Inequity case study: Haiti

I read something in The New York Times about a week ago that very succinctly explained what I couldn't in my last Haiti post or my mini-lecture at the GSS meeting last week. Aggravatingly I now can't find it online; it was called "Some Straight Talk About Haiti" or something to that effect and ran last Thursday on the editorial page. It did a pretty good job of providing historical reasons for Haiti's poverty (apparently, it wasn't because of a deal with the devil). As we have established, Haiti is one of the poorest and least developed countries in the world. The nation ranks 149 (of 182) on the Human Development Index, 80% live below the poverty line, 50% are illiterate, and there's a major brain drain: 80% of college graduates emigrate. The Haitian gourde exchange rate with the United States dollar is less than 40 to 1. Child slavery is a punishing reality-- shocking for a North American country-- and the top 1% own 50% of the wealth. And like any similarly poor nation, it is incredibly corrupt. OK, got it-- Haiti is an "economic basket case" and has been since long before January 12. What happened??

According to the phantom NYT piece, a lot of it has to do with the French. Haiti was a French colony from 1697 until 1804, when a slave uprising defeated the French army and claimed sovereignty. (Yes: an uprising consisting of a bunch of malnourished, disease-ridden slaves managed to drive out Napoleon's forces. Insert your own French military jokes here.) In 1825, France decided it wanted some compensation for recognizing Haitian independence and thus giving up a slave colony. Upon threat of war, France demanded 150 million francs ($21 billion USD, ca. 2006) in what I will call "reverse reparations." Haiti negotiated them down to 90M and then 60M, which when you think about it is pretty slick, but was still way more than they could afford. The new Haitian government took out loans from the U.S., Germany, and France itself, and finally managed to pay off the 1825 demand and enormous interest in 1947. Unfortunately during that time it wound up mired in a lot more debt of various types, and thanks to a series of dictatorships it had not developed at all since the French were forced out. Debt remains its central problem, or it did until the earthquake hit and shifted everyone's attention to the humanitarian crisis.

U.S. groups have been calling for the cancellation of Haiti's debt for years, and the World Bank relieved it of $1.2B worth in September '09. This left $800M, which many are calling for the alleviation of in light of the earthquake. My guess is that it will happen.

Haiti is a case study is how countries get to be poor, and I think it's safe to extrapolate its story to at least several other very poor nations. Colonialism is a major part of why countries are poor today, and I expect it to be a recurring theme in both the books I report on and the individual countries I study. And yes, there will be more, though given its topicality, my main focus will be Haiti, at least for the time being. I will next look into what kept it from organizing after gaining independence and establishing a functional government that actually had a plan for development. After all, the U.S. was a bunch of colonies once too.

Globalization and income disparity: intrinsically related

Amartya Sen writes in "How to Judge Globalism" (published in The Globalization Reader, Frank J. Lechner and John Boli, ed.) that globalization is tied to income inequality in this century, but may also present a way to start fixing it. Sen discusses two opposing views of globalization: as "a gift from the West to the world" that benefits all other nations by introducing them to economic policies that increase standard of living; and as a form of Western imperialism that subjugates other cultures, forcing them to bend to alien norms. Under both interpretations, the West benefits, but only under the former do the poorer nations. Sen suggests that given globalization's reality and permanence, it is something that will have to become mutually beneficial for both rich and poor nations. But does that distinction ever go away? Should it? And will it be because of or in spite of globalism?

Sen says that "global capitalism is much more concerned with expanding the domain of market relations than with, say, establishing democracy, expanding elementary education, or enhancing the social opportunities of society's underdogs." Perhaps, but a rich country is a lot more likely to have those things occur as "side effects" than a poor one. However, she (he?) also asserts that globalization is not an effective mechanism for capitalizing poor countries, and doesn't lead to prosperity, so the point is kind of moot.

The main relevant thing about this article was that the author basically says that globalization is here to stay but there needs to be some mechanism that allows the poor to get what they need. "Globalization deserves a reasoned defense, but it also needs reform." It would be interesting if someone could provide that, wouldn't it, Mr. (Ms.?) Sen? I guess that's my job.

