[wordup] Sweden proves the neoliberals wrong about how to slash poverty.

[Adam Shand]

Via: Brett Shand <brett at shand...>
From: http://www.monbiot.com/archives/2005/01/11/punitive-and-it-works/

11/1/2005
Punitive – And It Works

Sweden proves the neoliberals wrong about how to slash poverty.

By George Monbiot. Published in the Guardian 11th January 2005

“Does not already the response to the massive tidal wave in south east 
Asia,” Gordon Brown asked on Thursday, “show just how closely and 
irrevocably bound together … are the fortunes of the richest persons in 
the richest country to the fate of the poorest persons in the poorest 
country?”(1)

The answer is no. It is true that the very rich might feel sorry for 
the very poor, and that some of them have responded generously to the 
latest catastrophe. But it is hard to imagine how the fate and fortunes 
of the richest and poorest could be further removed. The ten richest 
people on earth have a combined net worth of $255bn – roughly 60% of 
the income of sub-Saharan Africa.(2) The world’s 500 richest people 
have more money than the total annual earnings of the poorest three 
billion.(3)

This issue – of global inequality – was not mentioned in either Brown’s 
speech or Tony Blair’s simultaneous press conference. Indeed I have so 
far failed to find a reference to it in the recent speeches of any 
leader of a G8 nation. I believe that the concern evinced by Blair and 
Brown for the world’s poor is genuine. I believe that they mean it when 
they say they will put the poor at the top of the agenda for the G8 
summit in July. The problem is that their concern for the poor ends 
where their concern for the rich begins.

There is, at the moment, a furious debate among economists about 
whether global inequality is rising or falling. No one disputes that 
there is a staggering gulf between rich and poor, which has survived 
decades of global economic growth. But what the neoliberals – who 
promote unregulated global capitalism – tell us is that there is no 
conflict between the whims of the wealthy and the needs of the 
wretched. The Economist magazine, for example, argues that the more 
freedom you give the rich, the better off the poor will be. Without 
restraints, the rich have a more powerful incentive to generate global 
growth, and this growth becomes “the rising tide that lifts all boats”. 
Countries which intervene in the market with “punitive taxes, grandiose 
programmes of public spending, and all the other apparatus of applied 
economic justice” condemn their people to remain poor. A zeal for 
justice does “nothing but harm”.(4)

Now it may be true that global growth, however poorly distributed, is 
slowly lifting everyone off the mud. Unfortunately we have no way of 
telling, as the only current set of comprehensive figures on global 
poverty is – as researchers at Columbia University have shown – so 
methodologically flawed as to be useless.(5)

But there is another means of testing the neoliberals’ hypothesis, 
which is to compare the performance of nations which have taken 
different routes to development. The neoliberals dismiss the problems 
faced by developing countries as “growing pains”, so let’s look at the 
closest thing we have to a final result. Let’s take two countries which 
have gone all the way through the development process and arrived in 
the promised land of prosperity. Let’s compare the United Kingdom – a 
pioneer of neoliberalism – and Sweden: one of the last outposts of 
distributionism. And let’s make use of a set of statistics the 
Economist is unlikely to dispute: those contained within its own 
publication, the 2005 World in Figures.(6)

The first surprise, for anyone who has swallowed the stories about our 
unrivalled economic dynamism, is that, in terms of gross domestic 
product, Sweden has done as well as we have. In 2002 its GDP per capita 
was $27,310, and the UK’s was $26,240. This is no blip. In only seven 
years between 1960 and 2001 did Sweden’s per capita GDP fall behind the 
United Kingdom’s.(7)

More surprisingly still, Sweden has a current account surplus of $10bn 
and the UK a deficit of $26bn. Even by the neoliberals’ favourite 
measures, Sweden wins: it has a lower inflation rate than ours, higher 
“global competitiveness” and a higher ranking for “business creativity 
and research”.

In terms of human welfare, there is no competition. According to the 
quality of life measure published by the Economist (the “human 
development index”) Sweden ranks third in the world, the UK 11th. 
Sweden has the world’s third highest life expectancy, the UK the 29th. 
In Sweden, there are 74 telephone lines and 62 computers per hundred 
people; in the UK just 59 and 41.

