John B. Cobb, Jr., Ph.D. is Professor of Theology Emeritus at the Claremont School of Theology, Claremont, California, and Co-Director of the Center for Process Studies there. His many books currently in print include: Reclaiming the Church (1997); with Herman Daly, For the Common Good; Becoming a Thinking Christian (1993); Sustainability (1992); Can Christ Become Good News Again? (1991); ed. with Christopher Ives, The Emptying God: a Buddhist-Jewish-Christian Conversation (1990); with Charles Birch, The Liberation of Life; and with David Griffin, Process Theology: An Introductory Exposition (1977). He is a retired minister in the United Methodist Church. His email address is email@example.com..
This lecture was delivered at the Nobel Conference, Gustavus Adolphus College, October 2,000. Published by permission of the author. Note: This article has been translated into Romanian by Alexander L. Ovsov. The translation can be found at click here
Deliberate planning and massive human effort have created the present system of globalization. This system exploits the poor and enriches the wealthy. It destroys human communities and devastates the natural world. The author suggests other solutions.
I. Ecclesiastical Globalization
Christians have been interested in globalization from the earliest days of the faith.
We inherited from Israel a story about the whole earth; so we have understood ourselves in the context of global history. We have understood that the good news about Jesus Christ was to be carried throughout the world. (Mt. 28:19; Acts 1:8) Although this globalizing impulse has waxed and waned, it has never been absent. Finally, in the nineteenth century, it came close to realization with the implantation of Christian churches in almost all countries.
In the twentieth century, this form of Christian globalization has been called into question. We have come to recognize that the missionary movement has often been too insensitive to its cultural bias. We have confused the gospel with North Atlantic culture. We have connected missions with colonialism. We have disrupted traditional cultures. And we have failed to appreciate the wisdom of the other traditions from which we have sought converts.
This has not led us to lose interest in globalization, but it has changed the character of the globalization we seek. We have emphasized the importance of the indigenization of Christianity in the many cultural contexts in which it now exists. We have encouraged autonomy of these indigenized churches from Euro-American control. We have developed a World Council of Churches in which these younger churches have equal place with the older ones.
Even more important, perhaps, since the World Parliament of Religions in 1894, the emphasis has shifted from proselytizing to dialogue and cooperation. We have
recognized that we have much to learn from other religious traditions. We are now seeking new institutional expressions of our shared concerns, such as the new ongoing World Parliament of Religions and the United Religions Initiative.
During the same period some of us have become aware of the global context of our lives in a different way. Earth Day 1970 awakened us to the devastation human beings had wreaked on our natural context. The famed essay of Lynn White, Jr. on the "Historical Origins of the Ecological Crisis" forced us to recognize that our own teachings had contributed to the blindness and indifference to this context that characterized most of Western culture. The church is now struggling to think globally about these matters.
However, we have not gathered here to reflect about ecclesiastical globalization. Our concern is with economic globalization and, specifically, with that form of economic globalization that has advanced so rapidly in the past twenty years. I am invited to address this truly remarkable phenomenon from the standpoint of a Christian theologian.
II. Economic Globalization
Does a Christian, as Christian, have anything distinctive to say about this form of globalization? The answer to this, as to so many questions, is Yes and No. On the No side, Christians have no monopoly on any of the concerns that we may offer to the discussion. We derived most of them from the ancient Hebrews, and they continue to inform contemporary Judaism. We share many of them with modern ethical humanists as well as adherents of other religious traditions. On the Yes side, clearly, we do have relevant concerns. We also have strong convictions. There are many people who do not share all our convictions, but we feel that we have the right to voice our convictions in the public arena alongside others. I will identify seven such convictions and comment on the implications of each for the evaluation of economic globalization.
First, we have a concern for the whole world. We oppose parochialism. We believe that people everywhere are just as precious in God’s sight as our next-door neighbors. We are convinced that our concern for the well-being of others should extend to all of them.
Economic globalization scores quite well in this regard. It brings people all over the world into contact with one another. Caricatures and stereotypes of various foreigners are modified positively if they do not disappear altogether. Ethnic prejudices decline. People from various parts of the world are treated more or less equally, depending on their roles in the market rather than their race or nationality
Second, we affirm the enjoyment of economic goods. Although ascetic practices have their place in some spiritual disciplines, it is a limited place. Good food, fresh water, adequate clothing, comfortable homes, reliable health care, and other goods and services produced by the economy are positive values.
The global economy is unquestionably producing a vast increase in goods and services. In and of itself, Christians support the goal of supplying more goods and services, and the globalized economy is doing this on a large scale.
Third, there are other values that are not produced by the economy. Perhaps the most important is human community. We believe that rich relations among people are essential to personal well-being. We rejoice that these relations can now include global ones, but we believe that ongoing relations with those close at hand are crucial.
