Archive for the ‘US poverty’ Category

Around the World with Joseph Stiglitz

1 December, 2008

BWPI Chair and Nobel Laureate Joe Stiglitz has a new documentary just out. ‘Around the World with Joseph Stiglitz’ is a hard-hitting look at globalization. Joe takes two journeys. His own journey began in Gary, Indiana. The documentary returns to his hometown to see what shaped his thinking. It then heads across the world, taking in Botswana, Ecuador, India and China. It weaves together the social and economic effects of globalization, recommending ways to manage it for the good of all.

If you are in New York you can catch it at the Lincoln center this Wednesday (3 December).

In the meantime, check out Joe’s interview with Alex Jones on YouTube on his book The Three Trillion Dollar War: the True Cost of the Iraq War, with Linda Bilmes. And Joe on the sub prime crisis on CNBC.

Keynes is Back. But What to Do, Darling?

24 November, 2008

Britain’s Chancellor of the Exchequer, Alistair Darling is praising Keynes – along with just about everyone else. He’s boosted public spending (go here). The present focus on fiscal policy reflects the fear of a ‘liquidity trap’ – which Keynes first identified in the 1930s. The Bank of England is set to cut interest rates further, but this might not encourage banks to lend. So monetary policy alone can’t do the trick (it is said). Hence public spending. And now tax cuts.

Today we hear the Chancellor’s plans (at 3.30 pm: go here). The government’s spin machine was busy over the weekend so a VAT reduction will hardly come as a surprise. The FT reckons it will be a £12.5 bn package:

“At the heart of the stimulus package is an expected “temporary” cut in the VAT rate from 17.5 to 15 per cent, the lowest standard rate allowed in the EU. Food, children’s clothing and some other items have always been zero-rated in Britain”.

Will a VAT cut work? Canada cut its sales tax at the beginning of 2008, but this had modest effects on total spending, according to the ‘Undercover Economist’, Tim Harford interviewed on the BBC Today programme this morning. For a critique of the Canadian tax cuts from a poverty perspective see GrowingGap. Canadian readers: send us your views.

To cut taxes now, taxes have to rise later. Economists describe this as borrowing from ourselves. Spending won’t rise if we fully anticipate the future tax increase. Or at least that’s what some macro-economists say (see Robert Barro). It’s called Ricardian Equivalence (drop that into your next pub conversation on the economic crisis: sure to impress). Economist readers: please up-date us on whether Barro is right.

Will businesses cut prices following a VAT reduction? They are slashing prices in any case, in advance of Xmas – a last ditch hope that the sales can carry them through the new year. Buyers stormed Marks & Spencers last week, following a 20% price cut. So we might all now afford fresh underwear. But will stores cut prices further, or take some of the VAT cut to rebuild their margins?

Ann Pettifor of the New Economics Foundation interviewed on the BBC yesterday was skeptical about tax cuts (Ann was one of the first people to predict this crisis). She believes that people will instead save the VAT cut (i.e. you will still buy the same basket of goods, but now the basket will be cheaper and you won’t add any more items. Your money is then deposited in one of Britain’s hopeless banks or under your mattress). Ann points out that if the money is spent then a lot will go on foreign imports (true, but I don’t think this is necessarily as bad as is often believed. The Americans need help too. I’ll do my bit by buying a new Apple Mac).

Other ideas I have come across: delay VAT payments by small businesses for six months. Many small businesses are penalized by the larger firms not paying their suppliers on time (a zero-cost way for the latter to fund themselves). Peter Mandelson promised a crack down, but doesn’t seem to have achieved much yet. In the recession of the early 1990s, small business failures were running at a 1,000 a week. So maybe government could help with a delay in VAT payments. Housebuilders want a continuation of the present holiday on stamp duty to get the housing market re-started. Readers might like to comment on the merits of each.

But there are two ideas from the Get Fair campaign that I really like.

First, immediately invest £4bn in measures to halve child poverty by 2010. Child poverty costs at least £25 billion each year in losses to the Exchequer and in reduced GDP, according to research from the Joseph Rowntree foundation. So spending tax revenue on eliminating child poverty now would actually save public money in the future. Surely a good idea.

