So what are we going to do with these tools, with this economic language? Where are we heading?
The answer: it’s up to us. The future direction of the world economy is not written in stone, and the same goes for those in the US and the UK and in the developed world more generally. Economics is a tool kit, and tool kits are used to make things and do things. We have choices and options. That might sound banal, but I would argue that it’s actually a very important point. The neoliberal consensus in economics presents itself as consisting of self-evident laws. Low tax rates, a smaller state, a business-friendly climate, free markets in international trade, rising levels of inequality and an ever-bigger gap between the rich, especially the superrich, and the rest—these are just the facts of economic life, if you want your economy to grow and your society to be richer. But this is a con. This system is intellectually coherent, and it’s the one we’ve been living with for more than thirty years, but it is not the only way of organizing the economic order. It is not a given. In the words of Tony Judt’s posthumous masterpiece Ill Fares the Land:
Something is profoundly wrong with the way we live today. For thirty years we have made a virtue out of the pursuit of material self-interest: indeed, this very pursuit now constitutes whatever remains of our sense of collective purpose. We know what things cost but have no idea what they are worth. We no longer ask of a judicial ruling or a legislative act: is it good? Is it fair? Is it just? Is it right? Will it help bring about a better society or a better world? Those used to be the political questions, even if they invited no easy answers. We must learn once again to pose them.
The materialistic and selfish quality of contemporary life is not inherent in the human condition. Much of what appears “natural” today dates from the 1980s: the obsession with wealth creation, the cult of privatization and the private sector, the growing disparities of rich and poor. And above all, the rhetoric which accompanies these: uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth.
We cannot go on living like this. The little crash of 2008 was a reminder that unregulated capitalism is its own worst enemy: sooner or later it must fall prey to its own excesses and turn again to the state for rescue. But if we do no more than pick up the pieces and carry on as before, we can look forward to greater upheavals in years to come.
And yet we seem unable to conceive of alternatives.81
Judt was right. Having spent the better part of a decade writing and talking to people about economics, I’ve noticed that the most common shared political feeling is a sense of bafflement, alienation, impotence, and passivity. People feel as if there’s nothing they can do. The weight of money is a weight pressing down on their lives from above. At the individual level, I’m sorry to say, this is sometimes at least half true. If you’re buried under a mountain of debt, there isn’t much you can do about it except go bankrupt or pay the debts back. Either is a laborious and painful process, with no short cuts. It isn’t that you have no agency: it’s just that you don’t have many choices, and you have no pleasant ones. People lose jobs all the time, for no good reason and through no fault of their own—it’s just the way economic things are. But what is true at the individual level is not true of societies as a whole. There are voices keen to tell us that there is no alternative to the economic order, that we have to accept things the way they are; but that isn’t true. Marx was right when he said that “men make their own history, but not under circumstances of their own choosing.” Both parts of that are accurate: we didn’t create the world we inherited, but we also don’t have to leave it the way we found it.
So here’s how I see things. I’d like you to take a moment to think about what you think is humanity’s greatest collective achievement—the single best thing we have all done together. Please take a few seconds to think about that. One leading candidate, perhaps most people’s top choice, would be the collective enterprise of modern science and medicine. We haven’t evolved in the last 20,000 years: so it’s especially astonishing that the same brains that were functioning as hunter-gatherers and then as neolithic farmers are now stepping into scanners that analyze the activity of those very brains by means of positrons, the antimatter form of electrons—and one could pick thousands of other examples of science and technology that would have seemed miraculous to our ancestors. That sense of the miraculous is appropriate: we’re too quick to move past wonder at what we have achieved. So that’s one candidate. Another would be the development of societies that offer care and protection to all their citizens from cradle to grave, and the general phenomenon of the modern liberal democracy, the most admirable form of human society that there’s ever been (not least because it is so insistent on noticing its owns flaws, and trying to rectify them). Or the collective enterprise embodied in the arts, what Michael Oakeshott called the “conversations” of humanity through literature and music and visual art: conversations that give us the ability to talk to and listen to ourselves across generations and indeed entire cultures. Consider the fact that we can read Homer, whose two-and-a-half-millennia-old work has survived the collapse of two entire civilizations, and still be amazed at its freshness. As somebody said, “If you want to see how much life and people have changed, read Homer. If you want to see how little life and people have changed, read Homer.”
