Peers and parents, past and present

Typically, the child-rearing not done by parents is done by peers.

Source.

Fatherhood, being (unlike biological paternity) a socially-constructed relationship of social identity, provision, care and attention, varies much more across (and within) cultures than does motherhood, which is far more biologically-grounded (at least until the infant is weaned). A small number of societies traditionally did not recognise the relationship of fatherhood at all, the role of male protector being taken by uncles. Even beyond such outliers, evidence from the anthropological literature is that the father’s attention is a highly variable factor in child-rearing.

The investment in attention and feeding required to raise a human child is considerable. Far more than is required to raise the young of any other species. As pregnancy and lactation ties women to the raising of infants, this leads to recurring risk-management patterns across human societies whereby activities that are compatible with breast-feeding, and other aspects of child-minding, become presumptively female roles. Those activities that are not thus compatible become presumptively male roles. The first scholarly explication of this was in a classic short analysis by anthropologist Judith K. Brown. An analysis that subsequently acquired considerable statistical and other support.

In his The Lifeways of Hunter-Gatherers: The Foraging Spectrum, archaeologist Robert L. Kelly includes a very useful summary of the anthropological evidence on child-rearing and its interaction with the acquisition of culture. (All quotes are from Lifeways, mainly Pp108–110.)

The two dominant social sources for transmitting or acquiring culture are parents and peer groups. They generate rather different patterns. Parents, particularly, mothers, are predictable and consistent providers of resources — breast milk, food, affection, attention and protection. Over time, the parents provide less and less resources until eventually the child is cut off.

It has been reasonably argued that parent-raised children learn that “resources and desirable goods are limited and hard to obtain”. They can also be expected to tend to be assertive and independent, focusing on using knowledge of terrain and technology to gain resources rather than social favours. In nomadic societies, boys tend to “de-emphasize male-male competition and focus more on manipulation of the world through technology”. Parent-raised children can be reasonably expected to show greater within-group variation in beliefs and behaviours.

Peer-rearing produces different patterns. Potentially from a young age (as early as around two years old) the child finds themselves in a group, often with older siblings, who become the focus of the child’s social interaction. A group that has less status and power differences within it than are involved in parent-child interactions. Children learn that there are “many sources of food and desirables other than their parents”. Peer-raised children learn to network (who people are, what they have, how they are disposed towards them); that resources are acquired by manipulating social relations. They learn that “resources are not scarce and can be acquired through persuasion”.

The acquisition of culture within the peer group can also be expected to generate less variation in beliefs and behaviours. (It is a long-standing pattern that any organisations seeking to impose uniformity of outlook tend to be inherently suspicious, even hostile, to family autonomy and seek to undermine the authority and independence of families.)

Shifts in the activities of parents are likely to also shift societies from having children being parent-raised to being them peer-raised. In foraging communities, the shift to sedentism leads to longer foraging trips by males and more intense food acquisition and processing by females, as consumption shifts to more-effort foods. This leads to less parental attention to children, leading to more peer-raising. A mechanism that “may account for why sociocultural change seems to occur so quickly once hunter-gatherers become sedentary”.

Peer-raising typically has quite different effects on boys and girls. Girls are typically assigned as caretakers, contributing to “girls having attitudes favoring nurturance and prosocial behaviors … [and] more restricted spatial ranges”. Fathers being away for extended periods of time “is associated with boys who have poor attitudes towards females, who are aggressive and competitive towards other males, and who, when grown, give little attention to their offspring, encouraging a continuation of peer-rearing”. A pattern we can see in contemporary societies in deprived urban communities.

In sedentary societies, adolescent male peer groups have greater importance than in mobile societies, with more violent initiations and harsher punishments. “These competitive groups define a boy’s success in life more than in mobile societies where, presumably, fathers are more often present.” Street gangs are peer groups with added income or self-protection element

Early C20th Chicago street gang

Source:

Cross-cultural surveys have found that “when men spend a lot of time with their offspring and cooperate in child rearing, there is less cultural emphasis on competition”. If men spend more time away from children, “there is a general physical separation of male and female tasks, and competition among men is encouraged”. (This could be a bit chicken-and-egg, if presumptively male tasks are such that they have to be done elsewhere.) “Partially as a response to male behavior, peer-raised girls show expression of sexual interest and assumption of sexual activity early in life, while also showing negative attitudes towards males and a poor ability to establish long term relationships with one male”.

Shifts in adult labour patterns can be “expected to have dramatic effects on enculturation and hence on cultural change”. These patterns clearly have implications well beyond foraging societies. Much of the literature on fatherlessness, for example, reads as the difference between parent-raised and peer-raised children. A sole parent clearly has less potential to counter-balance peer effects than do two parents.

In complex societies, peer groups may vary considerably. Much of the motivation to get students into “good” schools (whether public or private) is to ensure that they have a better quality peer group. Peer group effects also complicate trying tease out the specific effects of a school or teaching on education outcomes.

One of the counterpoints raised to the literature on fatherlessness is the claim, famously made in psychology Judith Rich Harris’s book The Nurture Assumption, that if one control for income/socio-economic status, the negative effects of sole-parenthood disappear. This is a classic problem of co-dependent variables. Bering a sole-parent family tends to greatly affect (i.e. lower) household income and socio-economic status. Normal regression techniques are not analytically reliable in such circumstances. One has to use techniques such as comparing single-parent with two-parent families who are in the same income range. When that is done, the dis-advantaging tendencies of being raised by sole-parent families become quite clear: as one would expect. (For those interested in pursuing this further, the footnoted citations in this essay provide a useful place to start.)