Second, Get Fair says improve the take-up of existing benefits: they estimate that this would help 500,000 pensioners out of poverty. Here in the UK we have just had Remembrance Sunday, a day on which we remember those who gave their lives to defend Britain – especially in the Two World Wars. A 20-year old in 1940, is now 88. Helping our pensioners now, especially those in poverty (2.5 million of them) will be one of our last chances to thank their generation.

So, over to you Darling.

Like to Know How to Live on a Dollar a Day?

9 November, 2008

Then go to the One Dollar Diet Project – you will be shocked at how difficult it is. Christopher Greenslate and Kerri Leonard tried it for a month. To survive the two Californians had to give up most purchased food and make their own from the raw ingredients. Many vegetables were too expensive, and they had to forage. Vitamin intake became a serious problem. The two school teachers found that they could not sustain their previous energy levels. The average American eats $7 worth of food per day, but it can go below a dollar late in the month before pay day or when food stamps run out. In a New York Times article on the project, Christopher says: “I challenge anyone to live on a dollar a day and eat fresh food in this country”.

This resonates with the British debate around food and poverty, which has been given another boost by Jamie Oliver (see our earlier posts). Obesity is generally above average among low-income groups in rich socities. Why? One reason is that junk foods (energy dense: with the most calories and fewest nutrients per ounce) are cheaper than nutrient rich, lower-calorie foods like fruits and vegetables.

Pablo Monsivais and Adam Drewnowski found that junk food is not only less expensive, but that it has gone up less in price than nutrient rich, lower-calorie foods. In their Seattle study, the cost of the latter is $18.16/1,000 kcal, compared with $1.76/1,000 kcal for the most energy-dense (junk) food. Over a 2-year period, junk food actually fell by – 1.8% in price while the least energy-dense foods saw a price rise of 19.5 per cent.

Who to help in the current financial crisis?

29 September, 2008

Who to help in this financial crisis? On the FT web site I argue that the 37 million Americans in poverty (about 12% of the population) should be first in line for help (for US poverty statistics go here).

Many Americans on low-incomes have been sucked into loans that they cannot now service as house prices collape. African Americans will be hit hard (their poverty rate, 24.5%, is twice the average). And the relentless rise in US inequality will continue (see the graph here). The financial services industry feasted for years on selling mortgages to people who wanted to own the roof above their heads. The scandal of teaser-rate mortgages will run and run.

And the financial crisis is causing unemployment to jump. As Ken Rogoff in the FT says:

“A large expansion in debt will impose enormous fiscal costs on the US, ultimately hitting growth through a combination of higher taxes and lower spending”.

The history of financial crises demonstrates two common outcomes. First, bank crises almost always become fiscal crises – as public money has to be used to keep the credit wheels turning. Second, capital gets help first, and labour last (see for instance Mexico’s ‘peso’ crisis of the mid-90s). Will history repeat itself?

Universal Right to Pleasure

21 September, 2008

We enjoy our grub here in Manchester. And so does Slow Food Nation which came together over Labor Day in San Francisco to celebrate an inclusive food movement to create a better American food system.

The slow food movement originated in Italy over 30 years ago, founded by Carlo Petrini. He was annoyed by a badly cooked pasta dish at a political meeting and wrote to the organizers to tell them so — who responsed that the comrades didn’t bother with such trivialities. Petrini retorted that the working class had every right to good food. And so the ‘universal right to pleasure was born’.

So, food quality shouldn’t be just a middle-class foodie concern – the way it is often presented. The link between poverty and bad nutrition remains an urgent issue in the UK (check out the Food Access Network). And then there are the 400 million-plus people in chronic poverty whose food – when they can get it – is often appalling: anyone for mud-cakes? (see this story from Haiti).

The BBC food programme covered the San Francisco event and includes a speech by Carlo Petrini himself, as well Raj Patel of Stuffed & Starved (one of our favourite books this year).

The Slow Food Story: Politics and Pleasure by Geoff Andrews traces the origins of the movement. In the UK it is still early days. The industrial revolution, rapid urbanization, and the second world war did much to destroy English food culture, and it has only really started to recover over the last 20 years.

