In Our Time - Economic Rights

Episode Date: January 27, 2000

Melvyn Bragg and guests discuss economic rights. Is democracy the truest conduit of capitalism, or do the forces that make us rich run counter to the democratic institutions that safeguard our rights? The economist Milton Friedman once said, “If freedom weren’t so economically efficient it wouldn’t stand a chance”. If that was ever true, is it still the case as we enter the era of the globalised economy? What is the relationship between democracy and capitalism? Is it possible for a country to get rich and stay rich without a liberal constitution and what is the prospect of the ever looming spectre of ‘globalised capital’ infringing human rights?With Professor Amartya Sen, Master of Trinity College, Cambridge and winner of the 1998 Nobel Prize in Economic Science; Will Hutton, former Editor of The Observer, Director of The Industrial Society and author of The State We’re In.

Thanks for downloading the In Our Time podcast. For more details about In Our Time and for our terms of use, please go to BBC.co.com.uk forward slash radio four. I hope you enjoy the program. Hello. Is democracy the truest conduit of capitalism, or do the forces that make us rich run counter in the end to the democratic institutions that safeguard our rights? The economist Milton Friedman once said, If freedom weren't so economically efficient, it wouldn't stand a chance. If that was ever true, is it still the case as we enter the era of the globalised economy? With me to discuss the relationship between democracy, human rights and the economy,

is the Nobel Prize winner, economist Amati As Sen, whose master of Trinity College, Cambridge, and author of Development as Freedom. I'm also joined by Will Hutton, former editor of the Observer, a newly installed director of an industrial society. He invented the term stakeholder society in his book, The State We're in. Amati Asen, in the lectures that you gave to the world back, and the book that's come out of them, you take an evaluative approach

which is distinct from traditional economic policy analysis. Was your main objective to outline a new definition of poverty? Well, it's not so much to redefine poverty. I think we know what poverty is, that we know that poverty consists of powerlessness, primarily the powerlessness to be able to feed oneself, to get medical treatment, the kind of economic means that we need.

But powerlessness could take other forms too, not being able to express oneself, getting beaten up and attacked if one expresses a contrary view. So it just takes the unfriedom, the lack of freedom, which is really the underlying force, the underlying rationale behind thinking of poverty as low income. It's that broadening that I try to pursue. So I wouldn't see it as redefining poverty. but really exploring the implications of taking a more evaluative view of poverty, understanding poverty in terms of its motivation rather than just its symptoms. Do you think this has its root in your view has its root in utilitarianism? No, I would say that it's, I mean, utilitarianism concentrated on one kind of deprivation, namely misery in terms of psychological, inability to feel well, be well, and so on.

But it's not an adequately broad view. I mean, I think in some ways probably the broadest approach to that is that a very startle in Nicomachian ethics and in politics outlining why we need to... There's certain things that we value doing and have reason to value doing. And if we do not have the freedom to do it, well, that is, in some ways, a big deprivation.

And that line is taken up, kind of sometimes indirectly, I mean, right from the beginning of economics, William Petty and so on, quite clear the motivation is concerned with that. I think it's absolutely clear in Adam Smith's writing. It's very clear in the writings of Karl Marx or John Stuart Mill. So it's that,

and utilitarianism, by illuminating one aspect of it, the mental deprivation aspect, says something of relevance there, yes. It assumes me that this is a broader definition of poverty, Will Hutton, to do with poverty in not only economic poverty, but poverty in the sense of not having freedoms, not in access, and so on. Would you agree with that? I don't see how you can disagree with it.

The issue is what weight you put on different aspects of it and what you think the solution is. I mean, I don't want to neglect in a discussion like this that actually the great fact of being poor is that you don't have much money and the lack of purchasing power and the deprivations that fall out from that are actually, I think, you know,

the most fundamental aspect of actually being poor. I mean, life from hour to hour is actually grindingly difficult. Now, that is about powerlessness, but actually the most immediate form of empowerment is actually having some purchasing power. not being hungry. You actually disagree with that. I don't disagree with that.

