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INVEST IN INNOVATION!!!Instead of Eating the Seed Corn...James S. Henry and Jim Manzi

We are called the nation of inventors. And we are. We could still claim that title and wear its loftiest honors if we had stopped with the first thing we ever invented, which was human liberty."  

-- Mark Twain

(The following is a longer version of a piece that appeared this week in The Nation.)

In the midst of our deepening recession, the US faces another  economic crisis that is less visible and dramatic than house foreclosures, bank failures, plant closings,  or stock market avalanches, but even more important in the not-really-that-long run: systematic under-investment in technology and innovation.

Indeed, nothing less than our global economic leadership may be at stake because of this underinvestment.

On the other hand, with a little bit of funding,  foresight, and determination, we believe that it may be possible to kick-start an innovation revival.

Especially at the federal level, for a  modest investment,  there’s an opportunity to create a whole new generation of idea-growing, job-creating  technology hubs all across the country – perhaps even an “automotive Silicon Valley”  in otherwise moribund Detroit.

  This revival would not just be about investing more heavily in R&D. Especially in troubled times like these, we need to remind ourselves that innovation has always been a critical American tradition, a crucial part of our patrimony. It is as much a by-product of our political system and cultural norms as of our business and scientific practices.

This patrimony is now at risk, not only from our failure to invest,   but also from the failure to reward and honor scientists, technicians, engineers, and inventors above lawyers, bankers, and hedge fund managers, and to recognize the central role that real innovation of all kinds has always played in our story.

CUBA'S HEALTH CARE REVOLUTION, LATIN AMERICA'S HIDDEN HOLOCAUSTSomething for Fidel to Be Proud OfJames S. Henry

While US media conglomerates like Time and Fox have been obsessing for months about whether or not 80-year old Fidel Castro is finally about to meet El Fabricante,  Cuba has been busy setting health records -- helping its 11.4 million citizens achieve lower mortality and longer lives than almost anywhere else in the developing world.

Now that a leading Madrid surgeon has made it clear -- contrary to USG agitprop -- that Fidel is not suffering from terminal cancer, and, indeed, is recovering well from last summer's stomach operation,   perhaps this other Cuban health story will finally receive the attention that it deserves. 

Just this month Cuba announced that its infant mortality rate has reached the First World average of just 5.3 per thousand -- on a par with the latest rates for the UK, Canada and New Zealand, even lower than the 6.7 US average,  and less than half the 14.1 average rate for all African-Americans in the US.

LATIN AMERICA'S HIDDEN HOLOCAUST

Even more to the point, Cuba's infant mortality rate is also the lowest in Latin America and the Caribbean, and indeed, the lowest for any developing country in the world.

The corollary is another important story. This is the fact that while Fidel's tiny, isolated, centrally-planned, highly-inefficient, antediluvian island economy has managed to set record after record on public health, education, poverty reduction, and gender equality since the 1970s,  the "non-revolutionary" rest of Latin America has lagged far behind. Over time, the cumulative impact has been huge.

For example, as we'll see below, if other Latin American and Caribbean countries had simply kept pace with Cuba's percentage improvements in infant mortality from the 1960s to 2005, an additional 6.4 million infants -- an average of 184,000 per year for the region as a whole -- would have survived the first year of childbirth.

In effect, all these "missing children" amount to nothing less than a continuing hidden holocaust -- attributable at least in part to the pro-elite development paths that most of these countries have pursued.

Many of those critics on the Right who like to rail against the deficiencies of Castro's regime -- its admitted lack of US-style national elections and market freedoms, its shortage of big fancy cars and other consumer goods -- also profess to be profoundly concerned about human rights,  the welfare of Elian Gonzalez, "the rights of the unborn," and so forth.

Perhaps they will now bring themselves to admit that at least in one respect, Fidel's Revolution is actually a role model -- and that naked capitalist development also has very high costs. 

This goes a long way to explain why, far from being the pariah that USG has tried to make him, Fidel is today treated with greater respect and admiration throughout Latin America than ever before -- certainly in comparison with former US-backed right-wing thugs like Pinochet, Rios Montt, Banzer, Fujimori, and the Argentine and Brazilian juntas.