Kate Colquhoun’s The Story of Britain’s Cooking tells a dismal tale. Ian Jack in the New York Times asks why we developed such a poor cuisine despite so many excellent ingredients (‘the roast beef of old England’) and finds it in “… the triad of the Industrial Revolution, empire and free trade. The first drove people from the fields to the factories; the colonies of the second grew what Sidney Mintz has called the tropical ‘drug foods’ (including sugar and tea); the cheap imports encouraged by the third drove out the homegrown”. By 1800 according to Colquhoun:

“… the poor in Britain were now subsisting not on a diet that had remained broadly unchanged for centuries of ale, grain and vegetables and a modicum of fatty meat, but on a vastly less nutritious mix of often adulterated white bread, cheese, tea and sugar”.

The slow food movement in the UK has so far focused largely on quality. It is only now taking on the ethical and political issues that Petrini championed, according to the BBC food programme. “What’s good, clean, and fair” are the watchwords, and Petrini urges us to be curious about food: because it tells us much about the culture of the people who produce and eat it.

To that end, to maintain the ‘Ark of Taste’, the movement has supplied vacumn packing machines to India to market more widely a rare variety of basmati rice. Globalization has made us aware of other food cultures but it has also endangered local food cultures as well. And as Petrini emphasizes, when a food culture is threatened, a whole life style is endangered.

Confused about the Financial Crisis? Is Man United Safe?

19 September, 2008

Then go the freakonomics blog. Guest bloggers Doug Diamond and Anil Kashyap provide an excellent guide to what is going on. They also assure us Mancunians that the blessed United is safe:

“… the Federal Reserve made a bridge loan to A.I.G., the largest insurance company in the world; perhaps best known to most of the world as the shirt sponsor of Manchester United soccer club, A.I.G. has assets of over $1 trillion and over 100,000 employees worldwide. The Fed has the option to purchase up to 80 percent of the shares of A.I.G., is replacing A.I.G.’s management, and is nearly wiping out A.I.G.’s existing shareholders. A.I.G. is to be wound down by selling its assets over the next two years. (Don’t worry, Man U will be fine.) The Fed has never asserted its authority to intervene on this scale, in this form, or in a firm so far removed from its own supervisory authority”.

So, that’s ok then. Meanwhile our comment to Ken Rogoff’s piece in yesterday’s FT on the impact of the crisis on the dollar argues that now is the time to invest in better social protection for the 37 million Americans in poverty. Bailing them out can help stabilize the domestic economy, and put a floor under the wobbly property market — and thereby help reduce the need to bail out the financial system. In the meantime, United becomes the first football club to be sponsored by a central bank. Thanks, America’s taxpayers!

US Financial Crisis Hammers the Poor

18 September, 2008

Former IMF chief economist, Ken Rogoff worries that the dollar is headed for another dip in today’s FT (go here). He says:

“If the US were an emerging market country, its exchange rate would be plummeting and interest rates on government debt would be soaring”.

Instead the dollar has strengthened over the last month. But he doesn’t think this will continue. Rogoff is worth listening to: over the summer he said a major US financial institution would fail before the end of the year (reported here). And this has now come to pass (with more on the way?).

What does the financial crisis mean for the poor? Earlier in the year we commented on the big rise in the number of people using America’s food banks (see our February and US archives). The US government buys surplus food for distribution through organizations like America’s Second Harvest — and these are facing heavy demand in areas worst hit by the house-price collapse.

Given the US slowdown, unemployment will rise further. With few if any savings, plus the cost of health care (and the fact that many Americans are uninsured), unemployment can quickly push people into poverty. The US prides itself on social mobility (the rags-to-riches story that all those self-help books play upon). But only 6% of children born to parents with a family income at the very bottom move to the very top (see the Economic Mobility Project here). It’s actually a very static society, especially for African Americans.

Unemployment is, in turn, pushing up the default rate in the already hard-pressed mortgage market. This adds to pressure on mortgage-bonds and the balance sheet of the financial sector.