In your book you seem to demur, but don't let me put words in your pen. Well, having spent two decades and working on famines and hunger and so on, I do not disagree with that. But I don't think it's an adequately broad definition. And it's also wrong to think that people who are poor don't worry about their rights. just to take my own country, India, the first real electoral show of muscle happened when Mrs. Gandhi's government abolished fundamental rights

and tried to suppress the constitutional rights, and there was a massive electoral defeat. So the first show of electoral power on the part of one of the poorest population of the world in a democratic election, namely the Indian electorate, was not on an issue of hunger, but on the issue of basic democratic rights and free speech. And so, again, I think people do.

I mean, I think we underestimate the extent to which even people in poverty worry about their freedom. I mean, there's a very interesting study by some Belgian economists, Schocht and Van Uttigen dealing with Belgian unemployed. And one of the things that come out in the analysis is that what they're regretting most in the state of unemployment I mean, it's not just primarily lack of income, but lack of ability to choose anything,

you know, once you are in that state, you're stuck. You know, you have to get your doll in some way. You have to survive on the basis of handouts, etc. And it's the lack of freedom that they're resenting. By the way, Adam Smith discusses it quite clearly. Well, that's right. I mean, because when you get high levels of inequality, that's not happened as a matter of chance.

It's because the system is working in a way to reduce those levels of inequality. and without rights, the mass of people who are poor cannot challenge the political economy that's produced that level of inequality. And I think that's, I think, the big point you're making, if you look in British history, it was when the working class insisted on having the vote, insisted on organising themselves in trade unions, that actually began to address the extraordinary income inequalities that grew out of the Industrial Revolution. And I'm completely with you, actually, on this. I suppose the point I'm concerned about is that if you, is that in a developed country,

one could take this set of propositions and say, right, as long as we make certain that the mass of people have a minimum income and a minimum degree of education, a minimum degree of health, and a capacity to reasonably live well, we don't have to worry that much about the incomes of those at the top. you can I think that's a kind of it's a dangerous invitation I think to take this cluster of propositions where we agree and then say well actually if we were to empower the mass of people

in the way that you and I would both want to do a march here that actually that's sufficient you don't need to worry about the incomes, lifestyles, attitudes culture of those at the very top of society as long as you empower those at the bottom and I do it in the gap but the absolute gap between rich and poor

does matter Yes, I think it does matter and also you're absolutely right that just giving them the ability to exercise democratic rights is not adequate. I think you also have to bring out the major issues

of which inequality between the rich and the poor is one of the major ones into public discussion just to take a case of a successful democracy in many respects to the United States. The fact that 43-3-movemberg, million people don't have medical insurance. It's only recently that has come into the electoral discussion. It figured a little in the Bradley versus Gore discussions. But until recently,

I was appalled since I lived in America in many ways, admired the functioning of the American democracy. I was quite surprised to see how little, it was known, in fact, that a very large number of people in the country did not simply have any medical access. And since I have kids who had friends who lived in the inner- between Boston. Sorry. No, I was just going to say that in Boston when they came into the house,

I could see how they lived, that they would wait until a medical problem developed, and then they will go to an emergency and get a very expensive hospital treatment, and that's the way they could survive, and that's the kind of, you develop a strategy of living without a medical insurance in a country of no national health service.

I'd like to come back to the idea that we began, really, with the idea of poverty. You see economic development as dependent upon freedom in your book, as I understand it, and you say, there's never been a famine in a functioning

multi-party democracy, even for those democratic countries that happen to be very poor. Could you explain that and develop that? Yes. Thanks for raising that, because it's a statement

I made, I guess, more than 20 years ago, and at that time, it was based on really looking at the past, that if you look at the famines of the past, they have occurred in colonial economies like India. I stopped only with independence and multi-party democracy. The last famine was 1943, India became independent of 47. I happened to be a nine-and-half-year-old boy and seeing the famine myself at that time.