Haiti

The earthquake that struck 16 miles outside Port-au-Prince, Haiti, on January 12, caused catastrophic destruction and death tolls that have been estimated as high as 200,000. Its aftermath could be a case study in the harms of income inequality. Haiti, the poorest country in the Western hemisphere and 149th of 182 nations in terms of Human Development Index, was utterly unprepared for a natural disaster like this one and as such the results were devastating. Haiti's construction standards are low; it doesn't have building codes, and engineers have warned for years that most Haitian homes and other buildings do not have the structural integrity to withstand an earthquake in the tectonically-active Caribbean. Haiti was also unprepared for the first wave of aid that arrived in the aftermath; the first few planes containing emergency supplies were trapped at the only major airport, as there was insufficient fuel to get them off the ground, preventing other shipments from arriving. Again, this is directly attributable to Haiti's poverty. The question is, to what is Haiti's poverty attributable? While some of the more general research I do will provide answers to that question, for the time being I will be doing research on Haiti in particular, since this tragedy has so effectively demonstrated the true cost of income disparity. Expect further updates on this topic on both the information that develops and the background circumstances that led up to the nation's paralysis in the face of disaster.

In the meantime, please make a donation online to the earthquake relief fund managed by Yele Haiti, the foundation run by Haitian-American musician Wyclef Jean, or attend one of USM's bake sales next week, all proceeds of which go towards relief for the Haitian people.

Capitalism, globalization, and income inequity

Thomas L. Friedman's definitive crash course on globalization, The Lexus and the Olive Tree, claims that since the end of the Cold War, the free market system idealized during the administration of Ronald Reagan in the United States and the concurrent premiership of Margaret Thatcher in the United Kingdom has been applied as a "Golden Straitjacket" to virtually every country around the world (with a few notable exceptions). He notes that the ubiquity of economic liberalism has resulted in economic growth but fewer political choices. Political parties, of which there are usually only two of any relevance anymore, tend to only offer slightly different permutations of the same system as "opposing ideologies." He points out that in 1996, Paddy Ashdown of the U.K. Liberal Party accused Labour PM candidate Tony Blair and incumbent Conservative PM John Major of engaging in "synchronized swimming." I might add that consumer advocate and perennial U.S. presidential candidate Ralph Nader similarly called 2000 presidential rivals Al Gore and George W. Bush "Tweedledum and Tweedledee." Gore, the Democratic candidate, filled his partisan hole as the ostensible left-winger, when in fact he was a centrist Southerner (by U.S. standards, which are different-- more on that shortly). Bush, the winner of the election, ran as a Reaganite compassionate conservative on a noninterventionist foreign policy; his presidency saw the launch of two major foreign wars and a domestic policy described by the libertarian publication Reason as "disaster socialism." What do these labels mean?

If you'll grant me the liberty to go off on a small tangent, I'll demonstrate that the answer to that is "not much." Look no further than our current president. Barack Obama is the scapegoat of what we will call for simplicity's sake the far right. (It's not actually that "far"-- at least, not far away from anyone else.) He has been described widely as a socialist by them, and even by some as a "radical Communist." In fact, President Obama is right of center on both economic and social issues according to objective measures. This is, of course, compared to the whole political spectrum, which is more liberal in, say, Europe than it is here, and Obama is indeed quite liberal for an American politician. He is not very liberal among the American people; for example, he opposes single-payer health care and gay marriage, both of which receive considerable support among citizens. (Not a majority, though: Obama supported both as an Illinois state legislator; presidential politics can change a man.)

My point: Friedman is correct in his assertion that modern politics are very narrow. Obama, a center-right politician, is called a socialist; this is one consequence of a free-market society. Almost all mainstream American politicians are right of center on economics and social issues because they are free marketers; everyone is. Obama is just less to the right than many.

This is what makes the Golden Straitjacket a straitjacket-- it restricts national politics to a very precise and narrow economic ideology (the golden comes from the prosperity that free market economics brings). Friedman positions it as an inevitability even for totalitarian countries like North Korea and impoverished ones like Sudan. Obviously the concern of this blog is with the latter and countries like it. So why is it that these countries have not adopted the Golden Straitjacket? Why are the desperately poor seemingly the last holdouts from a system that guarantees prosperity? Are they enjoying the status quo?