The contrast between the averaged figures is stark enough, but it’s far 
greater for the people at the bottom of the social heap. Perhaps 
unsurprisingly, the Economist does not publish this data, but the 
United Nations does. Its Human Development Report for 2004 shows that 
in Sweden 6.3% of the population lives below the absolute poverty line 
for developed nations ($11 a day).(8) In the United Kingdom the figure 
is 15.7%. Seven and a half per cent of Swedish adults are functionally 
illiterate – just over one third of the UK’s figure of 21.8%. In the 
United Kingdom, according to a separate study, you are over three times 
as likely to stay in the economic class into which you were born than 
you are in Sweden.(9) So much for the deregulated market creating 
opportunity.

The reason for these differences is straightforward. Over most of the 
20th century, Sweden has pursued, in the words of a recent pamphlet 
published by the Catalyst Forum, “policies designed to narrow the 
inequality of condition between social classes”.(10) These include what 
the Economist calls “punitive taxes” and “grandiose programmes of 
public spending”, which, remember, do “nothing but harm”. These 
policies in fact appear to have enhanced the country’s economic 
competitiveness, while ensuring that the poor obtain a higher 
proportion of total national income. In Sweden, according to the UN, 
the richest 10% earn 6.2 times as much money as the poorest 10%. In the 
UK the ratio is 13.8.(11)

So for countries hoping to reach the promised land, there is a choice. 
They could seek to replicate the Swedish model of development – in 
which the benefits of growth are widely distributed – or the United 
Kingdom’s, in which they are concentrated in the hands of the rich. 
That’s the theory. In practice they have no choice. Through the 
International Monetary Fund and the World Trade Organisation, the G8 
governments force them to follow a model closer to the UK’s, but even 
harsher and less distributive. Of the two kinds of capitalism, Blair, 
Brown and the other G8 leaders have chosen for developing countries the 
one less likely to help the poor.

Unless this changes, their “Marshall plan for the developing world” is 
useless. Brown fulminates about the fact that, five years after “almost 
every single country” signed up to new pledges on eliminating global 
poverty, scarcely any progress has been made.(12) But the very policies 
he implements as a governor of the IMF make this progress impossible. 
Despite everything we have been told over the past 25 years, it is 
still true that helping the poor means restraining the rich.

References:

1. Gordon Brown, 6th January 2005. International Development in 2005: 
the challenge and the opportunity. Speech at the National Gallery of 
Scotland.

2. http://www.forbes.com/billionaires/

3. John Cavanagh and Sarah Anderson, 2003. World’s Billionaires Take a 
Hit, But Still Soar. 
http://www.ips-dc.org/projects/global_econ/billionaires.htm

4. No author, 11th March 2004. A question of justice? The Economist

5. Sanjay G. Reddy and Thomas W. Pogge, March 2003. How Not To Count 
The Poor. http://www.columbia.edu/~sr793/. Their findings are paper is 
summarised at 
http://www.monbiot.com/archives/2003/05/06/rich-in-imagination/

6. The Economist, 2004. Pocket World in Figures, 2005 edition. Profile 
Books, London.

7. You can see a table of the figures for 1960-1998, compiled from the 
US Department of Labor, Bureau of Labor Statistics at 
http://www.publicpurpose.com/lm-ppp60+.htm. I have taken the figures 
for 1999-2001 from the UN Human Development reports, 2001-2003.

8. United Nations Development Programme, 2004. Human Development 
Report: Cultural Liberty in Today’s Diverse World. UNDP, New York.

9. L. Dearden, S. Machin and H. Reed, 1997. Intergenerational mobility 
in Britain. Economic Journal #107; and T. Osterberg, 2000. 
Intergenerational Income Mobility in Sweden. Review of Income and 
Wealth Series 46, No 4, both cited in Ben Jackson and Paul Segal, 
October 2004. Why Inequality Matters. The catalyst Forum, London.

10. Ben Jackson and Paul Segal, October 2004. Why Inequality Matters. 
The catalyst Forum, London.

11. United Nations Development Programme, 2004. Human Development 
Report: Cultural Liberty in Today’s Diverse World. UNDP, New York.

12. Gordon Brown, ibid.