Piketty In A Coal Mine

Flooded Marina (Gas Pumps)" by Richard Misrach
“Flooded Marina (Gas Pumps)” by Richard Misrach

A new book by French economist Thomas Piketty has been causing quite a stir in academic circles over the past year. Now, with the translated publication of Capital in the Twenty-First Century, that fervor is about to spill out of the ivory towers and onto the streets. Piketty’s book ambitiously tackles the topic of economic inequality. His central thesis, in absolute simplest terms, is that the very rich are getting richer and the poor are staying put. Those who rely on wage income for their wealth (the middle class and the poor), Piketty argues, are not likely to see their lot improve in the near future. The very rich, who do not rely on wage income because they have capital in the form of real estate, financial assets, businesses, or patents, will continue to see their wealth skyrocket into the twenty-first century. Ultimately, if capital growth continues to exceed overall economic growth, Piketty worries that this striking imbalance will cause the breakdown of democratic institutions and the social fabric of society.

The Washington Post's "Wonkblog" considered this the graph of the year in 2013.
The Washington Post’s “Wonkblog” considered this the graph of the year in 2013.

Whether or not one agrees with his final premise, Piketty has done his fair share of research and is well respected within the economics field. While studying at the prestigious École Normale Supérieure and subsequently while teaching at MIT, Piketty began to collect historical data on income and wealth, something that economists at the time neglected to do. Although Capital in the Twenty-First Century was written for a global audience, Piketty has the data to back up his findings, though it has not gone without criticism. Most of Piketty’s harshest critics paint him as Marxist or Communist, when in reality he is merely challenging certain aspects of the current free market system – the part that contributes to a great deal of economic inequality. But any work that deals with inequality is bound to get political. And as Piketty notes in an interview with the New York Times, he is welcoming the debate.

Piketty’s ideas for solving this rising inequality are perhaps the weakest part of his argument. In his book he calls for a global tax on wealth that is at best impossible and at worst extremely out-of-touch with the political realities that frame any worthy discussion of policy prescriptions in developed countries. But we should not shrug off his work because of his ideas on policy. Piketty succeeds in collecting and presenting decades of historical data on an issue that has come to define the early twenty-first century. Working as an economic archaeologist, Piketty has made some fascinating discoveries. He has dug up a set of evidence that captures in a new light the increasing economic inequality today. His work is best read as a challenge to our current paradigm of economic inequality, not as a revolutionary tale of two cities.


Idealism Vs. Realism: The Need for Accountability

Last Thursday, the Hudson Institute hosted a discussion with Nina Munk on her book The Idealist: Jeffrey Sachs and the Quest to End Poverty. The book follows Sachs’ work to end poverty through Millennium Villages. The imgresproject provided improved fertilizer and mosquito nets to fourteen rural villages in Sub-Saharan Africa. Many in the development community view the project as a failure because of its inability to create sustainable development. Munk used the discussion to highlight the overarching themes in her book and to answer audience questions about her experience working with Sachs.

One major theme repeatedly appeared throughout the discussion: NGO and development accountability. Munk attributed a large portion of the Millennium Village failures to a lack of accountability. According to Munk, throughout the project Sachs refused to take the advice of on-the-ground development workers. He ignored the varying cultures, infrastructures, and economies of each village and how that would impact the individual development of each village. Quantitatively, the project seemed to be a success. It increased the corn production of villages and reduced starvation. But the increased corn production did not translate into long-term economic gains. The starving villagers were fed but what the project did not solve was the lack of a market or infrastructure to sell corn.

Munk claims that Sachs’ project needed an accountability structure. There were no measures to evaluate the success of the project beyond the quantitative numbers. There was no consequence for a failed venture and even now Sachs refuses to acknowledge the shortcomings of the project.  She equated the Millennium Village to a game of whack-a-mole. One problem would be solved only for six more problems to crop up. An accountability structure could have evaluated the project from the beginning and addressed its shortcomings in a timely fashion.

Sachs promoting the Millennium Village Project
Sachs promoting the Millennium Village Project

During the discussion Munk put forth the question of how to translate low hanging fruit into sustainable development beyond simple quantitative measures. An evaluative structure needs to be in place to measure the holistic success of development projects. The development community cannot afford to base success on purely quantitative measures. Munk claims the development community has a fear of failure and as a result does not acknowledge its mistakes. Making a humorous, yet genuine, suggestion, Munk proposed every organization should have a “Failures” section on its website. This way there is transparency across the development community and it can continue to learn from its past mistakes.