The anthropological evidence also lends support to identifying fatherlessness as a negative factor in raising children. With much of the effects of fatherlessness being due to the effects of peer groups lacking competition from family life, particularly for boys. This obviously has implications for socially-deprived urban neighbourhoods and other localities suffering from absent fathers. Elijah Anderson’s classic study Code of the Streets (a useful summary essay is here) is very much congruent with this anthropological literature. J.D.Vance’s Hillbilly Elegy also touches on these issues, as does the excellent study Trump’s Democrats.

The developing pattern in many Western societies of marriage (and fatherhood) being strong in the upper reaches of society but decaying in the lower reaches is yet another socially-polarising factor in such societies.

Cross-posted from Medium.

Free trade, expanding prosperity and technology dynamism are good things: but not everyone wins all the time.

The following things are very much good things: free trade, technological dynamism and expanding global prosperity. Free trade because it gives more people to sell to and buy from, to engage in gains from trade with. Technological dynamism because it allows more and more people to live longer and (in some very basic senses) freer and more prosperous lives. Expanding global prosperity, because it means living millions upon millions of people out of the grinding constraints of poverty.

But none of these good things happen without costs. Free trade expands some industries in some places and retards or destroys them in others. Technological dynamism creates new industries and devastates some existing ones. Expanding global prosperity effectively expands the global labour market (even without movement of people) and puts pressure on labour incomes in already prosperous societies--particularly at the bottom end of the skill level.

It is not enough to point to the good these things do, if that provides an excuse to ignore the costs they also create. It is true that their benefits are so great that it is easily possible to compensate losers and still make everyone materially better off. But that it is easily possible does not mean that it is actually being done.

Which where the need for attentive social policy comes in. Attentive in a range of senses: attentive to who is losing, how and why. Attentive to concerns of people disoriented by change. Attentive to how policy can make things better for those who are on the losing any of economic and technological change. Attentive to how existing policies may be getting in the way of doing that, or even exacerbating the negative effects of such changes.

Added to these waves of change has been social changes, particularly the Emancipation Sequence. This has been going on in the West for over two centuries now, but with considerable acceleration in recent decades. This adds to the disorientation, particularly through loss of previous assumptions and presumptions. Such changes take time to absorb and are not helped by folk on the side of such changes being vicious winners: that is, not showing some charity and accepting a reasonable transition period but instead insisting on full public endorsement of every possible aspect of changes by everyone while being extremely intolerant of any lingering commitment to previous patterns, no matter how deeply rooted in tradition and belief such may be.

Migrating disorientation
Part of the accelerating social change has been a broadening of migration patterns into Western countries. In some places, notably Australia and Canada, such migration has been generally well-managed and led to remarkably little social angst, despite high rates of migration. In the US less so. In Europe, immigration has generally been managed quite poorly.

Well-managed migration is diverse in its origins, involves high level of border control, and does not adversely shift the labour/capital balance (mainly by importing people with relatively high level of human capital). It also involves making the case and in terms that resonate widely with voters. Moral hectoring is not making the case, it is self-indulgent posturing in place of the effort of persuading.

Poorly managed migration involves a lack of border control (giving many people the feeling of having no say over something with the capacity to profoundly change their society), imports large lumps from particular sources (making the resident culture less obviously dominant and more challenged) of people with lower human capital (shifting the economic balance to capital and away from labour, putting more stress on labour markets and welfare systems) and fails to make the case that resonates broadly with voters. How migration is, or is not, managed makes a huge difference.

Poison and block
But if migration is turned into a Virtue signal where one has to be "for migration" to be Virtuous, then the problems are exacerbated. The complexities are flattened out--by failing to differentiate between attitudes to legal and illegal immigration; deprecating considering costs from migration; refusing to consider that different sources and selection criteria make a difference, that migrants are not, in fact, interchangeable and undifferentiated. Rather than a public debate, one ends up with a public shouting match between an undifferentiated acceptance deemed Virtuous and any concern over any aspect being Vicious (and subject to the rhetoric of denunciation: racist, nativist, xenophobic, etc). Using, as I noted in my previous post, the shouting of bigot! as a weapon of bigotry (opinion-bigotry, but still bigotry). Worse, it encourages a tendency towards poor policy by inhibiting attention to social costs and concerns.

One can see this nicely illustrated by George Soros being dismissive of voices of opposition before the Brexit vote. He, at least, is being wise after the fact about the effect of mismanaged migration. Many are so attached to their markers of Virtue that they continue to shriek after the fact: Bourbons of Virtue, who forget nothing and learn nothing--"correcting" others, not themselves.

Connected to this, supporting multiculturalism has become a particularly strong Virtue signal. But the reality is that multiculturalism is a social and policy experiment, which may not work. Nor is it remotely a morally compulsory policy for every society.

The problem with using policies as Virtue signals is not only does that poison debate, it also blocks consideration of facts deemed to be Virtue-awkward (or even Virtue-hostile). This is both potentially disastrous in terms of social outcomes (facts do not go away merely by being deemed wrong to mention) and helps further poison public debate, since ignoring facts on the ground inevitably becomes a process of ignoring, or even demonising, those concerned by said facts.

