Equality, the Third World, and Economic Delusion
Article
Books: HOW TO RATIONALIZE MEANNESS THIS is the most irritating book I have read in a long time, and it invites a reviewer to be as arrogant, ideological, and contemptuous of opponents as it is. P....
...That presumably explains why the OECD powers' economic aid declined from 0.51 percent of GNP in 1960 to 0.37 percent in 1980-and why the United States percentage in that period dropped from 0.53 percent to 0.27 percent...
...Bauer's response is that most tattered theory of neoconservatism: the New Class did it...
...Therefore he poses the problem of explaining how "patently invalid or bizarre notions" gain such power...
...but official aid is not subject to such constraints and therefore is often wasted...
...A somewhat more realistic assessment can be found in the 1981 World Development Report of the World Bank...
...Let me proceed then to a critical assessment of three areas of his analysis: his theory of why stupid ideas EQUALITY, THE THIBD WORLD, AND ECONOMIC DELUSION P. T. Bauer Harvard University, $17.50, 293 pp...
...Since this is the area in which the conservatives in Washington need ideological rationales to buttress their instinctive meanness, it is the one in which Bauer's work is having the most pernicious effect...
...A little later on, the polemical purpose has shifted and now Bauer is trying to explain why business and labor have pushed so hard (!) for foreign aid...
...Indeed, he doesn't even cite the Scottish radical, Adam Smith, who made much the same point more than two hundred years ago...
...The oil exporters invest their monies in the advanced oil importers, leaving the poor oil importers at a loss which is theoretically compensated for by the latter's access to advanced markets-which is, however, limited by protectionism and reduced in recent years by the shoddy performance of the advanced economies...
...Since Mr...
...It is never questioned in principle...
...P. T. Bauer, as his title tells us, is going to deal with the "economic delusion" of scholars and policymakers, "the conspicuous and disconcerting hiatus between accepted opinion and evident reality in major areas of academic and public economic discourse since the Second World War...
...So are his attacks on the third world...
...It is often criticized on the grounds that it is insufficient...
...That theory is patently absurd with regard to the 1950s, had a shallow plausibility in the sixties and early seventies, and is embarrassingly irrelevant at a time when a counter-class with the same sociological profile as the New Class, is helping to impose the most ideological and rightist administration in twentiethcentury history on our country...
...Example: "Foreign aid is perhaps the least questioned fofm of state spending in the West...
...How can Bauer put such an idea in his first chapter at a time when Brookings is down and American Enterprise up and authors for Commentary, like himself, are read in the White House...
...First why do preposterous ideas, i.e...
...Bauer does this while arrogantly presenting himself as Diogenes among the blind, one can only hope that the gods still punish hubris...
...Very true and very important, as Gunnar Myrdal pointed out at great length and with remarkable theoretical sophistication in Asian Dramcf...
...sent to Ronald Reagan, Arthur Laffer, and Jack Kemp rather than to anyone on the left...
...That description is much closer to reality than Bauer's...
...In poor countries, Bauer holds, "consumption promotes improved economic performance...
...and his attempt to show that not global poverty but the third world and its sympathizers in advanced countries constitute a central international problem...
...After presenting this thesis-which, one is tempted to say, is "patently invalid" -Mr...
...To begin with, Bauer constantly focuses on a straw man: a theorist who says that all of the poverty and misery of the third world has been caused by Western colonialism...
...Secretary Haig's UN speech in September echoed many of Bauer's ideas...
...Income differences, he argues, are to be explained by talent and initiative, or the lack of it...
...Those policies are presented as if they are mainly recent...
...Yet Bauer attacks Myrdal for ignoring the very theory he did so much to establish and asserts that his own (Bauer's) insight-which is warmedover Myrdal -is "largely ignored in the mainstream literature of development and planning...
...That Bauer would disagree with a maverick like Lester Thurow, who in his Generating Inequality showed that great fortunes were, most of the time, the result of a "random walk," is to be expected (though he does not mention Thurow or most other serious students of the issue in making his magisterial pronouncements about it...