And now I’m going to propose another candidate for that greatest-ever achievement. On 29 February 2012, the World Bank announced that the proportion of the planet’s population living in absolute poverty—on less than $1.25 a day—had halved from 1990 to 2010. That rate of poverty reduction, driven by economic growth across the world from China to Ghana, is unprecedented in global history.* Just imagine: in twenty years, there are half as many absolutely poor people. And the success story of improvement in our collective living conditions doesn’t stop there. Consider child mortality, which for any parent is the most important number there is. (It’s pretty important for any child, too.) This has been the subject of a precipitate decline. In 1990, 12.4 million children were dying every year under the age of five. Today that number is 6.6 million. That’s obviously 6.6 million child deaths too many, but it is 16,438 fewer child deaths every day. I know I’ve mentioned this fact already in the lexicon, and I apologize, but then again I don’t apologize much, because that’s 11 children’s lives being saved every minute. Does any other achievement in human history match that? Child mortality has a meaning beyond the number of lives lost and saved. It’s used as a proxy for a whole set of things, to do with level of medical and technological development, strength of social ties, degree of access to care for the poor, a society’s acknowledgment of the needs of strangers, and so on. If you want to measure a level of a society’s development, and can only choose one number with which to do that, child mortality is the one to pick. A world undergoing a sharp decline in child mortality is a world that is rapidly and inarguably becoming a better place.
This focus on the numbers for people living in absolute poverty, and on child mortality, forms part of the Millennium Development Goals, announced by the UN at the turn of the new century. The MDGs set targets for 2015 from a starting point of 1990, with the books slightly cooked by setting the starting point ten years in the past—in other words the world gave itself a bit of a head start. The targets are in eight areas:
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality†
5. Improve maternal health
6. Combat HIV/AIDS, malaria, and other diseases
7. Ensure environmental sustainability
8. Global partnership for development
There are a number of points to make about that list: the goals might sound a bit vague in themselves, and it is hard to put specific and incontestable numbers on things such as sustainability and “global partnership for development.” When you look into the detail, though, most of the MDG aspirations are attached to specific numbers and metrics. Even the wooly-sounding, tree-huggy “partnership for development” has aims that it’s hard to disagree with, and it is significant that the burden of debt on developing countries has decreased by 25 percent since 2000. As for protectionist barriers on the part of the rich world, it’s interesting that 83 percent of all goods exported by the developing world enter the rich world free of any duty.
Other targets are even clearer. The goal of eliminating hunger, for instance, comes attached to the defined objective of halving the proportion of people suffering from hunger. (The UN says that that objective will be met on schedule.) One of the specific targets for gender equality is to equalize access to primary education between boys and girls—which has been achieved, and which in turn emphasizes the disparity of access in secondary education. Many of the targets overlap: the higher the level of female education, the lower the rate of child mortality; so, to cite one example from the latest MDG report, a program to target hunger in Yemen has the effect of keeping more girls in school, which in turn has a positive impact on a whole range of other metrics. Greater access to AIDS education and treatment has a huge effect not just on mortality statistics but also on those for poverty and hunger. This is particularly the case in sub-Saharan Africa, where one in ten children still dies before the age of five. For instance, Botswana has a terrible life expectancy of 31.6 years, but if you remove the impact of AIDS that goes up to 70.7 years.
What distinguishes this achievement from any other is its speed—twenty-five years—and also its extraordinary scale. Small countries can get rich fast, because a spike in economic growth in one area quickly lifts all the statistics across the board. It’s harder for big countries to do that, and as for the whole planet doing that, it would once have been thought impossible. We had thought that the industrial revolution was the benchmark for rapid transformation in people’s lives—the most important economic event since the domestication of plants and animals in the neolithic revolution. But not even the industrial revolution halved poverty and child mortality in twenty-five years. The MDGs have seen 700 million people move out of absolute poverty. In 1990, 47 percent of the population of the developing world was below this threshold, a number that by 2010 had fallen to 22 percent. The proportion of the developing world’s population living in hunger fell from 23.2 percent to 14.9 percent. That still leaves 870 million hungry people, which, on a planet with the resources to feed all of them, is 870 million more than there should be. In addition, although the proportion of poor and hungry people in sub-Saharan Africa has gone down, the population has gone up, so the actual number of poor and hungry people has in fact increased. Nonetheless, the world has made progress, and let’s not confuse progress with its opposite. Put it all together and, as I said earlier, I don’t think there is an achievement in human history that matches this: it’s the greatest thing we have ever done.
Two main questions arise from the progress we’ve made towards the Millennium Development Goals. The first is “How have we done this?” The second is “Why don’t people pay more attention to it?” I think the answer to the second question is partly contained in the answer to the first.