Consistent with this, on October 28, 2006, the UN General Assembly voted for the 13th year in a row to condemn the US embargo on Cuba. Every Latin American and Caribbean country voted to support the resolution, joining 179 countries that did so. Only four countries voted against it -- the US, Israel, the Marshall Islands, and Palau.

In any case, whatever the quality of life in Cuba for adults today, the fact is that if you are an unborn infant of average means who somehow gets to decide where in the entire developing world to be born, there's no contest.

(For all the gory statistical details, read on below):

 

REMEMBERING THE GENERALPart I: OverviewJames S. Henry

---

I was born a Chilean,  I am a Chilean,
I will die a Chilean.
They, the fascists, were born traitors,
live as traitors, and will be remembered forever as fascist traitors.

-- Orlando Letelier, 1932-76

---

Both Chile's General Augusto Pinochet and Saddam Hussein, two formerly US-backed dictators, have at last had to confront Higher Authorities that they were unable to intimidate, compromise, or evade.

However, unlike Saddam, who was hanged in the middle of a night on December 30, 2006, by a nervous Iraqi Government tribunal,  Pinochet managed to escape human justice for his crimes, and died of natural causes at the age of 91. 

How does the General deserve to be remembered? Did he not richly deserve the same fate as Saddam? And how did he manage to avoid it? 

Was he simply a ruthless, corrupt right-wing tyrant, the puppet of foreign interests and their handmaidens, like ITT,  Nixon, Kissinger, the CIA, George H.W. Bush, Margaret Thatcher, and Reagan?   

Or was he, as many of his defenders still maintain,  an essential bulwark against the Leftist Horde in Latin America?

If perhaps not exactly the world's staunchest defender of political liberalism, was he at least -- as Thatcher, some neoliberal  economists, The Wall Street Journal, and even supposedly "liberal" newspapers like The Washington Post now maintain --  a staunch defender of  "free markets" who deserves much of the credit for Chile's economic performance since the 1970s?

As we'll see,  most conventional portraits of General Pinochet are flat-out wrong, not only with respect to his alleged role in combating Soviet expansionism, but also with respect to his regime's alleged beneficial influence on Chile's economy.

First,  Pinochet was at best only a non-essential bit player in the anti-Soviet struggle. Allende's broad-based social democratic "revolution" was never taken seriously by Moscow or Havana. Nor was it strong enough to mount a Cuban-style revolution, or even to precipitate a civil war. Left to its own devices, Allende's "leftish" alliance would probably have burned itself out by the next election or plebiscite in 1974.

Furthermore, even if Chile's leftists had somehow managed to create a "Soviet Republic of Patagonia," tiny Chile was already completely surrounded by other countries that had much greater strategic importance to the West.

By 1973, they either already had their own right-wing dictatorships (Brazil, Paraguay, and Bolivia), or were well on the way (Argentina and Uruguay).

In short,  killing off Chile's long-standing democracy was gratuitous -- the political equivalent of exaggeratinging Iraq's "slam dunk" WMD threat.

All the repression was for nothing.

On the economic front, Pinochet's interregnum was also a costly, needless detour. 

Indeed, one key reason why Chile's so-called "economic miracle" has proved to be so successful in the long run -- with great help from human capital finally brought back home by many well-educated returning "Leftists" who were  driven out of country in 1973-90 -- was precisely because Pinochet's first decade of experiments with "Los Chicago economics" proved to be so disastrous. Giving Pinochet credit for the subsequent corrective reforms is like crediting Leonid Brezhnev with last decade's revival of economic growth in Eastern Europe.

(For more details, see Parts II and III...)

 

   

EVO'S HISTORIC VICTORYBolivia's Democratic RevolutionJames S. Henry LaPaz, Bolivia

The mood at Tuto Quiroga's well-appointed campaign headquarters at the Hotel Radisson in downtown LaPaz was funereal, while across town at MAS Party headquarters in the former Brazilian Embassy, and later on in the impoverished township of El Alto,  people were chanting and singing in the streets late into the night. Not long after the polls in Bolivia closed late this Sunday afternoonn,  it was already clear that the country's impoverished majority had finally elected one of their own as the country´s next President -- and by a much larger margin than any foreign policy expert, journalist, or Latin America political pundit had expected.

