A connection between dialectics, in which everything is considered to be in the process of becoming (something else), and Chinese language and Daoist philosophy. This is a helpful way of thinking when analysing economic growth and development, drawing on Marx’s method, which in turn drew on Hegelian thinking.
“In Chinese, properties take a processual or verbal form. One cannot say that the grass is green but must say that the grass is greening…there is no absolute or simple distinction between noun and verb in Chinese. Metaphysically…in their thought one thing is always passing into something else.”
Roy Bhaskar (2016), From East to West, Odyssey of a soul, Second Edition
A number of rents, and the rent-seeking which sustained them, played a critical role in the development of capitalism in the East Asian countries. Not only was the creation of rents critical for primitive accumulation and learning, transfer rents were critical for maintaining political stability even though the economic implications of these transfers varied significantly. The role of rents in economic development is worth stressing in the aftermath of the financial crisis of the late 1990s. The depth of this crisis led many economists to link the immediate economic woes of the regions to the systems of rents and rent-seeking popularly described as ‘crony capitalism’. The implicit counterfactual to ‘crony’ capitalism is a ‘genuine and impartial’ capitalism of free markets, zero rents, fair market-determined returns for everyone, and a minimal state which only maintains a level playing field. However appealing such a mythical capitalism may be, our discussion has been concerned to establish that such a model is not relevant for developing economies, and perhaps not for any economy. The relevant distinction is between rent-seeking systems which are developmental and those which are crippling. The relevant policy question is to understand how one may transform into the other…
…The long-run relationship between rent-seeking and growth is of much greater interest. If growth requires the management of growth-enhancing rents rather than the abolition of all rents, high-growth countries will always have rents and will therefore inevitably have to live with rent-seeking. Globalization and liberalization will not change this fundamental economic problem, nor is globalization or liberalization likely to succeed if policy-makers attempt to proceed on the basis of inappropriate no-rent market models. The no-rent model remains compelling not because the evidence supports it, but because its policy implications are much simpler to understand. Our analysis suggests that identifying the conditions which have in the past been conducive for growth is a much more challenging task. The conditions which allow value-enhancing rents to emerge and which limit rent-seeking costs vary from country to country because countries do not have the same political conditions and do not follow the same technology trajectory. This is where a deeper examination of the historical evidence is important to warn us against falling for seductively simple theories. There is no evidence in Asia, possibly no evidence anywhere, of long-run development taking place on a no-rent basis. Instead, the policy challenge is to construct and reconstruct institutions and politics in developing countries to sustain developmental rents and rent-seeking while attacking value-reducing rents and rent-seeking.
Mushtaq H. Khan (2000), Rent-Seeking as Process, in M.H. Khan and Jomo K.S. (eds) Rents, Rent-Seeking and Economic Development
Productivity growth is essential to the prosperity of the economy. If it does not grow, then there is no room for wages and profits, as the two main categories of income, to grow together, so as to improve the material conditions of the majority. Of course, growth needs to create jobs as well, since those without employment cannot share in rising incomes, other than through out-of-work benefits which represent incomes redistributed from those in work. Employment in the UK has grown strongly since the recession, but wages have not, so that the economic ‘pain’ due to sluggish growth has been shared more fairly, with more people in work alongside stagnant wages. Continue reading →
A few years ago I set myself the task of reading the three volumes of Marx’s Capital, which I achieved, not without struggle. I fully admit that I found it difficult, and I am probably not the first. The writing style, translated from the original German, is sometimes hard to comprehend, and at times the same ideas are repeated over and over in different ways. But it contains many memorable phrases and profound insights too, so one doesn’t need to be a socialist to find the effort worthwhile.
Only volume one was completed in his lifetime, while Engels assembled volumes two and three from Marx’s notes after his death. I was greatly helped along the way by two books summarizing and discussing the contents: Ben Fine and Alfredo Saad Filho’s Marx’s Capital and Anthony Brewer’s A Guide to Marx’s Capital, both of which I can highly recommend. Continue reading →
Some of my readers may well be enjoying coverage of the Olympic Games in Rio de Janeiro at the moment, if that’s your thing; others may be fed up with it and doing all they can to avoid it. Yes, this post is about sport, but it is also about political economy and social science, whose practitioners have throughout their history debated the meaning of and relationship between the individual and the social in society. I want to explore the lessons for these subjects of countries such as Great Britain, which has done very well in last three Olympic Games in terms of medals won, and overall team performance. Continue reading →
Here is a useful five minute interview on the Guardian website with Cambridge economist Ha-Joon Chang, bestselling author of 23 Things They Don’t Tell You About Capitalism, which is very readable and full of interesting and iconoclastic ideas. I have discussed some of Chang’s ideas on this blog in the past. Here he punctures a few myths about the recent direction of economic policy in the UK.
Some good news for the environment: following the introduction of a 5p plastic bag charge in England in October 2015, consumption has dropped dramatically, by 83% by the end of 2016 if current trends continue. This is surely an example of how a simple policy can be effective in changing behaviour, or incentives, as economists like to say. Note that the charge is not a tax, and is meant to be reused by the companies to which it applies. Many will give the money to charity, certainly if they care about their ‘social responsibilities’.
Plastic bag waste and pollution are an example of what in economics is called an externality. This is when the social cost or benefit of behaviour is not reflected in the price charged for a good or service. This results in economic inefficiency. If businesses or consumers are polluting but are not in some way paying for the cost imposed on society and the environment, then there is the potential for a charge or a tax on production or consumption to improve the economic outcome. Continue reading →