July 15th 2000

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Articles from this issue:

Cover Story: Human Genome mapping milestone?

Editorial: Managing Australia’s interests in S.E. Asia

Canberra Observed: Defence: opportunity beckons for Howard Government

Families: The hollowing of the middle class continues

New South Wales: Follow Swedish model: drug forum told

Trade: Canberra capitulates without firing a salvo

Doctors suspended over 32 week abortion

Straws in the wind

Education: New Queensland syllabus attacked

Economics: UN to look at the Tobin Tax

Media: GST ads unchained media bias

Development: Amartya Sen: the return of humane economics

Comment: The politics of suicide

Law: Death penalty debate resurfaces in USA

United States: Rising tide leaves poor floundeirng

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Development: Amartya Sen: the return of humane economics

by Bob Browning

News Weekly, July 15, 2000
Bob Browning profiles a Nobel Prize winner who believes economics requires a larger context than it is currently being given.

If the leading contributors in our time to the world’s humanitarian traditions were listed, Amartya Sen should be included. Sen holds the prestigious position of Master of Trinity College, Cambridge, but colleagues sometimes refer to him, not all of them kindly, as the “Mother Teresa of economics”. In 1998, he was awarded the Nobel Prize for having “restored an ethical dimension to the discussion of economic problems”.

Asked recently what was the thrust of his life’s work, Sen said he had tried to restore the humane tradition with which economics began — a tradition which the current liberal economic orthodoxy has undermined. He said his latest (1999) book, Development as Freedom revived “a line of thinking that was extremely important in the reasoning of pioneers of economic and social analysis, in particular Adam Smith, Condorcet, John Stuart Mill, and others.

“In fact, the motivation of economic studies from the earliest times (Aristotle in Greece, and Kautilya in India, both in the third century BC) was deeply concerned with enhancing the quality of human life and increasing the options we have. This is true even of the medieval beginnings of modern economics. While they were all concerned with material prosperity, they saw it as a means to other — bigger — ends.”

The current policy dogma is that national development consists of little more than an increase in Gross Domestic Product or real national income per head. In Sen’s view, this is “basically a vulgarisation of the vision that motivated the origin of the development of economics”. He has tried to reclaim that original version of economics, and to place the narrower considerations in a bigger context, one in which he says they could be judged “in terms of what they manage to do for human life and liberty”.

Development as Freedom is a compilation of the series of lectures that Sen delivered to the World Bank, and which reportedly drew a positive response from James Wolfensohn, the Bank’s Australian-born president. The book’s publishers, Oxford University Press, said the lectures presented a necessary intellectual and moral framework of analysis and scrutiny “to a world divided between those who fear the ruthlessness of the free market under prevailing conditions of global capitalism, and those who fear the terror of authoritarian states that stifle individual liberty as well as initiative ...”.

Sen’s first major effort to re-humanise economics began with his study of the great Bengal famine of 1943. He challenged the conventional economic wisdom that people died in famines because of a shortage of food.

Through meticulous research of weekly arrivals of food grains into Calcutta, Sen showed that food availability increased rather than dropped during the famine. Food owners and government let people starve, not because no food was available, but because the starving could not afford to pay after the demand for their labour collapsed. Their pre-famine purchases were modest enough, but when earning ceased they could not afford even their bare subsistence.

Sen challenged dominant economic theory by arguing that people in poor agrarian economies were “entitled” to enough goods, if for no other reason than to reproduce their labour power. He pointed out that there has never been famine in functioning democracies. Unlike dictators and oligarchs, democratic politicians cannot avoid responding appropriately to impending food shortages and crises. This has been true of all functioning democracies, from modern India to Zimbabwe.

Sen’s ground-breaking study of famines in Bengal, Bangladesh and Africa was published in Poverty and Famines. Commenting on the book, Meghnad Desai, Professor of Economics at the London School of Economics, said (Prospect, June 2000) that: “Just as Keynes had shown that a market economy could be in equilibrium with many people unemployed, so Sen showed that a functioning market economy could leave millions dead.”

