Tuesday, October 28, 2014


This post was initially made in 2007 on Lost Legacy and i reproduce it today as my contribution to a discussion on Poverty and Inequality.
This theme has been pursued on Lost Legacy since I began posting in 2005 and it is still - perhaps more so -relevant to public discussions of modern controversies (see the reception of some economists to Piketty's Capital).

Absolute Poverty is the Priority, Not Relative Opulence”

Eduardo Penalver, writing in Dot Commonweal, a Blog by the magazine’s editors and contributors (Commonweal: a review of religion, politics and culture), takes a pop at Tyler Cowen, for his column in the New York Times on ‘Inequality’.

Eduardo Penalver quotes from Tyler Cowen’s column:

The broader philosophical question is why we should worry about inequality — of any kind — much at all. Life is not a race against fellow human beings, and we should discourage people from treating it as such. Many of the rich have made the mistake of viewing their lives as a game of relative status. So why should economists promote this same zero-sum worldview? Yes, there are corporate scandals, but it remains the case that most American wealth today is produced rather than taken from other people.

What matters most is how well people are doing in absolute terms. We should continue to improve opportunities for lower-income people, but inequality as a major and chronic American problem has been overstated.”

Penalver comments:

The notion that we should only care about "how well people are doing in absolute terms" appears to be completely untethered from any plausible conception of human flourishing and its relationship to distributive justice. One reason that Catholic teachings on economic justice are so powerfully persuasive is that they are rooted in a realistic conception of human nature that rejects the unstated individualistic premises about human nature underlying Cowen's op-ed.

Cowen is surely correct that "life is not a race against fellow human beings." But neither is it the case that individual lives are hermetically sealed pursuits in which our absolute well being can even be measured in isolation from what happens to others. For starters, as Cornell economist Robert Frank has argued, most people actually care about their relative position in society -- so making someone at the top even better off than they already are by itself makes other people less well off in a real and measurable sense. 

The connection between our own well being and the well being of others does not depend just on the fact that we might be envious of the wealthy, but also on the fact that conventions of social participation are sensitive to the well being of others. Adam Smith understood, for example, that what we legitimately consider to be a necessity will depend upon our particular cultural and social context. Drawing on Smith's insight, Amartya Sen has argued that -- even for someone who accepts an objective and universal account of human flourishing -- the resources human beings need to flourish will vary from culture to culture and, within the same culture, from era to era. As societies become wealthier, what each individual needs in order to meaningfully participate in that society will also become more elaborate and expensive.”

Tyler Cowen’s point seems perfectly sensible to me. It is not, of course, the end of the matter, or the last word, but it encompasses the basic lesson of history that the creation of wealth (the annual flow of ‘necessaries, conveniences, and amusements of life’) takes priority over its distribution.

We once ‘enjoyed’ the equality of absolute and relative poverty for all, but at a very low standard of living, which included short life-pans during the 190,000 years of Homo sapiens before the agricultural revolution, 8-10,000 years ago. It is unlikely that people in that condition were reconciled to their egalitarian poverty and that none of them wished to ‘better himself’ (a powerful human motive said Smith, and with us 'from the cradle to the grave’).

Yes, I know that even living standards dropped too over this period from 10,000 years ago at first, to which population pressures on the hunting mode of production contributed, the struggle to recover from the most recent ice age, and also that much of the agricultural systems in the near East, India, China and, eventually, South America a millennium or so ago, were characterized by ‘tyrannies’ of frightful dimensions.

It was only after what Adam Smith called the fourth age of man, the age of commerce appeared, that the march from subsistence agriculture to the opulence of manufacturing markets was initiated about 2-3 millennia ago, but this was interrupted catastrophically from the fall of Rome (5th century) until its very slow and gradual revival in Western Europe (14th century). Interestingly, China, on the verge of the first breakthrough to modernity in the 14th century fumbled the pass by self-inflicted nutty policies of withdrawing from international contact with ‘barbarians’, about the time that Western sea power was reaching towards the Americas. 

China did not get ‘moving’ again until in the 20th century. Even then it took another ‘nutty’’ detour, until it began dismantling its state-run communist economy, to ‘open up’ to the world, which its leaders six centuries earlier had closed at precisely the time when China and its technology might have been the leading industrialized nation in the world for several centuries.

Countries can set the world back for centuries by false policies; a threat that is of concern in the current alliance of anti-globalists and the nuttier waves of the climate change catastrophists (many of whom don’t like capitalism or markets, either).

In this context, Tyler Cowen’s points are reasonable. Not for Eduardo Penalver. He writes:

For starters, as Cornell economist Robert Frank has argued, most people actually care about their relative position in society -- so making someone at the top even better off than they already are by itself makes other people less well off in a real and measurable sense.”