Perhaps the single worst feature of the contemporary intellectual landscape is the way in which it is divided along such predictable and partisan lines. As the Gérard Depardieu character says to the Andie MacDowell character in Peter Weir’s romantic-comedy Green Card, “You get all your opinions from the same place.” That’s depressingly accurate. Most of us do indeed get our opinions from one single place, and if you know what somebody thinks about any one issue (SUVs in the city, Michelle Obama’s childhood obesity drive), you know what he thinks about everything else too, up to and including how he votes. The polarization of modern intellectual life is a large and understudied subject, too broad to tackle here; but it is a fact that in these heavily polarized circumstances, ideas tend to get allocated to one side or the other, and to stay the property of that camp, irrespective of changes in circumstance and external reality. Sometimes the allocation of views to particular sides of the political debate is not easy to understand, looked at from a distance and with a cold eye. Conservatism has, as its name suggests, a strong emphasis on conserving and preserving the legacy of the past; it isn’t that hard to imagine a conservatism that took a strong stand against the prospect of sweeping, irreversible change offered by global warming, and made the “precautionary principle” of acting to prevent disaster a central part of its mission. This was once less of a counterfactual than it might now seem, since the first global leader to mention climate change in a speech was Margaret Thatcher, who in 1989 said in an address to the UN, “We are seeing a vast increase in the amount of carbon dioxide reaching the atmosphere. . . . The result is that change in future is likely to be more fundamental and more widespread than anything we have known hitherto.” 82 She had moved some distance to get to this point. Her first reaction on being told about climate change, by the government’s chief scientist Dr. John Ashworth, was “Are you standing there and seriously telling me that my government should worry about the weather?” But over time she got it. Thatcher was and remains the only British prime minister to have had a degree in science. She saw the question as a scientific one rather than an issue of ideology. Conversely, since globalization and trade are the single biggest factors raising GDP in the developing world, we might expect the left to be in favor of them, and the right, which historically has had a strong protectionist streak, to be against. But it didn’t work out that way: climate change is owned by the left, globalization by the right, and there’s an end to it.
The single biggest factor in reducing levels of absolute poverty is economic growth in the developing world: over the period in question the main locus of that growth has been China. The Chinese story is a bizarre hybrid of ultra-free-market economics, high levels of state control, and a total lack of democratic accountability. It’s not a model that you’re going to find in any textbook, but it’s one that has been extraordinarily, unprecedentedly effective at quickly raising the living standards for hundreds of millions of people. Who in the Western world can claim that one as an ideological win? Well, the right, broadly speaking, since it’s a form of capitalism, and not just any old capitalism but the hyper-free-market variety, which has achieved the progress. As it happens, though, the particularities of Chinese Communist Party–mandated capitalism are so odd that nobody on the political right is willing to claim China’s progress as evidence for the virtues of free markets. So credit for the biggest economic achievement in the history of the world is in effect lying unclaimed on the table, like a weirdly toxic form of poker winnings.
As for the other component of the story, no ideological camp is claiming credit for that either. This other component is to do with aid. Writers such as William Easterly (The White Man’s Burden: Why the West’s Efforts to Aid Have Done So Much Ill and So Little Good) and Dambisa Moyo (Dead Aid: Why Aid Is Not Working and How There Is Another Way for Africa) give powerful critiques of the way in which aid encourages dependency and corruption. Broadly speaking, this objection to aid is becoming a popular position on the political right. This school of thought doesn’t just argue that aid doesn’t work; it argues that aid is actively counterproductive, since it has distorting effects that prevent the development of indigenous solutions to problems. Critics also point to the fact that a huge amount of aid is stolen by elites in the target country, and that it often contributes to conflicts continuing longer and causing more damage than would otherwise be the case.
And yet, progress towards MDGs shows that aid can indeed have powerfully positive effects. The key provision is that it is targeted and specific, and designed to maximize positive consequences, such as the example of the Yemeni hunger program mentioned above. (Since 2007, parents enrolled in the program have been given wheat and vegetable oil in return for keeping their children in primary school; and because more than 60 percent of the children not going to school are girls, the program has the effect of improving women’s education. The illiteracy rate for adult Yemenis is 60 percent for women and 21 percent for men.) Another example is an irrigation project in Malawi, targeting 2,800 families who live in areas affected by flash flooding; the project teaches improved farming techniques to increase the families’ abilities to look after themselves, with obvious consequences for the metrics on hunger, poverty, and child mortality.