On this point a Christian must be critical of economic globalization. One of the disturbing features of the earlier Christian globalization was the disruption of existing communities. Economic globalization disrupts on a much larger scale. Further, whereas the new Christian churches constituted important communities for the converts, economic globalization generates nothing comparable
Fourth, we believe that human beings flourish when they have considerable ability to shape their own lives. This is partly a purely individual matter, but it is more importantly a matter of personal participation in community decisions.
With regard to individual decision-making, there may be some gain from globalization. It can be argued that the breakdown of traditional community frees individuals. The market is composed of individuals who freely buy and sell labor and commodities. Each makes his or her own decisions. On the other hand, the great majority of individuals lose access to any means of production. When they sell their labor, they have no self-determination in the day-to-day decisions about how it will be used. People with whom they have no personal contact, often in distant parts of the world, typically decide whether their jobs will continue or end. Most feel – and are --more powerless than they felt – and were -- in traditional society
Fifth, we are concerned not only for all who are now alive but also for generations yet unborn. We believe it is always important to consider the long-term consequences of actions as well as the short-term ones. Since people are in general inclined to emphasize short-term consequences, our task is often to extend the horizons.
Advocates of economic globalization often appeal to just this principle. They recognize that the disruptions it introduces are painful, but they are confident that, in the long run, all will benefit. On the other hand, the more radical critics of globalization believe that continuing in the present direction will lead to disaster. Christians divide in their judgments on this exceedingly important question. I will return to this topic.
Sixth, we are convinced that what should concern us most are the consequences for those whom Jesus called "the least of these." (Mt. 25:40,45) In New Testament times these were often identified as the widows and orphans, because their place in society was least secure and most marginalized. Today we call for a preferential option for the poor.
. This is one of the places where Christian perceptions clash most sharply with supporters of contemporary patterns of globalization and with the dominant schools of economics that justify them. Much of economic theory deals with how to attain sustainable growth. Distribution of wealth and income are not built into the theory. Welfare economics avoids issues of income inequality by appealing to the principle of Pareto optimality. In their book, On Income Inequality, (Oxford: Clarendon Press, expanded edition, 1997), James Foster and Amartya Sen explain this as follows: "The principle of Pareto optimality was evolved precisely to cut out the need for distributional judgements. A change implies a Pareto-improvement if it makes noone worse off and someone better off." The situation is optimal if no change would improve the lot of some without worsening that of another. In other words, even a substantial improvement of the lot of the poor is not favored if it would cost the rich anything at all. (pp.6-7).
It is obvious that Foster and Sen are among the many economists who are not indifferent to inequality. On the contrary, they have contributed alternative approaches. Unfortunately, the more influential modification of welfare economics has been effected by Kaldor and Hicks, who argue in utilitarian fashion that an improvement has been made as long as gains to gainers exceed losses to losers. Although in principle this would allow for improving the lot of the many poor at the expense of the few rich, in practice it has functioned to support growth-oriented policies that have been detrimental to many of the poor. Since it is economic thinking following either Pareto or Kaldor-Hicks that shapes globalization, and since the poor are in fact not profiting, at least not proportionately, Christians must be critical.
This list of Christian concerns could have been formulated a century ago. It is largely uncontroversial among us, although there are disputes about the relative emphasis to be placed on each concern. But from today’s perspective, these concerns are far too limited. During the past thirty years we have come to recognize that our standard teachings ignore the natural world, viewing everything in human terms. Some Christians continue to defend this anthropocentrism, but most of these now recognize that human well-being is bound up with the well-being of the natural world. Other Christians, among whom I count myself, have gone further to reaffirm the Biblical doctrine that the whole world is God’s creation and that God saw that this creation was good even apart from human beings. (Gen. 1:11, 18, 24) The World Council of Churches has declared "the integrity of creation" to be a central guideline for its work, along with peace and justice.
How does globalization affect the integrity of creation? There are respects in which it may help. For example, industry in developing countries is less efficient in its use of resources and more polluting than that in developed countries. Transnational corporations transfer technology that improves this situation. But overall, globalization has contributed to rapid deforestation, over-fishing, exhaustion of fresh water supplies, degradation of soil, pollution of the air, and global warming
In view of these considerations, Christians can only conclude that the present form of economic globalization has been promoted in terms of a system of values that we cannot support. In recent decades society as a whole has been persuaded that the most important value is economic growth. I call this ideology "economism." It is profoundly opposed to Christianity. Indeed, for Christians, it is an idolatry, one that was specifically rejected by Jesus (Mt. 6:24). A Christian must condemn a society that organizes itself for the pursuit of wealth and encourages its citizens to order their lives in this way. Since the globalization now occurring in the world is an extension of that type of society, as a Christian, I cannot support it.
In response to the power of this idolatry, our primary role as Christians may be to instill the values that come from serving God and not wealth. The values identified above are among these. If we had succeeded in this task, and if other religious and secular communities had also succeeded in transmitting more humanistic and ecological values, society would not have become economistic. We are now called to confess and repent more than to criticize others.
