Not as advertised
A new study in the journal World Development debunks a viral graph developed by World Bank economist Martin Ravallion used to defend capitalism’s effectiveness at reducing world poverty over the last 200 years. Matthew Rozsa describes the study for Salon:
The study — which was led by co-authors Dr. Dylan Sullivan of Macquarie University in Australia and Dr. Jason Hickel of Autonomous University of Barcelona and the London School of Economics and Political Science — concludes that extreme poverty was uncommon throughout history except when there were external causes of severe economic and social dislocation. Indeed, the rise of capitalism half a millennium ago led to a sharp uptick in human beings living below subsistence levels. When mass conditions began to improve around the turn of the 20th century, it was because of political movements that threw off colonialist regimes and used the government to redistribute wealth.
Sullivan and Hickel also pointedly critique the Ravillion graph, which Sullivan told Salon by email “suffers from several empirical flaws.” By estimating poverty incomes with historical data about gross domestic product (GDP), the graph overlooks the suffering that occurs when people lose access to resources that they need but did not previously obtain as commodities. “If a forest is enclosed for timber, or subsistence farms are razed and replaced with cotton plantations, GDP goes up,” Sullivan pointed out. “But this tells us nothing about what local communities lose in terms of their use of that forest or their access to food.” In addition, the study relied on the World Bank’s definition of the poverty line as being $1.90 purchasing power parity (PPP) per day, even though poverty is best assessed by determining whether wages are high enough and prices are affordable enough that the masses have easy access to essential goods like housing, food and fuel. Finally, Sullivan and Hickel criticize the graph for only going as far back as 1820, even though the current system of global capitalism began in the late 15th and early 16th centuries.
Sullivan and Hickel looked further back and collected data on real wages, height and mortality, indicators of human thriving. Interesting results:
“Everywhere capital goes, it leaves a footprint on the empirical indicators of human welfare,” Sullivan told Salon. “The social dislocation associated with capitalism was so severe that, as of the most recent year of data, in many countries key welfare indicators remain lower than they were hundreds of years ago.” As of the 2000s, an unskilled Mexican wage laborer earned on average 23% less than that person would have earned in 1700. Meanwhile, on the other side of the globe, real wages in India in the 2000s are lower than they had been more than 400 years earlier — in 1595.
There are documented physical consequences to this historic poverty. In Tanzania, heights were 0.67 inches lower in the 1980s than the 1880s. In Peru, a man born in the 1990s is on average 1.5 inches shorter than a man born in the 1750s. In the European nations of France, Germany, Italy and Poland, the average adult male height fluctuated wildly depending on whether the prevailing capitalist system provided for enough basic needs — which was often not the case. As such, Germans and Poles born in the 16th century were much taller than those born in the 1850s, and conditions (and height) did not improve until the 20th century.
Conditions also improved in places far less capitalist than our culture. It turns out that “in public health care, education, and the universal distribution of food” improves peoples’ standard of living even in communist countries. World Bank and International Monetary Fund (IMF) strong-arming developing countries to cut “social spending, deregulate their markets” and privatize government assets can act to reverse gains for the poor.
Expect Wall Street and the Chamber to push back in a blizzard of self-justification. Flaws will be found and data challenged. And yes, but freedom.
Capitalists oppose increasing wages and labor standards, says Dr. Richard D. Wolff, professor emeritus of economics at the University of Massachusetts Amherst. Any “claimed improvements, when real, occurred despite and against capitalist’s efforts, not because of them.”
As I’ve said before, it’s important to distinguish between small-scale capitalism and “the current system of global capitalism.” The two are quite different. There have been capitalist acts between consenting adults since before Hammurabi. The “current system” Sullivan and Hickel criticize arose with the spread of a new style for organizing a capitalist enterprise: the corporation. Corporate capitalism shields investors from personal responsibility for the actions of the businesses they own. Stockholders are not small-business owners. They are absentee landlords. That’s a different animal altogether.
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