1 - Roanoke College
1. Introduction
1. How I came to be in Salem this afternoon. Well, it is simply this: I attended Robert Tuttle’s thoughtful lecture last year, and I got trapped—in a moment of celebration for Tuttle’s execution, and the place. But, what better could it be? This Lutheran citizen holds to some themes in life. One the celebration of “ordinary saints”—and James Crumley goes to the top of the list. He was my bishop, a rock in the evolution of my church. To this day he stands as a consistent messenger of where that church needs to be. I am happy to be here, to continue a sequence of Crumley Lectures in the fine traditions of this Lutheran college.
2. Why this Crumley Lecture. {Tocqueville in the Valley?}
3. Qualifications. The topics that I address today are but distantly related to my personal research. I dealt, briefly, with them in my early academic career. You should know that I have had a long-standing intellectual interest in these; that I have made an effort to keep on top of them. I speak today, from the constructive works of others. I reach some strong conclusions based on their work. While happy to debate my conclusions, you will be stuck with this: factual results are those that I sight. Arguments over these should be had with the authors; and, wisely, I will duck the role of an intermediary.
2. What We Know about Economic Growth and Its Distributive Consequences: the starting point for this Lecture.
1. Some initial perceptions
1. Inequality is—in the long-run of history—a recent phenomenon. The first-century world—to pick an arbitrary, but fitting, starting point—was one of relatively equal distribution of both income and wealth.[1] As the Middle Ages came to an end, there are indications of increasing disparity in wealth, though not in income. From that time, things changed: incomes gains substantially, and wealth distribution—the result of those gains—produced more equivalent results.
2. This line of inquiry: Adam Smith in Edinburgh. Professor of Moral Philosophy, Smith[2] was the constructor of a positive vision of economic structures as well. But Smith, like Tocqueville (later) and Montesquieu (earlier), was living on the backend of an economic revolution. That revolution was well underway. It had more than a small amount to deal with what we call the Protestant Reformation. [More on this to follow.]
3. More research is on its way. Could it be any other than this? We must be endlessly fascinated by the theme of poverty and wealth for we are driven to it by moral commitment, by fascination with numbers—or simply fashionable dalliance in social outcomes (see, e.g., the focus on upper level tables of wealth found in the popular business press). One has the feeling that this constant focus on outcomes has at its base an implicit religious element: how well does the individual feel about his own positioning in the hierarchy, and is there any satisfaction to be found in that position relative to that of “the others”.[3]
2. The two signal sources in my thinking:
1. David Landes on the fullness of economic history. To grasp the awesome dimensions of economic progress in the modern world is a difficult task. It works out that we have a “provider” in David S. Landes, Professor of Economics and History Emeritus, at Harvard University. How unusual these days to have scholar trained in two tightly linked fields. Professor Landes is not a friend, but an acquaintance. His work on the Industrial Revolution is landmark stuff: it defined the way we think about that period. His subsequent tome, Wealth and Poverty of Nations has given us a wider view of the economic evolution of nations in the context of underlying cultures.[4] His approach is that of narrative history—and a powerful one at that. He misses few points; he weaves the stories with impeccable skill.
2. Jeffrey Williamson on the structures and measured outcomes. To understand the empirical dimensions of economic progress one needs to read the work of Jeffrey G. Williamson, Professor of Economics at Harvard University. Williamson is by any definition the most widely published economic historian of our time.[5] His sequential constructions of the distributions of income in the two centuries of rapid economic growth are signal to my remarks today.[6] Jeffrey Williamson stands as case apart: his constant, balanced approach to the working of economies has defined the approach for economic research in topic at hand[7]. His approach is formal in both theory and data analysis; his conclusions tightly argued.
3. Landes: Findings on Wealth and Poverty
1. The facts are straightforward. Over the past 500 years, the collective nations of this world have become dramatically wealthier. That said, the distribution of the gains have been disproportionate. Some nations find themselves with economic rewards[8] that are so extraordinary, as to think these nearly an undue reward. Others, strapped with little progress, find the results painful—and somehow suspect.[9]
2. If we are to understand the post Middle Age development of economies, we must understand geography. It follows—by some fortunate set of circumstances—that Northern European nations, and selected colonial offshoots, have had “a good run” at economic growth. To a degree, that good run has produced (in the longer term view) some significant decreases in inequality. The geography of this earth is complex, but in economic terms it comes be quite simple. Here are the premises, and the conclusions:
1. Temperate climates work. Western Europe comes blessed with the trade winds. The moderate climates, blessed as a result with fairly regular rainfall, proved the basis for early agricultural development not seen elsewhere.
