Our Word is Our Weapon

During a post on land value taxation, Tim Worstall mentions “the obvious truth that it is only in a low taxation state that policy can be redistributive”.

Come again? On closer inspection, it seems that this truth is so obvious that Worstall didn’t think of it himself, but instead got it from Stumbling and Mumbling, who has a relatively detailed post on the subject. Briefly:

The fact is that high government spending means the tax system cannot be used to redistribute income … These figures from the Inland Revenue illustrate the point. They show that the 1.8 million people earning over £50,000 will pay £55.6bn in income tax this year. That’s 43.7 per cent of all income tax.

But it’s only 12.2 per cent of the £454.7bn the government will raise this year (table C8 here).

This means that even if the government could double income tax receipts from people earning £50,000 or more – which might not be possible - the rest of the population would still have to pay three-quarters of the money raised by government. (I’m ignoring here the fact that the rich pay more in VAT and other taxes, but this is a minor wrinkle).

Even if we define the rich as those earning above £30,000, income taxes on these account for only 18.2 per cent of all government revenues. The bottom line here is simple. If taxes account for two-fifths of national income, they cannot redistribute income very well, because most taxes will have to fall on people who aren’t rich.

But when we’re looking for redistribution in a system, the point isn’t whether most taxes fall on people who aren’t rich - it’s whether the rich pay a higher share of taxes and receive a lower share of benefits than the poor.

This is undoubtably what happens in the UK today. This article by Caroline Lakin gives a good summary. The graph below shows shares of taxes paid and benefits received by income quintile (poorest on the left, richest on the right):

Then there’s this one, which gives you an idea of the effect of redistribution by comparing incomes before and after taxes and benefits:

The system is clearly redistibuting a serious amount of income, but I think Tim Worstall would agree that we don’t live in “a low taxation state”. So his ‘obvious truth’ is nothing of the sort.

A revealing remark from Madsen Pirie of the Adam Smith Institute:

Gordon Brown prefers to spend our money inefficiently and wastefully on projects which he values, rather than the ones we would choose.

That’s funny, I thought the electorate chose a Government that featured Gordon Brown as Chancellor. That must mean that a lot of people trust him to make some choices for us.

The ASI and its ilk pretend to like democracy, but they hate its natural manifestation - government. They can’t really resolve this tension, so end up contradicting themselves. Take this quote:

Most people know their circumstances and needs better than government does. They care more about their future and that of their family. They are more cautious spending money they have worked to acquire. When they choose how to spend it, they are exercising the freedom to express their tastes, preferences and values. Government, by contrast is profligate and thoughtless.

Here, people are rational in their own individual actions, but must suddenly turn irrational when they vote, because they keep electing Governments which are “profligate and thoughtless”. So for the Adam Smith Institute, individuals should be left to fend for themselves because they are too stupid to choose a competent government.

A more reasonable explanation, I would have thought, is that most people recognise that some problems are best solved by collective action as embodied in a democratically elected government.

Recently I got sucked into a discussion on the blog of Diplomad, who I have previously criticised for, basically, telling lies about the UN relief effort after the Asian tsunami.

That prompted Diplomad to comment here. Because I think the comment is revealing, I’ll reproduce it here along with my response.

Here’s Diplomad:

Jim — We’ve been through this over at our blog with you. Let me recapitulate: We have been on the scene in Aceh; you have not. We have seen the UN in action in Aceh; you have not. We never pretended to write about Sri Lanka — if the UN did great work there, fine, glad to hear it — it’s not what we hear from US diplomats there, but, fine. The Aceh airport was not closed when Powell visited; his plane dropped him off and then departed and returned to pick him up. The press reports are wrong on that (We were there; you weren’t). UNICEF is a joke; they have steadily moved away fom basic work to loonier and loonier concepts; you’d know that if you bothered to read their literature, the pronouncements of Bellamy, and bothered to go to where UNICEF claims to be working.

The UN has been deliberately distorting its work in Indonesia; it has essentially done nothing. It is only now–one month after the quake/tsunami — that we are beginning to see a UN presence out in the field. And, frankly, it is still an inept one and one greatly resented by the locals who find the UN staff arrogant, overbearing, and dismissive. We just had a demonstration in Jakarta by Acehenese asking the US military not to leave and not to turn over the relief operation to the UN. Don’t believe me? Come look. Then you’ll have to “withdraw your lies.”

BTW, thanks for the free publicity for our blog. We like getting savaged by the ignorant left; esepcially the ones who pontificate about the world from some flat in London or NY and rely on the BBC and the NYT for their information.

Keep reading The Diplomad! And tell your friends, too . . .

And here’s my response:

“We have been on the scene in Aceh; you have not. We have seen the UN in action in Aceh; you have not. We never pretended to write about Sri Lanka — if the UN did great work there, fine, glad to hear it.”

Bollocks. Allow me to quote from your post of Friday December 31st:
“the much-vaunted UN humanitarian effort is a disgrace … there is no massive UN effort underway … children are dying all over the place and where does UNICEF want to spend its, I mean, your money? On psycho-babble training of teachers …”

These comments were in response to press releases on the UN website describing its work all around the tsunami-hit region. What’s more, you made no attempt to qualify your comments or point out that you were just talking about Aceh (in fact, you declined to say where you were stationed). This would have been simplicity itself, but you chose not to do it. So you absolutely were pretending to write about the whole region, and no amount of weasel words will change that now.

