November 5, 2013

A cause and consequence of progress (2)

The Great Escape: Health, Wealth, and the Origins of Inequality

Although Angus Deaton qualifies himself as cautiously optimistic in the book, some paragraphs may help to understand his caveats:
Our children and grandchildren cannot possibly expect a unique exemption from the forces that brought down previous civilizations. In Europe and North America we have grown to believe that things will always get better. The past 250 years have seen unprecedented progress, but 250 years is no great span of time compared with the long-lived civilizations of the past who doubtless thought that they were destined to last forever.
On growth:
Economic growth is the engine of the escape from poverty and material deprivation. Yet growth is faltering in the rich world. Growth in each recent decade has been lower than in the previous one. Almost everywhere, the faltering of growth has come with expansions of inequality. In the case of the United States, current extremes of income and wealth have not been seen for more than a hundred years. Great concentrations of wealth can undermine democracy and growth, stifling the creative destruction that makes growth possible. Such inequality encourages the previous escapees to block the escape routes behind them.
Mancur Olson predicted that rich countries would decline like this, undermined by the rent seeking of an ever-growing number of focused interest groups pursuing their own self-interest at the expense of an uncoordinated majority. Slower growth makes distributional conflict inevitable, because the only way forward for me is at your expense. It is easy to imagine a world with little growth but endless distributional conflict between rich and poor, between old and young, between Wall Street and Main Street, between medical providers and their patients, and between the political parties that represent them.
The inevitability of distributional conflict is the issue to take into account. This is in my opinion the greatest concern for the future, unless we are able to build firewalls to protect the foundations of social welfare.

 “The Kennedys” at Galería Loewe by Mark Shaw until Nov 15th