2. Trouble along the equator. Crop cultivation proves problematic in this region for moisture is lacking, and/or irregular (and then, often inconsistent) on massive proportions. And—to Landes great credit—there must be the realization that a consistently warm climate produces biological consequences incompatible with the healthy development of its inhabitants.
3. Working beyond geography, one must be focused on culture—and most particularly in politics and religion. How this “run” in absolute, and relative, terms came to be continues a subject of debate. But there are elements that need attention, and Landes gets most of them right:
1. Religion must be a part of it. Brad De Long, in his review of the Landes book[10], included this line: “Shoot the priests”. Landes, himself, would not have said this. But the point is straightforward: a hierarchical church is not the place to find celebration for free markets.[11] {speak the note}
2. Free labor markets. For real progress in economic activity, those that “do the work” must have a clear expectation of the rewards for difficult effort—a contract, written or implicit. A positive perspective on this matter evolved early in Northern Europe, and in England and Holland most particularly.
3. The working of the political outcomes: small kingdoms, and free peoples. With luck, the European beginnings came from small kingdoms. {From my view the positioning of those kingdoms derive from the Protestant Reformation.} Landes has the view that those “princes” sought accommodation to the times, and I think he has got this right. Simply put: better living standards straightforwardly produce less trouble for the leadership.[12]
4. Openness to new technologies, even when they are not “home grown”. Key to Landes’s view is the openness of European—and one needs to emphasize English—culture to discoveries found elsewhere. Minimally, Arabic mathematics had important contributions to commercial progress. Printing, functional clocks, went a long way. Textile manufacturing, also derivative technology, go a long way toward improved health conditions. (Oh, the gains from cotton undergarments!)
4. How the European start plays out.
1. Well, it does not play out by emulation of some European traditions. The colonial designs—in retrospection—of the Spain and Portugal prove less than constructive. The pursuit of gold was a very bad idea: most particularly when it became apparent that the gold of the new world was of African origin. The resounding theme here is that monetary assets do not measure the well being of a society. This is the theme that Adam Smith had in mind with his dismissal of mercantilism.
2. It does play out well through the accumulation of capital, and the consistent projection of property rights. Truth is, it worked.
4. Williamson: Tightening the Focus—globalization, government intervention, and outcomes
1. Let us tighten up some things here. The time focus of Williamson’s work differs from that of Landes. Rather than a five hundred year perspective, Williamson—driven by the need for quantitative definition of the issues—provides a perspective on the most recent two centuries of economic development. Think of 1820 as the starting point for this discussion.
2. The distributional facts in the Williamson work.[13] First the most telling facts:
1. Global inequality[14] has been increasing, with a few decades experience, for some 160 years.
2. Strangely, this immergence of global inequality has, seemly, nothing to do with economic rewards within countries. To be straightforward, the period in Williamson’s view show these results: {JGW file}
• 1820-1900, strong rate of increased inequality
• 1900-1940, no change in inequality
• 1940, and following years, increased inequality.
3. Pointedly, the entirety of the increased global inequality comes form one source: increased inequality between countries
4. Considerately, over those nearly two centuries, inequality in rewards have improved within selected countries
3. The three epochs of progress, and regress. But there is are underlying themes in the Williamson work that proves constructive. I offer them as this:
1. Migration proves helpful: the delightful paradox[15]. {The Swanson family’s 1890 departure from Sweden proved good for both Sweden and the United States of America. This continues to be the case: “Jose Santos” migrates from Chihuahua to California in 1990.} The message is simple: a low-income individual earning w[0] departs a country, thereby raising the inequality metric of that land. On arriving in the new country, he finds employment at wage rate w[1], which is better than his prior wages—say w[1] = 1.5{w[0]} a good thing. That new wage, one can conjecture to be small relative to Jose’s new relative position in the U.S.: say this, w[1] = (0.3){w[2]}, where w[2] is the prevailing wage rate in the U.S. Here then is the paradox of my friend Jose Santos: he has had a 50% improvement in his earnings, and while he earns but 30% of the prevailing California wage rate, he is vastly improved in his economic standing. The important thing in this: how do we report the inequality numbers? For what just happened with Jose Santos’s migration is this: Mexico got an improvement, the U.S. had the opposite. Do you think that my hypothetical friend, Jose, might have felt badly about the inequality statistical measurements? Or, should you and I be worried about those numbers in this specific instance.