This kind of aid has a number of qualities. It is based not on generalized good intentions but on precise goals, usually with an emphasis on nutrition or health. It seeks to make measurable progress towards a defined numeric target. It is difficult to do this kind of aid—for just how difficult, look at Nina Munk’s entertaining book The Idealist, about Jeffrey Sachs and his attempt to establish “Millennium Villages” in Africa. Perhaps the most effective aid is designed by people who have taken on board the criticisms of the anti-aid lobby, and who try to design their programs so that the possibilities for the various forms of negative outcome—corruption and dependency prominent among them—are avoided. It is, for instance, difficult to see how teaching Malawian farmers techniques for harvesting their crops in winter (which is one of the main tricks of the Naamasalina program) offers potential for theft by the elite, or increases the farmers’ dependency on anyone. This is wary, precise aid giving, and it is strongly informed with a desire to measure things. In the 2013 edition of his charity foundation’s newsletter, Bill Gates spoke about the importance of this:
Unlike so many vaguely worded international resolutions, the MDGs came with concrete numbers. You can use the goals to measure progress around the world and in specific countries. . . . And the measures apply to things that everyone can rally around, like saving children’s lives and preventing maternal mortality. I’ve been writing about measurement a lot this year, because I’ve found that measuring progress is the only way to drive lasting success.83
This is the kind of thing you’d expect Gates to say; but that doesn’t mean he’s wrong. As it happens, the precise impact of a lot of aid is difficult to quantify, since there is a huge difference between outcomes (i.e., what happens) and impact (i.e., the specific difference made by a specific piece of aid). To truly measure the impact of something you have to quantify the difference between what happened with the aid and what would have happened without it. This is very difficult to do, and most charities don’t bother to even try, since it isn’t in their interest to come up with numbers that in many cases will make the impact of their interventions look smaller. But it is difficult to disagree with programs that aim to eradicate polio or provide sanitation for the proportion of the world’s population without proper toilets: 51 percent in 1990, 36 percent today. Consider the story of the guinea worm, a horrible illness-causing parasite, once endemic through parts of Africa and Asia, which today is on the verge of being eradicated. This would be the first eradication of an illness since the defeat of smallpox in 1979. The vehicle for the eradication hasn’t been some expensive drug or corrupting, incentive-distorting aid program, but education and improved hygiene. It’s going to be the first disease to be wiped out through changes in people’s behavior. Given that this disease had 3.5 million new infections as recently as 1986, this is an amazing feat.
Perhaps this, taken all together, is why we don’t hear as much about the amazing achievement of humanity in the last two decades. The right is embarrassed by the fact that the economic growth that it would normally boast about has taken place mainly in a communist country; the left is nervous about claiming success for aid programs that have been so vociferously criticized, whose fund-raising has an emetic overlap with celebrity culture, and that don’t ever seem to make visible progress. And so we’ve achieved something that in terms of mass material progress exceeds the feats of classical civilization, the Renaissance, and the industrial revolution—and yet we hear very little about it.
The media are rubbish at reporting good news. Part of the reason is that we humans seem hardwired to pay attention to stories of disaster and distress. Also, we are hardwired to like stories about individuals, about heroes and villains. A good news story about systemic progress is a difficult-to-impossible sell. Look at the example of flying. I’m completely terrified of flying—when I say “terrified,” I mean I can’t get on a plane unless I’m zonked on prescription tranquilizers. But even I can see that that’s an irrational fear, because contemporary commercial aviation is extraordinarily, uncannily safe. The experience of flying is so ghastly—the nasty airports, the multiple queueing, the intelligence-insulting security theater, the cattle-car in-flight conditions—that we tend to forget what an astonishing success the air industry has made of its safety record. Do we even notice? No, not really—what we notice are the crashes. Maybe the story of aid is a bit like that. If 16,438 children died today in a single disaster, it would dominate every news media outlet in the world for weeks. The fact that they aren’t dying isn’t news.
Perhaps there is, to go with the politically uncomfortable nature of the news, and its nondisastrous, nonpersonal nature, a third factor behind our lack of interest. What makes it so difficult to take in the news about the extraordinary progress being made in large parts of the developing world is the fact that here in the developed world things can at best be described as flat. Added to this is the reality that whole categories of work are disappearing, and seem likely never to come back. I have friends in journalism who have lost their jobs and who have no serious prospect of ever finding comparable work again. They aren’t duffers: these are people who are really good at their work. It’s just that the work doesn’t exist any more. Print journalism is dying, and among people who work in it, conversations around the subject don’t turn on what’s going to happen, or whether it’s going to happen; they turn on how long it’s going to take before newspapers in their current form disappear and everything is digital-only. But digital-only can’t sustain the same number of jobs and the same level of investment in quality and research and the expensive stuff—good writers, foreign reportage, in-depth pieces that take a lot of time, risky and drawn-out investigative journalism. The jobs that are going away are not coming back.
