the increase in inequality -- 6/6/23

Today's selection -- from Slouching Towards Utopia by J. Bradford DeLong. The formula for economic growth that economists bequeathed to the Global South has failed to close the wealth gap, and in fact that gap has increased:
"In 1870, when the long twentieth century began, British industry stood at the leading edge of economic and technological progress, and the nation's real income per capita had reached per­haps $6,000 a year. However, that was already at least double what was found anywhere outside the charmed area of Britain (in the circle centered on Dover), its overseas settler colonies, and the United States, its ex-colony. Outside this nascent global north, our standard estimates show annual income per capita levels with a spread of a factor of five, ranging from $600 in the poorer parts of Africa to $3,000 in those European economies about to join the global north. The curve is heavily weighted toward the lower end, because China and India were then in the down-phase of the Malthusian cycle. The average per capita annual income level within the global south alone was perhaps $1,300.

"By 1911 the world had grown -- largely together. Global-south incomes were now spread by a factor of almost six, ranging from $700 to $4,000 -- with Russia, fueled by French loan capital to build its railways, in the lead. The global-south center of gravity had inched up to perhaps $1,500. That's not bad growth rnea­sured against previous eras. But the technological frontier of the global north was growing at a much faster pace.

Map showing a traditional estimation of world regions in Global North–South grouping. Red countries in this map are grouped as 'Global South,' blue countries as 'Global North.'

"Then, over the years when the global north writhed -- world war, Great Depression, world war, Cold War -- the global south diverged even more substantially, falling further behind. As the end of the Cold War neared in 1990, the United States (which by that time had replaced Britain as the leading edge of technological and economic progress) reached an average per capita income level of $35,000. That was still twice the high end of the average income range in the global south, which now stretched from $600 to $17,000, a factor of about twenty-eight. And the center of gravity of the global south was at perhaps $2,500, largely because China and India were still desperately poor. Many global-south economies had managed to take some advan­tage of technologies from the global north in their domestic pro­duction. Others had benefited substantially from enhanced and richer markets for their exports. But the results were strikingly at variance with the expectations of neoclassical, neoliberal, and neoliberal-adjacent economists like myself, who hold that dis­covery is -- or should be -- more difficult than development, that development is more difficult than deployment, and so that the world economy should 'converge' over time.

"Between 1911 and 1990 that did not happen. The opposite did: the world economy diverged to a stunning degree. 

"How to make sense of this? Economic historian Robert Allen had a checklist that countries needed to work through in order to step onto the escalator to prosperity that was post-1870 economic growth. It included having a stable, market-promoting govern­ment; building railroads, canals, and ports; chartering banks for commerce and investment; establishing systems of mass educa­tion; and imposing tariffs to protect industries and the commu­nities of engineering practice that support them, and in which their long-run comparative advantage lay. Then, in addition, there needed to be a 'Big Push' to set all the virtuous circles of economic development in motion.

"For most of the economies in the global south, it simply did not happen. They did not catch up to, or even keep pace with, the fast runners of economic growth and development. The rea­son? The pre-World War II colonial masters did next to nothing to prepare the colonized nations of Asia and Africa for indepen­dent prosperity. Before World War II, these colonizers had little interest in bringing about a Big Push to jumpstart the economies and aid the populations of their colonial subjects. Compound­ing their problems, the workers of the colonized nations of Asia and Africa faced stiff competition from the workers of extremely low-wage India and China, which hindered their ability to build the sort of middle class that could have driven demand and spurred industry.

"Similar patterns held elsewhere in the global south. Consider Latin America, which had achieved independence from Spain and Portugal early in the 1800s. Mexico, Colombia, Peru, Brazil, and the others suffered, by and large, from what one might call 'in­ternal colonialists': a landed elite privileged by property owner­ship and Iberian descent that feared an educated proletariat, loved foreign-made manufactures, and had Iberian-derived legal systems that did not mesh well with the needs of commerce and industry. 

"After World War II, the now dominant United States would not bless the aging colonial empires. The 'winds of change' would bring independence to Asia and Africa. And in one of the more bitter ironies of colonization, the false claim of a civilizing mission that had justified empires was dropped right when acting on it in fact would have made a difference. After generations of providing to the colonizers, the ex-colonized needed help. Yet back in the colonial masters' home offices there was little appetite for meeting the needs of reconstruction and financing. Instead, Britain, France, and the others withdrew bit by bit.

"Newly decolonized nations tried to follow the plan the wise men of the global north had laid out for them. Many of them began with bureaucracies and structures of government typical of the industrial north: representative parliamentary institutions, independent judiciaries, laws establishing freedom of speech and of assembly, and a formally apolitical civil service bureaucracy. The goal was to achieve typical liberal democratic politics. Power would alternate among parties somewhat to the left and some­what to the right of some sober median voter center. And, it was presumed, economic prosperity would follow.