Nevertheless, we have another task as well. We cannot simply critique economism and its consequences. We should propose forms of economic life that more nearly conform to our understanding of the world and our concerns for it.
The situation is analogous to that faced by the church of my youth. In those days, the 1930’s, the dominant idolatry was nationalism. The idolatry was obvious, even explicit, in Germany, Italy, and Japan, but in less virulent forms it was present in other countries as well. This idolatry plunged the world into the horrors of World War II.
It was easy to see that nationalism was an idolatry, but condemning it did not mean that we rejected nations as such or failed to care especially about our own. We typically taught that while nationalism was bad, patriotism was good. Devotion to God does not exclude many subordinate devotions, such as devotion to one’s country, as long as they remain subordinate
Today we need a similar response to the new idolatry of economism. We reject the idea that the meaning of human life is to be found in the pursuit of wealth. We deny that economic growth is to be sought at all costs. We oppose the restructuring of societies everywhere based primarily on economic considerations. We reject the industrialization of the health care system and the redefinition of education as preparation to serve the market. We oppose the idea that the courts should be more committed to supporting productive efficiency than to fairness. We struggle against the domination of politics by economic interests. But we emphatically do not deny the importance of the economy and its capacity to serve essential human needs
Accordingly, it is important for Christians not only to condemn economism but also to propose ways to make the economy serve humanity better. For some years I have been trying to make such proposals. They have centered on the questions of human community and a sustainable relationship to the natural world. They have, of course, also dealt with the distribution of wealth and income, but primarily in the context of community and ecology. Today I will reverse the order and focus on the question of poverty. If we complain that the present global economy fails the test of serving the poor, what changes can we propose?
IV. The Dominant Proposal
Before launching into proposals for major changes, we need to consider the possibility that the present form of globalization can itself solve the problem of poverty. The argument that this could be accomplished was first presented in the Brundtland Report to the United Nations. A thoughtful book by Robin Marris, entitled Ending Poverty, (New York: Thames and Hudson, 1999) reaffirms this claim, building on a 1997 White Paper for the British government. (Eliminating World Poverty: A Challenge for the 21st Century).
Marris believes that 5% annual growth in the developing world can be maintained, if it is not blocked by non-economic factors, such as revolution and war.
Even taking account of the increase of population, this rate of growth, evenly distributed among social classes, would eliminate absolute poverty by 2050. By the end of the century, he proposes, slower growth in the developed world will increase per capita income four or fivefold. By that time, the 5% growth in the developing world will bring about a thirty-fold increase in per capita income there and will close the gap between now developed and developing countries. In this scenario, global production would increase five-fold by mid-century and thirty-fold by the end of the century.
I will consider this proposal in terms of three types of criticism. First, how can we insure that the poor will participate proportionately in the growth? Second, is the required growth possible? Third, does the proposal take into account the economic and human costs of growth?
V. Participation of the Poor in Growth
Thus far, growth has not been distributed equally among classes. Despite a huge increase in global production in the past fifty years, nearly half the world’s people still lives on less than two dollars a day. A recent United Nations report states that in the last five years, the percentage of the world’s population earning less than one dollar a day has increased from 17% to 19%. That this is not simply a matter of an early phase of development is shown by the fact that the poor have lost ground in the United States during the past quarter century. When governments and labor unions do not interfere, the market tends to concentrate wealth in the hands of the most powerful players, the rich. This has been happening globally, and Marris does not discuss how this is to be changed.
Without equal distribution, the total increase in production would have to be much larger. If the income of the poor rises at half the rate of GDP, then the total increase required to remove absolute poverty would have to be a factor of ten; if the rise is one-fourth as fast, a factor of twenty. To achieve such growth will take far more than fifty years. And since considerable growth in GDP can in fact take place with no improvement whatsoever in the condition of the poor, as recent U.S. history has shown, even these ratios may be optimistic.
The point here is that, at the very least, one who wants to solve the problem of poverty by economic growth must consider how a reasonable portion of that growth is to reach the poor. The changes required would not challenge economic globalization as such, but they would challenge its present form. This present form reflects what is known as the Washington Consensus, involving the United States government, the International Monetary Fund, and the World Bank.
The Washington Consensus centers on the idea that development should be through corporate investment rather than governmental and intergovernmental grants and loans. To encourage corporate investment, national boundaries should be downgraded so that goods and capital can flow freely around the world. In short, the ideal is that a single global market replace the international economy that was dominant in earlier decades.
Each country should privatize all productive assets and make them available for purchase by international capital. It should cease to protect its businesses from international competition and concentrate only on that production in which it has a comparative advantage. It should adopt governmental policies that make it attractive for transnational investment. To a truly remarkable degree, the Washington Consensus has governed global economic policy since the early 1980s, and in the nineties, it has approached its goal of a unified global market.