This is easily one of the most surprising and important elections in the history of Latin American democracy. For fans of the "neoliberal," free-market approach to development, as well as coca eradication, it is also a time for soul-searching.

Evo Morales, the 46-year old working-class meztizo, cocalero organizer, and leader of the neo-left "Movement Toward Socialism" party, has soundly defeated the seven other Presidential candidates in the race, capturing close to 50 percent of the nationwide vote.

While the final vote tally still has to be certifed by Bolivia's Electoral Court,  this clearly puts Evo within reach of becoming the first Bolivian President ever to have won a first-round victory outright -- without having the choice default to Bolivia`s fractious, "rent-seeking" Congress.

From an historical perspective, Evo's performance is an all-time record for a Bolivian Presidential candidate, far surpassing the 31 percent received by the second-place candidate, the free-market oriented-former President, Tuto Quiroga. It also surpasses the previous all-time high registered by Hernan Solis in 1982, as well as the 34 percent captured by neoliberal businessman "Goni" Sanchez de Lozada in 1993.

For that matter, relative to other recent elections in the Western Hemisphere, Evo has also outperformed the victory margins achieved by the US´President Bush, Brazil´s Lula, and Argentina's Kirchner. Whatever one thinks of Evo's economic platform -- and it certainly contains more than a little wishful thinking-- there is no doubt that, at least for the moment, he has far more credibility with the Bolivian people than his opponents.

A DEMOCRATIC REVOLUTION?

Even more important than the historical records,  Bolivians have clearly voted en masse in favor of at least three fundamental changes in Bolivia`s social and political landscape -- all of them supported by MAS.

 

• Reasserting public control over Bolivia`s natural resources, especially its huge natural gas reserves -- already, in official terms, the second largest in Latin America, and quite possibly much more.

  Evo's vague, rhetorical shorthand for this is "nationalization," but there is a whole range of policy options that MAS is considering to increase the public`s share of the income generated by its natural resources, and add more value, and generate more jobs by using these resources at home. Whether or not any of these will make practical economic sense is far from clear. But it is hard to argue that this program will  necessarily be any more disappointing for ordinary people than the last two decades of neoliberal policies.

 

• Rejecting (US-backed) coca eradication programs. This supply-side approach to cocaine trade has been pursued by Bolivia since at least the mid-1980s, especially under the Banzer-Quiroga administration from 1997 to 2002.

  Unfortunately, as most observers outside the "drug enforcement complex" now agree -- including good solid conservatives like Milton Friedman and Steve Forbes --  the impact on ultimate cocaine supplies have been limited at best.

  At the same time,  the social, political, and economic impacts on countries like Bolivia, Columbia, and Peru have been disastrous.

  Oddly enough, with respect to drug enforcement, Evo is the true "neoliberal."  He believes that a poor country like Bolivia has a right to grow crops like coca if it makes economic sense, that punishing them for doing so is like punishing Dupont because some of its chemicals end up in illicit drugs, and that Bolivian farms should not be made to pay for the fact that  Americans and Brazilians can't control their bad habits.

  From this angle, his election is just one in a growing series of "corrective interviews" that Andean countries are giving to Washington on the huge costs of the failed supply-side drug control strategy. To summarize the matter quickly -- wouldn't the American people really have preferred to be buying several million cubit feet per day of LNG from Bolivia this winter, rather than pursue coca eradication policies in Bolivia that have had little impact on drug supplies while fostering a hostile political movement?

• Much greater effective representation for Bolivia´s impoverished, excluded, indigenous and meztizo majority. In this case the cliche happens to be true -- for centuries, the Bolivian people have stood by and watched the country´s incredible raw materials -- silver, tin, iron ore, guano, rubber, and now natural gas -- being expropriated by private interests or elite-controlled state companies, while the vast majority have remained dirt poor.

