgand wanted was enough land to build a railway in order to open up the intererior. For this the Twsana were pretty much left alone, crucially unextracted and without interefering institutions which had been set up to allow the extraction to take place.

Also signficant is that, following Colonialism and the discovery of diamonds, the Tswana chiefs passed a law that all diamond wealth was to be national property, rather than giving the rights to individuals or Corporations (like neoliberals would claim should be done, and like what happened in Sierra Leone). The effect of this was masses of public money which was then used to pay for public services. Hence development……

Something else emphasised in this chapter is that in all three cases certain key actors made important decisions at crucial junctures in the country’s history (when an existing leader died, such as Mao, creating a power vaccum, or when Independence was gained in Botswana) – The decisions taken at these crucial points in history in these countries involved either fighting the power of entrenched elites (as in China) or establishing laws which would prevent political corruption (like nationalising the diamond supplies in Botswana) – it was these decisions, in contrast to decisions in countries like Sierra Leone where a national railline was sold off to benefit an elite, which led to economic development.

Chapter 15 – understanding prosperity and poverty

The most interesting section of this concerns the predictive power of the theory – which is limited given the role of agency and contingency in said theory. However, the authors do predict that…

America and Europe are likely to get even richer than countries in most of the rest of the world, because these are the most inclusive institutions (I’d beg to differ given Tory Policy). Nations that have undergone no signficant state centralisation such as Afghanistan, Somalia and Haiti are unlikely to witness any development. Some Latin American countries are set two grow – most noteably Brazil, Chile Mexico as are some African countries – Tanzania and Ethiopia for example. Growth will not be sustained in China.

The irresistible charm of authoritarian growth…..

This section reminds us that modernisation theory is flawed – economic growth (more Mcdonalds as Thomas Friedman might put it) does not necessarily lead to to more inclusive political institutions.

Plenty of repressive regimes have pursued and achieve very rapid economic growth in the last 60 years – Germany, for example, Russia, and China.

This chapter also deals with what probably won’t work in terms of development… Firstly, any attempt at engineering policy changes such as those attempted by neoliberalisation throughout the 1980s and 90s – Because if a country is politically corrupt, they just subvert the policy changes – Privatisation happens, but the people winning the contracts are the brothers of the ministers for example, or the country says it implements a policy but they just carries on as normal!

You can’t engineer prosperity

…because the actors within developing countries are constrained by their institutions, and if these are extractive then any programmes designed to engineer change will ultimately result in further extraction.

This is true of two approaches to foreign aid preferred by the West – both the neoliberal ‘restructure your economy’ type approach and the micro-economic approach which focuses on specific institutions.

The failure of foreign aid

As above, any aid money going into a country with extractive institutions will ultimately end up being extracted. The authors do argue, however, that even if only 20% of aid money reaches its ultimate destination then it’s worth it!

What works….?

The chapter and book round off by going back to the English and US revolutions which resulted in institutions becoming more inclusive – what is required for development is a plurality of voices demanding to be heard by government and actually being heard. This cannot be imposed from above, but seems to have to become from below.

In this sense, any attempt to engineer growth and provide aid seem pointless – the only things that make any sense are programmes oriented towards empowerment and making sure media is free because the later fosters the former.

Thoughts and comments….

Positives

The comparative analysis of countries and territories in close geographical proximity does seem to rule out the role of environmental and cultural factors in explaning divergent patterns of development, leaving only political and economic institutions.

It fully recognises the importance of the legacy of extraction identified by dependency theory, however, it also puts more emphasis on the already existing extractive institutions which the early colonisers extracted and it recognises the continuation of extraction post-colinalism, acknowledging the fact that corrupt elites also play a role.

This seems to deny the validity of neoliberal theory – the state seems to be crucial in helping development, and the absence of the state seems to be crucial in explaining the descent into chaos and civil war.

This isn’t a deterministic theory – it stresses the importance of agency and contingency at crucial historical junctures.

Limitations

This is  quite a generalist analysis – ‘extractive’ and ‘inclusive’ institutions are very general, broad terms, and there’s lots of variation possible within these voluminous concepts.

The book only draws on a relatively few case studies – and lacks the statistical rigour of, for example,  Paul Collier’s Bottom Billion Theory.

The book doesn’t seem to deal with the globalised context of the nation state today within a ‘world system’ – There is no mention (as far as I can see) of the role which TNCs, trade rules, the World Bank might play in allowing a global elite (rather than nationalised elites) to extract regions of the world.

