Thursday, March 2, 2017

Tim Worstall Visits Bangladesh

Bangladesh was the poorest place on the planet when I was a kid. We’ve defined relative global poverty upward. Now we talk about living on $2/day as extreme poverty, but it used to be $1/day, and most Bangladeshi’s didn’t make that much.

Tim Worstall is there right now as an invited speaker. It’s his first visit.

Tim and I have been virtual friends for 12 years now; we were both very early economics bloggers. He’s had a varied career, one part of which is that he’s now an occasional columnist for Forbes.

On his blog Tim often uses language that some might find offensive. You’ve been warned.

Sexist too. You have been warned. The articles he gets paid for are far less … hmmm … salty.

Per capita incomes in Bangladesh show that it has risen to about the 30th percentile amongst countries, so it has overtaken the level of well-being of perhaps sixty others.

Bangladesh, like China, is what the growth models we’ll be doing after spring break say should be happening in every poor place. That it is not is an astounding commentary on the amount of poor policy practice around the world; many macroeconomists, myself included, assert that the poor choices of many governments around the world qualify as crimes against humanity.

Tim is giddy about what he is seeing in Bangladesh, so I felt I would paste in his entire post. Our world has, over your lifetime, undergone the greatest reduction in poverty and misery in human history. Heck, more people have been lifted out of poverty over that time than in all the rest of human history. That’s a story that every college student should know by heart. Here’s Tim, starting out by noting that Bangladesh was so bad 45 years ago that most international advisors didn’t even know where to start:

In a piece of his talking about how sweatshops ain’t great but they’re better than what poor places have to offer as an alternative Krugman says something like “even Bangladesh”. On the basis that 120 million people on the flood plains of the Himalayan rivers, with little other than the people and the flood plains, has always been one of those places where the development specialists and planners go “Well, what the fuck do we do here?”

Which rather speaks to this comment on the blog here:

I’ve become more optimistic since taking the time to read Tim’s Register and Forbes articles. I like that the world is getting richer. I didn’t realise how much and how quickly.

They’re having an industrial revolution, something that’s not pretty nor nice up close but it is happening. And like most other places that have had one they’re starting in textiles. Here it’s making up the garments, not the weaving or spinning. But that industry employs 4 million and produces 82% of exports.

It’s the old thing. The options are staring at the south end of a north moving water buffalo or the factory. And the water buffalo option produces an income (including domestic production of rice etc) of perhaps 2,000, maybe 3,000 takka a month. 20 to 30 quid. Rickshaw drivers get about the same. One thing I noted was that they’re direct drive, no gears on them. Asked around and gears are considered too expensive…..that’s a certain level of poverty, no? A short rickshaw ride is 10 takka. Got to do a lot of 10 p rides to make a living….

Minimum wage in the factories is 5,000 takka. Time and a half for overtime etc (not included in that number and min wage goes to the new entrants, no training etc). As ever in these sorts of industries the “names” pay better, offer free school for the kiddies, health care etc. The penumbra of subcontractors don’t. A typical career path is off the paddy into the subcontractor factory, a year or two later, with some experience and training under the belt, into one of the main contractors.

Yes, these are shitty wages and neither you nor I would want to try to live like that (note they’re at market exchange rates, not PPP, they understate the standard of living quite a bit, at UK prices think more like £150 a month). But the change wanted, the change desired, is happening.

I was talking to one of the industrialists, and at another time to an Oxford Prof who studies these things (household surveys on stress and mental health of those in and out of the industry for example, being in it raises stress for the worker, lowers it for the extended family…economic security is valuable it seems), and both said much the same thing. The biggest problem for the factories is access to labour. They’ve pretty much swept up that reserve army and are now, to their consternation, competing with each other for access to the desired labour.

As even Marx pointed out, that’s when wages start to rise, seriously and substantially.

The people who invited me out there are the mill owners. Not even Victorian yet, this is still a Georgian economy and some are taking the high road, some the low. Some are training and developing their staff, some are squeezing them. It ain’t, as at the top, pretty nor nice up close.

But the big question in development economics has been, over these past 5 or 6 decades, well, we think we know quite a lot about various places. But what the fuck do we do about Bangladesh? No, really, that’s been the general conclusion all along. And the answer seems to be, as it always has been everywhere, to have a free market driven industrial revolution.

And it is free market too. The creation myth of the industry is that back in 197x, a bloke (I was told his name, cannot recall it) corralled a few dozen sewing machines into a couple of apartments and started. Exports in year one were $20,000. He shipped a dozen likely lads off to Korea for 6 months training, the understanding being that they would then work for him for 5 years, a non-compete clause. None of them kept to that for even 12 months, having seen that this was a bit of alright this business. Absolutely no planning, no legislation, no government help, nowt. Just the lust for profits and market experimentation.

Exports will be $28 billion this year, there’s those 4 million in employment making that double the normal wage (a teacher in a government school might make 8,000 takka a month, with free accommodation, a high school teacher in the private sector would be thoroughly middle class on 15,000 takka. 5,000 takka plus overtime straight out of the fields doesn’t look so bad).

The great economic question in all of history is how do we move on from us all standing around in muddy fields. “So, Rasel, you know how this rice stuff works?” “Fucked if I know Faruqe.” “Mohan, Mohammad, know how we stop the buffalo eating the stuff? “Not a scoobie, sorry.” The answer being that all go off and work in factories.

And it’s happening. Even in that arse end of the development universe, Bangladesh. 5 and 6% GDP growth per year from a Stone Age starting point doesn’t sound like much but they’ve been doing that for two decades now. I spent 22 hours of yesterday traveling, I should be feeling like shit. I don’t think I’ve ever been quite this generally cheerful about the world. Sure, of course, I’ve been personally more excited (that realisation that the bird with the Big Tits is about to put out always generates a certain joy for example) but in that agape instead of eros sense I am indeed that cheerful.

We’d all like this to have happened 250 years ago, when it happened to our forefathers. But it’s true, the poor are getting rich. Life for great vast multitudes of people is getting better.

Time for the Happy Dance, no?

It’s only the dawn but there’s a certain bliss to being alive and knowing it is happening. Now what I’ve got to do is work out if there is some manner in which I can get involved, help prod it along. Probably not, for it has all happened without the intervention of the western upper middle classes in how it works. It’s been everyone else voting with their dollars, buying the stuff produced, which has made it work.

But bugger me, it is working. Ain’t that fucking grand?

There are some Britishisms you may not know. “Quid” is slang for a single English pound. The “Georgian” period ran from 1715 to 1837, with the “Victorian” following — so he’s asserting that Bangladesh is still very early in their industrial revolution. “Nowt” is nothing. “Not a scoobie [doo]” is rhyming slang for a “not a clue”. In America, we probably would not say “arse end of the development universe” but we might say “armpit of the universe”. And “bugger me”? Please don’t go and look that up for a literal meaning and blame me. For slang, in contemporary Utah it is akin to “oh, my heck”.

If you care about people, the economic growth over the last generation is one of the most important stories in all 5,000 years of human civilization. Every economic issue discussed in our recent election cycle pales in comparison.

1 comment:

  1. A very slight correction Professor

    "We’ve defined relative global poverty upward. Now we talk about living on $2/day as extreme poverty, but it used to be $1/day, "

    It's actually inflation in the US. That's a PPP number, so, describing the consumption possibility at US prices in a US supermarket. Walk into Walmart and feed, clothe, house, heat, everything, yourself for one day on $2.

    $2 in 2017, but when the standard was first set that only cost $1. We've not changed the standard of living we call extreme poverty, the dollar has changed on us instead.