There has been no lack of protest. The East Asian tigers have pointed out that they achieved their success in ways quite counter to the requirements of the Washington Consensus, and there has been much opposition to some of these policies in developing nations and in the United Nations. The World Development Report 2000 confirms that the World Bank’s concern for poverty reduction has led its leadership out of the Washington Consensus, recognizing that, by itself, the growth produced by economic globalization has not met the needs of the poor. However, the Report did not go as far as some had anticipated in critiquing the results of economic globalization. It continues to claim that globalization does benefit the poor, and the Bank continues its commitment to a globalized economy within which the investments of transnational corporations will be the main engine of growth. Although there is now talk of a post-Washington Consensus model of development that adjusts to some of these criticisms, it continues the commitment to globalization and overall economic growth, differing only in regard to the best means of achieving this. (Cf. Charles Gore, "The Rise and Fall of the Washington Consensus as a Paradigm for Developing Countries," World Development, May 2000, pp. 789-804.) Only among some of the nongovernmental organizations does one find a more radical critique of the focus on economic growth and globalization.
The policies promoted by the Washington Consensus have also shaped internal affairs in this country. It may be easier to understand these policies by focusing on how they work out here. In the United States they take the form of what Barry Bluestone and Bennett Harrison call "the Wall Street model" (Growing Prosperity: The Battle for Growth with Equity in the Twenty-First Century. Boston: Houghton Mifflin Company, 2000). This model is so designed as to prevent the poor from benefiting from economic growth.
The basic assumption is that investment is the engine of economic progress. Investment depends on borrowing, and the amount invested depends on the interest rate. Hence keeping interest rates low is of crucial importance. Because rates rise if there is fear of inflation, we need policies that prevent inflation. One such policy is to maintain sufficient unemployment to keep wages low. If economic growth threatens to reduce unemployment below five or six percent, it is the duty of the Federal Reserve Board to cool the economy by raising short-term interest rates. This anti-inflationary policy is to be accompanied by reduced taxes, especially on the rich, a balanced budget, de-regulation of business, weakening labor unions, free trade, and capital mobility. One may readily see that the growth resulting from these policies will not be evenly distributed among social classes.
A number of recent writers (e.g. James K. Galbraith, Created Unequal: The Crisis in American Pay. New York: The Free Press, 1998) have recognized this and proposed alternatives. Bluestone and Harrison call their alternative "the Main Street model." It calls for a larger role for the government in promoting research and development as well as education, for fair trade based on labor rights and standards, for an expansionary fiscal policy, for rising wages and improved employment security, and for regulation and taxation of speculative capital movements around the world. The net result would be to distribute income more equitably.
It is obvious that the goals and intentions of this model are more in harmony with Christian concern for the poor than is the present system. The question is whether policies following from it would have their intended effect or would in fact lead to the runaway inflation against which the Wall Street model is intended to guard us. Is the Wall Street fear that low unemployment would lead to runaway inflation well grounded?
The standard argument is in two steps: the Phillips Curve and NAIRU, the non-accelerating inflation rate of unemployment. The Phillips Curve posits that as unemployment rises, inflation declines and, of course, that as unemployment is reduced, inflation rises. It implies a trade-off between these considerations. It allows liberals to argue that reduced unemployment is worth acceptance of a somewhat higher rate of inflation, while conservatives argue for acceptance of higher levels of unemployment for the sake of reduced inflation.
In 1968, however, Milton Friedman introduced an argument that soon gave the victory to the conservatives. He argued that if unemployment triggers wage increases, the rate of inflation will rise much faster than the Phillips Curve indicates. It will be accelerated by expectations of inflation that will feed on themselves. Interest rates will rise in anticipation of inflation thus fueling further inflation. It is important, therefore, to keep unemployment at its "natural rate," which is the one that does not accelerate inflation.
Recent historical experience of low unemployment without inflation has opened the door to questioning whether federal policy to keep wages low by maintaining unemployment has ever been justified. The unemployment rate has fallen well below the supposed NAIRU without inflation. There are alternate readings of the history that show that the pre-NAIRU policies geared to reducing unemployment had positive effects throughout the economy. It may be that full employment brings into production unused fixed capital, the cost of using which is minimal. As a result, even if the workers are less efficient or wages rise, the cost of the goods they produce does not increase. It may also be that when labor is scarce, employers are under more pressure to institute laborsaving practices and hence raise productivity. In any case, there is now good reason to challenge any continuation of the unemployment policies that have for decades imposed such suffering on the poor. They are particularly vicious when combined with so-called "welfare reform" that punishes those who are kept unemployed by just these policies.
In addition to these fiscal policies, wages are kept low by international competition. The extent to which this applies to U.S. wages is uncertain, but it is quite certain that the Structural Adjustment enforced on developing countries by the IMF and the World Bank encourage them to compete for transnational investments, and that low wages are one of the ways they compete. Often in the process of structural adjustment, the lowering of wages is achieved by deflation of the currency combined with no increase in wages. If the Mexican peso is reduced in value by thirty percent, and wages in pesos are held constant, the buying power of the worker declines.
