Ritchie tells me off!

I hope Tim knew he was being absurd writing what he did, but all he wrote after the above suggested he did not. It’s unsurprising that throughout the entire left he is treated as a buffoon. Oh, a buffoon who knows economic theory quite well. But a buffoon because of his complete inability to exercise any wisdom when it comes to interpreting it, as this latest blog shows.

But if blogging about me keeps you happy Tim, keep going. It does amuse us that you waste so much time and effort getting things so spectacularly wrong time, after time, after time.

Naughty, naughty Timmy.

And the buffoonishness of my commentary is proved by my attitude towards the Washington Consensus of course.

Why? Because the reality is it’s been about destroying the state, opening up markets to unfair competition, moving to regressive indirect tax bases, denying resources to industries that need them, denying labour rights whilst enhancing capital rights, allowing the free flow of capital and denying that right to labour, undermining the property rights of onshore states and enhancing those of offshore, allowing unfettered finance rights over all else and so much more.

I suppose it\’s possible that that is indeed what it\’s about but, well, you see, proof is in the pudding. Leave aside both rhetoric and ideological positioning and ponder the important question:

Look what it’s done to Africa and you’ll know why.

So what has been happening to Africa?

The conventional wisdom that Africa is not reducing poverty is wrong. Using the
methodology of Pinkovskiy and Sala?i?Martin (2009), we estimate income distributions, poverty
rates, and inequality and welfare indices for African countries for the period 1970?2006. We
show that: (1) African poverty is falling and is falling rapidly. (2) If present trends continue, the
poverty Millennium Development Goal of halving the proportion of people with incomes less
than one dollar a day will be achieved on time. (3) The growth spurt that began in 1995
decreased African income inequality instead of increasing it. (4) African poverty reduction is
remarkably general: it cannot be explained by a large country, or even by a single set of
countries possessing some beneficial geographical or historical characteristic. All classes of
countries, including those with disadvantageous geography and history, experience reductions
in poverty. In particular, poverty fell for both landlocked as well as coastal countries; for
mineral?rich as well as mineral?poor countries; for countries with favorable or with unfavorable
agriculture; for countries regardless of colonial origin; and for countries with below? or abovemedian
slave exports per capita during the African slave trade.

Now I don\’t know about you but I regard that as very good news indeed. Hundreds of millions of our fellow humans are becoming better off. Absolute poverty is falling in Africa, just as it has fallen in Asia. And, given that we\’ve been \”imposing\” (in fact, what we\’ve been doing is saying that if you want our money we recommend that you follow some fairly basic \”good\” economic policies) the Washington Consensus in such places we should probably credit said Consensus with the results that are appearing.

Now I\’m sure that you can claim that it\’s not that Consensus which is causing that fall in poverty. But if you do then you\’ve really rather got to argue that the Consensus hasn\’t actually been imposed. In which case of course it can\’t be blamed for any of the bad things that have happened just as much as it cannot take credit for the good. But if you argue that it has indeed been imposed, if Africa is reeling under that imposition, then we need to look at what is actually happening in Africa under said imposition. And a general reduction in poverty is what is happening which, if you\’ll excuse me for saying so, is actually what we\’d rather like to be the result of a socio-economic system. Which brings me onto a further point:

Tim Worstall is a very strange man. As far as I can see he’s written 13 blogs about me – in the past fortnight. I call that an unhealthy obsession.

And despite his clearly being my biggest fan and #1 cheerleader he also gets me quite wildly wrong.

There is certainly a possibility of an obsession there I agree. But I don\’t in fact get Ritchie wrong, far from it. This is something I\’ve said many times before but people still seem to be not quite understanding it.

I\’m a lefty. No, really, I am. I\’m a liberal, a progressive and a radical. Liberals are, as the word itself suggests, concerned with liberty, as I am. Progressives are those who believe in the power of the State to make things better and I most certainly agree with that. Radicals are those who think that we cannot simply tinker at the edges, we need some fairly major changes. About the only way in which I disagree with the basic propositions as usually understood is that in terms of progressivism I think that one of the ways the State can make things better is to stop doing some of the damn fool things it\’s already doing.

