In which I refute Richard Murphy in three charts

One of Ritchie\’s many problems is that he just never does look up from his prejudices to check out the real world. He\’s told us often enough that finance overtook the world some 30 years ago (he really means around 1980). And that this was a disaster. As he says here:

But what is clear is that without systemic change we cannot deliver the reform really needed to create a just, equitable and hunger free world.

And at centre of the problem is the world’s financial system that has created, perpetuated and benefited from the inequality Red Nose Day highlights.

When some of us have argued that banking, tax havens and their related activities (and banking and tax havens cannot be separated) cause poverty and even death we have always meant it. And we still do. The gross misallocation of recourse that banks have permitted, encouraged and excused are just part of that.

Hmm.

So, what has actually been happening to inequality, poverty and hunger since the banks did co-opt the world 30 years ago?

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So, over this time when the banks have been gobbling everyones\’ money just for themselves we\’ve seen an extraordinary reduction in poverty in the world. Indeed, it\’s the largest reduction of poverty in the history of our species.

Even poor, benighted, sub-Saharan Africa has been benefitting: to the point that inequality there is actually falling. As, amazingly, is global inequality.

The really strange thing is that the system he hastens to condemn, the one he blames for all ills in the world, actually seems to have, at the very least coincided with if indeed not caused, the largest success ever in solving the problems he claims to want to address.

I want to beat global poverty. I hope you do too. And I\’m entirely relaxed about the idea that the banks gobble all our money is this is the end result, that global poverty is beaten.

What worries me about Murphy and the like is that he doesn\’t even seem to have noticed this. Let alone considered that he might be in error.

14 comments on “In which I refute Richard Murphy in three charts

  1. Tim

    You can lead a horse to water, as the saying goes. He is utterly incapable of grasping any evidence that is contrary to his worldview, as are his acolytes elsewhere and his main cheerleader on here. The quote about ‘recourse misallocation’ would be hysterical were he not deadly serious. He seems blind to both the performance of the Soviet bloc and its similarity to what he wants to put in place, and wholly ignorant of any history prior to 1979/80. When you have supporters of his on here (no prizes for guessing to whom I refer) pulling out the likes of Tony Benn as ‘conclusive proof’ that the Left is right, you may as well talk to your own hand. He is, as you have demonstrated countless times, utterly clueless.

  2. Ritchie trumpets finding a local Norfolk developer to tart up his website. Amusingly said local developer has this on his home page:

    “Andy Moyle is a participant in the Amazon Europe S.à r.l. Associates Programme, an affiliate advertising programme designed to provide a means for sites to earn advertising fees by advertising and linking to amazon.co.uk.”

  3. Is that an inflation adjusted $ a day in those graphs? I’d guess that a $ was worth just a tad more in 1970 than it is now…

    Tim adds: yes, it is inflation adjusted. Umm, 1992 Geary Harris PPP dollars maybe? That’s from memory which is fallible but yes, definitely inflation adjusted.

  4. From the Economist, 2008 (http://www.economist.com/node/11409401)

    ‘the number of poor in China fell by almost 407m from 1990 to 2004, compared with the previous estimate of almost 250m.’

    Say, can we think of any change vis a vis communism and capitalism that has happened in China since 1990?

  5. The biggest problem that the financial sector has at the moment is a surplus of capital. It is struggling to find a home for all of it. Any half arsed idea with good PR could raise a fortune. Companies and governments in developing countries have access to capital that they could not have dreamt of just a few years back.

    There may well be capital misallocation, but its only due to there being too much of it thanks to printing presses working overtime.

    Funnily enough, the crisis was caused by capital misallocation, as investors lent far too much money to governments to waste at far too low interest rates. Richie probably doesn’t mean that either.

  6. I don’t think the lending was the issue. The borrowing and spending of what was then available to spend could have had an impact on ability to ride out a problem.
    There are economies who seem to have done this. And there’s a major economy running similar to Ed Balls idea of spending to save the day…. and they have to again raise the debt ceiling…

  7. Serf
    “Funnily enough, the crisis was caused by capital misallocation, as investors lent far too much money to governments to waste at far too low interest rates…”

    Sorry, but that’s got to be wrong. Ireland and Spain had low public sector debts before the crisis, and Italy was reducing its debts (or at least debt to GDP). And anyone who bought UK gilts or US, German French Danish… (just about anywhere except Greece) before financial crisis is quids in. People (or rather German banks, weren’t lending to Ireland or Spain, but to Irish or Spanish banks.

    I’m not saying govts didn’t fuck up, just that lending to them, rather than, say, property investments, wasn’t the problem.

  8. Tim – can you state the source of these graphs.

    Tim adds@ Not exactly, no, as I’ve used them so often they’re on the hard drive.But they all come from the work of Sala i Martin. Google that name and global poverty or some such and you’ll find his papers.

  9. “I want to beat global poverty. I hope you do too. And I’m entirely relaxed about the idea that the banks gobble all our money is this is the end result, that global poverty is beaten.”

    You are happy for some organisation/s to take all your money if the end result is that “global poverty” is beaten? Really not sure you’re thinking that one through.

    On a more serious note, it would be a bit worrying if all these people raised out of poverty had been done so due to misallocated resourses based on ponzi finance. The adjustment would be severe. The lecture I saw a couple of months ago at the ASI blog was alarming in this regard – the financiers are utterly corrupt and the end is nigh.

    Ironic if Ritchie turned out to be right for the wrong reasons.

  10. I think Rirchie’s problem is one of parochialism (not unknown for Norfolk residents).

    He confuses issues with inequality/poverty etc happening in the UK with the world as a whole.

    So he bases his politics around the fact that UK CEOs or banks seem to have taken a disproportionate and unjustified share of the spoils over the last 20 years rather than the charts you post showing global inequality and poverty collapsing.

  11. Ritchie, and people like him, have the firm notion that the wealth pie is finite. So if the slice of the pie for the rich gets bigger, this means the slice for the poor must get smaller.

    Rich profit at the expense of the poor.

    Since money is just a token of wealth, the money pie must also be finite. If the banks are gobbling up the money, that can only mean there is less for others.

    In this World, the notion that the rich get richer by incidentally making everyone else richer, is anathema.

    The poor then can only be made richer by transferring wealth/money from the rich to the poor, reducing the rich slice of the cake to make the poor slice of the cake bigger.

    This view of the World is a stranger to reality. No point arguing.

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