Our Word is Our Weapon

Reader Paul Staines (of ‘Global Growth Org‘) has been lecturing me on my manners - apparently my ‘abusive’ tone is dragging down the standard of online discussion. Problem is, I don’t think I feel like taking lessons in manners from someone who, in his other guise as crap blogger Guido Fawkes, got drunk with some other overgrown school-boy and recorded a ‘podcast’ in which they said that Mark Oaten was ‘definitely gay’ and then insinuated that he’s a paedophile. Cos it’s basically the same thing, isn’t it?

So far, so screamingly unfunny, but what was really hilarious was that Paul/Guido then attempted to claim credit for the News of the World’s outing of Oaten as having visited a male prostitute. He also attempted to justify it all by calling Oaten a hypocrite for, er, saying something sensible about prostitution. Yeah, he really deserved to be taken down a notch for that.

It’s fairly common knowledge that Paul = Guido, so if he wanted to keep secret his other role as a puerile muck-raker, he’s not doing a very good job. But if so he should have done a better job of covering his tracks. Not having the same telephone and fax number (oh and IP address) as Guido might have helped.

So no, I don’t think I’ll be heeding Paul’s advice. To be honest, I’m not sure I’ve given this hypocritical, homophobic fuckwit enough abuse.

This Telegraph story raised a chuckle:

Britain’s home-owners are £550 a year worse off than a decade ago because of Labour’s tax policies, according to new figures.

Ten years ago, people owning their own properties received £2.6 billion in help from the Government in terms of income support and mortgage interest tax relief.

Now, home-owners are net contributors to the Treasury, paying £7.5 billion in inheritance tax and stamp duty. The £10 billion a year change, averaged over the number of Britain’s homeowners, comes out as a £550 burden that did not exist 10 years ago.

You know, I’m not sure it’s quite right to count the abolition of mortgage interest tax relief as an ‘increased burden’ - abolishing this expensive bung to the middle classes was one of Gordon Brown’s better moves, and if home owners are now net contributors to the public purse, that’s as it should be.

What the article somehow fails to mention is that personal housing wealth in the UK has more than doubled since 1997, an astonishing increase in wealth for those lucky enough to have benefited, mainly those who were already doing just fine.

This growth in inequality of housing wealth has amplified and entrenched existing inequalities, giving those children clever enough to choose the right parents a massive and entirely undeserved head-start in life over everyone else. As Bethan Thomas and Danny Dorling say, “For children born into families with low housing wealth or none at all, there will be large parts of the country to which they cannot consider moving in the future. This geographical immobility will affect children’s life chances and will impact on Britain’s economic well-being.”

In that context, I’m not sure we’re milking home-owners enough. Stamp duty is probably not the best way to do it, though - I’d prefer to see a more progressive inheritance tax (higher threshold, more rates, higher top rate) and maybe even a nice capital gains tax on primary residences. The resulting Telegraph editorials alone would make it worthwhile.

Update: this post originally said that the Globalisation Institute blocked a dissenting comment of mine on their criticism of Make Poverty History. That comment subsequently appeared, so I’m happy to withdraw my post.

When Heather Stewart of the Observer describes the UK government’s enthusiasm for “the free-trade, high-growth model which has seen the Asian Tigers, China and India burst onto the global market place in the past 20 years”, she neglects to mention that while all of those countries have enjoyed high growth, none of them (unless you count Hong Kong) have used free trade. This is well-known to those familiar with the historical record, but apparently that doesn’t include the UK government or the Observer.

Over at the Globalisation Institute, Alex Singleton outlines his vision of an “intellectual revolution in international development“. Naturally, he sees himself at the forefront of this revolution, but what’s it all about? Actually, there’s not much to it. Alex thinks that micro-credit schemes are just great, and believes that these and other discoveries about the importance of enterprise-based development should be used to “turn development policies upside down”, starting at the Department for International Development, which is still far too fond of nasty old “top-down” government aid.

I’m not sure if Alex realises this, but DFID seem to be quite keen on micro-credit and other enterprise-based schemes. They just don’t buy into the notion that there is an inherent contradiction between supporting both the private and public sectors. After all, the lesson of history (from Britain in the more distant past to South Korea in the 20th Century to China, India and Vietnam today) is that a strong and effective public sector goes hand in hand with a healthy private sector - clearly, they are not mutually exclusive but mutually supportive. How can you be in favour of micro-lending to African enterprises but against funding the roads they need to get their goods to markets? As Owen Barder writes in response to Alex’s post,

This top-down investment is used to vaccinate children, support scientific research into new crops, build roads, schools, wells and hospitals, reform customs, remove import tarrifs, liberalise telecomms, support teacher training, fight AIDS, tackle corruption, meet the costs of free and fair elections, provide safe drinking water - all things, in fact, that it is necessary for a society to do to enable enterprise and free markets to flourish.