The next day you went on to say
“Well, we’re heading into Day 7 of the Asian quake/tsunami crisis. And the UN relief effort? Nowhere to be seen … ”

Again, I notice the absence of any qualifier like “here in Aceh, at least”. At no point in this or any of your subsequent tirades did you stop to say anything like “of course, we don’t know what’s happening in Sri Lanka or any other country - if the UN did great work there, fine, glad to hear it”.

By your own logic (”We were there, you weren’t”) you were not entitled to say anything about the UN operation outside of Aceh. But you went ahead and did it anyway. In fact, you went ahead and repeatedly savaged any and all UN efforts in the region, describing UN staff as “vultures“. You now admit that for all you know, UN staff were busy saving lives at the time all across the region.

Can we look forward to you telling your faithful readers that you don’t actually know what was going on outside of Aceh and that therefore your description of the UN relief effort around the region as “a disgrace” was, er, completely unfounded? I’m not holding my breath.

[Update: The more I think about this the weirder it seems. For Diplomad to sit in Aceh and declare the UN to be doing nothing in the rest of Asia would be like me sitting in London and writing, “You may have seen reports of a tsunami in Asia. Don’t believe a word of it - I haven’t noticed anything different from here”. Surely, the only reason to make such stuff up is either a need for attention or a massive chip on your shoulder. If Diplomad wasn’t so vicious and crassly opportunistic, you’d almost feel sorry for him.]

According to a YouGov poll for Channel 4, most British people think their government gives far more overseas aid than it actually does, and when informed of the right amount, twice as many think the UK gives too little overseas aid as think it gives too much. But they’re overwhelmingly negative about paying higher taxes to fund more aid.

Maybe this isn’t as irrational as it looks: it could be they think there’s lots of other areas of government expenditure that should take a lower priority than aid, or maybe most are simply in favour of other people paying higher taxes …

Between 1981 and 2001 poverty in China dropped from 53% of the population to 8%, and inequality rose from a Gini of 28% to 39%, say Ravallion and Chen. So China traded off higher inequality for faster poverty reduction, right?

Wrong. “The periods of more rapid growth did not bring more rapid increases in inequality”, the authors say. “Indeed, the periods of falling inequality (1981–85 and 1995–98) had the highest growth in average household income” (see table below).

What’s more, they say, “the provinces that saw a more rapid rise in rural inequality saw less progress against poverty, not more”.

Initial high levels of inequality were important too: “the provinces that started the reform period with relatively high inequality faced a double handicap in future poverty reduction: they had lower subsequent growth and the poor shared less in the gains from that growth.”

Alex Singleton at the Adam Smith Institute has been reading Philippe Legrain’s Open World: The Truth about Globalisation which, he says, “takes apart many of the myths about globalization, carefully considering both sides of the debate”.

It doesn’t seem that carefully considered, at least judging by Singleton’s review. Firstly,

Legrain points out that globalizing countries grew by 5 per cent in the 1990s, compared with only 1.4 per cent for non-globalizing ones. Poor countries that have adopted globalization are catching up with rich countries. These poor countries include the likes of China, India, Brazil, Mexico, Vietnam and Bangladesh. The bad news is is the poor countries that are not globalizing - like most of Africa and many Muslim countries - are staying poor.

‘Globalizing’, of course, is left completely undefined. For the source of Legrain’s figures, see this presentation by Ian Goldin of the World Bank (based on research by the WB’s David Dollar). The critical point here is that the concept of a ‘Globalizing’ country as defined here actually has nothing to do with trade policy. Instead, ‘globalizers’ means “top 1/3 of developing countries in terms of increases in trade/GDP ratios over past 20 years”.

But as Oxfam point out, ‘globalizers’ generally had more trade-restrictive policies (measured by average tarifs) than ‘non-globalizers’ in both the 1980s and 1990s! So what Legrain and the Adam Smith Institute are (unintentionally) telling us is that more protected poor countries grow faster.

Singleton goes on:

As for the argument that poor countries should keep their tariff barriers, he shows that whenever poor countries do this, it is counterproductive. “In the 1960s,” he says, “the fashionable plan for going from poverty to prosperity was to industrialise through import substitution” … Unfortunately, it was a complete disaster.

Were the 1960s (and the 1970s, during which many poor countries maintained import substitution policies) really a “complete disaster” for poor countries? No, quite the opposite in fact - per capita incomes in poor countries grew more during the import substitution era of the 1960s and 1970s than in the 1980s and 1990s. The following chart shows real GDP per capita growth in developing (”low and middle income”) countries from 1961 to 2004 (1961-2001 based on World Development Indicators, 2002-2004 estimated by myself from here):

It’ll be interesting to see if the high growth of the last couple of years continues, but Legrain and Singleton are talking about the past, and here the evidence completely contradicts their claims. But who needs evidence when you’ve got blind faith?

Tim Worstall, of course, unhesitatingly agrees with the ASI, authoritatively asserting that import substitution theory has been “disproven in recent decades”. Seems a shame to burst such a comfortable bubble, but there you go.

It really is no fun whatsoever to have to write another blog-post about the fact that various cretins are exploiting the Asian tsunami disaster to take cheap, malicious and untruthful pot-shots at that perennial target of right-wing paranoiacs, the United Nations. But here goes …

In my first post on this topic, I mentioned Diplomad and described him/her as “at least giv[ing] the impression of being a resident, however peripheral, of this planet”. I have been forced to reconsider, because I’ve just had a look at Diplomad’s site again, and it’s not pretty.