  Futhermore, since the 1990s, Bolivia has been a virtual laboratory for neoliberal economics, as well as coca eradication. The country ended up with its most valuable assets in private hands, while more than half the population remained poor and inequality increased dramatically. Evo´s election sends a message, loud and clear, that Bolivians have had enough. Indeed, from this standpoint, their voting behavior is not particularly radical -- in capitalist terms, they are  simply a group of shareholders who have finally decided to show incompetent managers the door.

This  is a message that will reverbrate throughout the region -- in next year's elections in Peru, Colombia, and even Mexico, for example. This is a message that the US, in particular -- so obsessed with implanting "democracy" in the Middle East, and recently so careless about paying attention to Latin America's troubled democracies closer to home -- ignores at its peril.    

EVO'S ALLIES?

There is an old Russian proverb that says, "Keep an eye on your friends -- your enemies will take care of themselves."

Of course it is to be expected that hard-line America haters like Venezuela's Hugo Chavez and Cuba's Fidel Castro, as well as leading Latin leftlists like Lula and Kirchner,  will take pleasure in Evo's victory, just as many simple-minded American neoconservatives will regard it as an unmitigated setback. 

But Evo's erstwhile left-wing allies should be careful not to celebrate too soon.

In Fidel's case, the key question is, how soon is he prepared to give Cubans the same democratic rights that Bolivians have just exercized?   

In Hugo's case, the question is, is he prepared to make up all for the economic aid, debt relief, and lost exports that Bolivia will lose if it alienates the US and the international community by adopting policies like coca legalization and gas nationalization?  Isn't it just possible that he may well prefer for Bolivia's gas to stay in the ground, where it can't compete with Venezuela's proposed pipeline to Brazil and its proposed LNG exports to the US? 

In the case of Lula's Brazil and Kirchner's Argentina, the question is, are they really willing to renegotiate the lucrative gas export contracts they now have with Bolivia, helping Evo by sharply increasing the prices that they pay, while increasing their Bolivian investments? Assuming that Bolivia is going to export at least part of its gas, shouldn't it consider competitors to Brazil and Argentina, rather than continue to be a captive supplier to these monopsonists?

Overall, therefore, it is easy for Latin America's kneejerk Left to celebrate Evo's rise as yet another defeat for Yankee imperialism -- and, indeed, there is just enough truth in that story to keep the brew bubbling. 

But every day that  Evo wakes up, he needs to remind himself that it was not the Yankees who are responsible for the fact that his country is one-half the size that it was 150 years ago;  that it is not Yankees who consumed most of his country's silver and other resources; that it is not Yankees that are consuming up to 30 million cubic feet per day of Bolivian gas at prices less than a fifth of US market levels (but Brazil and Argentina -- and Chile, by way of Argentina);  that it not Yankees who are content to keep Bolivia landlocked. On the other hand, it IS Yankees who have provided Bolivia with more foreign aid per capita than almost any other Third World country since 1948 -- much of which was admittedly wasted, but much of which undoubtedly did some good. 

In short, now that Evo is President, and not just an angry outside critic of the system, he will have to take responsibility for governing, and admit that Venezuelan, Brazilian, Argentine, and Chilean imperialism -- or, indeed, Chinese imperialism --  are no better than gringo imperialism.

As I`ll argue in Part II, none of these changes will be easy for Evo to implement within the bounds of Bolivia's existing political system, with its increasing regional polarities.   

Indeed, he faces an extraordinary list of challenges -- the least of which will be to become an effective head of government.  He will need a great deal of help. The US could usefully start by lifting its ban on holding discussions with him, and by granting him a visa. 

Despite all the obstacles, it is not too early to pronounce the strong, unified outpouring in favor of this program a ¨democratic revolution.¨

And what is perhaps most striking about this particular one is that Bolivia's people have made it on their own -- without the costly outside intervention that has been required to construct Lego-democracy in other well-known energy-rich developing countries.