So, as such a lefty, why am I so in favour of things like markets, free trade, capitalism and so on? Those things which are generally thought of as the preserve of the \”right\”? (Let us leave aside that \”the right\” ain\’t been a friend of free trade shall we?)

Because they work.

If what you want is that the poor get richer, if what you want is an improvement in general living standards, if what you want is that the absolutely poor become only the relatively poor, then capitalism, markets and free trade are the only games in town. The unique thing about this really rather strange economic system is that it is the only one which has produced a general and long lasting rise in the standard of living of the average chelovek on the Chelyabinsk omnibus.

Which is why I Rag on Ritchie quite so much. To the possible point of obsession. I do him the courtesy of assuming that he wants just what I do. A better and richer world for those currently stuck in the absolute poverty that has been humanity\’s historical lot. Certainly he works with a lot of organisations who claim that this is their aim (Action Aid, Oxfam I think, Christian Aid and so on). It\’s just that his actual suggestions of how to get from here to our jointly desired goal strike me as entirely wrong.

And as such, as suggestions which are entirely wrong, they should be critiqued in the hope that by doing so his suggestions can be improved. For we do both desire exactly the same thing. That those in Africa, indeed those anywhere, should become just as fat, rich and happy as we pinkish people who by historical happenstance were the first to leave the Malthusian world behind.

It\’s a simple and observable fact about the world around us that those places which have been roughly capitalism and market based for a century or more are places where people are rich, fat and happy. Those places which have been roughly capitalist and market based for mere decades are those places where people are becoming rich, fat and happy, in what has been generally noted as the greatest reduction in poverty in the history of our species. Those places which have only just adopted these twin capitalist and market based policies are those places where the first stirrings of becoming rich, fat and happy are starting.

Those places which have never been and are not even attempting to adopt the capitalist, market based, structure are those places where people are not and are not becoming, rich, fat and happy.

Thus, as a good little lefty, one who desires that all of humanity share our own good fortune in being rich, fat and happy, I recommend that all of humanity adopt the economic system which made us so and which is making those who do adopt it as rich, fat and happy as we are.

And the Ragging on Ritchie is that, while he claims to want the same things, his recommendations are not that those others adopt the system that worked for us and is working for those that do adopt it. That is, that his recommendations are wrong.

Which seems like something worth getting obsessed about quite frankly.

18 thoughts on “Ritchie tells me off!”

  1. If you are a buffoon to the “Left” then Murph is a buffoon to everyone else. That makes him a much bigger buffoon than you.

    Will he complain about the inequality?.

  2. You’re not coming across as much of a Leftie, Tim. At least not a modern day one., most of whom seem to very much prefer more equivalence in all things rather than absolute improvements. I wouldn’t assume for one minute that Ritchie desires to see Africans becoming ‘fat’; more likely he wants the rest of us thinner. And no doubt he bridles at the notion that absolute wealth equates to happiness; more likely he harbours romantic notions about happiness involving paternalism and bllissful ignorance, rather than independence of means and cheap food.

  3. Ye gods; he’s destroyed his own position completely FFS. Comment made there, copied here in case it doesn’t get through:

    “It’s unsurprising that throughout the entire left he is treated as a buffoon”

    Untrue. If you’re going to make a gross generalisation, make sure it’s not disprovable by the presence of one person who disagrees with it.

    I have a lot of time and respect for Tim; I disagree with him on more issues than I agree with him on, but he’s one of the few people that, if we disagree, I’ll go check why I think what I do.

    Sorry Richard, but Tim is not a buffoon.

    Now, how about interpreting what the consensus has supposed to have done, why not tell us which individual specific part you actually disagree with? Unless you can do that, then it’s very easy to argue that the problems in Africa you point to were due to a failure to implement the proposals, and without a counterpoint, that would be a fair argument.

    Not necessarily one I agree with, but…

    IT can definitely be very easily argued that the consensus has not been implemented within the UK; we definitely don’t have moderate marginal tax rates, for example, especially for those of us who’re at the bottom end of the income scale.

    So, which parts do you disagree with? Play the ball, not the man.