On January 8th, Diplomad said that the UN is “not feed[ing] people or provid[ing] them medical care”. This is a lie, as s/he inadvertently admits later in the same post, responding to a UN press release describing the distribution of deworming tablets to children by snarling “How about combating starvation first?”. Actually, UNICEF was feeding people and providing them with medical care as soon as anyone else, but Diplomad simply ignores this.

In fact, UNICEF seems to be the target of the most invective, presumably because it is the UN agency that has done the most. Diplomad readers are told that UNICEF is “notably odious”, as opposed to just “truly obscene” “Vultures”, which covers the rest of the UN. Why? Well, Diplomad thinks that UNICEF chief Carol Bellamy is a feminazi, and surely that’s reason enough to defame the organisation and everyone who works for it? In the January 8th post, Diplomad goes on to lable Bellamy “Queen of the Vultures and the Supreme High Priestess, Con Artist Without Peer”, apparently because she had the gall to visit the disaster zone in person.

It was about this point that I began to wonder whether Diplomad had a bit of a chip on its shoulder about the UN. The only visiting dignitaries to get this kind of treatment are those from the United Nations - there’s no mention of Colin Powell, whose visit to Banda Aceh apparently necessitated closing the airport and thereby blocking aid (as did Koffi Annan’s). The reason, I suppose, is that Bellamy works for the UN, but Powell is an American and, perhaps more importantly, Diplomad’s boss. Of course, that’s assuming we believe Diplomad’s claims of being written by “career US Foreign Service officers”, at least one of whom is apparently attending high level meetings in the area at which they get to roll their eyeballs while UN staff blather ineffectually and Sri Lankans lean over to confide that “We all know you Americans will do everything”.

Frankly, I’m just as inclined to believe that it’s the work of fantasists, or, to be more accurate, shrieking lunatics. That’s certainly a more reassuring thought than the idea of an American diplomat in the tsunami disaster zone going to such lengths to tell lies about people who are out there saving lives as we speak.

Meanwhile, cretins in the UK have quietened down somewhat. Tim Worstall stopped responding to comments on his anti-UN snipes once the posts had fallen off his blog’s front page. When criticised by The Obscurer, though, Worstall is quick to say that “yes, indeed, everyone who is helping deserves both our thanks and our support” (directly contradicting his previous insistence that anyone who works for the UN deserve none). Don’t hold your breath waiting for a similar admission on his own blog, though.

Meanwhile, Samizdata, distinguish themselves by declaring that Diplomad lies about the UN doing nothing to help tsunami victims are simply wonderful, on the basis that “We can never get too much UN-bashing here”. Nice.

I said when I first posted on this topic that “It really shouldn’t be necessary to have to go around rebutting morons who want to take advantage of a global catastrophe to score cheap political points”. Unfortunately it seems these morons are not only still out there, they are, if Diplomad’s comments and trackbacks are anything to go by, extremely popular. That is monumentally depressing, but maybe it is no longer remarkable, and for that reason I’m not going to post about it any more.

[Update: Oh alright, one more bit. Tim Worstall reponds:

I must have missed that lesson at the Blogging Academy where it is pointed out that I have to respond to every passing crank, especially when there are other posts here which explain exactly my views on such matters.

Two points on this: Firstly, Worstall is usually pretty diligent at responding to every passing crank, especially if they agree with him. My perception is that he stops responding when he thinks he’s losing an argument but nobody else is reading the post anymore so it doesn’t matter.

Secondly, his other posts (and his comment on The Obscurer) don’t really ‘explain exactly’ his views at all - rather, they demonstrate that he changes his tune when challenged.

Anyway, Worstall restates his new argument:

What Jim manages to miss is that this blog uses economic arguments a lot of the time. We are always interested in relative results, not absolute.

This line is particularly amusing given that Worstall regularly lambasts ‘idiotarians’ for talking about poverty in relative rather than absolute terms. His line is that relative poverty doesn’t matter, only absolute poverty does. Now he says that his ‘economic arguments’ are always interested in ‘relative results, not absolute’. Something of a contradiction?

Sure, we can all have a great global love-in called the UN but if that organisation is less effective than, say, the US Military, at delivering disaster aid then we should be using the latter, not the former, to deliver disaster aid.

This is the crux of it, I suppose. The US Military would be the first to tell you that they are unable to deliver aid to all the regions hit by the earthquake and tsunami. They were very effective at certain critical points in the relief effort, particularly ferrying aid from Aceh airport to cut-off towns in the rest of the province, but that aid had to actually get to the airport first, and it got there via the UN and many other organisations, all doing their bit. Worstall would have us believe that because the UN and all those other relief organisations didn’t have the benefit of an aircraft carrier strike group to bring the aid to the cut-off areas, their efforts are somehow substandard or pointless and we should just rely on the military in future.

And this is just looking at Aceh, which I’ve noticed Diplomad and his acolytes seem to think represents the entire disaster zone simply because that’s where the US military is doing most of its work. There are areas of, say, Sri Lanka and India where various bodies, including the UN, are doing more than the US Military. Should we then decide that the US Military is ‘worse’ at aid? No, of course not. What the UN and the Red Cross and the US Military understand but what Diplomad and Worstall and their ilk do not is that this is a cooperative effort, not a competition. It works best when the US Military gets to use its strengths (in this case, primarily transport logistics to reach otherwise inaccessible areas) and the UN uses its strengths, like UNICEF having staff and supplies in every country ready for an early response to a disaster and the skill and experience to identify the right emergency supplies, distribute them over large areas by working with locals and, among other things, carry out mass immunisations.