One attendee brought up a great question concerning the accountability of publicly traded companies compared to non-profits and development work. If an official in a publicly traded company breaks the law or creates a failing project, he is held accountable, whether it be through fines, prison time, or unemployment. Why then does the development community not have the same punishments for failure? There are no consequences for organizations creating unsuccessful development projects. The people who suffer most are those that are supposed to benefit from development projects. Should an industry that deals with human livelihood have strict punishments for failure?

The point of accountability is especially salient considering the financial outlook on development. As Munk described it, the amount of money, private or public, put towards development is not going to radically change in the coming years. It maintains consistent, incremental growth. Development work needs an accountability structure to ensure that this money is not going to waste. Munk claims the development community needs to be upfront about what it can and cannot accomplish so that it does not waste money on impossible projects that have already failed in the past.

Please click here to watch the full discussion with Nina Munk.

Hear, Here: Aid Recipients on the Quality of International Aid

International aid’s minimal impact on the developing world has put the whole system into a bit of an existential crisis. As the developed world continues to struggle with economic recession, many have come to question the need to divest resources towards foreign countries when there is an abundance of problems to address at home. However, the real problem with aid is that very few people on the giving side actually know what happens with the aid and the impact it has on the ground.

time to listen cover

CDA Collaborative Learning Projects (CDA), an American nonprofit organization dedicated to improving the effectiveness of international aid, conducted a four year investigation into the cumulative benefits of international assistance in 15 different countries – that is, the effect of all aid projects on a certain area, rather than a specific case.

Continue reading

Let’s Make a Citizen Out of You: The Rise of Biometric Identification in India

Source: Ruth Fremson, New York Times

In many developing countries, lack of documentation can be a major obstacle for people who want to claim their rights to citizenship. India, in particular, has as many as 400 million people unaccounted for.

In the book Paper Citizens, Kamal Sadiq explores India’s over-dependence on documentary citizenship and the difficulties created for the government to distinguish between who is a legal citizen and who is not. The current national identification card (NID) leads to problems such as “blurred citizenship” where many natural-born citizens (unable to receive government benefits without NIDs) resort to fake documentation in order to receive benefits such as access to government welfare programs, the ability to open a bank account or enroll in school, and protection from wrongful deportation from their homes. Continue reading

Sec-u-lar-ism (n.) –Separation of church and state

– How Prime Minister Erdogan’s revised interpretation of secularism has reignited the debate on the role of religion in Turkey

Prime Minister Recep-Tayyip Erdogan

As the world watched the 20th become the 21st century 11 years ago, the Turkish government strived to reach new levels with their economy and achieve relevancy on the global scale.  Recep-Tayyip Erdogan, former mayor of Istanbul, and current Prime Minister of Turkey was at the forefront of an economic charge that an Islamic nation had yet to achieve.  Once he took the helm of the Turkish government in 2003, Erdogan started to implement a number of reforms that, while difficult to achieve, propelled Turkey into a global economic success.  However, during this time of national economic success, the country has become divided in their support of Erdogan’s view of religion and its role in society. Continue reading

Half the Sky and Women Donors

Kristof and WuDunn’s Half the Sky takes me back to Mumbai and Colombo and Beijing and Tegucigalpa where I’ve listened to stories from women who have suffered–many of whom live to tell their story with a mind-blowing hope that gives me confidence to believe in a destructive force of good that will ultimately strip the power from the evil that tortured them.

Half the Sky guts you with the ravaged vulnerabilities of women and girls but builds a rousing case that women’s power as “economic catalysts” can transform the world.

Kristof and WuDunn focus on unlocking the economic power of women in poverty, and this must happen. But women in poverty have allies in their sisters with resources all over the globe. These woman have been a major source fueling the increase in giving to many of the international causes that rescue and care for the women who tell their stories in Half the Sky.

Turns out that a particularly loyal group of donors are professional women in their late 30’s. According to research by Daryl Upsall and Owen Watkins and reported in the Chronicle of Philanthropy 38-40 year old professional females have staying power as compared to a large percentage of 20-something donors who gave after face-to-face recruitment but stopped giving within the first year.

Human trafficking, gender-based violence and maternal mortality—abuses on which Half the Sky focuses—are complicated, messy and require multi-faceted, multi-sectoral responses.

Donor fatigue can be a threat to sensationalized causes like these that succeed in cashing in on short-lived emotionally driven contributions. Perhaps the faithfulness of this new donor makes her an ally to be cultivated by thoughtful organizations committed to the long-haul. Additionally, many donors are guilty of a willingness to only fund new projects, perhaps this cohort of generous and committed professional women are also more likely to be contributors who stick to longer term efforts freeing up organizational capacity and giving effective organizations the ability to out-run, out-wait and out-maneuver the evil that victimizes with a seemingly bottomless supply of creativity.

-Heidi Metcalf Little
Deputy Director
Center for Global Prosperity