Then there are these democracies in military dictatorships, Ethiopia, Somalia, etc. you have the one-party state famines, Russia and Soviet Union, Ukraine, particularly in the 1930s, China in 5862, in which 30 million people died, the largest record of famine in history. Even as you look today, and these are subsequent to the first time I tried to predict it, so in some ways one looks and sees how, whether the prediction was right, what are the two countries having major famine now, Sudan and North Korea? I think the underlying logic is just this, that famines are extremely easy to prevent, if the government makes even half an effort to prevent it.

The only question is why doesn't the government make that effort? Now, famines don't affect the rulers, never, because they're immune from it. They belong to the right class. That is the wrong class to be affected by the famine. And the only way that some of the cost of the famine could be translated to them is to such things as democracy. You can't win an election after a famine. You don't like being criticized by opposition parties, by newspapers, don't like being attacked in Parliament. So what democracy and free press does is to pass on some of the cost of the famine and the rulers.

And then they do have the political incentive to stop the famines quickly. and therefore without exception there have never been a famine in an independent country not run by alien rulers which practices democracy and relatively free press now that's

it seems to be so clearly argued and in many ways so very fundamental will it says not only what it says on the surface but does it have deeper implications for the relationship between democracy and the economy yes

what a majority has described, I think, is the importance of mechanisms of accountability. If you can hold those who make decisions to account, if they know that they are being held to account, then their decision-making process is different. It is more sensitive to the common realm and the public interest and the consequences of them taking self-interested decisions on neglecting the mass of people, come home to them, and in consequence you get the results that you've described over famine. And the question is, what should those lines of accountability be?

Should it be voting? Should it be some combination of voting and a free press? Is it about courts? Is it about having a written constitution with constitutionally entrenched rights for every citizen? What kind of political community, what kind of social community, what kind of community do you need actually to sustain those things?

I think you're going to very kind of deep questions. I'm sharing a commission into accountability in the health service at the moment and I'm keenly aware that actually we in Britain, an advanced democracy, have not thought carefully enough about accountability systems in our own health systems so that people actually don't get redress sometimes for really grievous mishaps in our own health service. Again, it is the question of implanting accountability mechanisms

that is the trick, I think, to pulling off a successful organisation and a successful country. Can I get a sort of you rightly comment on? Well, I agree with that. I agree with that, but I think you have some questions. Well, I just like to take it on, to take the other side. So you've established very clearly for me, and I presume I would guess we're all for the listeners,

which is a remarkable, just very remarkable thing to say about famine and democracy. It's very striking, if you haven't thought about it before, as I hadn't. But what about the other side? So we have democracy stopping famine. Do you think democracy is essential to economic wealth and growth and well-being, the other side of the coin? I mean, what's your view on that, I'm not? Well, I think not.

You know, I think all the statistical work that has been done, and there have been a reasonable amount of work, indicates that the impact of democracy on economic growth, as such, that is growth of gross national progress, product, G&P per head, is neutral. That is, neither is it the case, as some people has argued, for example, Lee Kuan Yew in Singapore have argued, that authoritarianism is good for economic growth, nor is it the case that the opposite is true. To have good government, you often need less, not more democracy, was it occur. I think there's no evidence one way or the other. So if someone were

to justify democracy by saying it would lead to high economic growth, that justification does not obtain, nor does the vilification of democracy on that basis. But I don't think the justification of democracy is that. The justification of democracy is that we as human beings value our right to be able to speak. I agree with you, but I just like to stick to this. I will get to that in a moment. I just like to stick to the human rights thing in one second. Yes.

Just to try to get will in on this as well. Democracy and because we started with the Friedman idea that it's just as well democracy works efficiently. Democracy has become kind of like Protestantism. hasn't it? We all thought the Protestants were the great go-getters at that time because they had independence and they made capitalism work in the early days. I'm completely being very unfair and summarising, over-summarising of Tory, etc. And democracy is in a rough and ready way does the same thing. But it hasn't happened like that. Singapore, the Asian miracle economies were not rather strangers to elective democracy, won't they? And they did rather well. Well, I mean, democracy is very hard to do.

and we're seeing with the scandals in Germany just how hard it is to do and Amatia cited 43 million Americans earlier even in a great democracy like America who is living in a country where despite all their entitlements that no political party has taken up their cause to champion healthcare. Democracy is hard to do

and it's much more I think than voting although voting is absolutely this kind of centerpiece of it it's about courts, it's about the rule of law It's about makers of accountability. It's about access to information. It's about upholding certain rights to trial. And actually some of those things were in place in Asia. And some of those things were in place in both in Singapore.