I can only assume that Diplomad, Worstall and others, having easy access to the means of checking their claims, knew fine well that UNICEF was doing this kind of thing, but chose to ignore the inconvenient facts in favour of trotting out anti-UN propaganda. It was pretty sick behaviour, and no amount of back-tracking is going to change that.

Finally, Worstall has a go at my ten proposals for development, declaring that “A more absurd and preposterous series of economic ideas is difficult to imagine outside the syphilitic ravings of Lenin on Imperialism”. This is interesting, considering that among those ten proposals are to eliminate agricultural subsidies and open rich-country markets to exports from poor countries. I guess that Worstall doesn’t mind contradicting himself if it makes for a cool-sounding quote.

He finishes with

Bob Mugabe gets to decide which industries get tariff protection? Oh, Puhleease, get a grip dear boy.

Not sure what the point is here. Bob Mugabe is, unfortunately, Zimbabwe’s leader, so for now, yes, he gets to decide which industries get tariff protection. If the problem is his totalitarianism (otherwise why pick him as an example?), then presumably Worstall has no problem with non-totalitarian poor country governments deciding which industries get tariff protection. Which is what I was arguing for anyway.]

Criticising Gordon Brown’s call for a new ‘Marshall Plan’ for Africa, Global Growth Org notes that

The Marshall Plan funds were some 3% of the recipents’ GNP, aid to Africa already constitutes 13% of recipients’ GNP, 4 times as much. The Marshall Plan for Europe lasted 4 years, aid to Africa has been flooding into the continent for 40 years. 4 times as much aid for 10 times as long and it still has not worked.

This is misleading. Marshall Plan aid to Europe constituted a smaller percentage of their economies because, even after a destructive war, GDP per capita levels were much higher in the Marshall Plan countries than in Sub-Saharan Africa either just after WWII or at any time since. Marshall Plan aid looks restrained in comparison to African aid only because Europe was, relatively speaking, quite rich.

Since we’re comparing total quantities of aid, a more accurate indicator would be aid received per person per year. According to Tod Moss (possibly the source of the GGO numbers), the total Marshall Plan aid of about $13bn equates to around $85bn in today’s dollars. De Long and Eichengreen say that of that $13bn, “$3.2 billion went to the United Kingdom, $2.7 billion to France, $1.5 billion to Italy, and $1.4 billion to the Western-occupied zones of Germany that would become the post-World War II Bundesrepublik“.

Given that the populations of those countries in 1950 were 50m, 42m, 47m and 50m respectively, and that Marshall Plan aid was delivered between 1948 and 1951, we can calculate an average Marshall Plan Aid (MPA) per person by year, as I do in the table below (using the ratio of post-WWII dollars to today’s dollars used by Moss).

This gives us an average yearly figure of $75 in Marshall Plan aid per capita for the four main recipient countries.

How does this compare to Sub-Saharan Africa? On this spreadsheet based on OECD aid data, I’ve calculated ODA per capita figures for each African country for 2002.

The total ODA per capita in Africa in 2002 looks like around $26, one third of the derived Marshall Plan figure, and $34 if you exclude South Africa and Nigeria as Moss did to get the 13% figure (which GGO didn’t mention).

Of the fifty-five Sub-Saharan countries listed by the OECD, only eight had annual ODA per capita levels above the derived Marshall Plan figure of $75. Of these eight, six are tiny states with populations of less than 1 million, another was Mauritania, not much bigger at 2.63m, and the last was Mozambique, which received more than a doubling in aid flows in 2002 after being hit by catastrophic floods. Aid at levels of previous years were around $50 per capita in Mozambique. This really leaves Mauritania as the sole non-tiny African country receiving aid at above Marshall Plan levels.

So what does this tell us? Firstly, that Marshall Plan aid was more generous while it lasted than aid to Africa is (and probably ever has been). To which the reponse would presumably be that Africa has been receiving aid for forty rather than four years. Yes, but we all know that much ‘aid’ to Africa was never intended to promote development but to line the pockets of strategically important dictators during the Cold War. It’s true to say that much aid to Africa was wasted, but you can’t then turn around and complain about the results. And even if incomes did not rise much in Africa during the last forty years, it did (like much of the rest of the developing world), make significant progress on ‘quality of life’ indicators such as life expectancy. As the Center for Global Development points out, some of this progress can be attributed to aid.

Ultimately, though, I don’t think comparisons with the Marshall Plan are that useful. As Tod Moss says (though I disagree with him in other respects),

Even if Europe’s physical capital was in ruins, its deep human capital and experience with markets was still intact. Aid for Africa is mostly for building, not rebuilding. This is a long-term task and quick results shouldn’t be expected.

In the meantime, there is no way Sub-Saharan Africa as a whole can meet the Millennium Development Goals by 2015 without a significant injection of more aid (and at this stage it’s probably too late even with such an increase). The private investment flows and earnings from trade are just not there, in large part because (as Sachs and co. show) Africa is caught in a low savings -> low investment -> low productivity trap. The finance to escape the trap has to come from somewhere, and in the short term aid and debt relief look like the best sources.

Madsen Pirie of the Adam Smith Institute takes stock today of “the battle of ideas”. Some of the items on his list:

Pollution is spreading and poisoning the planet
The case used to be that rich countries pollute, and that as everyone became richer the world would become an open sewer. Now we think that wealth enables production to be cleaner. It is the poorer countries which pollute.