Stripping away social ballast
What also doesn't help is systematic attacks on common identities. A sense of national and cultural belonging can provide a sense of stability and even control: such things as, in the words of a recent post on the post-Brexit problems of the British Labour Party:

tradition, a respect for settled ways of life, a sense of place and belonging, a desire for home and rootedness, the continuity of relationships at work and in one’s neighbourhood.

provide a ballast against the disorienting effects of change. Attacking such identities as irretrievably stained with past sins (but somehow not attached to past achievements) attempts to knock away a comforting and stabilising part of social order, increasing the costs of social change--particularly their disorienting effect.

Creating unfortunate opportunities
Attentive policy flows out of listening politics. A political Party relies on balancing three things--rhetoric used, policies delivered and attention to voter concerns. The US Republican Party has got itself into The Donald mess because (at least at a federal level) it failed to pay sufficient attention to actual voter concerns while failing to match rhetoric to actions and actions to rhetoric.

But the Republican Party was also operating within a wider political and policy debate dynamic: part of the problem may well have been that its cosmopolitan operatives were inhibited from seeing how things seemed to its more traditionalist voters. As economist Luigi Zingales notes, if trust has been lost, the trick is not to blame those who no longer trust you (that just exacerbates the problem), but to work to rebuilt trust.

Which requires paying attention. Using policy positions as Virtue-markers blocks bothering to pay attention to--both the listening and attending to awkward facts. The result is an increase in political and policy dysfunction and, in particular, an increase in the numbers of angry and resentful voters. Who will inevitably start looking for folk willing to pay attention and who do not sneer at, or demonise, their concerns. Given enough economic and social stress, that gives an opportunity for people who, in more normal times, with sufficiently broadly attentive politics, would not get their chance.

Once such political entrepreneurs begin to get traction, it is further gist to the Virtue-demonising mill. And so the cycle builds with another spiral of Virtue-signalling and Vicious-demonising.

Once the spiral is underway, it is easy to point to the political entrepreneurs of angry and resentful politics and say "the problem is those dreadful people".  No, the problem is the refusal to pay attention by those whose proper role that is. Blaming others is so much easier than entertaining the problem that folk like oneself, folk with the beliefs which are so obviously Virtuous, are actually seriously problematic grit in the mechanisms of social adaptation via status-mongering and pseudo-comprehending contempt for those with different experiences and concerns.

Congenial framing as pseudo-comprehension
I say pseudo-comprehending because part of the game of Virtue is imposing a framing on folk and opinions which builds in dismissal of the opinion Other. It creates a crippled epistemology (pdf) which blocks attention and engagement with those outside the magic circle of the Virtuous. The illusion of knowing (and which deploying the rhetoric of denunciation expresses) blocks the capacity to genuinely see, let alone pay attention to: that's how systems of bigotry work.

But framings provide comfort: they are our go-to ways of making sense of the world. The illusion of knowing is a very comforting illusion, particularly if it flatters one's self-esteem. A British journalist's mordant tweet:

Notice we in the press went from: "OMG we never saw this coming!!" right into "We're experts on why they voted this way & what it means."?

provides an illustration of the easy go-to comfort of our framings.

As journalist Damon Linker has noted, the contradiction of the secular faith of Progressivism--that history has a particular direction, which the Virtuous know and are leading their cognitive inferiors into--has taken a major knock, hence the outrage of frustrated faith. But it is a really bad idea to turn politics into your substitute religion, given how antipathetic dogmatic faith can be to the give and take of persuasion and reasoned debate. Just as it is not good to lose sight of how one's sense of identity and attendant social experiences can be very different than other people's: and if you are attached to your identity, why wouldn't other people be attached to theirs?

Not everyone is a winner from the waves of globalisation and social change.  Refusing to pay attention to those who are not--demonising them for being, in effect, those disproportionately bearing the material and psychic costs of change--in itself, increases the costs to them and to the wider society. At little less smug moral self-satisfaction, and bit more open-minded attention, would go a long way to make things better.

But that would require giving up the psychic benefits of the aforementioned self-satisfaction, and its attendant sneering contempt for fellow citizens, in exchange for rather more moral humility and paying attention: thereby being better citizens and better participants in the wider society. Which requires breaking through considerable epistemic barriers and giving up considerable psychic benefits. Even incurring some social costs as one departs from (and so chips away at) the collective game of smug self-satisfaction.

And, as the song says, breaking up is hard to do.


[Cross-posted at Skepticlawyer.]

A crisis for whom or what?

As much of the developed world, particularly the US and the eurozone, struggle with prolonged economic stagnation (and looming worse), who or what is this a crisis of or for?

Not capitalism as such. This is not remotely the worst "crises of capitalism". Indeed, in much of the world, capitalism is doing just fine, thanks very much. People are continuing to move out of poverty at record rates (pdf). Even within the OECD, some countries are doing just fine.

So, not a crisis of capitalism but a crisis for some (important) capitalist economies.

It is a crises of cheap credit (or, more precisely under-priced and over-extended credit). Nothing particularly unusual in that, had them in the past. The perennial issue of appropriate prudential regulation thereby yet again becomes salient. With, as is normal, issues specific to this particular credit bust (notably land rationing encouraging housing booms which busted).