(c)SubmergingMarkets, 2005

BUSH HEADS SOUTHReceives Rousing Welcome In Argentina...Fox News Analysis

President Bush received an incredibly warm welcome at the 34-nation Summit of the Americas in Mar de la Plata, as thousands of ordinary people from all over the Continent turned out to hail his presence.

The effervescent US President was clearly buoyed by polls that showed that he still commands the support of an incredible 80 percent of Republicans -- otherwise known as his "base."

True, "non-base" support is reportedly a little less certain. Overall, in this week's latest polls, 59 percent expressed "disapproval," while 42 percent expressed "strong" disapproval." A quarter of the US population surveyed reported "violent morning sickness...."

However, knowledgeable insiders have called this a "temporary setback" that will be easily corrected if and when Presidential advisor Karl Rove, recently distracted by the Pflame investigation, starts covering the bases again.

The President, speaking through an interpreter, voiced optimism that "Free trade and liberal investment policies, plus a few billion dollars on defense, corn subsidiies, and our brand new military base in Paraguay" would completely change the lifestyles of the estimated 100 million Latin Americans who remain below the $1 per day world poverty line.

Said Bush, "These policies have only been tried for a decade or two. They need to be given a chance. Right here in Argentina, you've seen how well they've worked, right?"

Bush's sentiments were echoed by Vincente Fox, Mexico's amazingly popular lame-duck President, and Paul Martin, the astonishing Canadian PM, whose own popularity ratings have recently been taken to record levels by the Gomery Report, which documented the disappearance of $250 million of government funds, mainly by way of Mr. Martin's own party.

Said Martin: "We are quite pleased to have become a wholly-owned subsidiary of US multinationals. We didn't think we'd like the sensation, but it has become an experience that we really look forward to every night. You will also learn to enjoy it. Now if only the US would pay us that $3.5 billion...."

Said Fox: "Yes, it is true, millions of Mexican small farmers have been wiped out by free trade. But this criticism is baseless. Just look at all the remittances they are sending back home from the US !"

Meanwhile, the US President had an especially warm greeting from Diego Maradona, the famous Argentine soccer star, now in recovery. Maradona used a colloquial Argentine expression to describe just how delighted he is to finally have this particular American President visit his country.

Elsewhere, Cuba's Fidel Castro, who was not permitted to attend the summit, was reported to have decided to remove all restrictions on US trade and investment with Cuba, after having listened to President Bush's persuasive arguments.

Said the aging inveterate leftist leader, "I knew we were doing something wrong. Now I finally know what it was. We were way off base!"

After a prolonged negotiating session on Saturday, in which Summit delegates basically agreed to continue to debate the merits of free trade for a long time to come, Bush departed for a Sunday meeting in Brasiia with yet another embattled President, Luis Ignacio da Silva ("Lula.")

Brasilia is a pretty lonely, desolate, and distinctly un-Brazilian place on a Saturday night, because all the whores and politicians have flown back to Rio or Sao Paulo for the weekend, and one is just left with all these 1950s-vintage monuments to Brazil's cement industry. But perhaps President Bush will find a little solace taking a moonlit walk on the empty esplanades, wandering through the otherwise flat, lifeless landscape that Robert Campos once called "the revenge of a Communist architect against capitalist society."

(c)SubmergingMarkets, 2005

GREEN-'HOUSING' GAZANSJames S. Henry and Andrew Hellman

The US government, the Palestinians, and indeed most Israelis are delighted that the Sharon Government has finally stood up to some settler extremists, and is still on track to pull out of the Gaza Strip by mid-August.

However, we should all pay closer attention to the precise way that the Israelis are leaving.  There appear to be several missed opportunities to leave a much healthier economic base for Gaza's 1.4 million Palestinians when the Israelis leave-- a necessary, if not sufficient, condition for eventual peace. 

In particular, Israel is  now on a path to dismantle or destroy over 1500 homes and 1000 acres of greenhouses, which already provide thousands of jobs for Palestinians, and might provide thousands more....

MOTH MADNESS!The Latest Crazy Scheme in the Hapless "War on Drugs"James S. Henry and Jeremy Bigwood

In the midst of the war in Iraq, the war on terror, and the Bush Adminstration’s war on Social Security, Americans may perhaps be forgiven for having forgotten that their government is still waging a "global war on drugs" that costs at least $30-$40 billion per year, and also causes a great deal of other political, social, and environmental damage at home and abroad.