Really? According to the statistics on nationmaster.com, richer countries have higher per capita emissions of carbon dioxide and nitrous oxide, for example. And it’s not just about having bigger economies, either - poor countries (apart from former communist states and oil producers) seem to be more carbon efficient too.
Pirie says that “In Britain air and water quality are reportedly much cleaner than they used to be” - this is probably the case in our cities, be we’re still pumping pollutants into the air in non built-up areas.

The Kyoto Protocol is the only hope to prevent global warming
If all its assumptions were correct, it might delay until 2100 the warming level which would otherwise be reached by 2094. That’s six years.

This line seems to be trotted out with much regularity by critics of Kyoto, and it seems to come from Bjorn Lomborg, who in 2001 said:

A model by Tom Wigley, one of the main authors of the reports of the UN Climate Change Panel, shows how an expected temperature increase of 2.1°C in 2100 would be diminished by the treaty to an increase of 1.9°C instead. Or, to put it another way, the temperature increase that the planet would have experienced in 2094 would be postponed to 2100.

How does the source of this factoid, Dr Tom Wigley, feel about this use of his work? Well, when the Republican National Committee cited his work in the same way, Wrigley wrote a letter of protest at what he called a ‘misrepresentation’: what the RNC (and, by extension, Lomborg) failed to point out, he said, was that his analysis

assumed that Kyoto was followed to 2010, and that there were no subsequent climate mitigation policies. The point of the paper was to show that Kyoto must be considered as only the first step in a long and complex process of reducing our dependence on fossil fuels as a primary energy source.

It’s obvious really. If you only measure the effect of emissions controls up to 2010, of course that’s not going to have that much effect. Another 90 years of Kyoto-like limits, though, would presumably have a far higher effect on the temperature in 2100. Unless I’m missing something this critique of Kyoto is rather bogus.

[Edit: I was missing something. Reading up on this a bit more, it looks like Wigley’s projection was of another 90 years of Kyoto-like limits, i.e. developed countries lowering their carbon emissions to 5% below their 1990 levels by 2010. What Wigley meant, I think, was that in his model no further mitigation policies were implemented.

So I think I was wrong to say that “Another 90 years of Kyoto-like limits, though, would presumably have a far higher effect on the temperature in 2100″. However, Kyoto was intended to be a first step, without which the emissions cuts necessary to put a really big dent in global warming would be far more difficult. Projecting Kyoto forward 90 years still seems bogus to me.]

Globalization hurts poorer countries and holds back their development
The lesson of the success stories of last century is that countries which traded became richer; the others did not. A global economy gives poor countries the chance to earn by selling their goods. Holding them back are tariffs by rich countries to protect their more costly domestic production. It is globalization which can bring investment, development, and growth to lift them from poverty. Many once-poor countries have made huge gains from globalization; others can do likewise.

Generally technically true, but gives a misleading overall impression. What’s meant by “countries which traded”, for example? If Pirie means “countries that liberalised trade”, he’s pretty much wrong to say that they ‘became richer’. If he means “countries that increased exports and/or imports”, then he’s probably right - higher levels of trade tend to go along with higher growth. But countries don’t simply choose to increase exports and imports - they try, but some don’t make it, and not because of their policies. Many Sub-Saharan African countries are more open to trade in policy terms than, say, India or China, but have not been blessed with similar growth. The term ‘globalization’ always carries a sense of choice - countries are frequently described as having “embraced” or “turned their backs on” globalization. So using it here with evidence based on outcomes and not choices is misleading.

The rich world is getting richer, the poor poorer
With some exceptions both are growing richer. The income spread across the world is much narrower than 50 years ago, largely because of the rise of the Asian economies.

No it isn’t. The best source for this I can find is Bourguignon and Morrisson, whose results indicate that inequality on a variety of measures was higher in the 1990s than in 1950. The most reliable statistics are available for more recent decades, and they indicate that true world inequality (that takes into account rising inequality within countries) has probably beeen static for the last decade or so.

Poor countries need protective tariffs to protect their own industries
If you think their future lies in static production, protected markets and fixed prices, you might support this. If you think they should produce whatever they can do cheaply and efficiently, and get richer by seizing market opportunities, you might go for free trade instead. It makes for a less certain, less managed future, but one that seems to offer more wealth opportunities.

A straw man argument - arguing that poor countries should be allowed the freedom to selectively protect industries (just as every presently-rich country did when it was at a similar stage) is not the same as believing in universal protectionism or fixed prices. Wholesale liberalisation has not turned out to be a particularly succesful strategy for poor countries, but you won’t catch the Adam Smith Institute admitting that.

Multinationals exploit people in poorer countries
One person’s exploitation is another’s opportunity. Multinationals pay lower wages in developing countries than in rich ones: that’s why they go there. But their pay and conditions are reportedly better than those available elsewhere in poor countries, and so represent economic advancement. There are usually waiting lists to work for them. More and more of them are also providing education and healthcare for their employees.

A touch of moral relativism here: just because people are so desperately poor that they are willing to do it does not make requiring employees to work incredibly long hours in cramped, stressful and even dangerous conditions for very little money is not exploitative. Exploiting someone’s poverty is exploitation. This is not to say that all multinatioanl investment in poor countries is exploitation - far from it - but to deny that it can possibly take place in the context of paid labour is naive in the extreme. And where pay and conditions in Third World factories are good, it is in large part due to the reporting and monitoring efforts of the kind of campaigning NGOs who the ASI are usually so keen to disparage.