As a final word, what’s maybe most timely (or not timely?) about the book is its suggestion that some kind of political infrastructure which allows a plurality of voices to be heard and wealth to be distributed so it benefits all is crucial to development – it’s time more of us started asking how we might do this at a global, rather than a national level.

Further Reading

The blog based around the book

Posted in Aid or Trade, Global Development | No Comments »

TTIP – Putting Profit before People

Posted by Realsociology on 10th September 2014

The government is about to sign up to a treaty which will would allow companies like Sports Direct (just a random example) to sue a future government for increasing the minimum wage, if introducing such a policy damaged corporate profits.

The treaty’s called the Transatlantic Trade and Investment Partnership – And it’s seems to be primarily about shafting the 300 or so million citizens of European countries so that Transnational Corporations can make even more profit.

CORP

 

Having clicked around a few web sites which try to summarise what the TTIP is, I think I’ve done a better job below – down to just FIVE KEY POINTS… (Handily for anyone studying Global Development, this also reads like a ‘what is neoliberalism’ check llist).

1. The Transatlantic Trade and Investment Partnership (TTIP) is a free trade treaty currently being negotiated – in secret – between the European Union and the USA.

2.  The main goal of TTIP is to remove regulatory ‘barriers’ which restrict the potential profits to be made by transnational corporations on both sides of the  Atlantic.

3. These ‘barriers’ are basically social and environmental protections currently enforced through the laws of various nation states within Europe and include the following:

  • labour rights (e.g. Minimum wages, holiday pay, public sector pensions)
  • food safety rules (including restrictions on GMOs),
  • regulations on the use of toxic chemicals
  • digital privacy laws
  • new banking safeguards introduced to prevent a repeat of the 2008 financial crisis.

4.  TTIP also seeks to create new markets by opening up public services  to competition from transnational corporations, threatening to introduce a further wave of privatizations in key sectors, health and education.

5. Most worrying of all, TTIP seeks to grant foreign investors a new right to sue sovereign governments in front of ad hoc arbitration tribunals for loss of profits resulting from public policy decisions.

So here we go again – a further wave of neoliberalisation, given that it looks like many Nation States in Europe are about to agree to a set of international rules which put Corporate profits before the well-being of their citizens.

Of course you’ve probably never heard of this treaty, it’s firmly off the news agenda, even though, right now, your democratic rights are being undermined and this treaty will almost certainly mean that you are worse off in the future in terms of your labour rights, environmental protection, and quality of public services.

If you want to sign a petition to get Vince Cable to fix or scrap the deal then click here

This post is mainly summarised from this nice document – TTIP – A Charter for Deregulation, an Attack on Jobs and an End to Democracy

Posted in Agenda Setting, Capitalism, Global Development, Globalisation, Neoliberalism, TNCs | No Comments »

Cuba – A Development Success Story?

Posted by Realsociology on 10th October 2013

Cuba’s a good case study of  Socialist Model of Development that seems to have worked more effectively than most of the nel-liberal experiments in Latin America…. Today, Cuba’s HDI stats look like this….

chart

Human Development Index
Ranking 59
Health
Life expectancy at birth (years) 79.3
Education
Mean years of schooling (of adults) (years) 10.2
Income
GNI per capita in PPP terms (constant 2005 international $) (Constant 2005 international $) 5,539

Between 1980 and 2012 Cuba’s HDI rose by 0.8% annually from 0.626 to 0.780 today, which gives the country a rank of 59 out of 187 countries.  The HDI of Latin America and the Caribbean as a region is 0.741 today, placing Cuba above the regional average

In this nice infographic (hopefully it’ll work, although there’s probably too much info in it TBH) you can see the comparative development of Cuba compared to Bolivia, Columbia and Chile (three countries which were much more exposed to neoliberal policies – What you can see is that Cuba progresses more rapidly than both Bolivia and Columbia, but not as quickly as Chile. What you can also see (from about 5 years after 1990) is the negative affect the decline of Communist Russia had on Cuba’s development.

 

 

So it’s not easy to conclude outright support for any set of policies if just pure economic development is your goal. Although in this post – Cuba, A development Model which proved the developers wrong Jonataon Glennie outlines how a Socialist model of development has worked for Cuba since 1959… The general gist is that the means whereby Cuba developed involved much less human misery than the other three neoliberal examples above – As outlined by John Pilger in the excellent documentary War on Democracy).

To summarise Gelnnie’s article…

No other similar country adopted Cuba’s approach to development, and unlike in other Latin American countries such as Bolivia, Colombia and El Salvador, which experience widespread inequality and related problems, In Cuba, the extremes of opulence and misery are banished in favour of a generalised level of wealth, best described as “enough to get by”.