It is a crises of bad monetary policy. Also had them in the past, but the similarity between current failures by the Fed and the ECB and past failures by the Fed and the Bank of France raise issues about institutional incentives and corporate memory for central banks.

Which leads into the crises for macroeconomics. Macroeconomists have not collectively shone: those with public profiles have shown a marked tendency to lapse into political partisanship. The discipline clearly lacks analytical resilience. Too much fairly basic stuff is simply not agreed upon.

It is a crisis for the EU (or at least for the European Monetary Union): the euro has failed for much the reasons that Milton Friedman predicted it would in 2000 (pdf):

… the various countries in the euro are not a natural currency trading group. They are not a currency area. There is very little mobility of people among the countries. They have extensive controls and regulations and rules, and so they need some kind of an adjustment mechanism to adjust to asynchronous shocks—and the floating exchange rate gave them one. They have no mechanism now.
If we look back at recent history, they’ve tried in the past to have rigid exchange rates, and each time it has broken down. 1992, 1993, you had the crises. Before that, Europe had the snake, and then it broke down into something else. So the verdict isn’t in on the euro. It’s only a year old. Give it time to develop its troubles.

To the extent that it is a crisis of public debt, it is also a crisis for poorly managed social democracy/welfare states. With Greece as the cautionary worst case.

So, a crisis of poor or problematic public policy and its mainstream analytical support. But not of capitalism, as such.

Why do the poor remain with us?

Norman Geras raises a point that recurs in his commentary in his excellent blog:

but what a mark against the world's wealthiest countries that there remains in them such a category of people - the poor - who can be spoken about in this way. These are societies fat, bulging, overflowing, with stuff; oozing personal wealth, economic crisis notwithstanding; and they are yet to provide all their citizens with a standard of material well-being such that no one would any longer need to be referred to as the poor but might enjoy, even as unequals, the advantage both of a more comfortable state and a more dignified style of description.

An obvious response is that, by the standards of history and of much of the globe, the people referred to as ‘the poor’ in developed democracies are not poor. [This point is made very powerfully via a graph here.] They have life expectancies, security of food and shelter and rates of possession of consumer durables that mark them out as among the blessed of history. Indeed, as Michael Cox and Richard Alm point out in their Myths Of Rich And Poor: Why We're Better Off Than We Think, poor people in the US in the mid-90s had an average level of possession of consumer durables that would have marked them off as middle class in the early 1970s. [This point is expressed graphically here.]

But, by the standards of their own societies, they are poor, even if poor means “middle class two or so decades ago”. So, why do we have a persistent category of people who lag behind the general prosperity?

Well, for no single reason. As Norman Geras intimates, it is not a matter of how productive the society is, as used to be the case when poverty was the general human condition. There have been sharp drops in the general level of poverty in Western societies over time. Which is another way of saying that developed societies have been great engines of mass prosperity: that is what makes them “developed societies”. But these drops in poverty rates slowed and then stopped: for example, the proportion of people in poverty in the US dropped steadily, even dramatically, during the postwar boom until the mid 1960s and has been stubbornly persistent ever since. Rather discouragingly, the apparent ending of mass exit from poverty coincided with increased government effort against war on poverty: the US “war on poverty” has been about as successful as the “war on drugs”. But similar patterns can be discerned in other developed societies.

Indeed, one way to put the question is “why has poverty persisted despite massive expansions in the welfare state?” The question is not often put like this, but it is a very reasonable question to ask, on the evidence. After all, the welfare state is a century or more old: the failure of eliminate poverty is a reasonable criteria to evaluate it by, particularly given its massive expansion from the 1960s onwards. (It can hardly be the fault of “capitalism”, as its success in generating unprecedented and steadily increasing mass prosperity is what has made the elimination of poverty a remotely plausible goal in the first place. Indeed, the first post-classical public welfare measures – Venetian public health measures, English poor law provisions – grew up in the most commercial societies in part precisely because they were the richest societies.)

One answer to the persistence of poverty might be: because of the expansion of the welfare state. After all, the great mass exits from poverty clearly were not products of the welfare state: they were the result of massive expansion in productive capacities. The welfare state needs clients: if there are no poor people, then there are no poor people to be clients. Milton Friedman pointed out that, if one took the entire expenditure on anti-poverty programs and divided it by the number of poor Americans, there would be no poor Americans. Clearly, employing people in secure jobs with good pensions in welfare bureaucracies, and the transferring of funds to people who are not poor, take up a considerable amount of welfare resources and generate a considerable number of beneficiaries: beneficiaries who might be of some risk of losing said benefits if poverty was abolished.

So, waste and failure in welfare might be one reason for the persistence of poverty. Particularly if such retards economic growth – given why the mass exits from poverty have occurred – by, for example, reducing the level of productive investment.

Or it might be due to welfare subsidising unfortunate patterns of behaviour. The richer the society, the less absolute the penalties for destructive behaviour patterns tend to be, but they still exist. One of the effects of welfare can be to soften the effects of folly (or, to be less blunt, lessen the penalty for patterns of behaviour not conducive to increased income). People can get away more with clinging to leisure preferences, instant gratification preferences or familiar attitudes and patterns of behaviour which are not conducive to good incomes. (And the behaviour of parents may well have effects on the prospects of their children.) If there is a bell-curve of income-producing behaviour, then there will always be a tail end. The richer the society, the better off the tail-end will tend to be. But they will still be the tail-end.