The Main Street model of Bluestone and Harrison corresponds with the "people-centered" approach to development. In this model, nations control their own economic affairs and develop programs that are specifically targeted to the relief of poverty. In the 1970s and 80s, India’s growth rate was slow, but its economic independence allowed it to reduce the proportion of its population that was poor. In the past decade, its acceptance of the Washington Consensus has led to faster growth but no further reduction of poverty. (Amitabh Pal, "Does Global Economic Policy Help the Poor? No. Globalization Severely Harms Them," The Hartford Courant, July 29, 2000.) Policies directed to the people-centered goal of poverty-reduction are quite different from those directed primarily to an increase of GDP.
VI. Limits to Growth
There are many who view the global situation in such a way that the goal of increased growth appears entirely unrealistic. They see the global bio-system as already under acute stress. Present patterns of human life on the planet are already unsustainable. A vast increase of production will hasten catastrophe. Although Marris shows, rightly, that a five-fold increase in production need by no means quintuple the stress on the environment, those who deal concretely with what is already happening to agricultural lands, forests, fisheries, air, and water are not thereby reassured.
Economists on the whole are in a poor position to respond to these concerns. They have been schooled to believe that where capital suffices, natural resources pose no limit. This conviction is so deep that most of them apply it quickly when confronted with particular problems. The idea has so much truth that they feel no need to explore the limits where it breaks down.
There are two main elements in this truth. First, better technology can often make use of resources inaccessible to the older technology. Second, a more abundant resource can be substituted for one that is becoming scarce. These changes occur on the dictates of the market. That is, when the price of a mineral rises, it is worth investing in new technology and mining lower grades. Or it is worth finding a substitute, such as a form of plastic, that can do the same job
Robin Marris is far from indifferent to ecological questions, and he does snot rely entirely on market signals. For example, he has a very simple solution to deforestation. This should be forbidden by law. He does not tell us, however, how the multiplying demand for forest products is to be satisfied.
With regard to the supply of fish, he points out, rightly, that many edible species not yet exploited can replace the popular ones that have been decimated by over-fishing and that there can be more fish farms. When demand exceeds supply, the price of fish will rise. Consumers will then shift to alternative sources of protein. But he does not tell us what these are and where and how they will be produced.
Marris takes the prospects of global warming seriously. He expects its negative and positive effects on agriculture to balance out. Flooding of low-lying islands and coastal plains and increased destructiveness of storms will be costly, but since the annual cost will be around one and a half per cent of Global World Product, it is affordable.during the first half of the twenty-first century.
This does not mean that Marris is complacent about long-term consequences. He knows that these would eventually become catastrophic if nothing were done to halt the build up of carbon in the atmosphere. But he is convinced that technology can be developed to stabilize these emissions at an acceptable level while production rises dramatically.
Like most economists, Marris is not particularly concerned about food production. Agriculture is an area to which economists often point as illustrating their thesis. The application of capital and new technology has vastly increased global production. There has been no global shortage of food. Hunger results nor from the lack of food but from inability to pay for it. Amartya Sen has shown that this is true even in the case of famines occasioned by crop failures. (Poverty and Famines: An Essay on Entitlement and Deprivation. Oxford: Clarendon Press, 1981). The solution, therefore, is economic growth. Sen has also shown that food production has increased faster than population over the long haul and has continued to do so in the past quarter century. (Development as Freedom. New York: Alfred A. Knopf, 1999, Chapter 9)
Nevertheless agriculture is an area in which those most deeply involved are highly skeptical of the economists’ confidence that vastly increased demand can be met. Lester Brown was a leading participant in one of the economists’ great success stories, the Green Revolution. By applying new technology and capital, production of several grains was vastly increased. India, which was suffering from shortages of food, became a net exporter of grain.
But Brown warns us strongly against technological optimism. Whereas thus far actual global food shortages have been warded off by just the kind of developments economists count on, possibilities for such developments are becoming scarce. His book, Who Will Feed China? (New York: W.W. Norton & Co., 1995) shows that China’s population growth combined with a rising standard of living will lead to an enormous increase in demand, while the loss of cropland will make it difficult to increase production. China will need to import huge quantities of grain, more than is likely to be available, thus driving prices up and working great hardship on the global poor. In more general terms, he argues that around 1990 a shift took place from world food abundance to a lessening ability to meet demand. A reader of Brown finds talk of a fivefold increase in the next fifty years difficult to believe.
The limits of agriculture are relevant to other aspects of the confidence in growth as a solution to poverty. Those who seek alternatives to what is growing scarce, often look to plants. Ethanol can replace gasoline, but as agriculture presses its limits, one cannot foresee a great increase of ethanol production. A five-fold increase in the consumption of paper cannot come from trees unless huge areas are returned from agriculture to forestry. Alternately, growing other crops from which paper can be made will compete with food production.