He notes that from the beginning the instinct at the heart of the revolution in 1959 was that slower wealth creation and limited political repression were a price worth paying for fairer distribution, and the consequent eradication of extreme poverty. It may not have been articulated as such, but that is how it has played out.

Castro’s leadership was the key factor in rapidly rising living standards for the poorest. In 1958, under the Batista dictatorship, half of Cuba’s children did not attend school. The literacy campaign begun by Castro in 1961 led, in 1970, to Unesco declaring Cuba the country with the highest primary and secondary school enrolment in Latin America. These development gains, among others, have continued to this day.

But what of the future?

But there have been two broad consequences. First, a generation of educated young people aspire to more in terms of living standards and life chances than their parents ever did. It is no coincidence that the older generation is more uncritically supportive of the revolution than the young – it knows what Cuba was like before.

Second, state-led development and investment is costly, especially when the international context becomes less favourable. Relying on goodwill, volunteering and accumulated capital has worked perhaps longer than anyone anticipated, but eventually wealth must be created and that, as the critics have always maintained, means a platform for the private sector to grow.

Posted in Alternatives, Global Development | No Comments »

The World Wealth Report 2013

Posted by Realsociology on 2nd October 2013

 

The World Wealth Report reports on trends in the wealth of HNWIs – Or High Net Wealth Individuals. These are individuals with $1million or more in investable assets. You have to sign up to be able to download the report, but its free. (Thankyee for the crust kind sirs, doffs cap…) 

Between 2011-12, the richest 12 million people in the world gained an extra 4.2 trillion dollars of wealth between them – Their total wealth is now $46.2 billion, up from $42 billion in 2011. Thats a tidy $350 000 each extra on average, and according to the predictions below that trend is set to continue…

wealth1

Of course it gets bleaker… the averages above disguise the fact that the richest Ultra High Net Wealth Individuals increased their overal wealth more than the mere ‘millionnaires next door’… the proportional increases may well be the same, but of course a 10% gain on $50 million means you gain more than if you’d gained 10% on a mere $1 million.

wealth4

 

And bleaker… The richest 12 million may have got 10% richer on average, but this is on the back of a mere 2.2% GDP growth rate, so their wealth is growing nearly five times the rate of real global wealth (although somehow I’m sure that’s not a fair comparison?!)

wealth5

 

And even bleaker… according to the World Bank’s GNI data (not the same as wealth I know) -  GNI only increased from around 70 to 71.4 trillion dollars, which is less than 1%, so most of this wealth increse doesn’t seem to be rooted in the production of tangible goods and services.

No doubt there are different ways of interpreting what this data actually means, comments welcome!

 

In case you prefer a word-based summary – the 2013 report notes the following…

  • Between 2011 to 2012 The world’s HNWI population increased by 9.2% to reach 12.0 million, after remaining flat in 2011.
  • In the same period, The aggregate investable wealth increased 10.0% to US$46.2 trillion, after declining slightly in 2011.
  • ƒHNWI wealth in 2012 represented a new level of strength, going well past the historical high of US$42.7 trillion set in 2010.
  • Relatively stronger growth rates in higher wealth bands4 (US$5 million or more) led the growth of overall investable wealth globally.
  • All of this is despite a decline in the rate of world GDP growth to 2.2% last year.

 

 

Posted in Global Development, Globalisation, Infographics, Neoliberalism, Wealth and Income Inequality | No Comments »

UK Tourism – Suggests globalisation is exaggerated?

Posted by Realsociology on 26th June 2013

 

According to World Bank data, more people visit abroad from the UK than from any other country other than China.

travel trends UK

 

The thing is, we don’t tend to travel that far from home!

tt2

 

According the ONS 2012 Travel Trends the number of visits abroad by UK residents was 56.5 million, broadly equivalent to one visit abroad per person per year (although no doubt the distribution is nowhere near equal!).

What’s interesting, however, is just how close to home most of these visits are:

  • Nearly 20 million, or 34% of all visits are to Spain or France
  • About 38 million visits, or about two thirds of total visits are to just 10 countries, made up 8 countries in Europe plus America and Turkey.
  • This means that just 20 million visits, which will be considerably less than one third of the UK population, venture to more exotic destinations, and many of those 20 million visits are likely to be ‘safe’ western-style hotels in countries such as Egypt.

Given all of this, I think it’s safe to say that tourism trends are more regional than truly global. True global travelers are very much the exception.