Pirie concludes: “My scorecard suggests two of these won, four currently being won, and four still to be won”. On this evidence it seems that in order to win some of these arguments the ASI deems it necessary to obfuscate, mislead and misrepresent the evidence.

[Update: I sent a ‘trackback’ ping to the ASI post, so that their readers could follow the debate here if they wanted. The ASI, of course, deleted it, leaving only trackback links that commented approvingly. I suppose it’s easier to pretend you’re ‘winning the argument’ if you systematically exclude any dissenting views.]

The Indian Ocean tsunami is sure bringing out the cretin in some people. Mark Steyn is the latest one who cannot bring himself to admit that the UN might be helping the victims. So he selectively quotes from a UN press release in order to manufacture a clever-clever pay-off line:

For all the money lavished on them, the UN is hard to rouse to action. Egeland’s full-time round-the-clock 24/7 Big Humanitarians are conspicuous by their all but total absence on the ground … They’ve flown in (or nearby, or overhead) a couple of experts to assess the situation and they’ve issued press releases boasting about the assessments. In Sri Lanka, Egeland’s staff informs us, “UNFPA is carrying out reproductive health assessments”. Which, translated out of UN-speak, means the Sri Lankans can go screw themselves.

Now, have a look at the (Jan 31st) press release Steyn extracted that UNFPA quote from. What are the very next lines?

UNICEF continues to help ferry the wounded and dead to area hospitals while providing 10,000 bed sheets, towels, drinking water bottles, cooking utensils sets and mats to assist the displaced and stranded. UNHCR has been distributing non-food items.

Does that sound like the UN was telling the Sri Lankans to “go screw themselves”? Does that sound like an “all but total absence on the ground”? Steyn must have read these lines, so he must have known that what he was saying wasn’t true, but he went ahead and said it anyway, deliberately misleading his readers. It seems that for Steyn, to paraphrase his own words, “whatever happens, the real issue is the rottenness of the United Nations”.

Thanks of sorts for the link must go to Tim Worstall, who continues to spread a story that he knows to be false while lecturing others about “playing politics” with the tsunami.

Previous post on this subject here.

Maybe, says Charles Kenny of the World Bank, we shouldn’t be that worried about the apparent non-convergence of incomes world-wide, since “nearly everything that matters” - from life expectancy to child mortality, literacy, access to utilities, civil/political rights and, er, beer production - is converging.

There’s a few things going on here:

• Technological breakthroughs, most notably in the development of vaccines to major diseases, have had an enormous effect.
• There is probably some mutual causation effect, particularly between improving health and education and on to other variables.
• Thirdly, Kenny notes that “Income has a declining marginal impact
  on quality of life … an absolute proportional increase in per capita GDP in low income countries will improve social indicators more than a similar increase in rich countries”.
• Lastly, Kenny (understandably) focuses on life expectancy as a key non-income determinant of quality of life, but there is effectively a natural upper bound of around 100 years on life expectancy, so one would expect to see a convergence on this variable even if life expectancies at the lower end are rising only slowly. The same goes for other variables with upper or lower bounds, such as literacy or primary school enrollment.

It would be even more interesting to see regional breakdowns, and a more detailed trend over time, for example to gauge the impact on the trend of the AIDS epidemic in Sub-Saharan Africa. AIDS and the potential increasing incidence of natural disasters due to climate change may be the two major clouds on the horizon.

Hat tip to Adam Smithee for the link.

Here’s a bit more on the consequences of the Indian Ocean tsunami, some of which illustrates points I raised in a general discussion on disasters yesterday.

Firstly, says the New York Times, the disaster will ultimately have minor consequences for the region as a whole but catastrophic ones for particular groups, notably the very poor:

In the economies of Sri Lanka, Indonesia, India, Thailand and the other affected countries, the tsunami is likely to register more as a small wave, because the two industries most heavily hit - tourism and fishing - make up small percentages of the overall economy.

It is in individual lives, as well as the countries’ infrastructures, that the true cost will be felt.

Like many other fishermen, W. Lasanthe has known only the sea. Mr. Lasanthe, 31, who lives in Beruwala, Sri Lanka, bought his 18-foot boat two years ago for $2,500 with the help of a bank loan he is still paying off. Now the boat is gone. But even if he had a boat, he said, “nobody wants fish now” - not from a sea that swallowed so many dead bodies.

“No job,” he said glumly, and no plan. Economists agree that it is the poor who will suffer, rather than the overall economy. “It is mostly a human impact we are feeling at the moment,” said J. G. T. Sundaram of the Board of Investment, a government agency that promotes Sri Lankan business opportunities to foreigners.

Wing Thye Woo, a professor of economics at the University of California, Davis, said, “It’s a blip, but a blip that is concentrated among the poorest of the population.”

Even as it has destroyed the livelihoods of millions of families in South Asia, the tsunami will shave only a few points off the region’s economic growth this year. Depending on the importance of tourism in each country, the decrease is expected to range from less than 1 percent for Thailand to 2 percent for Sri Lanka and 4 percent for the Maldives, according to estimates by Standard Chartered Bank …

Most affected businesses and individuals along the rim of the Indian Ocean do not have insurance coverage for the kind of disaster they encountered a week ago. How much, or even whether, they will be compensated by their governments or through outside aid remains unclear.