Some exciting things are going to happen in journalism, and I’m not even a tiny bit Luddite about digital media. But because people won’t pay for it, or not as much, the new journalistic models can’t sustain the same kind of cost base. Something comparable is happening in publishing. A young American writer said to me a few years ago, shaking his head, shrugging, frowning, and crying into his beer more or less simultaneously, that “advances are down by an order of magnitude.” That’s a drop of 90 percent, and it’s the difference between an advance that could pay for somebody to write a book, and one that can’t. Again, the underlying shift has all the appearance of being a permanent historic one. Pressure on bookshops has put many of them out of business, and without bookstores backing writers and hand-selling them and giving an initial platform at the beginning of their working lives, many writing careers would never get going. I speak from experience, because that is exactly what happened to me. But now that first stage just isn’t there any more, and a landscape is being created in which the spotlight is brighter than ever before, but the dark around it is so black that anything in it is hidden, invisible. The big is bigger than ever, and the small feels as if it doesn’t exist.
There are consolations and complications even in this bleak portrait; the very fact of the big getting bigger sometimes leaves all sorts of interesting ways open for being creatively small. Digital journalism may yet surprise us all, and digital forms of distribution may well end up with writers being paid more than they currently are. But the positive kinds of changes are some way off, while the negative consequences are right here, right now. I mention this not because journalism and publishing are the most important industries in the world but just because I’ve seen at first hand some of the disruption that is coming down the pipeline to entire swaths of the economy. Musicians, journalists, and writers are middle-class canaries in the coal mine of economic change.
Equivalent phenomena have happened many times in manufacturing, so the basic historical phenomenon of fundamental change in the mode of work isn’t unusual. Indeed it’s a story we’ve seen many times over, in forms as different as the mechanization of cotton picking, the factory mass-production line, and the disappearance of electronics repair shops (in that case, because goods got so cheap it was simpler just to chuck a faulty item away and buy a new one). Some change is cyclical, and some isn’t. But as the world is getting flatter and more digitized, the prospect for what once were comfortable and secure means of making a living is much bleaker. We look ahead at the prospect of ferocious competition, remorseless downward pressure on pay, the constant prospect of outsourcing, and the incessant press of technological change threatening to disintermediate and—to use the cant term beloved of Silicon Valley—“disrupt” traditional forms of employment. Flat living standards, flat median income, the disappearance of secure employment. We are told, in the title of a lively recent book by Tyler Cowen, that “average is over.” But most of us in our hearts know that in most important aspects, we are average. That’s the whole basis of prosperity in our societies: it provides good livelihoods and life prospects to the ordinary citizen. The notion of its coming to an end is terrifying. It’s no wonder people can’t get all that excited about the fact that out-of-sight poor people in the developing world are having a slightly less horrible time than they used to.
What we’re looking at here is the prospect of the world doing the splits. Here’s a strange fact: during the two decades when the number of absolutely poor people was halving, inequality was growing in two-thirds of the world’s economies. We are moving at a brisk rate towards ever-increasing levels of inequality. This, in my view, is certain to dominate discussion of politics and economics over the next decade.
The problem is that the current world economic order is based on the theory that high levels of inequality at the top of the income distribution don’t matter as long as general levels of prosperity increase. Unfortunately, in the countries that have been following this policy in its purest form for a third of a century—mainly the Anglo-Saxon economies, which have been the most fully liberalized and open to the idea of the devil-take-the-hindmost free market—it’s becoming clear that if these policies were going to work, they would have already worked by now.
The problem is compounded because there is a provable link between inequality and heritability. In plain English, the more unequal a society, the more likely you are to inherit your life chances from your parents. The United States and the UK and China are all increasingly unequal societies, and they are also societies where the economic prospects of the parents are passed directly on to their children. In the ringing words of Tim Harford,
This is what sticks in the throat about the rise in inequality: the knowledge that the more unequal our societies become, the more we all become prisoners of that inequality. The well-off feel that they must strain to prevent their children from slipping down the income ladder. The poor see the best schools, colleges, even art clubs and ballet classes, disappearing behind a wall of fees or unaffordable housing.
The idea of a free, market-based society is that everyone can reach his or her potential. Somewhere, we lost our way. 84
Extrapolated over time, this trend offers the prospect of reinventing feudalism. It means that your life chances are your parents’ life chances; you stay stuck in the station of life you were allotted by birth. People sometimes argue about the precise meaning of “fairness” and point out that you can challenge the idea from more than one direction. The notion that talented people should be rewarded according to the measure of their talents and individual achievements has force: fairness doesn’t automatically mean everyone ends up in the same circumstances. But even people who believe in a right-wing version of fairness can see that feudalism is not the way to go.