    Of course, he’ll now try to describe me as a right winger in order to ignore the point, but if he does that, then he’s palpably clutching at straws.

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  6. First of all, if it is true that the “entire left” – whatever that is – regards TW as a “buffoon”, then that only demonstrates that the “entire left” is as cretinous as I suspect it is. As for Murphy, you almost sense that this retard is going to start crying soon.

    The truth is that Murphy is a nasty, power-lusting ideologue who wants to use the violence-backed power of the state to tax us. He is ignorant of basic concepts of accounting, as his comments frequently demonstrate. I know accountants and folk in the financial services industry and they all treat him with scorn.

    Why bother to take him seriously, folk may ask? Because RMurphy’s views are taken seriously by a lot of the unelected NGOs, legislators and policymakers in the EU, this country, and of course, the US under the Presidency of the Community Organiser. Murphy is a fuckwit of industrial proportions, but alas, fuckwittery is on the increase, and therefore full marks to Tim for contesting it.

  7. Tim, can you give ONE example where unrestricted free trade has elevated a country from poor to rich?

    Do you think for example South Korea, Taiwan, Japan, UK, US and Finland have succeeded using the policies you recommend?

    (Don’t jerk your keyboard to write Chile or Hong Kong unless you have read some of their economic history)

    Tim adds: Can you show the contrary? That a place has grown as a result of restrictions upon trade? No, not that A has grown while A had restrictions. That’s correlation. Can you show causation?

    Given that the only technical paper I know of proving the existence of optimal tariffs is about coffee exports from Brazil (yes, exports, not imports) I’d be interested to see if you can.

  8. Tim, empirical causation in development is very hard because there are few ‘natural’ experiments (but it is not impossible).

    As a start, this is what I think I can show;

    1. No country has ever become rich by adopting the economic policies of free trade (i.e. no tariffs, free capital flows ect.)

    2.Every country that has become rich has used a heavy mix of protectionist policies until key industries have developed sufficiently (with the possible exception of Switzerland that was relatively free trade all the way but used other heterodox methods of growth like refusing to protect foreign patents).

    I am quite well versed in standard economic theory and why it should work. However, all papers slip in the illicit assumption that by creating the right conditions, ‘technology upgrades’ (therefore increase in productive capacity) will just happen. In the context of international economics, John Williamson called this the ‘doctrine of immaculate transfer’.

    I say these things don’t just happen, but I am very happy to be proved wrong. Surely such a comprehensive body of theory as neo-liberal free trade must have one notable success story?

    Tim adds: 1) As no country has ever adopted free trade in its entirety I think we can take this point as valid.

    2) And every country which is still poor also has such protections for industry. So we’re not much further forward.

  9. Tim, that reply was quite disappointing.

    I used to hold all the views that you hold. I graduated last year with a 1st in economics from the LSE, so even though that doesn’t make me a good economist, at least it shows that I can do the textbook, modelling, hard math, free trade stuff. I am quite aware of the strong points of the theory but empirically it has been an absolute disaster (and not because it hasn’t been tried as you have said – what about the University of Chicago experience (1982) in Chile to quote one of many instances).

    There is only so much blame corruption can take.

    If you’re open minded on the issue of development( and I think you are) I would strongly recommend (as a start) reading ‘Kicking Away the Ladder’ by Ha-Joon Chang; I hope to continue to study economics under him at Cambridge next year.

    Then take a look at the interesting things sociology has to say about the human cost of rapid free market adoption (especially on labour market flexibility – Wolfgang Groeck is a good example). This might explain, in part, why it has had bad ‘happiness’ results (see LSE’s Layard for work on happiness economics).

    Decisions about development that affect billions of people surely need a stronger empirical basis and not just short run trade models which have been found to be deficient time and time again.

    At least we can both agree that the goal of development is, broadly, expanding a nation’s productive capacity.

    Tim adds: Well, I too went through the LSE….although I left with a Third which is one way of explaining my views. Layard was one of those who taught me (althought then it was Phillips Curve stuff).

    I’ve read some Ha-Joon Chang stuff and think he’s listened to precisely, and only, because he’s saying what people want to hear.

