Human development and what it reveals
- By Heiko Khoo and Michael Roberts
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E-mail China.org.cn, December 22, 2015
The economist Simon Kuznets believed that when capitalist economies "take off" and industrialize, inequality of incomes will initially rise, but as economies "mature," income inequality declines. This is known as the "bell curve" of inequality and human welfare. But over the last 40 years modern capitalism experienced the opposite. Indeed, in the past 25 years, rapid growth in middle-income countries, fast growth in top income countries, and a slipping behind in low-income countries have occurred. And the falling inequality between nations is almost entirely due to China's progress.
China has raised 620 million people out of internationally defined poverty. Its rate of economic growth was matched by some emerging capitalist economies in the 19th century when they were taking off. But no major country has ever grown so fast. In 2010, 87 countries had a higher per capita GDP than China, but 83 were lower. Back in the early 1980s, three-quarters of the world were better off than the average Chinese. Now only 31 percent are. This is an achievement without precedent; excluding China inequality between the richest countries and the rest has increased.
Rising inequality between countries and worse human development began in the 1990s with the intensified capitalist penetration of emerging economies and cut backs in public sector spending on health and education. This "neo-liberalism" was designed to reverse the low level of profitability of the early 1980s. The connection between growth, human development and inequality between countries is confirmed by the changing inequality of wealth and income in most economies after 1970.
The economist Thomas Piketty has shown that there is an inherent tendency for inequality in wealth to increase with the growth of capitalism - as the rate of profit for capital outstrips the rate of growth in output - although this tendency was counteracted between 1913-1950.
The idea of an inherent tendency with counter-tendencies smacks of the dialectical method of analysis that Marx used to outline his own laws of motion of capitalism. What Piketty finds is the opposite of Kuznets "bell curve" - a U-shape - as the decline in inequality of wealth for the brief inter-war and early post-war period gives way to a degree of inequality not seen since the late 19th century.
Economic growth, higher incomes and wealth, and improvements in health and education are all central to human "progress." In the last 30 years or so, progress has slowed significantly and the gap between the very top - between countries and inside them - has widened, not narrowed.
Heiko Khoo is a columnist with China.org.cn. For more information please visit:
http://www.china.org.cn/opinion/heikokhoo.htm
Michael Roberts is a London based Marxist economist and who works in London's financial services industry. He published the "The Great Recession" in 2008 and "Essays on Inequality" in 2014.
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
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