In addition, societies with high levels of inequality will always tend to have broken and antidemocratic political systems. The rich will almost always have more power than the poor. But it’s a question of degree. When the poor have a voice and a vote—or when the vote is the voice—there are factors at work in favor of a benign equilibrium. The rich can’t advocate policies that will enrage the poor too much, for fear of inciting class war, and the poor can’t expropriate the wealth of the rich, because they need the good things that are bought by the taxes the rich pay on their earnings. This equilibrium can be threatened, however, when the gap is widening between living standards at the top and everywhere else. The rich have got richer since the neoliberal order really took hold; this process went on for three decades, and has continued to go on since the credit crunch. During the recovery, such as it is, incomes have risen—but 95 percent of the rise in total income has been captured by the top 1 percent. Elsewhere, living standards are flat at best. In 1989, using real money (i.e., adjusted for inflation), the median American family earned $51,681. In 2012 the same family earned $51,107. In other words, in the richest and most powerful country the world has ever seen, the average family is slightly poorer than it was a quarter of a century ago.
As the gap widens, the rich have less and less in common with the rest. They’re barely inhabiting the same spaces. The consequences can become toxic. In the words of the economist Angus Deaton,
The political equality that is required by democracy is always under threat from economic inequality, and the more extreme the economic inequality, the greater the threat to democracy. If democracy is compromised, there is a direct loss of wellbeing because people have good reason to value their ability to participate in political life, and the loss of that ability is instrumental in threatening other harm. The very wealthy have little need for state-provided education or health care; they have every reason to support cuts in Medicare and to fight any increase in taxes. They have even less reason to support health insurance for everyone, or to worry about the low quality of public schools that plagues much of the country. They will oppose any regulation of banks that restricts profits, even if it helps those who cannot cover their mortgages or protects the public against predatory lending, deceptive advertising, or even a repetition of the financial crash. To worry about these consequences of extreme inequality has nothing to do with being envious of the rich and everything to do with the fear that rapidly growing top incomes are a threat to the wellbeing of everyone else.85
This issue just isn’t going to go away, and I would add that it is a problem not just for the Western world but for the emerging world too, perhaps especially for China, which had historically gone a long way towards abolishing inequality, at what must be admitted was a very high price, but has now taken a long stride towards prosperity, at the cost of greatly increasing inequality. The danger facing China comes from the fractures caused by that inequality. We already see rising tensions between this new urban workforce, the new Chinese middle class, and the rural poverty it’s leaving behind. In addition there is friction between the coast and the center, between the factories and the farms, and increasing problems with corruption and maladministration. All this matters for the rest of the world, because of China’s centrality to the world economy as a producer of so much and increasingly as a consumer too, especially of luxury goods.
I would love to have some magic solution to the problem of rising inequality or, failing that, to have some magic piece of advice about how to navigate the turbulence that is going to ensue, but all I can offer instead is a complete certainty about two things: that arguments about the economy are going to dominate the next decade, and that arguments about fairness and inequality are going to be at the heart of those debates. This one isn’t going away, anywhere—and that in itself is a strange and new thing, because we face the prospect of a world in which, arguably for the first time, every political dispensation, from Communist China to mixed-economy India to free-market America to the resource producers of South America to the welfare state capitalist societies of northern Europe, everybody, is for the first time, arguing about the same issue. In Beijng or Rio, Sydney or Paris, New York or London, it’s about the inequality, stupid.
So where do we go from here?
The two biggest “known unknowns” are those of inequality and crises in relation to resources. We simply can’t know how these issues are going to play out over the next few years, even though we can be sure that the subjects are going to be at the top of the global agenda. I think there we’re likely to see a gradually increasing distinction between the developed and the emerging worlds, in terms of their attitudes to wealth and in particular to public displays of wealth and conspicuous consumption. Bear in mind that there are few areas where fashion is a more important factor than in that area; and bear in mind, too, that in the Western world, the current has been running in the direction of money and display for three decades. The last time there was a strong countercurrent in this area was in the 1960s with the hippie movement and in the 1970s with punk rock.
When the financial crisis struck in 2008, I thought we might see, as the full scale of the downturn became apparent, and also the full extent of the time it was going to take to emerge from it, a cultural reaction towards embracing financial restraint, opposing displays of wealth and consumption, and conscious and voluntary choosing of lower levels of discretionary spending. Napoleon once said that to understand a man, you must understand what the world looked like when he was twenty years old. I’ve always thought that a very interesting observation. When we think about what the world looks like to a twenty-year-old today, I think we get a glimpse of some trends that are going to become important. There are glimmers of anticonsumption attitudes, particularly where you’d most expect to find them, among the self-conscious and well-educated and relatively affluent young. Just anecdotally and personally, I know several young people who pride themselves on their ability to live on tiny budgets and minimize their consumption of resources and also their spending. They’re enthusiastic about “freecycling,” handing on used stuff, and “freeganism,” living off food they’ve obtained without payment. I suspect that this trend has quite some distance further to run and may well become a generationally defining movement, much in the way that the hippie counterculture once was, as young people react to the prospect of a world that is worried about overconsumption of resources, and at the same time offers more limited immediate prospects than they were taught to expect when they were growing up.