At the Ocean Plaza shopping center in Phuket, the mass of water destroyed the jewelry store, the Thai arts shop, the shoe store and the Chester’s Grilled Chicken outlet. In the basement, the Big One supermarket is still filled with water and bobbing debris - a reminder of the 30 tourists who drowned there.

“The insurance company does not want to pay, so they have not even come to inspect,” said Suthep Prabtook, the supermarket’s general manager. “They say they pay for normal water damage, but this was water damage caused by an earthquake.”

The fishermen of Sri Lanka do not have insurance at all. Prasantha DeSilva, whose family owns the five largest fishing boats in Beruwala harbor, said the insurance premiums had been too expensive. Now, with four of their boats, which cost about $150,000 each, wrecked, they must start from scratch.

“We are very badly affected - I don’t think we can stand up,” he said. “These are our major properties.”

Each boat - the longest is 60 feet - employs 25 or 30 people, from fishermen to helpers. That means that until Mr. DeSilva gets new boats, more than 100 people have lost their livelihoods …

Many economists predict a surge in the construction industry and the production of raw materials, like cement and steel, that supply it. But an influx of aid money and aid workers to help with long-term reconstruction could push prices up, as has happened in places like Afghanistan.

Rohan Chamindar, 26, is a lifeguard, not an economist, but he has his own prediction of how the tsunami will shape the Sri Lankan economy. The disaster, he said, was likely to propel even more women and men like him to migrate to the Middle East for work.

There is no work in Sri Lanka that could pay as well as his hotel job had, or, barring very specific government aid, provide enough income to finance the rebuilding of homes. “If I work in Sri Lanka, I cannot earn enough,” he said.

So the tsunami, he predicted, will have an economic impact in the Middle East, too. “They will lower the salary scale,” he said, “because after the disaster, so many Sri Lankans are looking for overseas jobs.”

Secondly, Edward Clay of the Overseas Development Institute discusses the impact on developmental prospects in the region:

As a general rule, the macro-economic effects of natural disasters tend to be relatively short-lived. The research evidence is that it is unusual to find significant decreases in national income or drops in the growth rate from sudden impact earthquakes, tsunamis or tropical storms. Indeed, in some cases, natural disasters have had a positive effect, because of increased spending on the rehabilitation of infrastructure …

In the longer term, those most seriously affected will be:

* Poor coastal communities especially fishing communities where families will have lost their breadwinners, homes, boats and equipment, and face debts for boats and equipment lost, also those on the margins of the tourist economy.
* Smaller, remoter economies especially
- Aceh (remote, poor and with severe governance problems because of the struggle for greater local autonomy and the wider near chaotic economic situation in Indonesia);
- Andaman and Nicobar Islands; and
- The Maldives because of its smallness and overwhelming dependence on disaster-affected tourism and the sea (economy and government finances could be very severely hit in short term).

Tourism is likely to recover quickly because: tourist operators and tourists are largely insured for loss and the bigger companies for disruption to business; multi-national tourism has the internal funding and can raise finance for rapid reconstruction; and demand will revive because a 1 in 1000 year event will be quickly forgotten.

The greatest challenge will be in ensuring that the poor, especially those in fishing, on the margins of the tourist economy and in remoter areas are helped to recover …

There are some important lessons for the future. The international community must
- invest much more in globally monitoring natural hazards that can cause disasters;
- help developing countries that under invest to provide warning systems2
- invest in protecting lives and livelihoods (Coastal embankments break the force of storm surges and tsunamis).
- The poor, who are most at risk and most vulnerable to the effects of disasters, need insurance. 2005 is the International Year for micro-credit. A major effort is needed to ensure that those successfully providing micro-credit to millions of poor people, such as the Grameen Bank BRAC and Proshika in Bangladesh, are able to include insurance in their loans and then have the funding in place and guarantees to withstand the effects of disasters.

Finally, the Guardian reports that the massive amounts of aid already pledged to the relief effort are probably largely diversions from existing aid budgets previously intended to be spent elsewhere, or reflect the cost of military deployments, or given the lesson of previous disasters such as the Bam earthquake, may not materialise at all. In a paper for the World Bank, (available here as a 10mb pdf or here as a 600k txt file), Edward Clay and others note that “Reallocation is the primary fiscal response to disasters”, and that “Disasters have little impact on trends in total aid flows”.

Even before the Asian tsunami catastrophe, 2004 was set to go down as a year of terrible losses to natural disasters. About 70,000 people lost their lives to disasters, and on the economic side it was a year of record damage, according to preliminary figures from the Munich Re group, reported here by the UN Environment Programme:

[F]or the first 10 months of this year natural disasters cost the insurance industry just over $35 billion, up from $16 billion in 2003 … Economic losses, the majority of which were not insured, will also have cost the planet and its people dear. Preliminary figures for the months January to October estimate that these losses were also among the highest on record totaling, so far, about $90 billion up from over $65 billion in 2003.

Insured losses were highest at $26bn in the United States, partly due to higher levels of wealth there but also greater insurance coverage. Munich Re’s 2003 report divides countries into seven categories according to their level of insurance coverage (map here), and finds that over the period 1980 to 2003, the most insured countries had 36% of the total economic damage and 2% of the total fatalities from weather-related natural catastrophes in 1980-2003, while the uninsured regions had 12% of the economic damage and 80% of the fatalities. Poorer countries may sustain lower absolute economic damage, but it usually accounts for a much bigger chunk of national income, according to this IMF paper:

Between 1985 and 1999, the world’s wealthiest countries sustained 57.3 percent of the measured economic losses to disasters, representing 2.5 percent of their combined GDP. Over the same period, the world’s poorest countries endured 24.4 percent of the economic loss of disasters representing 13.4 percent of their combined GDP.