I mean, yes, it was a dictatorship, but there were courts. There were property rights. There weren't rights of association. But there were some systems of accountability there that you didn't have in true authoritarian states. So, I mean, I'm not defending it for a minute, but I think that I think I'm just trying to say how sophisticated and subtle, you know, a working democracy is.

Couldn't an observer say, look, the world is being wealth-driven? If it's being driven by one thing, again, please excuse the... But the world is being wealth-driven. Now, a great number of people running things, it doesn't matter what system produces the wealth, as long as the wealth is there, because there's a sort of vague feeling that if we all get well enough off and everything will kind of turn out all right.

There'll be the percolation effect and all that sort. In that sense, democracy in the hierarchy of things seems to me to be not as important. I don't agree with that. But I think there are two distinct reasons why I don't agree. One is that in fact I think the world, I mean, wealth is very important in the world, but our aspirations are so much stronger,

in some field so that people are ready to risk their lives for the right of speech and for the right of political participation. So I think people do value other things also. That's the first thing. Secondly, even though as far as just

general economic growth is concerned, democracy has a neutral effect. Democracy has a far from neutral effect when it comes to economic security. Now, famine is just an extreme case of insecurity when you actually die of starvation, but insecurity that arises when even a booming economy suddenly comes to a halt, as happened in East Asia. And there, suddenly you find a set of problems arising which was not

noticed before. That is, when things move up and up, they tend often to move together. But when people fall, very often divided, they do fall. And at that time, the voice of the people who are being thrown to the wall, it becomes very important. I mean, if you think about these station crises, for every year, these countries, South Korea, Indonesia, even Thailand, many other countries in that region, grew at 10% or 8% or 10% a year, every year. Now, you might wonder what would happen? I mean, why do worry about a crisis where it goes down by 10% one year?

It wouldn't be worrying, excepting that it's huge. on one group and then the lack of democratic voice of that group which does not bring into them into the political arena is badly missed and so democracy was it wasn't a big issue earlier but suddenly became an issue in Korea in in Indonesia and Thailand exactly as you would expect because that's the moment when you need the protection of democracy even on the side of economics because you need the economic security and the family is just the extreme case of that.

Will Hutton? I guess a number of points to make there. I think that I think that's right. And I think that I wonder what Amachi would say, though, to the proposition that some economists make, which is that it's pretty difficult. If you look at the globe,

it's not just democracy that explains actually differential economic performance. It's pretty difficult for economies in and around the equator. I mean, Galbraith always says that in a thousand miles outside the equator, there isn't one really successful developed economy. Something about culture, something about climate, something about... Jared Diamond makes that point. And Jared Diamond makes that point.

David Landis makes that point in his opinion. That actually there's a... It's more complicated than just saying lack of democracy explains the poor development of some of these countries. But I'm not saying, you know, I'm saying that democracy does little for just average economic growth. And I'm not trying to explain economic growth by democracy.

Quite the contrary. I'm just saying aside from the independent importance of democracy and human rights and political rights, democracy's role in the economy is mainly for economic security rather than economic growth, which is a very different problem. As far, cultural theory is a concern. I think Melvin referred earlier to, I think he was saying Tony, but Max Weber was the first one.

But, you know, the cultural theories have always lagged behind. Just when Weber and Tony were going into later editions, claiming that Protestant ethics were the main engine of development, as it happened, the growth rates had by then shifted to the Catholic countries, like France and Italy. By the time the theory was generalized into Christianity, Japan was beginning to go very fast but suddenly this was all translated

into some additional thing about the samurai culture and the values coming there from by the time that was stabilizing Korea and other countries were beginning to go fast the theory was generalized to Confucianism By that time that was happening

Thailand was going very fast which is a Buddhist country So I think this cultural theories are always tend to look back and try to produce a kind of explanation which works until that moment and not very well in terms of its predictive record. Can we just look at the connection between...