_____________________________________________

As indicated in the adjacent chart, after more than three decades of this hallowed effort, drug enforcers have failed to produce any increase whatsoever in the real retail street price of illegal drugs.

Retail cocaine prices, for example, are much lower than when the drug war started. Similar charts could be also drawn for opium, marijuana, and the bevy of other new "designer drugs" that have been introduced in the last decades – a rational economic response to prohibition.

Of course, hard-core defenders of the anti-drug campaign may argue - just as Prohibitionist moralizers did about booze prices in the 1920s - that retail drug prices would be even lower, except for the war on drugs.

But it seems more likely that supply-side interdiction has failed to have any consistent impact, partly because improvements in drug dealer productivity – as many economists on all sides of the political specrum have predicted.

The collapse in retail drug prices is also consistent with the embarrassing fact that opium production has recently exploded in US-occupied Afghanistan.

The decrease in prices is also exactly what one would expect from a successful "decartelization" program, like the one that the US Government pursued with such fervor against Pablo Escobar, "Gacha" Orejuela-Rodriguez, and Manuel Noriega.

In the 1980s and 1990s that effort employed quite a few "drug busters," and provided endless material for TV and film scripts. But at the end of the day, it basically just helped to increase supply.

Now, after five years of saturating Colombia with chemical herbicides, the US government and their allies in Colombia have also failed to reduce the number of hectares under coca cultivation.

Indeed, the total area under cultivation in Colombia at the end of 2004 was slightly greater than at yearend 2003. Coca cultivation in Peru and Bolivia, have also recently been expanding. All this is consistent with a the "balloon" model, in which destroying coca in one place only increases the incentives to plant elsewhere.

It also appears likely that – like every other profit-motivated farmer on the planet – coca farmers, as well as cocaine laboratories and distributors, are not sitting still, but are working hard to improve per-hectare productivity.

This means they don’t require nearly as many hectares to produce a given amount of coca, as they used to. In calculating its estimates of "potential output," the US DEA assumes a constant 4.26 kilos of potential cocaine output per hectare of coca cultivation; UN "drug experts" assume a constant 3.56.

Even if we give the DEA the benefit of the doubt, however, it estimates that in 2004, Bolivia, Peru, and Colombia produced enough coca to make more than 640,000 kilos of pure cocaine. While this is 28 percent lower than the average potential output in 1996-2001, it is still enough coca to produce more than 2.5 billion grams per year of retail street-cut cocaine.

At today’s New York City street price for an "eight-ball" – $150 for an eighth of an ounce, or $43 a gram – even if just 20 percent of this potential output made it through, that’s a $22 billion annual market. Those who are waiting for supply-side interdiction to "win the war on drugs" will have to wait a long time.

Indeed, if one operative definition of insanity is to "do the same thing over and over again, expecting a different result," by this definition, US drug enforcement policy is bouncing off the walls.

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Harvard's President Summers and the Resurgence of "Scientific Sexism" Part I. This Is a Recruiting Strategy?

As if we did not already have enough reactionary "noise pollution" in this society, Lawrence H. Summers, Harvard University's President, has managed to put his foot in it again.     

Sommers has been compelled to apologize for the remarks on the subject of gender inequaIity that he made in front of an academic conference in Boston on January 14.

From Harvard's standpoint, these remarks were not only ill-considered and ill-informed. They were also downright self-defeating. 

After all, the University has recently committed $25 million of special funds to help recruit underrepresented groups, including female and minority faculty.

Furthermore,  the attendees at the Boston conference included a select groups of some of the most talented female academics in the country -- including several that Harvard wanted to recruit!

So this was hardly an object lesson in labor market strategy.

As noted below, this recent incident is just the latest in a long line of unfortunate missteps by President/Herr Professor Summers, a highly-intelligent but congenitally-insensitive former economist.   