In the US, if one completes high school, get and stays married, get and stays employed (even starting at a minimum wage job) and avoids becoming involved in crime, one’s chances of staying poor are small.

We also get into some stubborn persistences here. Consider that, in the US, students of Asian ethnic backgrounds do far more homework, on average, than do black students. If lifetime income prospects are connected to educational achievement (as they are) and educational achievement is connected to student effort (as it is) then we can reasonably predict that poverty will be more common among black Americans than Asian-Americans on that one indicator alone (as it is).
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So, what can we do about this? If doing less homework leads to higher rates of poverty, does poverty lead to doing less homework? No, but the patterns of behaviour and outlooks which lead to poverty (for example, by discouraging scholastic effort) may do so. A society where human capital is important, and increasingly important, has limited ability to get specific groups to value the acquisition of human capital. But, if they fail to do so, they will have higher rates of poverty. So poverty will persist due to a failure to take advantages of the opportunities available (with some depressive effect on the general productivity of the society, since the level of human capital will be lower than it otherwise would be).

Moreover, how good is the welfare system likely to be at putting itself out of business by encouraging patterns of behaviour that lead to exiting from poverty? Noting that, to the extent that a social system can be said to have “an interest”, poverty is not in the interest of “capitalism” – there is far more profit to be made from selling to rich consumers than poor ones. More precisely, the logic of capitalism has clearly been to generate mass prosperity, since capitalism is the best system ever developed for creating and using capital (the produced means of production) and the more capital, the more production, the more prosperity, the less poverty.

The welfare system can also create barriers to exit from it. Public housing can “trap” people in high unemployment areas, as to move is to lose one’s eligibility. The very high effective marginal tax rates that beneficiaries face (from their benefits reducing, and taxes increasing, as they earn more money) also constitute a barrier to exiting from poverty. But such are expensive to fix and tend to keep the level of clients for the welfare system higher, so there is little incentive from within the system to push for reform.

There are also some forms of poverty that simply are not much of a concern. That university students have low incomes in their 20s is not a concern if they end up being high-earning professionals in their 40s. Indeed, as Cox and Alm point out, the increased participation in higher education is a major reason for increased income inequality – we can tell this, because the slope of “life cycle” income changes (i.e. average income by age group) has become much steeper than it used to be.

So, given the increased participation in higher education, something that also took off in the 1960s, some of the persistence in poverty is a life-cycle effect.

Some of the persistence of poverty is a “recent entry” effect. New migrants, lacking skills and entre into various networks, will tend to start off with low incomes. Increased low-skill migration will also tend to lead to persistence in poverty rates, particularly if there is an increase in the importance of human capital in an economy. It is likely that the children and grandchildren of new migrants will not live in poverty, but if the flow-in is constantly replenished, then the poor are being replenished.

And, of course, if migration to a developed democracy becomes a guarantee that one will not be poor, the incentive to migrate will be greatly increased. Milton Friedman famously argued that the welfare state was incompatible with open borders: certainly the welfare state is likely to increase the resentment of migrants if people believe they are paying for people whose arrival they had no say in.

The low-skill migrant point interconnects with the educational point. It is clear that the Anglosphere is better at attracting productive migrants than much of Europe (and, apparently, my own country of Australia is the very best at cherry-picking its migrants).

But that second-generation male Muslim migrants in Europe are “going backwards” in their economic participation points to another difficulty – barriers to economic participation. Some of these can arise from the behaviour of those with lower levels of economic participation (e.g. the lower levels of homework among black American students). Others can flow from regulation or other institutional factors.

Regulation has a persistent tendency to protect the interest of incumbents: this is particularly true in land use regulation and labour regulation: unfair dismissal laws, for example, protect incumbents against new entrants to labour markets (since they raise the risk of employing new people, particularly for small businesses). Faced with increased risks in employing new staff created by such regulations which is not compensated for by increased productivity, businesses respond by cutting back on hiring, relying more on certification and on “vouching for” networks, became more reluctant to deal with differences that might get in the way of communication (i.e. the transaction costs of cultural differences) and so on. If migrant Muslim males put less effort into school and so are less certificated, are more likely to “have attitude” (or are believed to be so), are less plugged into networks, have less skills then they will be disproportionately excluded by such regulation. Though young people generally suffer from such “protect incumbent” laws.

The problem of persistence of attitudes not conducive to exit from poverty are not only a matter for the poor, they can be attitudes among the better connected as well. Labour market regulation penalising the more marginal in the labour market, land use regulation driving up rents and housing prices by restricting the supply of land for housing are not created or justified by the poor, and certainly do not benefit them, but do disproportionately penalise them.

The capacity for “progressives” (or, as former Labor Senator John Black puts it [pdf] the inner city rich, the code word for which is apparently, ‘progressive’) to romanticise green fields (which are every bit as much human creations as any suburb, and may well have less biodiversity), thereby driving up the value of their inner city properties by restricting the supply of land able to be used for housing, and to frame labour market regulation as “protecting workers” (as, indeed it does: it protects incumbent workers against competition from marginal workers) does its bit to increase barriers to economic participation and so to the persistence of poverty.

Add all these factors together and the elimination of poverty – that is, of a category of “middle class minus two or so decades” – becomes difficult, to say the least.