This is, of course, just one example of the problem of projecting a fivefold increase in production, not to mention a thirty-fold one. When particular shortages are viewed in isolation, solutions are often imaginable. But when one traces through what is involved in a proposed solution, one often finds that it conflicts with the solution of other problems. Limits to growth are not so easily wished away.
The problem of limits is exacerbated by population growth. Marris recognizes this and factors it into his calculations of what is needed to eliminate absolute poverty. There are two features of population growth, however, that he does not consider. His calculations assume that this growth is distributed evenly over the national population, whereas in fact it is concentrated among the poor. In addition, the figures are based on the work of demographers; most of whom do not take into account that the poor often choose to have more children when their prospects improve
VII. The Costs of Growth
Thus far I have spoken as though a vast increase in production slanted to the benefit of the poor would in fact solve the problem of poverty -- if it is physically possible. I have then raised the question of its physical possibility and expressed my own doubts about the kind and amount of growth projected. I now want to challenge a deeper assumption, that is, that growth in the sense of a general increase in economic activity would improve the real economic well-being of people in general and of the poor in particular.
In the discussions thus far, "growth" has meant, as in the conversation generally, increase in gross product. Marris’s proposals deal with per capita Gross Domestic Product. Like most economists, he assumes that this measures, or at least correlates with, economic well-being. This judgment needs to be examined.
GDP includes many things that do not benefit anyone and ignores the losses associated with production. When crime goes up, GDP rises by including all the increased expenditures on police, and courts, and prisons. When an earthquake strikes, all the costs of treating the injured and of rebuilding fatten the GDP. When global warming forces millions to leave their homes and build new ones, GDP will rise. The losses are not subtracted. When oil reserves are reduced, the market value of the oil adds to GDP, and nothing is subtracted because of the reduced reserves. The value of household work is ignored, so that the rise of GDP occasioned by a shift from household to market production counts as pure gain. Also, economic growth may depend on longer hours of labor. The GDP does not take account of the loss of leisure even though economists recognize this as an important consideration.
Noone disputes this. The only question is about the importance of the discrepancy. In the sixties, criticism of reliance by economists on the GNP persuaded William Nordhaus and James Tobin to develop a Measure of Economic Welfare, adding to and subtracting from the GNP as economic teaching dictated. They compared GNP and MEW from 1929 to 1965. Overall they found that there was no important difference between their rate of growth in the thirties and forties. However, in the fifties and sixties, while per capita GNP continued to grow rapidly, per capita MEW leveled off. Although their diagrams clearly showed this, they ignored this fact in their own conclusions. They said there was enough overall correlation between the two measures that they were satisfied to use the GNP as an indication of economic welfare.
Given the scholarly and personal character of the two economists, I find it astounding that they failed to note that in the years since World War II, economic welfare had not been appreciably improved by massive economic growth. I can understand this failure only in terms of their devotion to standard practices in the discipline of economics as it relates to policy. A Christian values actual effects on human beings more. Accordingly, I worked for some years in the eighties to get persons more qualified than myself to renew this project by developing an Index of Sustainable Economic Welfare. My son, Cliff, ended up doing most of the work. We published our results in For the Common Good, which I wrote with Herman Daly. Later, an organization called Redefining Progress picked up the project and developed an improved measure, which it called the Genuine Progress Indicator. Similar projects have been undertaken in a number of other countries. The results have shown that economic growth as measured by GDP now often leads to little or no improvement in sustainable economic welfare. In some cases, welfare actually declines while production increases.
In many parts of the world, no doubt, overall growth is needed. Everywhere there is need for some forms of growth. Increased production is certainly not to be systematically avoided. But a general effort to generate growth is a very inefficient, and sometimes counterproductive, means of achieving the kinds of economic growth that are really needed for economic well-being.
If we consider other values important to Christians, the case is still stronger. Consider an example well known in the United States: a factory closing. Policies aimed at increasing GDP favor closing a factory when the capital invested in it can be invested more profitably elsewhere. All the expenses of the move add to the GDP, as does the added profit in the new location. Economists believe that labor should be mobile and find employment elsewhere. In the long run all are expected to benefit.
Sociologists have studied communities that have lost their means of livelihood in this way. They note the rise of alcoholism, wife and child abuse, divorce, mental illness, and so forth. If these are considered at all in economic theory, it will be as GDP increases through the purchase of more alcohol, heightened expenditure on counseling and social work, and increased costs of police, courts, and prisons, and repairing battered bodies.
"Development" in Third World countries is typically accompanied by similar costs. Millions of women and children have been sold into prostitution or have adopted that life as their only option. Poor peasants in Latin America who have now become poor dwellers in favellas have lost the cultural and communal support that once gave some meaning to their lives. Around the world, tens of millions of people, mostly women, who once eked a living from the soil, now labor long hours for pitiful pay, cut off from family and village life, sleeping in worker dormitories. By World Bank statistics, they are part of the success. They now earn more than a dollar a day, but for them, too, the human cost is enormous.