For example, the 1997-98 El Niño events caused $1bn worth of direct damages in Nicaragua and twice as much in the US, but this represented 8.6 percent of Nicaraguan GDP and only 0.03 percent of US GDP.

Relative losses in human terms are shockingly different too:

Reflecting both their lesser preparedness and greater vulnerability, developing countries also tend to suffer more deaths per disaster: on average, 22.5 people die per reported disaster in highly developed nations and 145 die per disaster in nations of medium human development, while each disaster in countries of low human development claims an average of 1,052.

Not only are poor countries more vulnerable, but within any developing country the poorest sections of the population are most likely to be hit hardest, as they may be priced out of safer areas, have fewer savings and have less access to formal or informal risk-sharing mechanisms. Natural disasters can also permanently damage the growth prospects of affected areas, (for example through irreversible soil erosion), as we may see over the next while in Aceh and other regions badly hit by the tsunami.

Finally and most worrying of all, natural disasters seem to be on a long-term upwards trend (or at least seemed to be until the early years of this decade, which may or may not turn out to be a blip). Munich Re estimate that the number of ‘great natural catastrophes’ increased from 20 in the 1950s to 91 in the 1990s (but ‘only’ 60 in the ten years to 2003, around the level of the 1980s), while the total associated economic losses rose from $43bn in the 1950s to $670bn in the 1990s (chart here). While world GDP per capita has increased by an annual average of 3.4 percent over this period, disaster costs rose by an average of 7.4 percent. Global warming seems to be a reality, which suggests that weather-related disasters at least may become yet more common.

What to do, then? To start with two truisms, it would obviously help if poor countries turned into rich ones, and if global warming could be significantly slowed or reversed without enormous cost. On a more practical level, greater insurance coverage would also help, but there are significant obstacles, discussed at length in the IMF paper. The Asian tsunami demonstrates the importance of co-ordination between countries to improve monitoring and preparedness, and also the urgent need for investment in transport infrastructure to improve the promptness and reliability of emergency responses. In terms of policy for rich and poor countries alike, this is also really another argument for our old friend ‘pro-poor growth’: the urgent priority should be raising the incomes and reducing the vulnerability of the poorest at-risk countries, and of the poorest segments of the population in every developing country.

The response of countries like the US to the tsunami has been huge, prompt and life-saving, but we’ve also seen how they and others seem far better at helping countries respond to disasters than helping them prevent them or minimise the impacts. If the incidence and impacts of natural disasters continue to grow, aid donors might find this policy preference increasingly costly to sustain.

Faster than the wave itself, a new and particularly odious meme has raced around the world - apparently the United Nations is doing nothing to help. A quick trawl of the lower reaches of the blogosphere turns up posts (in order of increasing righteous derangement) from Tim Worstall, Tim Blair, Diplomad and the Belmont Club.

Unlike the Belmont Club, Diplomad at least gives the impression of being a resident, however peripheral, of this planet. S/he got the ball rolling with this:

Well, we’re heading into Day 7 of the Asian quake/tsunami crisis. And the UN relief effort? Nowhere to be seen except at some meetings and on CNN and BBC as talking heads. In this corner of the Far Abroad, it’s Yanks and Aussies doing the hard, sweaty work of saving lives.

Note that this is all based not on a comprehensive overview of what the UN and its various agencies is doing on the ground, but on an excerpt from a UN press conference which a cynical and/or paranoid mind might interpret as the UN taking credit for relief work done by the US and Australia.

In fact, various agencies of the United Nations are there right now, helping out. See here for an overview, and here for more on UNICEF’s activities. The UN would be able to do a lot more if it had a standing army and navy of its own like the Aussies and Americans, but somehow I don’t think this bunch of critics would really go for that.

Anyway, Diplomad didn’t bother checking what the UN and its various agencies is doing on the ground, because Diplomad doesn’t care about that. Tim Blair, likewise, doesn’t care. Nor does Tim Worstall (who, in a post of quite staggering hypocrisy, had previously accused others of ‘playing politics’ with the tsunami). They have clearly demonstrated, by merrily repeating Diplomad’s lies without even bothering to check them, that they care far more about sticking the boot into the United Nations at any and every opportunity.

It’s a pretty depressing way to start a new year, to be honest. It really shouldn’t be necessary to have to go around rebutting morons who want to take advantage of a global catastrophe to score cheap political points (and yes, that goes for Clare Short too). Why should it be so hard to say that everyone who is helping those affected by the tsunami - be they local people, Australian marines*, American helicopter pilots, and yes, even United Nations staff - deserve our thanks and admiration? By all means ask whether the aid effort is as effective and co-ordinated as it could be, but don’t try and tell me that some of these people aren’t actually there, helping, right now, simply because you don’t like their employer.

[Update: Tim Lambert raised similar points in comments at Tim Blair’s blog and was told by the site administrator to shut up. Good to see that the right wing blogosphere continues to encourage free and frank discussion. Secondly, I’ve fixed the link to the UN press conference.]

[Further update: Commenter ‘post-captain’ points out that there is no such thing as ‘Australian marines’. Quite right, of course - thanks, p-c. More details on the Australian military relief effort here.]