2. Well, trading helps, and it is well served in periods of dramatically falling transportation costs (driven by improved technology). That said, as good as open markets are, they prove not to be the telling tale in wage rate convergence. Helpful, to be sure, but not the driver one might expect. Williamson forewarns us that we have not got the metrics of ‘trade gains’ properly defined, that we need further research. He has got this right.
3. Do safety nets protect the losers in globalization? No clear answer, but the suspicion is simply this: these are the natural response of troubled, concerned people. The long-term, Williamson question in this: putting safety nets in place, and to be constructive here, allowing inter country discussions of “global policy choices”.[16]
5. Did Weber Have It Right?
6. Reflecting on the Outcomes
1. The unrecorded gains. We must go to the vast gains in western society. And it is straightforward: the lives of our parents, and most pointedly our grand parents bear no resemblance to our own. Robert William Fogel—University of Chicago economist, and the 1993 Nobel Laurite in Economics— has documented this progress, and has thought carefully about it.[17] Put simply, our modern lives—the day-by-day construction of these—bear no resemblance to those of but a generation gone. Some gathered here this afternoon will have memories of work that began early in the day, and ended late on that same day. Your lecturer here has memories that date to a dairy farm in Boone County Illinois, where that repetition of effort was “what we lived by”. Professor Fogel reminds us that our lives have changed—and for the much better. Work hours are reduced.[18] Unlike our predecessors, we have a whole lot of freedom. Fogel suggests, and I agree, that we do not measure these gains in any national metric. He does not offer another metric—but one believes that he wants someone to “do that work”. The clear Fogel vision is of this outcome: we have—on average, and sadly—consumed the available “free time” with watching television. Now, how could this—by any classical standard—be he good life”?
2. The tragedy of the gains—have we got the gains right? Amongst the giants of economic history is Professor Richard Easterlin. Richard writes from a special training[19], and consistent delivery of solid, fact-based research. So to the Easterlin perspective on economic growth—pointedly it does not go to inequality topics. Easterlin’s view, put most simply, it that the battle has been won. We are plenty wealthy as a world community. The worries of our 19th century economists—population growth in excess of agricultural productivity improvements—proved amiss. Between improved health concepts, and pointedly, birth control, economic progress has produced—across a wide range of nations—a potential utopia. Sadly, Easterlin concludes this to be a hollow result: we are not happy with the result. He has got this right. With high probability, we have not understood the “gains” right: we do not know how do deal with them. We are indeed healthier and wealthier; we are not happier. This comes back to a cultural matter.
3. Culture & inequality within- and between-country outcomes: addressing distress at the bottom of the income structure. Several authors go to the theme of culture and inequality. I select Robert Fogel, again; I add Isabel Sawhill.[20] The argument is simple and straightforward, and it applies within countries, and across them. I goes like this:
1. We seem to get the ordering of the beginning of adult life wrong. We tolerate early births to single parents. This produces failed educational programs that go on to assure limited job opportunities.
2. Getting the ordering right. The proper ordering of these events must be this: education completion, resultant job fulfillment, then child-bearing.
3. A moral problem. If we know the right ordering for improving economic life for the lower end of the spectrum, but fail to address it in well-off societies, then how can we be constructive contributors on an international scale?
4. Africa: the constant, troubling continent. A few notes:
1. We have tragic results here. With certainty, many derive from colonial postures, and most pointedly in the German, Dutch, and Portuguese instances.
2. The economic results are in, and they are appalling. Pointedly, we have in Africa the repeated examples of increasing inequality for the past two decades. In the list of the greatest declines in per capital income for the period 1960-1985: Zambia, Mozambique, Madagascar, Angola, Chad, Liberia, Ghana, and Zaire (in order of greatest declines, read from the top) are the most significant losers.[21]
3. After these facts, there is much to be done, and this needs doing. Where must we go here? The answer is to multiple strategies. First, the west needs to get out of the loan business. Second, grants need to be substantial and targeted. A starting point, much in discussion as we meet, is that of health care initiatives; and those related to the AIDS epidemic in particular. “Earn-in” grants, focused on execution, promise substantial gains.
4. A starting point (initial condition, in the language of differential equations, and growth theory) must be at the level of culture. If you want instruction on these lines, I send you to David Landes, who with painful frankness, reminds us of the issues. I forewarn you: this is not politically correct thinking. But I tell you, reading Landes proves most constructive.
5. The theological perspectives on these issues. Frankly, this has been the most troublesome aspect of my work. It appears that economists and theologians do not speak the same language. My reading of the theologians produces a constant frustration: a unique language that gets in the way of communication—not just with economists, but also with the other intellectuals.[22] Surely, this frustration is mine to bear by virtue of my limited theological instruction. That said, it is not a good thing.