As for resource shortages and the impact of climate change, that’s too big a topic to sum up here. But it is clearly not going away, and will have a defining impact on polities all across the world. A 2013 paper in Nature by a team of climate scientists based in Hawaii predicted that rises in temperature would put the climate of cities in the tropics outside all known historical ranges—“climate departure,” it’s called—as imminently as 2020. Since this would obviously involve large population displacements, and probably the total breakdown of order, not just in the cities affected but all around them, this study is in effect predicting the end of life as we know it, sometime this decade. Let’s hope the Hawaii team is wrong; but for sure this counts as a “known unknown.”
A third “known unknown” is that the world is likely to look more and more like a genuinely multipolar place. For a long time we lived with two superpowers, then with one; now there will be several sources of global power and influence. We haven’t had a world that looks like that for a long time, and it is likely to have many surprising features. When we turn to history for a comparison, the relevant one is from just over a hundred years ago, with a multiplicity of competing global empires, high and rising levels of inequality, competition over resources, and technology making the world economy an increasingly globalized place. A century ago those trends ended in the First World War, which is a discouraging comparison.
The world is getting younger, too. The median age of us humans is twenty-seven. So 50 percent of the world’s population is under the age of twenty-seven. The majority of those young people live in cities—that also is a new thing. As recently as 2007 the majority of the world’s population was living in rural areas; that has now changed, and the trend is for the proportion living in cities to increase. The UN predicts that the population of the world’s cities will hit 5 billion by 2030. That’s probably a good thing, for all sorts of reasons. As the UN puts it, “In principle, cities offer a more favourable setting for the resolution of social and environmental problems than rural areas. Cities generate jobs and income. With good governance, they can deliver education, health care and other services more efficiently than less densely settled areas simply because of their advantages of scale and proximity. Cities also present opportunities for social mobilization and women’s empowerment. And the density of urban life can relieve pressure on natural habitats and areas of biodiversity.” 86 So that is an optimistic prospect, with one small catch: it isn’t clear whether there is going to be enough work to sustain much of this population. In the next decade, 1.2 billion young people are going to enter the labor market, worldwide. That’s a big, big number: 1,200,000,000 youngsters looking for work. Projections at the moment are that growth in the labor market and retirement of the working population will open up 300 million new jobs over that same period. That’s a huge gap, 1.2 billion workers chasing 300 million jobs, and it points again back to the theme I have mentioned already, that of a world doing the splits. Over this coming decade the distinction between winners and losers is going to be sharper than ever, and more visible than ever, and I say again that this will be a truly global theme—I don’t think there is a society anywhere in the world where this issue will not be acted out.
The main economic model that has been used by international institutions over the last three decades is a set of policies that I’ve been calling neoliberalism. These policies have been effective at growing GDP, and equally or more effective at growing inequality. By now, the neoliberal agenda has taken us to a place where, for many people in the developed world, life offers the prospect of an interminable squeeze on prospects and living standards. The good years of open-ended, more or less frictionless growth that we in the developed world have all, broadly speaking, enjoyed since the end of the Second World War are over. That doesn’t mean we can’t have higher than ever standards of material well-being; it doesn’t mean we can’t have unprecedented levels of general prosperity; it doesn’t mean we have to stop trying to be better societies that offer better lives, year after year, to all citizens. It just means that we aren’t going to achieve those ends by pursuing the same agenda and using the same tool kit. The years around 1979 and 1980s saw a historic swing of the pendulum away from consensus-based postwar politics. At that point, inequality had been decreasing all through the twentieth century. Since then, it’s been increasing. Both of those things are conscious choices on the part of the society; we decreased levels of inequality and increased levels of opportunity before; we can do it again. As the political historian David Runciman recently wrote,
The world that fell apart at the end of the 1970s had begun to unravel much earlier in the decade, in the succession of crises that included the demise of Bretton Woods, the Arab-Israeli war, the consequent oil shock and a world-wide recession. That confused and confusing period turned out to be the dawn of neoliberalism, though it wasn’t until much later that it became clear what had happened. Now that neoliberal order is stumbling through its own succession of crises. We are barely five years into the unravelling, if that is what is taking place. . . . [W]e shouldn’t be surprised if we can’t yet spot who is going to make the difference this time round. What we’re waiting for is the counter-counter-revolution, led by progressives who have learned the lessons from the age of neoliberalism and are unafraid to make use of its instruments in order to overthrow them. Plenty have started trying. Someone will get there in the end and maybe by the end of the decade we will discover who.87