This blog has not yet put forth many of the sobering facts of income disparity so far, and this seems as good a place as any to start. Ready? The Big Five billionaires-- Microsoft's Bill Gates (U.S.), Berkshire Hathaway's Warren Buffett (U.S.), Telmex's Carlos Slim Helu (Mexico), Oracle's Lawrence Ellison (U.S.), and IKEA's Ingvar Kamprad (Sweden)-- are collectively wealthier than the poorest 10% of the world combined (that's 670 million people, more than twice the population of the United States. If they all made the average income of a U.S. citizen, they would have 125 times more than those five combined). That is not in spite of globalization. It's because of it. As other nations adopt free market principles, the labor starts spreading thin. Powerful, established corporations like Microsoft outsource jobs to poor countries (not ones that are so poor that they lack infrastructure, like anywhere in sub-Saharan Africa; let's use the common example of India), where competition for labor is fervent but standards of living are already low. People thus compete for a pittance in a market similar structurally to our own, where people compete to justify the Jag convertible or the little place in Aspen. (I realize this is not an entirely fair example, and it should go without saying that poverty remains a pervasive problem in the United States. Let's be honest with ourselves here, though: it's easier to get rich in this country than in the Congo.) The adoption of free markets in poor countries has allowed corporations to game the system even easier than they did when it was isolated to the U.S. and Europe. But free markets are obviously a necessity; we've established throughout history that capitalism is, in the words of P.J. O'Rourke, "the worst economic system anyone ever invented, except for all the others." So how can we reconcile free markets with a world in which people in poor countries actually have the ability to fairly compete? How do we eliminate that gap, torn open wide by globalization, without resorting to some clearly unfeasible form of global socialism?

Well, that's the $64,000 question.

The Rise of the Rest? Not likely

University of Singapore Dean Kishore Mahbubani's "The Case Against the West" is a stammering, often contradictory adaptation from his 2008 book, The New Asian Hemisphere: The Irresistible Shift of Global Power to the East, whose vitriolic Bush-era anti-Americanism/anti-Westernism is steeped in statements of the obvious ("The invasion and occupation of Iraq... was a multidimensional error"), broad generalizations coupled with vague language ("In all its analyses of global challenges, the West assumes that it is the source of the solutions to the world's key problems... this reflects a deeper structural problem: the West's inability to see that the world has entered a new era"), and outlandish predictions of Western decline based on questionable analysis. The accusations leveled at the West by Mr. Mahbubani run the gamut from the sublimely unconvincing (that the U.S. violated its own Nuclear Non-Proliferation Treaty by participating in a Cold War arms race with the U.S.S.R.; unmentioned is the fact that the U.S. has since disarmed over 13,000 weapons and currently has a stockpile containing less than a quarter of the weapons that it harbored during the 80s) to the patently ridiculous (that "Western officials have not abandoned the old assumption that an army of Christian soldiers can successfully invade, occupy, and transform an Islamic society," a statement that approaches the truth only if the words "Western officials" are replaced with "Ann Coulter") to the literally incoherent (that Asian countries have made progress that exceeds the ability of the West to keep up by emulating Western principles; that former U.S. Vice President Al Gore's Nobel Peace Prize is the last word on the threat posed by global warming and is indicative of proof that the U.S. is not doing enough to combat it). Most puzzling to me was the surprised anger Mr. Mahbubani expresses at the notion that the U.S. and Europe would dare to roll back economic practices (free trade) that have started to trend negatively for their economies, despite Eastern countries not yet being ready to take over as economic leaders. The West's greedy capitalists being accountable to the health of their own economies? Unthinkable! Oddly Mahbubani blames the West for not taking stewardship of the global economy (sort of a global application of a controlled economy, or arguably socialism) while simultaneously criticizing it for ending its push for trade liberalization (a global application of capitalism)-- all the while claiming that China is strong now and doesn't need the West anyhow.