It also turns out that the President of Harvard was woefully simplistic about the latest academic literature on gender inequality, and rather patronizing and counter-productive in his attempt to "provoke" further research by speculating from the hip about it -- without consulting the best minds in the field,  many of whom were seated in the audience!

Whatever we may believe about gender differences and sexual discrimination in academic institutions, therefore,  this  episode raises serious questions about whether President Summers  has the judgment and  emotional maturity  to occupy one of the most prominent academic offices in the land.

This remains true, whether or not his persistent bad judgment is explained by his genetic endowment, his childhood experiences, his child-rearing choices, or his astrological sign.         

 

Maximizing Gross National Happiness Rethinking the Economics of Growth and InequalityJames S. Henry

Each year, by the terms of Jeremy Bentham's 1832 will, his mummified corpse is wheeled out to sit with faculty and students at the University of London.  Apart from this peculiar celebration, however, few people today remember the 18th-century economist and social critic whose life's work consisted of trying to make the British legal system serve "the greatest happiness of the greatest number."

Indeed, most modern economists, under the influence of the Chicago School's homespun version of behaviorism and positivism, have long since abandoned the direct study of "human happiness."

In the economic development arena, this has led many economists to focus on technical policies that are supposed to increase overall efficiency, output, and measured growth, without regard to the distributional consequences.

In this "neoliberal" view, one person's subjective pleasure is another's pain, utility functions are unobservable, so interpersonal comparisons of utility are impossible. Distributional questions are therefore purely matters of "personal preference," to which "positivist economics" has nothing to add.

One suspects that this stance causes poor old Jeremy Benthem, who dedicated his life to identifying social polices that would increase human happiness, to turn somersaults  in his Auto-Icon.

Fortunately, modern psychologists, anthropologists, and public opinion pollsters have recently stepped in where most economists have feared to tread. 

NEO-BENTHAMITE PSYCHOLOGY AND ECONOMICS

Using a combination of survey research techniques and objective measures of individual economic and social status, these social scientists have begun to study the determinants of subjective happiness levels directly -- both within and across countries. 

Among their most important findings:

• Beyond a certain level of per capita measured income -- about $15,000 per year -- reported happiness levels don't improve very much across countries. There is also a great deal of variation in reported subjective happiness levels poorer countries at similar income levels. In other words, making "measured growth" the sine qua non of economic policy makes little sense.
  

• High-income groups report somewhat higher "very happy" levels within countries at any given point in time. But among First World countries,  increases in average real per capita income have not led to increased happiness levels over time.

• Indeed, since the late 1940s, increased real income levels among First World countries have been accompanied by rising levels of alcoholism and drug addiction, depression, and crime  -- an indication of a growing gap between trends in income and happiness.

• Changes in real income may lead to short-time increases in subjective happiness at the individual level.  But people become "habituated" to new levels of material income quickly -- in less than a year. Since they also tend to underestimate such "habituation" effects, they probably also spend too much time on the job, and too little time with their families.
  

• Measured income has much less impact on subjective happiness than many other determinants of happiness --  especially employment, job security, family status,  and health. The country of Bhutan has reportedly already recognized this fact by declaring that its national goal is to maximize "Gross National Happiness" rather than GDP per capita.
  

• Relative incomes and "rivalry" are other important determinants of subjective happiness. This depends on one's reference group. For example, reported happiness levels among residents of East Germany plummeted after 1990, when they went from having the highest incomes among Soviet-type economies to the lowest incomes in Germany.

• While genetic factors may help to explain differences among individuals in subjective happiness within any country, differences among neighboring countries -- say, within Europe -- are far too substantial and persistent to account for on the basis of such factors.

POLICY IMPLICATIONS

From the standpoint of Bentham's original goal of designing social institutions to maximize human happiness, the implications are many.

They include new justifications for: 

(1) Progressive income and wealth taxation;

(2) Polices that help to provide job security, social security, and health insurance;

(3) Using non-material incentives to reward people for doing a good job;

(4) Encouraging people to spend more time with their families; and

(5) Paying more attention to "non-material" development goals like democracy, family values, work force participation, and human rights -- in striking contrast to the materialist path that now seems to unite both China and the World Bank/IMF on the goal of blindly maximizing measured GDP per capita.