How would this happen? Well, we’re starting to see straws in the wind. They come from all points of the compass—which is necessary, because a change of direction along these lines would have to be international, in the same way that the neoliberal turn crossed the Atlantic and spread around the world. The world’s two leading centers of finance are New York and London, and coming up behind them on the rails is Switzerland. In New York, Bill de Blasio won the mayoralty with a campaign openly focused on the question of inequality: the first politician to win on a platform like that in the United States in living memory. One of the signature proposals of his campaign was to raise taxes on the most affluent New Yorkers, those earning over $500,000 a year. That’s irrespective of the fact that New Yorkers already pay some of the highest rates of tax in the United States. In Switzerland, they’ve just had a referendum to limit the multiple between what a company pays its CEO and its least well-paid worker. The proposed multiple was twelve. It was defeated—but more than a third of the population voted for it, and this was the second Swiss referendum in 2013 on the subject of executive pay. Just for reference, across the 500 biggest companies in America, the current multiple is that CEOs are paid 204 times more than their average employee.88
In the cheap seats, we’re often told that though people are increasingly furious about rising inequality, the most important thing is not to scare the “wealth creators,” because if we do, they’ll all move to places like London and Switzerland. But hang on: London and Switzerland are starting to have the same sorts of conversations that are happening in the USA. So where then would they go? The answer, I suspect, is that most of them wouldn’t go anywhere. A few bankers might head off to places like Singapore and Hong Kong, but that certainly wouldn’t be the end of life as we know it. When I was growing up in Hong Kong, top-rate tax in the UK was over 90 percent, whereas top-rate tax in Hong Kong was 15 percent, and there was no mass exodus of the rich then, just as there wouldn’t be one now. Most of the talk about the flight of the bankers is self-serving. The ones who are going to be driven out have already gone. As I say, Wall Streeters already pay some of the highest rates of tax in America. The more important question is whether a society should arrange itself primarily for the convenience of its richest citizens and its richest, most powerful economic sector, irrespective of the consequences of that for everyone else. A robber baron’s castle can be an amazing thing, full of art and color and life and music, with the most beautiful tapestries, and the highest standard of living, and the best food and drink for hundreds of miles around. The cutlery is gold, the glasses are crystal, the jewels are fulgent. But the robber baron’s castle glitters so brightly precisely because it devastates the landscape in which it sits. Its glory comes at the cost of the desolation it causes. The City of London is a robber baron’s castle.
The move away from neoliberalism is likely to involve higher rates of tax at the top end, dramatically increased education spending, and perhaps a rethinking of some of the ways in which capitalism can be inflected away from shareholder value towards models that include owners, managers, workers, and the surrounding community—a model that has been successful in, for instance, Germany. The provision of employment and training for apprentices is an explicit part of this. There will need to be a sharp increase in levels of social housing. The role model here is Singapore, which as well as consistently being voted the most open economy in the world—a beacon to free marketers everywhere—has the highest level of state and social housing in the world. The world capital of the free market is also the world capital of council houses. Not all the lessons of Singapore are about free markets. More generally, there will need to be a focus on material well-being in the round, and broader measures of quality of life than the mere narrow focus on GDP. In Denmark, a judge earns more than a cleaner: two and a half times more.89 How does that work out for them? The Danes report the highest level of life satisfaction of anyone in the world.
Some readers may be disappointed that I am not advocating more-explicit alternatives to capitalism. I might well advocate one if I could see one that seemed to be working. The candidate that was touted more than once in the first decade of this century was the socialist countries of Latin America, but the problem with that as a model for elsewhere is that all those countries were benefiting from gigantic commodity booms, especially in the case of Venezuela and its oil. No big Western democracy has an equivalent prospective source of largesse. But this doesn’t mean that no new model is ever going turn up. In the meantime, it may be that we have to settle for a world that is mainly getting richer, whose citizens are living longer, and whose richest countries are enjoying slower growth, but also a more equal, more satisfying, more mindful way of life. When people say, “It can’t go on like this,” what usually happens is that it does go on like that, more extendedly and more painfully than anyone could possibly imagine; it happens in relationships, in jobs, in entire countries. It goes way, way past the point of bearability. And then things suddenly and abruptly change. I think that’s where we are today.
* The definition of absolute poverty was moved from its initial figure of $1.00 a day to $1.25 a day in 2008, on the basis of the World Bank’s view that this number took account of higher-than-expected prices in the developing world.
† The MDG target for child mortality is not just to halve it but to reduce it by two-thirds. It will be missed.