Home > Uncategorized > The poverty of mainstream development economics

The poverty of mainstream development economics

from: David Ruccio

It’s as if nothing has changed in the history of failures of mainstream development economics in the postwar period.

The latest episode is the current debate between Amartya Sen and Jagdish Bhagwati, which rehearses once again the false choice between redistribution and growth, or between government programs and free markets. The fact is, we’ve seen plenty of government programs (including spending on health and education) and plenty of experiments in free markets (including in India)—and a large portion of the world’s population (especially in India) remains in poverty.

Perhaps it’s time, then, to try something new. A new kind of analysis. And a new set of policies. Starting, as I have argued before, with a redistribution of assets. Unfortunately, that’s an option that is never even mentioned by either Sen or Bhagwati—or, for that matter, by anyone else in the mainstream debate about economic development.

  1. August 29, 2013 at 3:04 pm

    Could not agree more on this…

  2. Allen Edwards
    August 29, 2013 at 4:57 pm

    Perhaps it’s time for “Imagining a New Politics of the Commons,” in which predistribution* plays a major role ( http://onthecommons.org/imagining-new-politics-commons ).

    * And let’s not let the status quo-ers steal this concept by re-framing it.

    • Allen Edwards
      August 29, 2013 at 5:16 pm

      P.S. Full recognition of the enormous economic contribution made by the commons–natural and human-made–would yield a far more equal distribution of wealth and income than that under the tunnel-visioned “free market” view that now prevails.

      _Capitalism 3.0_, a reformer’s defense of capitalism by Peter Barnes, and _Unjust Deserts_, by Gar Alperovitz and Lew Daly, are two relevant books.

  3. August 29, 2013 at 5:53 pm

    “Free markets” are a mirage, a simple artifact of ideological assumptions and a dangerous myth. There are no free markets, they are all dominated by large transnational corporations given free and total control over productive, financial and commercial transactions. Under neoliberal ideology and practices markets become free from governmental control only to become prey to absolute corporate control and tyranny.

  4. Ken Zimmerman
    August 29, 2013 at 9:43 pm

    David, a thought experiment. What would be the result of the following actions.
    1. You are relaxing at home.
    2. Knock on the door; it’s the Sheriff.
    3. He serves a paper on you which requires you to move out of your residence, as living in that place has been awarded to another family.

    Results …?

    Whenever folks such as yourself talk of “redistribution of assets” this scenario is what pops into the minds of many Americans. Do these Americans have it right, or not? This whole path is littered with so many land mines they’re likely beyond enumeration.

    But your points on the Sen/Bhagwati debate are generally valid. In narrowly construed particular cases it is sometimes possible to draw a bright line between free markets (and yes they are not free) and government programs. In most instances that is not possible, as the two constantly overlap and intermingle with one another. A common example that happens everyday is government programs using markets to acquire supplies, deliver services, or find staffing. Today this mix applies to virtually every government program. Going the other way no energy producer I know would voluntarily end safety and environmental regulations applicable to them or the agencies that enforce these. The regulations and regulators provide formulas and protocols for conducing business that would cost billions for the companies to replicate. Even with butting heads and attempts by companies to capture regulators and by regulators to blackmail companies, no one believes seriously the partnership should end. As one Exxon VP said to me, “You think we’re crazy? We’re not!” This is a “how many angels can dance on the head of pin” debate. It’s a waste of time,

    • Paul Schächterle
      August 30, 2013 at 12:30 am

      It is remarkable that in a lot of discussions (in the US anyway) the term “redistribution of property” is mentally linked to taking someone’s personal things away.
      In Europe, I would say, everybody knows that property is constantly redistributed in some way, for example by taxation or certain public social service fees. Or a more obvious case of redistribution would be a land reform. And, of course, the term property refers to large fortunes, certainly not a self-used residences or a small-scale enterprises.
      What is funny, or maybe not so funny, is that the scenario in your thought experiment is more or less what happened to a lot of poor people due to a lack of redistribution (low taxes for the rich combined with tax evasion), low wages and lack of financial regulation: they got evicted in the wake of the debt crisis.

      • Ken Zimmerman
        August 30, 2013 at 1:35 am

        Paul, I went just a bit beyond the gedankensexperiment. I sent the part of your post about income redistribution to a colleague in Texas I worked with for over 20 years. His response (somewhat cleaned up) is, “Another GD F**king slimy liberal wanting to take what I worked most of my life for. F**k him.” You may be correct that he should know the difference. But for my friend you’re in the same category as JPMorgan-Chase that ripped off most of his retirement money.

    • August 30, 2013 at 4:59 am

      These hypothetical Americans have it wrong.

      In the first place, assets means, or should mean, land. The land that most people’s homes stand upon is of little value.

      In the second place, the ownership of land is highly skewed. 5% owning 95% of the land, reckoned BY ITS VALUE, is typical. Only a few countries like Sweden are significant exceptions, and it notices, not least in Sweden.

      In the third place, what needs to be redistributed is not the formal ownership of the land, which is just a title in the form of a piece of paper or computer database entry, but the stream of wealth that the title gives claim to ie its rental stream. This can and should be collected as public revenue. Governments could then start to phase out those systems of legalised robbery which pass for contemporary tax systems.

  5. Paul Schächterle
    August 30, 2013 at 8:50 am

    Ken Zimmerman :
    […] “Another GD F**king slimy liberal wanting to take what I worked most of my life for. F**k him.” […]

    Is that supposed to be an argument or just an argument? ;)
    American conservatives and to a certain extent european market-liberals simply ignore the extent of inequality. They also ignore that a lot of huge fortunes are inherited and/or based on inherited conditions. Also american conservatives insinuate that “hard worked income” is about to be taken away while at least 35% of all incomes are capital incomes and “liberals” (american terminology) primarily want to tax the super wealthy. I say at least 35% because a lot of wealth held “off-shore” to evade taxes and sucks up the money not via interest payment but via “license fees” and the like.
    The basic mindset of conservatives is that any distribution of property is “just” and “earned” no matter how excessively rich the upper class is and how poor workers are and how much unemployment exists. Of course conservatives also think that the unemployed are responsible for their unemployment, just like they think any contract is based on “free will” — if you don’t want it, don’t sign it (you might have to starve, though). They just don’t get the notion of a social (i.e. societal, i.e. not individual) problem.

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