The fact is that ‘most people’ see their relative position as more significant than their absolute position (the zero sum view – what the rich gain; the poor lose, a wholly rhetorical device based on envy – not one of the Catholic virtues, nor Adam Smith’s) and this is not an argument that strikes Cowen’s statement at all. Tyler is talking about priorities; inequality is a price of market driven development, against which attempts at inducing equality by restricting markets have been shown to reduce wealth for all; it does not just redistribute it from rich to poor. Wealth is a flow, not a stock; slow down the flow and you eventually rundown the stock, of which archeology presents many examples. 

Smith wrote extensively in Moral Sentiments about envy and the adoration of the ‘rich’ (known as ‘celebrity’ obsession today). Most people do not sit pining for the lives of the rich, but they do care deeply about being relatively poor compared to their peers and this operates within the meanest ghetto and the plushest suburbs. It is already at work among kids in the smallest school playground ‘gang’ too; in any car park; in any club; in any student common room - anywhere in fact where people mix, work or socialize, including within the family (especially when older siblings look at what their parent’s rising incomes mean for the life-styles of young siblings compared to what they experienced a few years earlier at the same age. Inequality across class divides is nowhere as painful as inequality with one’s peers. 

It is estimated that Mao’s redistribution horrors killed 30 million peasants families from starvation, and it happened without a free press and media to report the facts on the country’s tv screens. A calamity on a tiny fraction of that scale would have been shown widely each night and it would have rocked the government if anything similar had happened in the US or Europe (the Chinese people didn’t have many tvs anyway). Compare how a few deaths on a bad day in Iraq damage the President’s standing in US polls with the adulation for mass murder by Mao in China not so long ago.

Amartya Sen also points out in ‘Freedom as Development’(Oxford UP) that some minority sections of the poor in the US have shorter life spans than people in Kerala, India; a sobering point worthy of notice by those who are extreme in their complacent acceptance of satisfaction with US progress. But this problem is more likely to be solved by US wealth than it is by impoverishing the ultra rich. You don’t raise anybody’s life spans by reducing everybody else’s; and, anyway, the deprived ghetto youth cares most about the shoes or the swagger of next door’s resident than about the glitter of Holywood ‘stars’.

Development can take centuries, whatever the emotional pain of ‘make poverty history’ campaigners whose target is measured in weeks or months. Poverty, above all others, is the most common experience of the history of the human species. Wealth is relatively recent history – a mere two centuries out of the two thousand centuries or so that we have been around since our predecessor’s speciation from the Hominids – poverty [has been] the norm is the iron rule of human society, but we are now on the verge of general opulence. 

We would be advised to deal with relatively minor poverty and longevity problems in the US with great care and circumspection, so that there is sufficient momentum for economic growth around the world to raise the overwhelming, and, dare I say, absolute majority of the 6 billion people on the planet from abject, crippling, destructive and appalling poverty that is their lot, as it was the lot for all our predecessors long before the priests, rabbis, sun gods and assorted mystics pontificated about ‘falls’ from mythical Eden gardens of the past, and ‘certain hopes’ of mythical heavens after death. Abolishing absolute poverty for the up to four or five billion outside the USA, Europe, parts of Asia, etc., takes precedence over the relatively minor incidences of it in the (skewed) 'rich' economies.

Humanity’s salvation from absolute poverty is now happening here for approaching a billion out of six billion; that’s several billion to go and counting. That is the absolute, most important target first. Relative opulence is the spur to eliminating absolute poverty. 

[Read the article by Eduardo Pemalver at:

Comment (27 October 2014)

Contributions are invited from readers on the above thesis.  I shall make space for those that are without abuse and vitriol.


Blogger eric said...

I agree that absolute poverty is more important than the inequality that has been increasing in the US over the past decades. But you seem to imply that increasing inequality is somehow going to help us reduce the absolute poverty, and that reducing US inequality (by modest and moderate means such as raising marginal tax rates or having a real national health care system such as those found in other developed countries) will somehow stymie efforts to reduce absolute poverty. These notions seem highly dubious to me, and you don't really make an argument for them.

2:22 am  
Blogger Gavin Kennedy said...

Thank you for your excellent observation.
I have only addressed part of the problem in stating the goal - reducing absolute poverty - rather than diverting efforts into eliminating/ reducing inequality. You are right to chastise me for that.
I would argue that the focus on inequality is diversionary. Whether it increases or falls does not per se affect absolute poverty, nor does it really tackle relative poverty.
I live in Scotland, not the USA, and we enjoy a National Health Service, paid for by taxation and National Insurance. It certainly alleviates some of the affects of poverty, and in my twilight years I have many reasons for being thankful for it.
Adam Smith and others made the fundamental point that production of products (be it light hunting tools, or digging and carcass-stripping stone tools and fire, shelter and so on) reduced quite dramatically the absolute poverty of early humans compared to other animals. Their egalitariam social arrangements rested on their production, which began slowly to raise per capita incomes of necessaries for human social life, which while historically unprecedented, still operated in absolute poverty and they were still aeons away from the extraordinary wealth (measured in products) today (as remaining hunting societies exemplify today).
I shall elaborate on these ideas in main posts in due course, but meanwhile, if you ask questions, I shall be delighted to develop my theses in response to your questions.

