Savitri Era of those who adore, Om Sri Aurobindo and The Mother.

Tuesday, December 04, 2007

Most decidedly the absence of markets most certainly does cause poverty

Globalisation Not the Problem: Absence of Markets is the Problem
from Adam Smith's Lost Legacy by Gavin Kennedy In short, living standards, basic as they were, depended on distant markets. Globalisation is not that new. When markets were absolutely local living standards were dire.
British colonies in America were prevented from developing local manufacturing by mercantile policies enforced by the British government, which Adam Smith criticized, though he advised the newly independent United States not to impose tariff barriers to keep out imports of manufactured goods in pursuit of a dash for self-sufficiency, but to allow time for a domestic manufacturing capability to take root and grow naturally by engaging in distant trade itself. Becoming self-sufficient is to go backwards to the world that was left behind, with world population levels close of the hunter-gatherer societies of 11,000 years ago, and living standards to match. It took the best part of 10,000 years to lift per capita consumption above bare subsistence to continual increase for the majority of the population of European countries (principally, Britain and its American colonies) in the 16th century, and towards sustained growth in consumption, knowledge, sanitation, health, medicine and technology from the 1800s.
That the rich are the main beneficiaries of growing GDP is nothing new; it has ever been so, right through the shepherding, farming and commerce millennia. The rich have hived off surplus GDP from the beginning of the modern ages. Apart from personal consumption levels much greater than the average (poor) majority, they also created what we know of recorded, literate, history. If there was another way to achieve these gains it never happened anywhere in the world at any time.
Commerce changed all that. For the first time ever, per capita growth enabled the poor majority to reach per capita income levels unprecedented in all history. This was not market failure; it was market success. The fact that there is widespread inequality is not new: it was unequal once humans left the equality of the hunter-gatherer mode of subsistence. The price of opulence was paid largely by the poorer majority, but from the 1800s, in Europe and North America, the steady march towards opulence has resulted in the living conditions that enable Stan Sorscher to send his views over the Internet to people like me in Edinburgh, Scotland, and for me to comment upon them.
Income inequalities are real problems, though I am bound to say that the real problems of relative and absolute poverty are not those between Stan Sorscher and the ultra-rich of North America (5 billion people would gladly change places with him); they are between Stan Sorcher and the poor of the non-developed (and non-developing) countries outside the ambit of the country that Stan lives in. Smith made exactly the same point in Wealth Of Nations (1776) in the contrast between the gap between the poor labourer in Scotland and the rich European prince, which was smaller than the gap between the poor labourer in Scotland and ‘that the absolute master of the lives and liberties of ten thousand naked savages’ in Africa (WN I.i.11: p 24).
If that problem concerns Stan (it does me) then the solution is not to return to self-sufficient living standards in Seattle (or Scotland). The cause of the differences is not racial, nor geographical, or such like. It lies in the success of the division of labour in markets in the developed countries, and their undeveloped state in Africa (or wherever). Markets do not cause these problems, they are part of the solution, but most decidedly the absence of markets most certainly does cause poverty.

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