VIII. Some Proposals
If there are many miserably poor people with extensive real economic needs, but policies directed primarily to growth are exceedingly inefficient means of meeting these needs, what can be proposed? Good proposals are harder to come up with than blanket denunciations! But Christians cannot turn our backs on the other peoples of the planet.
All along, Christian and other nongovernmental organizations have been pursuing another model of development that expresses our values much better. We call this "community development." A development worker spends time with the people of a village to understand the nature of life there along with its problems. She or he asks the villagers to discuss what improvement they would most like to see. Perhaps the great distance they have to go to procure water troubles them. The development worker can then offer to help them solve this problem. The help may consist of a pump and a little technical knowledge. But the villagers must install it. Only if they understand it and have ownership will they successfully maintain and use it over a period of time.
In economic terms, the pump will improve the productivity of the villagers. The hours they save in getting the water can be spent on their farms or in making clothing. Of course, the gain will be small in terms of GDP. But it will be a gain for all of them with little or no countervailing cost, economic or social. They may still be poor, but not as poor. It is also possible that success in one such project will lead to another. Perhaps they can be equipped with metal ploughs to replace the wooden ones they have been using. Perhaps they will learn to make more efficient cooking stoves or plant and tend a woodlot nearby.
It is important that these changes not make the villagers dependent on outside technologists or financiers. Appropriate technology is technology they understand and can keep repaired. Replacing a water buffalo with a tractor is usually the wrong step.
Another form of development directed to the poor is micro-lending. Very small loans are made to very poor individuals who have ideas about what they could make and sell but no capital with which to begin. This has been remarkably successful in empowering people, especially women; and the vast majority of the loans are repaid. Again, the contribution to GDP is small, but the contribution to human lives is considerable, and there is little cost to count against the gain.
These examples of people-centered development fit best into a decentralized economy. The international economy that prevailed before the Washington Consensus allowed for more local initiative than does the globalized market that now prevails. Markets controlled by democratic institutions work better for people than markets controlled by transnational corporations. It is important that ordinary people, through their social, cultural, and political institutions take back the power to order their lives.
Obviously, decentralization cannot be supported if it means only fragmentation. Many issues, including economic ones, can only be dealt with on a planetary basis. Our goal must be that the many communities around the world understand this need and constitute themselves as communities of communities. At the global level the United Nations is such a community of communities. Unfortunately, the great economic powers, led by the United States, have prevented the United Nations from shaping the economic life of the world. The European Community in many ways has provided a good model of a community of communities. Unfortunately, in the past decade it has been moving toward an integration that would lose much of the value of more local control. The global market drives it in that direction, whereas a much more promising direction for the planet would be regional, national, and local markets. If that model were accepted, the individual nations involved could go further in the decentralization of political and economic power within them.
In addition to the support of bottom-up development and the decentralization of economic and political power, Christians can support efforts to direct conventional development into channels where the costs are small in relation to the gains. One policy, supported by economists in theory, is pricing goods to cover their full cost to society. The purchaser would have to pay, in the form of a tax, the full cost of the pollution for which gasoline, for example, is responsible. This would be not only the effect on local air quality and of pollution caused by its extraction, transportation, and refining, but also its contribution to global warming. Of course, these calculations would be very difficult, but even some rough approximation would shift significant expenditures into less destructive channels and encourage the purchase of more efficient vehicles.
Similarly, owners of capital who wish to shift the location of their production should pay the full cost of doing so. That would entail an arrangement with the community they are abandoning that will enable it to reestablish itself around some other economic activity or assistance to those who are ready to move on to train for other work. The real costs of the move may prove greater than any gain from it. We should not allow the corporation to have all the profits, while society bears all the costs.
To slow exhaustion of natural resources and avoid the abrupt transition to other sources, the government could limit extraction to something like 3% of known reserves. Auctioning the right to extract this amount (or to import from another country) would allow reduction of other taxes, encourage more efficient use of the resource, and initiate the transition to other sources at an earlier date.
With enough checks in place to protect human communities and natural resources and to reduce pollution, the Main Street paradigm proposed by Bluestone and Harrison could be tried. Even if full-cost pricing and extraction policies slow GDP growth, full employment at a living wage may still be possible.
Economists may complain that policies of this sort work against increased productivity, which is the engine of growth. I have made it clear that I do not regard increasing GDP as a goal worth pursuing. The Christian aim to which I subscribe is human well-being, of which sustainable economic welfare is an important part. Once we have blocked those channels of growth where in fact the cost is greater than the gain, we can seek as much efficiency as possible in others. But in a world in which the real shortage is not labor but resources and sinks, the productivity we should emphasize is of these resources. By these measures, it turns out that the old-fashioned methods of the Amish are more productive than agribusiness.