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Tourism Departures – An Indication of the Rise of the BRIC Nations?

Posted by Realsociology on 24th June 2013

I just knocked up this graph using World Bank data on tourism departures between 2003 – 2011 (which is very easy to do btw!)

 

Data from World Bank

 

It’s a nice illustration of the relative increase in the spending power of (some) people in the four BRIC nations in relation to the relative decline of spending power in the United Kingdom and the USA.

It also shows how much further ‘ahead’ China is compared to the other BRIC nations, as well as serving as a reminder of just how inward looking Americans are   – The same number visit abroad do from the UK, but their population is about six times the size of ours!

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China and Russia – Among the world’s worst human rights abusers

Posted by Realsociology on 22nd June 2013

China and Russia have both been moved to the bottom tier of the U.S. human trafficking rank, joining the likes of North Korea, Sudan, and Zimbabwe, according to a recent U.S. State department report.

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In China, the one-child policy and a cultural preference for male children perpetuates the trafficking of brides and prostitutes. Chinese sex trafficking victims have been reported on all of the inhabited continents. Traffickers recruit girls and young women, often from rural areas of China, using a combination of fraudulent job offers, imposition of large travel fees, and threats of physical or financial harm, to obtain and maintain their service in prostitution.

Forced labour is also widely practised in China, in which both internal and external migrants are conscripted to work in coal mines or factories without pay, as well as its continued use of re-education hard labor camps for political dissidents.

In Russia, there are estimates that 50,000 children are involved in involuntary prostitution and about one million people are thought to be exposed to exploitive labor conditions, including extremely poor living conditions, the withholding for documents, and nonpayment for services.

Human Rights Watch has pointed out that some of Russia’s labour abuses have occurred during the preparations for the 2014 Winter Olympics in Sochi, with some workers enduring “12-hour shifts with one day off per month, having their passports confiscated, being denied employment contracts, and facing unsanitary and overcrowded employer-provided accommodations, with up to 200 migrant workers living in a one single-family home.”

While the nature and scale of such absuses isn’t on a scale with what’s going in Syria, these two nations are not ‘rogue states’, they make up half of the BRIC nations. Given their status as rapidly growing and globoalising economic superpowers, combined with the size of their populations, the potential for further human rights abuses in these two nations profound.

It would be nice to think that this lower designation results in the U.S. imposing sanctions on these contries countries, such as voting against any IMF or World Bank loans. However, given the historical record of the U.S. tolerating and even supporting governments who champion capital over human rights, I don’t think sanctions are likely anytime soon.

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A crisis of overpopulation?

Posted by Realsociology on 27th May 2013

populationThe world population recently topped 7 billion, and current UN predictions are that it will reach 9 billion by 2050, but does this matter – are we facing a crisis of overpopulation in which population growth will outstrip the limits of the planet to provide for us?

The original and most famous exposition of this thesis was by Thomas Malthus in 1798 whose basic idea was that population increased exponentially but food supply only increased incrementaly, so population growth would always outstrip the ability of the population to feed itself. Malthus predicted that the world would run out of food by 1890.

Malthus of course failed to foresee the incredible increases in agricultural yields that were to be brought about by the green revolution after ww2 (nicely summarised in the video below) which trebled food production per acre in countries such as Mexico and India – allowing them to sustain increased population

However, such population increase lead Malthusianism to be revisited by Paul Erlich in his 1968 population bomb, who predicted that high birth rates would lead to mass famine and reduce the population by at least 1/5th by the end of the 1970s.

Again with hindsite Erlich also got it wrong, and clearly not because of any global reduction in population, which has grown significantly since Erlich’s day, so could it be that the Malthusian doomsayers are just wrong?

Criticisms of Malthusianism – Overpopulation is a myth (.com)

This web site offers (at time of writing) six video-based criticisms of the Malthusian view point – Some of these include

  1. Going back to the graph at the top of this post, the average projection has it that the world population will peak at 9 billion in about 40 years from now and then start to go back down, although the overpopulation web site draws on even more optimistic figures of an 8 billion peak in 30 years.
  2. Many developed countries, most noteably Japan, have very low fertility rates, far below the level necessary to replace the population. These countries face an increasing depenendency ratio as the number of people retiring relative to those of working age increases.
  3. Overpopulation proponents suggest that there is not enough food for everyone, however, the FAO and WFP point out that there is enough food for everyone, but several hundreds of millions of people lack access to that food because of such things as poverty, conflict and poor agricultural infrastructure – In other words it’s not too many people that’s the problem, it’s the economic and political systems that block access to available food.