Sen’s next contribution was to challenge the idea of rational economic man — the idea that people’s choices are all about maximising personal self-interest. Professor Desai explains Sen’s argument as follows:

“[C]hoice may not reflect an egotistical, utility maximising action, but a more inclusive set of preferences — Sen showed that we must take into account notions of sympathy or commitment in order to understand such things as voting behaviour, paying for public goods, looking after elderly relatives, sticking together in a marriage for the sake of the children, and so on. This may seem obvious to non-economists, but Sen helped to take economics out of the confines of private consumption into real life behaviour where families, groups, collectivities have claims on us. He did this not by an emotional diatribe but by using logic. Buried in some highly technical material was a formidable challenge to Homo oeconomicus.”

Next, Sen tackled the economic right-wing over their rejection of income distribution. Right-wing economists justified opposing redistribution on the utilitarian grounds that laissez-faire would lead to greater wealth production and greater per capita income. Sen responded that laissez-faire would result in the benefits of growth going mainly to a small group of “winners”. If the economy was to serve all society, attention had to be paid, not just to the total growth of wealth, but also its distribution.

What is poverty?

Sen continued to apply his humane, anti-instrumentalist thinking to economics by asking more basic questions about what constituted well-being. He began rethinking the concept of poverty.

Economic rationalists argue that there are no truly poor people in rich countries like America, Europe and Australia. Compared with the poorest in underdeveloped countries now, and how most in the West fared in the not so distant past, the “so-called poor” in developed countries are really rich.

But Sen defined poverty not just in terms of food and shelter but according to people’s comparative inclusion in the society in which they lived and their capabilities to realise their potential. Professor Desai comments that Sen argued that:

“The poor are poor because their set of capabilities is small — not because of what they don’t have, but because of what they can’t do.”

Sen’s minimal list of requirements to raise people above poverty includes the capability to lead a healthy and productive life, to communicate and participate in one’s community, to reproduce biologically with the partner of one’s choice, and to move about freely. Describing the context of Sen’s contribution to economics, Desai says:

“The market alternative worked, but at what price? Many countries found that in undergoing IMF-led structural adjustment, they had to achieve targets — balanced budgets, reduction of trade deficits, exchange rate depreciation — which had an adverse effect on their populations. They had to cut their health and education spending to balance the budget. The question became: are we balancing the budgets as we are unbalancing the lives of people?”

True human development

That centre-left governments in the developed world are now emphasising the need to equip people with the skills to compete in the global economy is largely attributable to Sen’s thinking and advocacy. So too is the recent construction of the Human Development Index (HDI). The HDI seeks to counter the simplistic and misleading device of using per capita income and GDP statistics as the measures of national development. The HDI defines human development in terms of positive freedoms, in terms of the real choices people have over things they can do.

Three variables were chosen to measure human development: life expectancy, adult literacy and income. Desai notes:

“Taking these three together — health, education and resources — an HDI was calculated for each country. This simple device of ranking all countries — developed and developing — in a single table had a dramatic ‘bench marking’ effect. Poor Sri Lanka, with a per capita income of $400, fared much better in Human Development Index than Saudi Arabia with 15 times its income. Oman and Czechoslovakia had the same income in 1990, but Oman came 58 ranks lower than Czechoslovakia in the HDI. Very rapidly, the value of a country’s HDI and its ranking displaced growth of per capita income in policy discussions as well as perceptions. The Human Development Report is now the most widely reported and read of all the reports published by the UN, IMF or the World Bank ...”

Using the deceptive income per head measure not only keeps attention off distribution and the growing gap between rich and poor, but it also makes the relatively poor in America, for example, look relatively rich in the world context. However, if we move to other measures such as survival chances, the relatively deprived in the rich countries are seen to be also relatively deprived in the global context. Indians in the better provided states, the Sri Lankans, and others, as Desai notes, have a much larger chance of living to later ages than do, African-Americans as a general group:

“African-Americans in inner cities often do substantially worse in terms of survival than the poorest people in some of the countries with reasonable arrangements for school education and health care. In fact, in many US cities (such as Washington, DC) life expectancy at birth is in general lower than that in India and Pakistan.”

Sen’s contribution to restoring decency to public policy has been to argue logically, unabrasively, but persistently that élite policy-makers need to think differently about why we seek to increase national wealth. In line with other leading contemporary humane thinkers, from Solzhenitzyn to Pope John Paul, Sen applies the simple value criterion that the economy exists for man, not man for the economy.

Economics began not just as the search for ways to increase wealth but also for ways to use national wealth to enhance human life.

— Bob Browning’s previous articles and reviews of his books are available on www.sprint.net.au/~rwb

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