Governments of all stripes across the world have, since the turn towards what are often termed ‘neo-liberal’ policies in the late 1970s, cut taxes for the richest individuals in society, ostensibly to encourage them to engage in more entrepreneurial activity and stop them leaving for lower tax nations. There is certainly no doubt that the incomes of the top 1%, and even moreso for the top 0.1%, have increased dramatically more than middle and lower income earners since that time.
But prosperity is not all down to those currently at the top of society. Those of us lucky enough to live in industrialised countries with a high standard of living and the prospects of continuing economic growth in between periodic recessions, are ‘standing on the shoulders of giants’, to coin a phrase. Whether rich or poor, we live in a society with capitalist institutions which, more or less between different countries, encourage continuous technological advancement and productivity growth. But we inherited these institutions which were established in the past and which continue to evolve. Markets, different kinds of business organisation, finance and the state, among others, all have a long history and, to greater or lesser degrees, create an environment in which wealth can be created.
The very highest earners never make their money in a historical or social vacuum. If they had been born in a very poor country without the kinds of institutions mentioned above, they would have found it impossible to earn nearly as much. Even some of the poorest people in rich countries would find that formal employment is absent and the prospects of improving one’s lot to a significant degree would probably be close to nil. The investor Warren Buffet has admitted as much….
The Political Economy of Development
Standing on the shoulders of giants
Nick Johnson
Yep, but your link is missing but I found it anyway.
ReplyDeleteBTW Ian Welsh says the same thing better here. "let’s run through why, no, it isn’t your money. We’ll start with two numbers. The income per capita for the US in 2005 was $43,740. The income per capita for Bangladesh was $470.
Now I want you to ask yourself the following question: Are Bangladeshis genetically inferior to Americans? ... I’ll assume everyone answered no.
Right then, being American is worth $43,270 more than being Bangladeshi and it’s not due to Americans being superior human beings. If it isn’t because Americans are superior, then what is it?
The answer is that if it isn’t individual, it must be social."
Ian has his faults -- he rambles, his economics is sloppy, and he doesn't have much patience with fools. But when he's in his groove he's really good.
Migrants from Northwest Europe brought Industrial Age technology with them and North America developed industrially alongside Northwest Europe among the first countries to undergo a major industrial transformation.
ReplyDeleteAmerica got a lead in the industrial race from the vast untapped resources of the continent. The mainly European immigrants basically stole the resources from the indigenous population. The major leap ahead for North America was the discovery of vast shallow oil reserves, the automation and consolidation of the agricultural sector. This was timed perfectly for the USA to emerge victorious from the highly mechanised warfare of WW2. Europe only developed a large scale automotive and consolidated mechanised agricultural sector after WW2. Facilitated by the expansion of Middle East oilfields.
The development of high tech weaponry in WW2 gave the US a technological edge, with a fragmented, weak, war damaged Europe and Japan and with the uncontested largest navy in the world they were able to capitalise on their fortunate advantages and extend their influence across the planet.
Meanwhile Bangladesh was a pre-industrial agricultural economy with limited natural resources the under educated peasant farmers kept down in indentured servitude first by the British, then their own landowning elites now the international textile industry.
Bangledeshi's still have a long way to climb up the educational, industrial and technological ladder, they are about 150 years behind. The pace of change has increased recently, just look at China's recent transformation from a peasant economy! albeit under a far sighted and focussed leadership with total authority..
Thanks, Dan Link fixed.
ReplyDeletejust look at China's recent transformation from a peasant economy! albeit under a far sighted and focussed leadership with total authority..
ReplyDeleteSince the substitution of capitalism for feudalism, where wars were largely local, the West has sought to dominate the ROW for economic purposes. So economic liberalism generated colonialism which also involves imperialism. Warfare among Western contenders for colonies and empire has been the norm since the fifteen century.
The Western opposition to Russia was not about Communism. It began long before that, even before "Emperor" Napoleon's invasion of the Russian Empire. The opposition to Communism was not about "the Communist threat to freedom (liberalism) but preventing a rival from rising to power.
It was not until Communist China liberalized and began the transition to a liberalized market economy that the West, dominated by capital, didn't want to miss out on the potentially huge market that China represented. This gave China the opportunity to build an industrial base and acquire advanced technology.
Now the issue for the West and the US in particular because the "West" is the American Empire dominated by US interests, which vassal states are expected to accommodate for access to US markets and technology. This is why the present geopolitical issue the American Empire attempting to undermine the resurgence of the Russian Empire, the Chinese Empire, and the various Islamic empires such as the Mogul and Ottoman.
China has the best chance of being a serious contender soon enough for the US to be concerned about. The traditional Russian Empire looks to be finished for the foreseeable future and the Islamic contenders don't even have a state.
But China presents a real threat by expanding across Eurasia and combining with Russia in a way not dissimilar to the symbiosis between the US and Europe.
The big problem for the US is that as the Eurasian empire develops its going to make more economic sense for Europe to climb on board, as shown by the rather surprising defection of the UK in its financial cooperation with China to ensure that the City remains a dominant financial player even if Wall Street does not.
This could not happen if China and Russia were not strong enough militarily to deter the US from direct interference. But they are, first, owing to the nuclear deterrent and secondly since the US is not in a position to fight a two front land war in Eurasia. It would be a three front war if Iran joined China and Russia as would be likely.
This creates the political space for an economic transformation of Eurasia, the Middle East, and even Europe. The issue that remains is the social one. Is there enough homogeneity and commonality of interests to make it workable. This is likely the geopolitical dynamic for the rest of the century.