Putting in place effective safety nets for those on low-incomes could help establish a floor under house prices (and thereby indirectly help the dollar, which is Ken Rogoff’s concern). Since many low-income families were lured into mortgages they cannot now afford through so-called ‘teaser rates’ (low interest rates to suck them into debt) they deserve as much help as the banks — if not more.

But we fear that any help will be squeezed out by the fiscal costs of the financial crisis itself (not to mention the continued cost of Iraq: see Joe Stiglitz here on the ‘three trillion dollar war’). And it is very likely that the US will exercise even less voice in international development, since its bilateral and multilateral aid commitments will come under budgetary pressure as any new administration (be it democratic or republican) will focus on domestic priorities first. The bottom line: it’s not just America’s poor who are hammered, but the world’s poor as well.

Average cop has more integrity than the average professor

29 August, 2008

At least that’s what Harvard-trained sociologist Peter Moskos reckons. And he might know. He joined the Baltimore police force in the high crime Eastern district, after basing himself there for his PhD research into the methods and culture of an American Police department (go here for an interview). It has certainly given him a new view of academic research:

“I think in the Ivory Tower there’s a problem with researching a group without ever talking to them. In academia, it’s all about measuring in quantitative stats. Culture matters. Cops live and work there, so they can see it. It cannot all be explained by money. [Academics] think it’s all about racism and economics”.

His book Cop In the Hood: My Year Policing Baltimore’s Eastern District is out now. One to read before watching the next episode of the The Wire.

Far from Correcting the Distortions of Unbridled Capitalism, the Political Process Makes Them Worse

29 August, 2008

So says Sam Brittan in today’s FT, reviewing Robert Reich’s Supercapitalism: the Battle for Democracy in an Age of Big Business. You’ll remember Reich as Bill Clinton’s secretary for labor.

In a nutshell, Reich argues that the golden age of capitalism — the rebuilding of the post-war years up to the 1970s — delivered enough prosperity to win the allegiance of most ordinary folk. That got replaced by ‘supercapitalism’ which has delivered our present mess.

For Brittan the novelty in Reich’s book lies in his rejection of a central role for corporate social responsibility. Instead, Reich gets into the intellectual bed of Milton Friedman — who famously argued that it’s the job of businessmen to make lots of dosh, and that’s their sole responsibility. For Reich we need to strengthen states to ensure that dosh-making is compatible with society’s goals — as set out by democracy.

Brittan likes this (unexpected) approach. But he’s less optimistic about democracy pushing business in the right direction. US energy policy is Brittan’s example (presumably excessive subsidies for biofuels driving up world food prices). And Brittan cautions that this might also let business off its (moral) hook:

“… there is a danger that the Friedman-Reich position could inadvertently give sustenance to the “I was only doing my job” defence for evil actions”.

We continue to think this one over while awaiting our copy of Reich’s book. In the meantime, you can read his excellent blog here.

You’ve Got to Serve Turkeys to The Poor Too

10 March, 2008

Celebs-in-philanthropy is the latest thing (see this NYT Sunday Magazine piece, featuring Natalie Portman). One disgruntled PR guy sums it up on Gawker: “You can’t just get $20 million a picture, you’ve got to serve turkeys to the poor too.” Hollywood is one tough scene.

Last month a different kind of celebrity died. No movie star but a friend to India’s lepers and harijans: Baba Amte. Born into a wealthy landowning family in Maharashtra, Baba Amte’s life changed when he stumbled across a leper dying in the gutter.

A moving tribute in The Economist describes his reaction thus: “He was outraged at the fear he felt: fear of touching, as if he shared the common belief that lepers were paying for their sins and would infect anybody who came close. Where there was fear, he told himself, there was no love; and when an action was not done in love, it had no value. Deliberately, he went back to the gutter to feed the leper and to learn his name, Tulshiram. He then carried him home to care for him until he died, and began—once he had had training in Calcutta—to work in leper clinics all around the town”.

Baba Amte hated the word charity (go to YouTube here). True he fed the poor, and got them back on their feet. But above all he wanted to give them the dignity of work. And that is what he did with the thousands who passed through his ashrams He would have hated being called a celebrity. But we should celebrate a life well-lived.