    But I think our biggest difference is this:

    “At least we can both agree that the goal of development is, broadly, expanding a nation’s productive capacity.”

    No, I don’t agree. Just as Adam Smith said that the aim of all production is consumption the aim of development is to expand a nation’s (and I’m extremely uncomfortable with the identification of nation rather than individuals) consumption possibilities.

    In short, who gives a shit what people produce? It’s what they’re able to consume which matters.

  10. How do you plan do consume in the long run without producing roughly an equal amount?

    It is all good dismissing a different theory, but you have to give reasons.

    That ‘free trade capitalism’ has never been implemented is like saying that true communism never existed. It’s a pretty vacuous statement, and it actually isn’t true.

    So do you have a good example of a free market success story?

    Tim adds: Sure…all the industrialised countries. Free (to the extent that there’s ever a “free” market in anything) markets and capitalism cause development. These countries are developed. Thus they are success stories for free market capitalism.

  11. No, they are success stories for a kind of capitalism that is very different to what you recommend.

    I like trade a lot; China trades despite being deeply protectionist.

    It is not as if one can say communism is a success because they have high taxes in Sweden. One has nothing to do with the other.

    Almost everybody recognises the awesome power of markets. That is not the same thing as saying free-trade, no tariffs, small state is evidently the best system of development because logically coherent, simplified models says so.

    If the fact that industrialised countries used markets some of the time is satisfactory empirical proof to support your rather emotive policy prescriptions, then fine, I can see there is no point in discussing this further. You’re indeed ‘vain monarch o’er barren spot’.

    I didn’t expect to see you change your mind, but the fact that you cannot even acknowledge that there is a possible divergence of theory and fact suggests that you suffer from heavy confirmation bias.

    “A little learning is a dangerous thing; drink deep, or taste not the Pierian spring: there shallow draughts intoxicate the brain, and drinking largely sobers us again.”

  12. And sorry Ididn’t comment on this;

    2) And every country which is still poor also has such protections for industry. So we’re not much further forward.

    That just isn’t true. The slightest attempt to read some economic history will convince you of this. That is why the World Bank, IMF and the WTO have been harmful for developing countries (since roughly 1970 at least).

  13. Teodor Todorov:

    You are of course wrong, (but not entirely) but it takes too long and is too troublesome to debate bumptious, inexperienced youth, always detail oriented absolutists. Live a while, start and run a business, or two, or three, then call back. If you go to work for a government or university, don’t call back, I don’t want to hear from you.

    However my chief complaint with you and your comment, and often with Tim, is the implicit assumption that you lot can plan all of this growth and development, and that you should: “Decisions about development that affect billions of people surely need… blah, blah, blah”

    The incredible arrogance. I’ll plan my own development. I grow daily more enraged at the interference my businesses and my life face from academic airheads.

    Leave us the f**k alone and we’ll make you all rich.

    And please, all this talk of degrees and honors, it’s all piffle. I and many of my compadres could match you degree for degree, IQ point for IQ point, and indeed best you at them. We all know that our academic labours taught us so very damn little about it all. What little Fingerspitzgefuehl we have came from “Life”.

  14. Fred Z,

    I completely agree with you. That is why I was at pains to stress that an economics degrees does not make me a good economist, but it does mean that I have studied the theory in depth.

    And I completely agree with you about the real world. The neo-liberal theory is not real world. How do I know this? Because not a single real world example has been advanced in its favour.

    An example that has been given is of a child. You can hardly say that it is a good idea for a child to work at 10 years old; it will probably hurt his long run development. He can do low-value work, but he is hardly going to be at the intellectual frontier of his field. If he wanted to be a trained astrophysist, he needs training first. When he is ready, he competes.

    Fred Z, ‘picking winners’ is ‘messy’; no easy unifying theory here! There will be successes and failures. But there seems to be nothing better.

    Perhaps you can succeed where Tim failed. Can you name a country that has developed as the result of little government, balanced budget, no tariffs or subsidies, foreign currency manipulation or capital controls?

    I would be genuinely interested to hear.

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