There are more criticisms of Malthusianism on the web site, with data and links!

 

Limits to growth – How many people can the earth support?

This video, hosted by David Attenborough,  lies somewhere between Malthusianism and the ‘overpopulation myth busters’ – It starts off with the point that we are approaching the Earth’s limits to growth, while holding open the possibility that we can prevent meltdown, but only if we make a concerted global effort…..

Some of the evidence being cited for us reaching the Limits to Growth include…

  • Nasa’s satellite imagery showing us that we are already using nearly all of the earth’s surface to provide for our needs
  • The fact that we appear to have reached the technological limits for increasing food yields per acre
  • Extensive land grabs (mostly in Africa) suggest that developed countries are concerned about their ability to feed their populations in the future
  • The reduction in capacity many of the earth’s water sources

Attenborough suggests three solutions to our reaching the limits to growth

Firstly we can rely on technological advances to produce more with less land

Secondly we could reduce our consumption

Thirdly we can control population growth in the developing world

None of these are necessarily going to happen of course, and I think I might deal with these in  a seperate post…

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Perspectives on the April 2013 Bangladesh Factory Collapse

Posted by Realsociology on 26th May 2013

The recent factory collapse in Bangladesh in which over 1100 workers died makes this the second worst industrial accident in world history – after the Union Carbide disaster in Bhopal, India.

For Sociology students studying Global Development this is a good example that seems to offer broad support for the continued relevance of dependency theory.

One article highlights the following factors which contributed to the 1000+ death toll -

  1. Bangladeshi factory workers cannot afford to not work when wages are only around the $50/ month mark.  Behind this, of course, lies Western demand for cheap and fast fashion – We only get £2 because of those low wages…..  
  2. The lack of long-term commitment to suppliers on the part of Corporate buyers – which means that it is economically irrational for many factory developers to invest in health and safety measures in their factories. As I see it behind this lack of commitment lies transnational firms’ desire to take advantage of the ‘race to the bottom’ – short contracts means the parent company can move out of Bangladesh at short notice to take advantage of cheaper labour elsewhere….  
  3. International Corporations effectively wash their hands of responsibility for monitoring health and safety through outsourcing – As a result, many of our high street shops have scant representation themselves in Bangladesh, leaving monitoring of health and safety to the Bangladeshi authorities, which basically means effective monitoring doesn’t take place.

However, The Ethical Trading Initiative takes a different approach, preferring to put responsibility on the Bangladeshi authorities, pointing out that…

‘A common reaction in the UK media and from NGOs has been to focus anger on brands sourcing from Bangladesh. But the view in Dhaka is rather different.  Newspapers here have concentrated almost exclusively on the failure by government agencies to implement the law on occupational safety and health (OSH) and the building code. This in turn is blamed on the nexus between garment factory owners and politicians – sometimes the same people.

According to the 2008 building law, any new structure, for any purpose, has to obtain an occupancy certificate from a government agency before it can be used; only six certificates have been issued since 2008, although it is estimated 4,000 – 5,000 new buildings come up every year.’

The ETI also aruges that the lack of unionisation of workers is an important contributory factor in these deaths – As the article above says, the workers could clearly see the cracks in the walls of the factory, but were forced to go in and work – Unionisation may have given them the sense of empowerment to stand up for their rights and stay alive.  

Of course both of these perspectives – one blaming the TNCs, the other blaming the Bangladeshi elite – still offer broad support for the continued relevance of Marxist Theory – At the end of the day this is still a situation where the poor and powerless are dying so the powerful can maintain their profits.

 

Posted in Aid or Trade, Global Development, Globalisation | No Comments »

Ugandan Alchemy or The Resource Curse?

Posted by Realsociology on 18th December 2012

Here is a nice illustration of the resource curse from relatively recent history- taken from the UN

The pink line shows Uganda’s gold production

The blue line shows Uganda’s gold exports

Uganda – A Nation of Alchemists?

 

Note the way in which gold exports, but not gold production, suddenly increases immediately following the entry of  Ugandan troops into the Congo War in 1994.

Some observers might suggest this offers support for the view that Uganda’s military involvement in that war was merely a cynical attempt to extract a few tonnes of gold – 40 tonnes over the period shown.

Of course it wasn’t only Uganda – Rwanda, Burundi, Namibia, Angola and Zimbabwe were all extracting DRCs resources during this period too!

Find Out More -

The Curse of Gold – The Democratic Republic of Congo

Posted in Countries (List), Global Development, Uganda, War and conflict | No Comments »