I would have said something about that, but you want to go on that. Oh, go, no, go, no, please. Well, no, I... You look just... Well, I do think, I do think if you think about Europe and European development in the 16th and 17th centuries, it is notable that Protestant countries were first off the block. And I, you know, I just...

All I want to say is that, really, because I know that you, Melvin, wants to say... And I think that this notion that religion, Protestantism, was associated with the early development of capitalism in Europe. I think the evidence of that is quite good, actually. And I'm less reluctant to let go. I'm more reluctant to let go of it than you are much here. No, but my point isn't that it wasn't associated. That's the historical fact.

The question is, how can we learn from history for looking at the future? That's the context. as a historical thing, absolutely right. That early capitalist development occurred in Protestant countries and there are good reasons for that. But to think that somehow, if you don't have Protestantism there, you're doomed,

was sort of disputed first by the success of Catholics, then they're Japanese, then the Confucian societies, finally the Buddhist societies. Do you think you're looking at globalization, Well Hutton, and then your book you're just starting on it so forth, do you think that the big global economies

can manage without poor countries? they need metaphorically the sweatshops of the world to make to keep them as buoyant as they are? Do they need to move their operations from Texas to Bangalore to make it work? I think that the success of the American economy in the 1990s, the boom in Wall Street, is impossible to explain without looking at the relationship between the US and the rest of the world. The US capacity to locate production in low-cost countries and to lift the price. profitability of U.S. corporations thereby has been a kind of central part of the story. And yet so I do think, actually, that the flipside of American economic success in the 1990s has been the growth of global inequality.

Yeah. And you think when you say not just flipside, do you think that is an essential characteristic without which the wealth that we see and the abundance of it and the juggernaut of it would not be as powerful. Yes, I think that the US economy would not have got so far in the 1990s without its relationship to the rest of the world, which is one of structural inequality. I mean, America, I think, runs something close to an informal economic imperial system. And the tribute that we all pay to America is one of the reasons its stock market is so high

and it's had the success it has. That's not to deny that it's a highly entrepreneurial culture and that's not to deny the importance of the 1990s of information technology, which are also part of the story, clearly. Is it possible to you to abstract a philosophical conclusion to this discussion? Well, no, it's not the conclusion. I don't agree. I think that American prosperity requires other countries to be poor.

It's certainly a crying shame how much global inequality there is. That has its independence. status as something which we have good reason to resent. But to think that the prosperity of Europe and America has to survive on the poverty of other parts of the world, I think that's just not right. And I think from that... I would not. I said it... No, you were not saying that, but that was the question that Melvin asked. And in that context, you know, I think the basic argument that there are tremendous complementarity of interest in international trade is something which I do basically

believe. There are issues, important issues about equity and such things as development of patents, use of patents. For example, in medicine, there are an interesting question about asymmetry. In trade freedom, for example, the rich country is still

continuing to have a high degree of protectionism on agricultural product, textile, is something which requires much more discussion and so forth. But I think from there to jump to the conclusion, which is not what Will is saying, but it was related to your question, that does the richness of the rich country depend on the poverty of the poor?

I don't believe that for a second. Well, I think that we have constructed, or there is constructed, a global economy in which there are huge inequalities. And I do think that... I agree with that. And I think that part of the dynamic that's been set up has been a very substantial increase in the profit share in an American...

GDP, which is really the driver of the rising Wall Street, which in turn has been, had all these consequences on spending and investment in America, and enable the great boom and information technology, because the whole thing is linked. And it's in that sense that I think, I'm not saying that it's dependent upon. I'm saying that inequality, the inequality, the global inequality, has set up a dynamic which has particularly helped the US. Thank you both very much. Thanks very much to Will Hutton. And thanks very much to Marty Assen. and thank you very much for listening. We hope you've enjoyed this Radio 4 podcast.

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