In other words, all this adds up to a pretty interesting justification for -- in effect -- Europe's "high tax/social insurance/long vacation" welfare state version of capitalism. 

From a competitive standpoint, however, since the US, China, and other ruthless global competitors are unlikely to adopt such a model any time soon -- and, indeed, moving in precisely the opposite direction, the question is whether any of these Neo-Benthamite policy implications stand a snowball's chance in hell. They may, but only if those of us who are located in neoliberal vanguard countries are able to push social policies in a more progressive -- and happier! -- direction.

(For a concise summary of the literature, see the following three lectures by LSE's Professor Richard Layard:) 

• Download  Lectur 1

• Download Lecture 2

• Download Lecture 3

***

© James S. Henry, SubmergingMarkets™, 2005

 

Letters from the New World #7: “Post Office Manners” Denis Beckett (JBG)

Five or six customers were waiting in the Post Office line. Everybody was in the second half of life’s span. Everybody had had the vote since before ’94. Nobody was joyous.

I had tried to be slightly joyous. I offered a greeting when I arrived, but people mmmphed in that embarrassed bourgeois manner, scandalized at unlicensed breaching of queue silence. So I like everyone was a stalagmite, separate to the other stalagmites, waiting in our separate spaces while the counters proceeded with lo-o-o-ong transactions.

Then a girl came in, a black girl in a school uniform. She looked around in the manner of someone in an unfamiliar place.

“Excuse me”, she said to the tannie  (Afrikaans for 'Aunty') at the back of the queue, “Where do I go to send a parcel?”

If she’d whispered it  the tannie might have whispered back. As it was, she said it out loud, unconcerned about putting the tannie on the spot in front of the other members of the queue.

So the tannie had an attack of Middle Class Frost, and couldn’t say anything. She gestured the girl in behind her. “Thank you”, said the girl, without irony.

And we stood. The big batch customers up front were taking time. After a while, the girl said, to no one in particular, “Excuse me, has something gone wrong or do we just keep on waiting?”

Everyone laughed a bit, including the clerks behind the counter. Several people mumbled something reassuring. One of the clients at the front turned and apologized for the hold-up. Ostensibly he was apologizing to the girl, but in fact he was apologizing to us all.

We felt better that he did apologize. We had been working up a resentment. Had it not been for the girl, he would never have made the apology. He would have walked out of there with all our glares daggering into his back. But now the glares were defused.

We resumed waiting, but it was different. The stalagmites were thawing. The tannie at the front of the queue called to the girl: “Don’t you have to be back at school by quarter past?” The girl said “Yes, but if I don’t send it now my granny won’t get it in time.” The tannie at the front said: “You’d better come up here, then. I’m sure these nice people won’t mind.” And she beamed a beam at the rest of us in the queue, and people nodded and murmured assent and beamed reciprocal beams.

The girl moved up the queue, politely thanking each person as she passed them. As she got to the front, the apology guy finished and went off with waves and goodbyes. The girl took his place and started explaining her needs in Sotho, calling the clerk “ntate” (Mr.) in every sentence. Apparently it was fairly lousy Sotho, because the clerk switched to English – he was explaining express services – and she was clearly relieved.

Meantime, the tannie at the front explained that she had recently retired from the school. The guy behind her said yes, he thought he recognized her; she had taught his child. Conversation spread. It’s not that everyone was vocal, but that the stalagmites had melted into a brand of community. The feel had been isolation; it became connection.

When the girl finished she did a curtsy to the ntate at the counter, a curtsy to the queue, thanked everyone, and hurried off. The rest of us stood differently now, relating better to each other, better even to the clerks.

Funny, I felt, how in 1994 and for a while beyond, we in the pale gang thought that the big change was an act of generosity; that we were leaning down, holding out the hand of friendship to pull them up.

These days, I find it humbling and thrilling to see ever more evidence of the two way street, the ways that white lives are enhanced by living in Africa.

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© Denis Beckett, Submerging Markets™, January 05

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