3:38 pm  
Blogger Thornton Hall said...

Your comments are... I don't know... silly.

Either we march forward with the priority of overall wealth creation or we suffer the Maoist Great Leap Forward? C'mon.

You acknowledge that human well-being is not measured by GDP, right?

If someone observes the empirical fact that once necessities are taken care of, human beings care about relative wealth, what do you say?

Humans are wrong?

9:28 pm  
Blogger Gavin Kennedy said...

Thank you for your comments.
I like your contrasts, though I do not concur that they address my, admittedly sketchy statements so far. I have not written a thoroughly stated point of view, so far and intend to do so in future.
In so far as we recognise the role of overall ‘wealth creation’, as Adam Smith defined it - the production by the labour (toil) of human kind of the “necessaries” of subsistence, initially of food for sustenance, shelter from the elements, tools (wood and stone), hunting, protection, and searching amidst Nature for its bounties, the creation of language and meaning, and social culture, broadly definined, then we can agree that these were the initial priorities of human kind that difrerentiated our predecessors from other animals.
It also took a very long time from the early proto-human species a million plus year ago to the singular triumph of the human sapien species. Labour and toil were and are the foundation of human societies. But it is an ‘empirical fact’ that ‘enough’ wealth creation is a much more complicated question, for which there is not enough space for an adequate answer in a Comment.
Briefly, how much ‘necesities' are enough? As humans have differentiated their answers to that question, many millennia has passed. Poverty, however, is precisely evidence that there is still a long ways to go before ‘enough’ is answerable. Moreover, poverty in necessities is present at all levels of output through all levels of existing ‘GDP’ (if we are allowed to give that ‘measure’ for all levels of human societies on Earth even now, let alone during our long past.
At which precise point “human beings care about relative wealth” is discussable; anthropologists express views on this (so do archeologists), right up to some modern economies where subsistence, if for relative minorities, is supplemented by what Smith called ‘conveniences’ and ‘amusements’ (Wealth of Nations). As market economies emerged, the relative abundance of necessities became unequally available. As did ‘conveniences’, and a long way behind, ‘amusements’ (if only second/third hand, eg., King James bed!).
My priority is to address the deficiency of the distributions of ‘necessities’ and ‘conveniences’ which can only come from applying more labour, not by attempting transfers from the rich towards the poor. That shortcut is not realistically available and when tried it severely damages ‘wealth creation’, as evidenced from the deep history and recent history of attempts to do so. While ‘Mao’s great leap’ starkly reveals the poisoned chalice you may dismiss my considered argument, but I suggest you look at Venezuela today and Cuba recently, and also note that Maoist mass famines affected the poorest in China and China’s dissaffected upper echolons, but not the Maoist ‘true believers’.
Lastly, I believe people worry less about relative poverty than their absolute poverty, evidenced in attempted movements of absolutely poor people from outside Europe and the USA who are willing to risk everything to join the relatively poor people in these richer geographical regions. Therefore, I am morally concerned with absolute poverty than I am with the top 1%, who may deserve the contempt they attract but they are not the real essence of the problem.

4:34 pm  
Blogger Thornton Hall said...

I think everyone would agree, don't do the Mao thing.

Nonetheless, in the United States, the people who buy assets keep getting more and more rich.

The people who buy goods and services have seen their incomes stagnate and fall.

This means that assets get bid up into bubbles, but companies have no reason to invest.

Inequality causes secular stagnation and therefore limits growth.

9:40 pm  
Blogger Gavin Kennedy said...

Thornton Hall
Asset holders may borrow against their assets provided they pay to their creditors their charges for borrowing. In asset booms they appear in today's measures ‘more wealthy’ and more credit ‘worthy’. In so far as they buy goods and services they also enhance/maintain employment of non-asset holders who supports the production of necessaries, conveniences, and amusements, that is real annual ‘wealth’ in Smith’s political economy.
For that proportion of the population producing goods and services, their incomes may continue, fall, even stagnate, across the relative incomes scale. For those at the very bottom of the scale, their absolute poverty may worsen, though it may remain relatively less worse than the poor living in absolute poverty in the poorest economies.
Inequality does not cause stagnation; it has always existed as a human condition through all its episodes; inflating asset booms are
and a short term asset/money event, usually ending in tears when the economy adjusts.
Economies that intend to reduce/eliminate inequality have to focus on raising productive employment using current government sector income to re-distribute expenditures to radicalised education provision targetted on the unskilled, ‘drop-out’ sectors of the otherwise unemployable population, and targetted sectors of the economy. This can be done by shifting resources fromthe current government sectors that presently are tagetted on, for example, ‘world defence’ (UK ‘end of empire’ ambitions) and ‘taking sides’ in foreign country civil war roles, and so on.
Poverty is more important than inequality.

3:23 pm  

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