A Myopic Visionary Speaks: holiday edition

Prof Viswanathan, Director, International Socio-Economic Research Bureau (E Mail Id : economist@dataone.in) post a long manifesto of sorts on the Mike Adkin’s Blog (HERE)

It is full of harmless nonsense, of which its author is seriously attached, and eminently missable on busy workday but worth a look at the outer-fringes of curiousity. Here is a sample on Adam Smith:

“3. Economic Affidavit of Adam Smith: In his book Adam Smith spelt out an ‘Economic Affidavit’ solemnly and sincerely that if we, the people, entrusted our capital to a few capitalists in the name of ‘Capitalism’ (Individualism), they would not only change even the sand into gold but also drive the mankind to march towards an ‘Ideal Society’ by modernizing production potentialities with the help of scientific technologies and division of labor. Completely ignoring the working class who constitutes the society, Adam Smith concentered and focused his interest on a few capitalists and advocated that they without the interference of State would accumulate wealth of nations with the help of division of labor using modern machines and assured that the few independent capitalists would moreover create a favorable climate for the establishment of Ideal Society by increasing production many folds. Adam Smith completely neglected the equitable distribution of wealth to the mass working class. He linked the establishment of an ideal society with the mass production but not equitable distribution of wealth. Thus he misguided the whole world convincingly and decisively for a long period during which the working class was thrown into appalling poverty and horrible living hood.”

Comment
What can one say? Meanwhile, what was going on in Asia, or Africa, or the Americas, or Russia? All the tens of millions of the world’s population gave their “capital” – of what did their “capital” consist of [if their "labour" why are the labour surplus countries so wretched?] -– to “capitalists” – where did they come from, and why did they not use their own “capital”? Where did this major historical event take place and when?

The entire history of the human species has been one of varying degrees of barely tolerable poverty, absolute and relative, and debilitating ignorance, and above all short-life spans. Per capita incomes hardly changed, except for a changing few, for tens of thousands of years, and hasn’t changed yet for a significant minority.

The detritus of stone-built former ‘civilisations’ are found scattered across the globe where the elites used growing ‘GDP’ to create these structures, some useful, like irrigation, some not, like temples to their gods, meanwhile holding per capita incomes down to the eternal-like subsistence level of ages past.

Only since the so-called 'idustrial revolution', or the triumph of commerce, have many of these indicators improved, some quite dramatically in recent times.

Prof Viswanathan creates an alternative history and a fictional future to do what? Read it for yourself. Of one thing I am sure; it ain’t going to happen.

Per Capita Incomes Misleading as GDP grew 1000-1820

Angus Maddison had his paper, The West and the World Economy, 1000-2030: Maddison and Malthusian Interpretations, read by a colleague because he was unable to attend the EAEPE, Rome conference through serious illness.

Judging by the slides of tables he provided it appeared to be an excellent paper, somewhat marred by the stand-in speaker who was not always clear in his English (but, then I cannot speak Italian and would sound awful over the 40 minutes of a presentation).

I shall skip the details until I read a copy of Maddison’s paper, and I shall pick up one thing about these useful statistics; somewhat similar comments were made by me on Lost Legacy during the online discussions we had over Greg Clark’s on ‘Farewell to Alms’ (Princeton University Press) about a year ago.

These concern the conclusions drawn from estimates for ‘per capita incomes’ over the period to ‘1820’ (Angus Maddison) or ‘1800’ (Greg Clark). Per capita income comes from dividing GDP by numbers in a population. It does not signify actual per capita consumption of individuals. If the majority of a population is on or near subsistence it is perfectly feasible for GDP to grow and for actual consumption to remain near or not much above subsistence.

Now there was some growth in what constituted subsistence over the period 10 around 1800, or perhaps a bit earlier in mid-century. Several commentators have said so (including Adam Smith), but overall there is not much to shout about if ‘subsistence’ is pretty near not being much at all. Certainly, the upper orders experienced degrees of opulence, and those in paid employment could reach living standards, in comparison to ‘savage’ Princes in North America or Africa, that were favourable in terms of abodes, artefacts and conveniences.

There is no doubt that GDP maintained steady, but slow, growth over the centuries concerned. Whether the majority of poorer people’s incomes rose steadily before the end of the 18th century is another question. This raises the obvious question as to where was the additional GDP going? True, the upper orders consumer more – their per capita incomes probably grew throughout this period – it was, is, ever thus. But while large relatively, it does not account for the entire ‘surplus’ in the growth of GDP.

I suggested in our discussions of Greg Clark that we should not forget that the civilisations of the ancient past and earlier (Egypt, Babylon, China, India, Greece and Rome) were noted for their stone-built cities, massive public works, ‘hydraulic’ irrigations, stone megaliths, fortifications, war technologies (including shipping), roads, temples, and artefacts of varying degrees of sophistication.

Now these constitute long term uses of GDP consumption of considerable magnitude (somebody might think about undertaking this task sometime soon!) for it provides a useful insight into the capital expenditures of these societies. Bear in mind too that ‘stock’ or capital in Adam Smith’s view consisted of the subsistence of labour plus raw materials made ‘beautiful’ by skilled hand craftsmen and craftswomen. Funds useable for productive growth in reproducible output were controlled by the elites of these earlier societies who could siphon-off considerable revenues to whatever purposes they wished, including troops, uniforms, boots, weapons, materials and subsistence.

If, as I believe, these factors are ignored by researchers in these fields, then it is no wonder that Maddison argues with Malthus, and that Clark quarrels with Adam Smith and casts these centuries as ‘richer’ than they were in per capita incomes of the poorest majority. Once productivity began to grow faster after 1800, then per capita consumption of the poorest majority followed the middle and upper orders in an upward and continuous trend.