...Oh yes, "in the United States there is some sporadic and rather ineffective criticism of aid which does not affect mainstream discussion at all and official policy not much either...
...Now there is some truth to the second part of that thesis, but it is limited, and the first part is utterly ideological and non-empirical...
...Michael Harrington have influence...
...But then there are occasions when Equality, the Third World, and Economic Delusion becomes even more questionable...
...his soapbox attack on equality...
...But the real argument-made by economists for UNCTAD, by Gunnar Myrdal, dependency theorists, and a host of others-is that the resulting gains were skewed and misshaped to meet Western priorities and created a system which institutionalized maldistribution of global wealth...
...Now it is certainly true that there are a few individuals who amass large fortunes within their lives-and truer that inheritance is not only a surer, but a much more pervasive, source of income and wealth...
...That is both right and irrelevant to the serious debate...
...Bauer quite rightly remarks that, in the third world, the distinction between consumption and investment is not the same as in the first world...
...Bauer proceeds to an attack on equality...
...In one place Bauer assures us-he is arguing against the idea that the terms of trade in the postwar period have, with an exception or two, been negative-that "the West cannot prescribe international prices...
...At times his zeal in this enterprise leads him to what could be called "bizarre notions...
...Of course it was imperialism and colonialism which shook those societies out of their traditional inertia...
...I will not reply in kind, not the least because I hope that a tone of calm criticism will better persuade the reader that most-but not all-of this book is a repetition of the stalest cliches of conservative economics...
...of course that impulse resulted in a degree of modernization and production (Karl Marx overemphasized these points a century ago...
...those Bauer opposes, dominate our intellectual and political life...
...But honesty quickly inhibits charity and I have run out of Bauer's virtues already...
...There are occasional insights in Equality, the Third World, and Economic Delusion: someof the attacks on oversimplifications about the third world are persuasive, and discussion of the careless use of the concept, investment, is worthwhile though it should be...
...The methodology of Equality, the Third World, and Economic Delusion is, in short, that of an intellectual street fighter rather than of a scholar...
...With a few exceptions-and one of them, as we will see shortly, involves a misrepresentation-Bauer does not deal with his difficult opponents but only with the simplifiers among them and non-existent straw men...
...He doesn't even comment on Frank Knight's statement that inheritance and luck are both more important than effort in the accumulation of riches...
...And the reason is, as usual, that these people promote policies which enhance "their emotional, political, and material interests...
...In short, Bauer's discussion of inequality within the advanced economies is ideological and unserious when measured by a scholarly standard...
...Or as Bauer rephrases the old saw, "the political nation" of "public servants, writers, mediamen, academics, teachers, and at times some churchmen and entertainers" is responsible...
...But Bauer's normal assumption is that there is a classic free-enterprise flow of capital around the world...
...These prices are the outcome of innumerable individual decisions of market participants...
...It is, he says, a "self-protection racket" in which those groups try to buy off criticism of their protectionist policies...
...The West has actually been an agency of material progress in the third world...
...But two of them first appeared in 1980 and the entire volume, we are assured, has been revised for 1981 publication...
...True, many of these chapters were written in the mid-seventies when it was permissible, but not particularly perceptive, to hold such a theory...
...Vicious attacks on Julius Nyerere and Tanzania are "documented" by references to a series of newspaper and magazine articles in the mid-seventies, but there is no mention of Cranford Pratt's scholarly study of that country which appeared around the same time...
...One could go on...
...If an investment in a poor country is a sound one, it can be financed by money markets...
...Wrong, he answers...
...Moreover, Bauer argues, foreign aid is bad for the third world anyway...
...Incomes, Bauer continues, are normally "produced by their recipients and the resources they own...
...in fact, the Kennedy Round of the sixties reduced protection between affluent powers but did little to stop it when it had its impact on the poor...
Vol. 109 • February 1982 • No. 3