So, is it a “mark against the world’s wealthiest countries”? Well yes, though not as much as it may seem at first blush and those who are most likely to hold it so are often very much part of the problem.

Or, to put it another way, the sort of mushy, self-satisfied reasoning that Norman Geras likes to berate Guardianistas for in international affairs has its domestic equivalents. There is even some suggestive social science research (pdf) that implies that conservatives signal competence while progressives signal trust: hence the importance to the latter of policy positions which allow one to signal one’s good intentions (and conservative contempt for any disastrous consequences, which the liberals deride as being unfeeling or otherwise lacking in virtue).

Indeed, we observe people who not that many years ago would have been nodding along to descriptions of science as a “patriarchal Western discourse”, not worthy of any privileging, now holding the results of climate science as absolutely authoritative: attitudes to science clearly being subordinated to the commitment to signalling virtuous intentions. But embracing of such serial, or even concurrent, contradiction actually improves the capacity to signal that one’s priority is membership of the club of the ostentatiously virtuous.

If we allow actions to have income consequences (since that promotes productive behaviour) but not negative ones (since that can lead to poverty), stop low-skill migration, ensure that the welfare system promotes independence and not dependence (even at the risk of losing its client base) but otherwise pays those who cannot be independent enough not to be poor, only permit students in higher education who won’t be on low incomes while they are studying and eliminate regulations and other institutional factors that are barriers to economic participation (which will require neutering the “progressive” intelligentsia having any effective capacity to frame public debate so as to block such changes), we in developed countries can have “tail ends” which are not poor by the standards of our societies.

Good luck with that.

Still, the good news is that we could do better: the bad news is that we probably won’t (beyond general increases in productivity).

Helmland follies: a case study in how aid (and indigenous policy) fails

Helmland is a province in Afghanistan where expensive and grandiose American ambitions go to die. It is a focus of the current war against the Taliban, but US involvement in the region goes back to the Truman Administration and continued until the Communist coup of 1978.

Fighting the Cold War with dams
Nick Cullather’s revealing (pdf) (and depressing) history of modern Afghanistan, focusing on the Cold War era Helmand Valley dam project, notes of the Kingdom of Afghanistan:

Modern states are able to govern through manipulation of abstractions—unemployment, public opinion, literacy rates, etc.—but in Afghanistan interventions of any kind, and the reactions to them, were brutally concrete.
… the regime persisted in slowly, firmly, laying the barren politics of abstraction and principle over the warm, cruel politics of the heart.

Afghanistan is a complex society. Partly tribal, so partly following the structures that Phillip Carl Salzman so revealingly delineates, and partly not. This complexity does not respond well to abstract plans developed elsewhere.

Such as dam projects (for example, the HAVA—Helmland and Arghandab Valley Authority) based on the “just add capital” notion of development-through aid. As Cullather points out, dam projects:

had the additional function of redefining political conflict as a technical problem. Britain’s solution to Afghanistan’s tribal wars had been to script feuds of blood, honor, and faith within the linear logic of boundary commissions, containing conflict within two dimensional space. The United States set aside the maps and replotted tribal enmities on hydrologic charts. Resolution became a matter of apportioning cubic yards of water and kilowatt hours of energy. Assurances of inevitable progress further displaced conflict into the future; if all sides could be convinced that resource flows would increase, problems would vanish, in bureaucratic parlance, downstream.

There was no history, no local social ecology, just the bright promise of technology.

As so often was the case, this was aid as driven by external ambitions, not local realities:

From 1946 on, the salaries of [contractor]Morrison Knudsen’s advisers and technicians absorbed an amount equivalent to Afghanistan’s total exports. Without adequate mechanisms for tax collection, the royal treasury passed costs on to agricultural producers through inflation and the diversion of export revenue, offsetting any gains irrigation produced. Although it pulled in millions in international funding, HAVA soaked up the small reserves of individual farmers and may well have reduced the total national investment in agriculture.

With a crude, by-the-numbers, approach to “modernization”:

The US ambassador in 1962 noted that if successful, HAVA would boost Kabul’s “earnings of foreign exchange and, if properly devised, could foster the growth of a strata of small holders which would give the country more stability.” This billiard-ball alignment of capital accumulation, class formation, and political evolution was a core proposition of the social science approach to modernization that was just making the leap from university think tanks to centers of policymaking.

No one seems to have noticed that that was precisely not how modernization had been built in their own countries. Ironically, other dimensions could be spotted if they had a Cold War element:

[Afghan Prime Minister] Daoud’s receptiveness to Soviet and Chinese aid was particularly troubling. As [anthropologist Louis] Dupree put it: “A nation does not accept technology without ideology. A machine or a dam is a product of a culture.”

Afghanistan was marked by weak central authority and periodic rebellion:

But despite their favored status, Pashtuns revolted against the Mohammedzai eight times between 1930 and 1960. Open violence between minorities was less common than conflict that pitted clan autonomy against central authority.

As had been true for millennia, settled agrarian existence was regarded as inferior to pastoralism:

But even with the closing of the border and the attraction of subsidies and well-watered homesteads, it proved difficult to entice Ghilzai Pashtun to become ordinary farmers. Freer and wealthier than the peasants whose lands they crossed, the nomads regarded their new Tajik and Hazara neighbors with contempt.

Phillip Carl Salzman’s work brilliantly explains why.