- The Land Tax
I conclude with one more proposal for the relief of poverty. It is that made by Henry George in his book, Progress and Poverty. Whereas discussions of poverty among most economists deal with income, George focuses on ownership. Inequality in the former realm is great, but it is still greater, and growing more rapidly, with respect to ownership.
According to a study by Edward N. Wolff for United for a Fair Economy (See David Moberg, "Congress Feeds the Rich," In These Times, August 7, 2000, pp.17-18.), the concentration of wealth has been increasing rapidly. Between 1983 and 1998, the wealthiest one per cent increased its wealth by 42%. The next 39% gained about half that much, and the middle 20% added 10% to its holdings. The shocking news is that the net worth of the bottom 40% declined by 76%!
If we want to reduce poverty without enormous overall increase of economic activity, we must consider changes in ownership even more than in income. Without confiscating property, society can reduce its value by taxing it. Replacement of the income tax by a wealth tax would make the tax system more progressive.
At present real property is taxed, whereas other forms, such as stocks and bonds, are not. One possibility would be to tax all property as real property is now taxed, and much could be said in favor of such a move. But George’s proposal is quite different. He made a distinction, which has resonance with the Biblical and theological tradition, between what human beings make and what is simply given to us. The latter is the land. In principle it should be a commons functioning for the benefit of all. Sites, in distinction from what is built on them, should not be private property at all. Their value is a function of social developments and not of human labor.
The proposal to which this leads is that taxes on buildings be abolished, whereas the tax on sites be raised substantially. Ideally this tax should ultimately be close to rental value. This would insure that sites be used for the most profitable purpose. Speculative holding of unused land would end. The disincentive to improve decaying buildings would end. Land would become more widely available to those who want to use it. And revenues from this source could replace other taxes, most of which discourage practices, such as work and entrepreneurship, that society should encourage.
There is much in standard economic teaching supportive of taxing sites. A group of American economists, led by James Tobin, wrote to Gorbachev in 1990, encouraging him to retain the land of Russia for the government in the process of privatization, using rents as a major source of income for the state. Unfortunately, this implication of economic theory has not been emphasized by most economists or taken up widely in the United States. This is true despite the fact that such cities as Pittsburgh, which have made minor moves in this direction, have had excellent results.
The ramifications of shifting taxes drastically from improvements, income, and consumption to land are multifarious. George’s theory is far more complex than I have indicated, and much work is needed to bring it up to date. Today the commons includes such things as broadcasting frequencies and air space. George was convinced in his day that private ownership of what should be the commons was the primary cause of poverty. The idea is well worth exploring today.
Deliberate planning and massive human effort have created the present system of globalization. This system exploits the poor and enriches the wealthy. It destroys human communities and devastates the natural world. It is widely supposed that pressing forward in the present direction will reduce global poverty. I have offered reasons for doubt. Since Christians care about the world’s poor, we must look for other solutions.
We are told repeatedly that there is no alternative to the present system. (Thomas Friedman, The Lexus and the Olive Tree. New York: Farrar, Straus, Giroux, 1999.) Globalization, it is said, is the product of technological progress, and one cannot turn the clock back on that. There is much truth in that statement. We all live on one planet, and technology has brought us much closer together. That is reality, and it holds great promise. But that there is no alternative to living closer together on this globe in no way means that there is no alternative to the present economic system of globalization.
The supporters of the present system want us to believe that the inevitability of globalization of some sort entails the inescapability of this system. As long as we believe them, Christians will have to make the best we can of a very bad deal, ministering to the system’s victims. But Christians do not believe in fate. This system is the result of planning and political decisions made in accordance with the Washington Consensus. I do not question the sincere belief of those who established this Consensus that it pointed the way toward universal prosperity. But those of us who believe that its assumptions are in error and its values misplaced have the right and duty to propose other goals that can also be approached through planning and political decisions. Christians are among those who have this responsibility.
I cannot be sure that the adoption of the policies I advocate would solve the problem of poverty. It may be that it is too late. In some parts of the world the consequences of economic globalization combined with the population explosion have already generated catastrophes of staggering dimensions. There are seemingly insoluble social and political problems, often exacerbated by these developments. The likelihood that the proposals I have made be adopted seems close to zero. It is easy to despair.
But as a Christian I cannot do that. I must live by hope. There have been wonderfully surprising historical changes in the past half-century that occurred with startling abruptness. One thinks of Vatican II, the ending of the Soviet Empire, and the transformation of South Africa. In all these, the Christian sees the working of God through responsive human beings.
Perhaps our own nation, which has led the world into the worship of wealth, will awaken to the idolatrous and self-destructive character of the ideology of economism. Perhaps the world’s people will recognize the impossibility of solving human problems with a growth whose costs often exceed its benefits even in strictly economic terms. Perhaps the economics profession will devote some of its enormous knowledge and profound insight to finding another way. Perhaps national leaders will have the will to implement a deeply different form of international life. None of this seems likely. But Christians can look to God in hope.