Alex’s opposition to any and all ‘top-down’ policies seems to stem not from any real examination of the historical record or current practice, but from sheer ideological antipathy to the idea of government. That’s why, when Owen asks

Is there evidence that supporting NGOs and small businesses is a more effective use of aid than providing aid to governments?

I fear he is being naive. Can we be sure that the Globalisation Institute cares about the evidence on aid? After all, they have ignored the stacks of evidence pointing out that it is good for growth and human development, and their own contribution to the debate is this risibly flawed hack-job.

So the track record is not encouraging. But that said, some recent signs give cause for hope. For one thing, the Globalisation Institute has actually taken the massive step of allowing readers to comment on its posts! For another, Alex seems to have the admirable capacity to change his mind on important topics when he turns out to be completely wrong - for example, on DDT and fair trade. I look forward to the day when he realises that supporting African enterprise doesn’t mean you have to oppose ‘top-down’ investment too.

One last point. Alex says that “free marketeers have failed to influence the public debate” on development. But free-marketeers had a great deal of influence over development policy during the 1980s and 1990s, particularly when it came to the structural adjustment policies which highly indebted poor countries were required to implement. Of course, we all know how succesful that was - structural adjustment did not seem to help, and in fact many of the victimspatients actually regressed. So the reason free-marketeers (of the right-wing variety, I suppose I should stress) have failed to influence the public debate on development is that their ideas have failed.

Dani Rodrik’s presentation from his November talk at the LSE is available here.

He makes quite a few good points, for example pointing out that the countries identified by the World Bank as “star globalizers” of the 1990s - China, India, Vietnam, and Uganda - seem to have thrived while ignoring the ‘rules’ of trade liberalisation ’suggested’ by the World Bank for structural adjustment in Latin America and Sub-Saharan Africa, two areas which broadly did not see anything like the same benefits. And he’s strong on how important domestic institutions are for development but also how diverse developmentally succesful institutions have been (China being an excellent example).

But I suppose the most interesting part is his “10 reforms that would make the world more conducive to development”. These are:

1. A temporary work permit scheme that allows workers from developing nations to spend 3-5 years in the advanced countries. (Revolving pool of workers; low and high skill; return important)

2. A multilateral agreement that bans the subsidization of DFI. (The only significant form of industrial policy that (a) is not banned; and (b) clearly transfers resources from developing to developed countries.)

3. A “development box” in the WTO that legitimizes the use of trade and industrial incentives (including export subsidies) for developmental purposes (with burden of proof on those that argue the intervention is not developmental.)

4. Willingness to share information with LDC governments on Northern bank accounts held by LDC residents.

5. A 0.10% financial transaction tax on foreign currency transactions, with proceeds spent on global public goods.

6. A recognition by the US, in particular, that prudential restrictions on capital flows (“capital account management”) in the developing world is an integral part of a development agenda.

7. Adoption of the “odious debt” notion, whereby debt contracts signed by oppressive regimes are no longer enforceable in Northern courts.

8. Preparation of a “developmental impact statement” as a necessary requirement for any international agreement (including the costing out of the financial implications for LDCs, and laying out the modalities of how these will be financed).

9. Ending the monopoly of the World Bank in generating and disseminating policy ideas, particularly in the lowest income countries, by breaking it up into a number of competing agencies.

10. Moving the IMF’s Policy Development and Review (PDR) Department (and its staff) to a developing country, and rotating it in, say, among different African capitals every five years.

These all seem reasonable and achievable to me. As a bit of a trade wonk, I’m particularly interested in point three on the ‘development box’. I’ve long been concerned that WTO agreements (not to mention structural adjustment recipes) discourage or even outlaw the kind of unorthodox trade policies that served Asian success stories like South Korea and Taiwan so well.

For example, Alice Amsden pointed out (as summarised here by Brandon Wu) that “the Korean government actually coerced firms into increasing their exports, to the point that in 1976, 53% of firms surveyed said that export targets were hurting them! In return, though, the government effectively subsidized this demand by inflating domestic profits through trade barriers on imports”.

And no, I’m not saying this is a sure-fire way for every poor country to attain untold riches, just that it is one way that worked (in combination with various other factors) in the past but which is increasingly difficult in the current environment.