One needs to be careful about one’s assumptions, again and again:

Agricultural experts found the mullahs to be a progressive force, “constantly look[ing] for things to improve their communities, better seed, new plants, improved livestock.”

Afghanistan has a much longer history of American involvement and engagement than folk may realise:

By the 1960s, Afghanistan had Soviet, Chinese, and West German dam projects underway. It was receiving one of the highest levels of development aid per capita of any nation in the world. U.S. News described it as a “strange kind of cold war,” fought with money and technicians, instead of spies and bombs. The Atlantic called it a “show window for competitive coexistence.” Publicly, U.S. officials said this was the kind of cold war they wanted, just a chance to show what the different systems could do in a neutral contest. Afghanistan had become a new kind of buffer, a neutral arena for a tournament of modernization.

Alas, even more than most aid projects, the project, not the consequences, became the key thing:

For reasons of prestige alone the United States kept pouring money in, even though by 1965 it was clear the project was failing. Diplomats complained about having the US reputation and credibility hang on “a strip of concrete,” but there was no going back. Afghanistan was an economic Korea, but Helmand was an economic Vietnam, a quagmire that consumed money and resources without the possibility of success, all to avoid making failure obvious.

Examples of failing to attend to what happened in actually modern societies continued:

Legal titles were still clouded by HAVA’s inattention to land surveys, but the settlers had nonetheless sculpted wide tracts of empty land into irregular 15-acre parcels divided by meandering juis, tree-lined canals that served as boundary, water source, and orchard for each farm.

Hernando de Soto had not yet published his The Mystery of Capital. But, fear not, they had a plan:

Unfortunately, the juis system proved incompatible with the new plans. The small, hilly, picturesquely misshapen fields contributed to runoff and drainage problems and prevented the regular, measured applications of water, chemicals, and machine cultivation necessary for modern agriculture. A green revolution would require, in effect, a land reform in reverse: merging small holdings into large, level fields divided at regular intervals by laterals running from control gates on the main canals. As the wheat improvement program got underway, a team of U.S. Department of Agriculture advisers proposed that HAVA remove all of the resettled families, “level the whole area with bulldozers” an then redistribute property “in large, uniform, smooth land plots.” HAVA adopted the land preparation scheme but implementation proved difficult. Farmers objected to the removal of trees, which had economic value and prevented wind erosion, but they objected chiefly to vagueness of HAVA’s assurances. HAVA itself acknowledged, as bulldozing proceeded, that questions of what to do with the population while the land was being prepared, how to redistribute the land after completion, and whether to charge landowners for improvements were “yet to be worked out.” When farmers “met the bulldozers with rifles,” according to a USAID report, it presented a “very real constraint” that “consumed most of the time of the American and Afghan staffs in the Valley throughout the 1960s.”

The project folk had apparently never read (or if they had, understood) Hayek’s point about The Uses of Knowledge in Society:

But a little reflection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientific in the sense of knowledge of general rules: the knowledge of the particular circumstances of time and place. It is with respect to this that practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation. We need to remember only how much we have to learn in any occupation after we have completed our theoretical training, how big a part of our working life we spend learning particular jobs, and how valuable an asset in all walks of life is knowledge of people, of local conditions, and of special circumstances. To know of and put to use a machine not fully employed, or somebody's skill which could be better utilized, or to be aware of a surplus stock which can be drawn upon during an interruption of supplies, is socially quite as useful as the knowledge of better alternative techniques. And the shipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices, are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others.

All this failure was a product of bad theory, as Cullather outlines, citing a range of critiques. But it was bad theory persisted with because theorists and decision-makers were not constrained or burdened by the consequences of what they did—that fell upon others, who had no say in the decisions but were central to the outcomes.

Fighting the war on terror with …
And it is happening all over again, as Holly Barnes Higgins sets out in describing her experience as an aid worker in Helmland. The Coalition forces are offering modernization, which is precisely what the Taliban is a revolt against. The Taliban have a great advantage in that modernization is much easier to disrupt than to build:

Making the roads unsafe was and remains a Taliban objective. The more they could disrupt our work, the more they could intimidate through violence and murder, the more likely—they seemed to reason—we infidels would flee for safety, leaving the province ripe for their accelerated exploitation.

Another great advantage the Taliban have is that they are connected to local patterns in a way that the Coalition modernizers are not.

The third great advantage the Taliban have is that the local patterns the Coalition interlopers ended up having to work through inhibit modernization and aid the Taliban:

When the Taliban dissolved and left Lashkar Gah in the autumn of 2001, the position of provincial governor was filled by a man from the north whose arrival into town was accompanied by 200 armed men. Though barely literate, this relative-by-marriage of President Karzai was confident enough in his status to proclaim himself governor. A rival of the governor soon seized the position of regional police chief in similar fashion. In spite of the fact that both had a private militia in tow, neither man was strong enough to wipe out the other, so an uneasy truce prevailed.

This is a struggle over structures of governance. One the locally embedded and connected Taliban are winning and the Coalition interlopers are not:

… an informal alliance between farmers, officials and the Taliban. In the end, it would be hard for me to swallow the simple truth that the benefits of these symbiotic relationships far outweighed anything we could offer as an economic development project.

The Taliban used coercion applied to the local population in ways that make sense to the local population and were embedded in the local population. The Coalition soldiers are just visiting. Which makes them like Western aid workers everywhere, except with guns added.