6. There are some good things to be said about the field of economics, and they may surprise some in this room. Here are my observations:
1. My colleagues spend some time with major issues of existence.
2. The work of those colleagues shows sensitivity to cultural aspects of economic growth, and to the Judeo-Christian concerns for “equity”.
3. The current work on “equity” goes to a straightforward theme: equality of opportunity, and not to the earlier 20th century, religiously driven, theme of focused redistribution of extant wealth.
4. We economists have read Professor Rawls’s work. Those that take to his views are increasingly marginal to the economic research on wealth distribution.
7. Apologia & Commitment
1. There is much do be done here. The understanding of differential economic rewards is a complex matter. This best comes from the universities these days, for the organized churches—and the so-called “main-line churches”—are simply to captive of aging social science thinking to effectively address the issues.
2. Melding a religious perspective. Well, I think that I must have done this in my remarks. That said, I reiterate two themes:
1. First, it proves too difficult for theologians and economists to talk. There is, to be sure, the “language barrier”. Something might be done about this.
2. Second, economists—come from an intellectual tradition that makes normative propositions difficult.
3. I ask your understanding of what that might be. The topic at hand, poverty and wealth of nations, must be at the core of our intellectual and moral commitments. We are obligated to continuing debate, but also to some timely resolution. The debate needs to be constructively offered in the “public square”. And we need a resolution the issues, for the stand at the forefront of future.
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[1] Wealth might be an exception, but not by present standards.
[2] Smith citation
[3] There is a constant worry today that I would call a moral one. Namely, surveys of undergraduates at major universities have asked this question: which of the following outcome would you prefer? In outcome [a] you have an income of $100,000, and all others have an income of $50,000; in outcome [b] your income is $150,000, and others income is $200,000. The vast majority of those students vote for outcome [a]. To sacrifice a 50% gain in material well-being, as against relative loss of economic standing (67% worse off), seems an unacceptable outcome. The moral dimensions of these widely reported results are not the subject of this Lecture. That said, they are of some considerable consequence—and constitute a real worry.
[4] David S. Landes, The Wealth and Poverty of Nations: Why Are Some So Rich and Others So Poor? (New York: W.W. Norton, 1998). ISBN: 0393040178. My relationship with Professor Landes is minimal. We have met, exchanged what are called “pleasantries”, and that it it.
[5] JEH piece …
[6] Williamson’s research has always been linked to joint collaboration. In the topics related to this lecture, they are specially linked to his collaboration with Peter Lindert. This link will produce the breadth of the collaboration: .
[7] . I do offer this note: Jeffrey Williamson provided the base for my training in economics. He and I have collaborated across several fields of economic research. That work has “worn well”, and I am appreciative of that.
[8] For working purposes in this Lecture, the standard of economic rewards will be per capita income, where the measurable dimensions of this runs along the following lines {…}. There are reasons to consider alternative measures, but they do not “work well” within the several topics at hand.
[9] For a particularly pressing instance, consider the current tensions between Christendom and Islamdom. The latter word I borrow, with no apologies, from Bernard Lewis.
[10] J. B. De Long, (Apr-1998).
[11] It is my view of the Protestant revolution had a signal impact on future economic development this important way: it became theologically acceptable—to Protestants anyway—that a “vocation” in the economic world might be as positive in the “larger picture of salvation” than a calling to the clergy.
[12] Dare I suggest that this is an early standard for democratic politics in a liberal world?
[13] J.G. Williamson, “Winners and Losers over Two Centuries of Globalization”, National Bureau of Economic Research, Working Paper 9161 [Sep-2002].
[14] Recall the commitment to per capita outcomes, stated earlier in this lecuture.
[15] I employ this paradox, simply to be “in line” with the long-standing tradition of paradoxical traditions of my Lutheran church.
[16] J.G. Williamson, “Winners and Losers over two Centuries of Globalization”, NBER working paper 9161 {2002}.
[17] Robert William Fogel …
[18] In the present instance, I will not remark on the “progress” in treating milch cows, for it comes close to a tragic topic.
[19] Easterlin had the good fortune to learn at the desk of Solomon Kuznets. For one the best appreciations of Kuznets’s work see this:
[20] I.V. Sawhill, “The Behavioral Aspects of Poverty”, The Public Interest (Fall, 2003).
[21] A wonderfully concise piece on the relative gains, and losses of the period is this: S.L. Parente and E.C. Prescott, “Changes in the Wealth of Nations”, from a publication of the Federal Reserve Bank of Minneapolis. Here is the link:
[22] See Klink & xxx. This is a case in point.
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