That is Mr. Mahbubani's thesis: that Asian countries are rising such as to replace (rather than conquer) Western nations as the world's military and economic powerhouses. His evidence for this is a feeble and unsubstantiated claim that China et al. have "responded positively" to a request made in 2005 by U.S. Deputy Secretary of State Robert Zoellick that it "become a 'positive stakeholder' in the international system." Though China is increasingly privatizing its economy, it is still a Communist state infamous for human rights violations. Moreover, it is guilty of many of the accusations Mahbubani reserves for the West, such as the possession of nuclear weapons. And with the exception of Japan, all other Asian countries including runner-up India, the world's largest democracy and in some ways a reason to have hope, lag behind China in terms of economic or technological sophistication, a reality that begs the question of when, exactly, this supposed rise of the East will take place.

Zalmay Khalilzad wrote in 1995 that if the United States were to lose its hegemony, the result would not be a shift from unipolarity to multipolarity, but to "apolarity-- a global vacuum of power." He wrote that in a world just out of the Cold War, and argued-- correctly-- that U.S. leadership is crucial to prevent the rise of a "another hostile global rival" to replace the U.S.S.R. If the U.S. did not exist as a hegemon, no treaty, no matter how sound by Mr. Mahbubani's standards, could possibly stop nuclear proliferation. Furthermore, if the U.S.' hegemony were to legitimately falter, in way that allowed China or another non-Western nation to ascend to superpower status, that is a scenario in which nuclear war would be a serious and realistic concern. Fortunately, the scenario itself seems unrealistic after reading "The Case Against the West."

So what does this all have to do with global income disparity? Frankly I don't know the answer to that question yet; it's a question that this blog will aim to answer at some point, after deeper research into what causes the income gap in the first place. There are a few educated guesses I can make, however. First, China, India, and other Asian nations are among those countries with very high poverty rates. Mr. Mahbubani might think that the absence of the West and its money-grubbing capitalists might allow for the eradication of that problem, but the reality is that it would cause a host of other problems which would make income disparity seem relatively insignificant. The United States, rich as it is, may seem like a problem and an obstacle for nations that are poor, and it might be. Perhaps the U.S. should be doing more to aid poor countries. But it also might have nothing to do with the gap. That's what I'm trying to figure out, and I'll be writing on the subject soon-- but for now, I can confidently say that if the gap someday begins to close, a scenario that I will lay out a blueprint for after I am more knowledgeable, it will be because of other nations approaching the U.S.' wealth, not the other way around.

This country is here to stay; despite mistakes in foreign policy we've made and the zealous anti-American sentiments that have flared up during the 21st century, the U.S. remains a moderator of the global balance of power in a way that, according to the evidence, seems truly irreplaceable. That role comes with a responsibility to not screw up as badly as we did with the Iraq War, a regrettable error, but it's utterly absurd to allege that because of eight lousy years the U.S. is suddenly in a position to cede to countries that currently are hardly functional, economically, socially, or militarily. Part of their dysfunction is attributable to their comparative poorness, and it is that issue that this blog will ultimately address.

Global warming and income disparity: WSJ

Mark Whitehouse of the Wall Street Journal reports that researchers from the Massachusetts Institute of Technology and Northwestern University have discovered yet another contributing factor to global income inequality: the onset of climate change. According to their report, a temperature increase of one degree Celsius can reduce annual export growth by 5.7% and overall economic growth by as much as 2%-- and this contraction is only observable in poor countries. Wealthy countries were not negatively affected by the study's climate change model; if anything, climate change has the potential to accelerate leading economies, as they will be the nations making innovations to combat warming.

According to the WSJ article, the reasons for this phenomenon are unclear, but the report postulates that the agricultural problems supposedly caused by climate change may be a factor. These can be disastrous in poor countries since many of them depend on farming as a leading industry. In any case, it appears that worldwide temperature increases of up to five degrees Celsius by 2100 (as predicted by the field's leading scientists) may have especially dire economic consequences for developing nations, and may directly widen the gap between the rich and the poor.

EDIT: Comments on the article indicate suspicion of the Northwestern/MIT study's grasp of the logical principle of correlation not implying causation among WSJ readers. One wonders if such comments may be politically charged; user "some_knowledge_of_stats" suggested "it would be interesting to know if these poor countries have socialistic government. Maybe the problem is that a 1 degree rise in the temp leads to socialism and that socialism leads to poverty."

Global gross domestic product (PPP) per capita (click to enlarge)