"But it was not to be. These ex-colonized nations could build the railroads, canals, and pores. They could charter the banks for commerce and investment. They could establish educational systems and impose tariffs to nurture modern industries and the communities of engineering practice in which their long-run comparative advantage lay. But taking these steps did not auto­matically put them onto the escalator to prosperity. Something else, the Big Push, was necessary.

"In much of the global south, the political aftermath of de­colonization turned out to be a long-run disappointment. The hoped-for liberal democratic politics became rare exceptions rather than the norm. This was a problem for economic devel­opment because so much of the checklist of prosperity was pred­icated on Westminster-style parliamentary politics, independent judiciaries, and the like -- but these took root rarely and shal­lowly. The important exception was India. Elsewhere, regimes emerged that derived their authority not from electoral competi­tion among different groups, but from the army and the police, whose authority came from suppressing dissent with varying lev­els of brutality, or -- in the best case -- from populist attachment to a charismatic nation -- symbolizing reforming leader. Through­out much of the newly decolonized third world, political democ­racy collapsed with disheartening speed. One of the very first democratically-elected decolonized African political leaders to fall victim -- to be assassinated by members of his own army­ was the first prime minister of independent Nigeria, Abubakar Tafawa Balewa.

"The disheartened had been, quite likely, delusional in their optimism. There was no historical reason to suppose that repre­sentative democracy and liberal freedom would be durable in the global south, or, for that matter, in the global north. Indeed, there was recent history to suggest the opposite was true. The country of Goethe and Schiller could not maintain them, after all. The 'mother of parliaments' in Britain's Palace of Westminster took centuries to grow its procedures, gain its powers, and work its way toward a workable approximation of representative democracy.

"And the democratizing phase of the great French Revolution had lasted for less than four years. Why should anyone expect it to be different elsewhere?

"Still, even if the recently decolonized countries were unsuc­cessful in implementing political democracy and freedom, it seemed inevitable that they would reap some economic benefits. After all, the storehouse of industrial technologies that had been developed since the beginning of the Industrial Revolution was open to all. The forms of knowledge and technologies that made the global north so rich were public goods. The benefits from tapping this storehouse were enormous and had the potential to multiply the wealth of all social groups and classes -- property owners and nonproperty owners, politically powerful and po­litically powerless alike -- manyfold. It stands to reason that all developing economies ought to have experienced not just sub­stantial growth in absolute living standards and productivity lev­els in the years following their independence, but ought to have closed some of the prosperity gap vis-a-vis the world's industrial leaders.

"The global south did grow, by and large. But it did not catch up. Latin America lost a decade of development in the 1980s. As of the early 2020s, Chile and Panama are the only Latin Ameri­can countries that are better off than China, while Mexico, Costa Rica, and Brazil are China's rough equals. In Africa, only Bo­tswana. In Asia, only Japan, the Four Tigers (South Korea, Tai­wan, Hong Kong, and Singapore), Malaysia, and Thailand. The gap between China and the global north is still a factor of about 3.5 to 1. It was not all disappointing: progress in education and health was rapid and extremely heartening. But that did not hide the disappointing growth in material production.

"And Africa has fallen way, way behind: South Africa, Kenya, Zambia, Ghana, and Nigeria -- all those for which in the 1960s there were great expectations for economic development -- have fallen well short of their promise. Perhaps most discouraging, during the generation after independence, was the fall in the production and export of crops that had been the staples of Af­rican exports. As scholar Robert Bates wrote as early as the start of the 1980s, 'Palm oil in Nigeria, groundnuts in Senegal, cot­ton in Uganda, and cocoa in Ghana were once among the most prosperous industries in Africa. But in recent years, farmers of these crops have produced less, exported less, and earned less.' The only continent in which farmers still made up a plurality of the workforce was spending an ever-increasing portion of its export earnings on imported food.
"In 1950, more than half the world's population still lived in extreme poverty: at the living standard of our typical preindustrial ancestors. By 1990 it was down to a quarter. By 2010 it would be less than 12 percent. And in 1950, most of this extreme poverty was spread throughout the global south. Thereafter it would be­come concentrated in Africa, where, by 2010, some three-fifths of the world's extreme poor would reside. This concentration came as a surprise: there had been few signs back in the late colonial days of palm oil, groundnuts, cotton, and cocoa exports -- the days when Zambia was more industrialized than, and almost as rich as, Portugal -- that Africa south of the Sahara would fall fur­ther and further behind, and not just behind the global north, but behind the rest of the global south as well. From 1950 to 2000, Egypt and the other countries of North Africa grew along with the world at about 2 percent per year in average incomes. But -- to pick three countries from south of the Sahara -- Ethiopia, Ghana, and Zambia grew at only 0.3 percent per year. …
"Was the global south richer in the 1990s than it had been in 1911? Yes, much richer. Was the world more integrated in terms of trade, technology, and communication? Yes, by impressive de­grees. But was the world more unequal? Yes, vastly so." 



J. Bradford DeLong


Slouching Towards Utopia: An Economic History of the Twentieth Century


Basic Books


Copyright 2022 by J. Bradford DeLong


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