The soldiers and aid works bring their own policy contradictions with them. For example, the “war against drugs” continues to frustrate “the war against terror” with neither being permitted to force assessment of the other (or, indeed, itself):

As a result of poppy production, the Taliban was able to recruit more, pay more attractive bonuses for successful attacks, and supply themselves more abundantly with weapons. But despite active insurgency/counterinsurgency warfare all around us, we were to persist. And so we did.

Those abstract notions modern government is based on can have their own blindness to, or discounting of, consequences.

The traditions that gravely inhibit harnessing the talents of women operated whether or not the woman was local or a visiting foreigner:

It was a bit harder to get used to the fact that, as a woman, I was not supposed to be seen outside my quarters without being fully covered from head to toe. While my male colleagues could sit out in the sun and read and had their clothes cleaned by male staff then hung dry outdoors, I needed to exercise and clean my clothes myself, then drape them around my room to dry indoors, lest they offend.

But the struggle to allow people to fully participate in Western society itself has been a long one, and continues still.

Higgins came to see how much it is about people: their beliefs, preferences and expectations, formed under very different bases than any Westerner is used to:

As time passed and my experiences accumulated, I began to understand the local saying that “Afghanistan is where God comes to cry.” Just as the country itself combines remarkable beauty with unrelieved bleakness, so the people are stuck between the rock of the opium economy and the hard place of no viable alternative, between the anchors of tradition and the desperate need for progress and change.

Aid and “nation-building” are not matters of applying Cobb-Douglas functions, whose mathematical and geometric forms operate over the top of institutional presumptions taken utterly for granted. The "just add capital" notion is not only not justified by history, it is flatly contradicted by history: specifically by the way the curse of silver turned Spain from the technological, institutional, organisational and intellectual cutting edge of Latin Christendom into an obscurantist backwater.

The problem of knowledge
Hayek wrote in his classic 1945 essay The Use of Knowledge in Society:

One reason why economists are increasingly apt to forget about the constant small changes which make up the whole economic picture is probably their growing preoccupation with statistical aggregates, which show a very much greater stability than the movements of the detail.

The saying “the devil is in the details” points in the same direction. But Hayek was making a larger point, as he goes on to say:

The comparative stability of the aggregates cannot, however, be accounted for—as the statisticians occasionally seem to be inclined to do—by the "law of large numbers" or the mutual compensation of random changes. The number of elements with which we have to deal is not large enough for such accidental forces to produce stability. The continuous flow of goods and services is maintained by constant deliberate adjustments, by new dispositions made every day in the light of circumstances not known the day before, by B stepping in at once when A fails to deliver. Even the large and highly mechanized plant keeps going largely because of an environment upon which it can draw for all sorts of unexpected needs; tiles for its roof, stationery for its forms, and all the thousand and one kinds of equipment in which it cannot be self-contained and which the plans for the operation of the plant require to be readily available in the market.

This is a point that applies beyond markets. Whenever one is looking at social arrangements, either directly (at people’s behaviour) or indirectly (the things they build) one is looking at a mass of judgments, local knowledge, trade-offs, incentives … Farms and buildings are not lumps of “things”, they are always and everywhere the products of human action. Sustained improvement means changes (for the better) in those patterns of human action and nothing less than that. Those patterns of action are not incidental, they are not simple conveyor belts by which adding inputs “make things better”, they are the heart of the story. They are the story.

Hayek quotes philosopher Alfred North Whithead:

It is a profoundly erroneous truism, repeated by all copy-books and by eminent people when they are making speeches, that we should cultivate the habit of thinking what we are doing. The precise opposite is the case. Civilization advances by extending the number of important operations which we can perform without thinking about them.

Precisely so, which is why aid programs that operate on taking things for granted—that something translated into a new social environment will have the same significance as it did in the social environment that the designers of aid are used to—are so disastrous.

Institutions matter, because they structure how people act. A 2001 paper on the effects of different forms of colonisation on (pdf) (via) long term economic prospects presents clear evidence on this.

Starting with why some regions do worse than others:

These results suggest that Africa is poorer than the rest of the world not because of pure geographic or cultural factors, but because of worse institutions.

What matters was whether rule was about establishing authoritarian rule so resources could be extracted or whether there was a sufficiently large group of locals able and willing to agitate for—and then make work—the transfer of similar institutional arrangements as operated domestically in the colonizing state:

When the establishment of European-like institutions did not arise naturally, the settlers were ready to fight for them against the wishes of the home country. Australia is an interesting example here. Most of the early settlers in Australia were ex-convicts, but the land was owned largely by ex-jailors, and there was no legal protection against the arbitrary power of land-owners. The settlers wanted institutions and political rights like those prevailing in England at the time. They demanded jury trials, freedom from arbitrary arrest, and electoral representation. Although the British government resisted at first, the settlers argued that they were British and deserved the same rights as in the home country.

With appropriate institutions, and people who understood how to make them work and what you could get out of them, things happened. As a history the authors quote notes:

“the enormous boom in public investment after 1870 [in New Zealand] ... was an attempt to build up an infrastructure ... to maintain high living standards in a country where voters expected politicians actively to promote their economic welfare.”

As the authors point out, non-settler colonies were typically ruled by authoritarian, extractive structures based on a narrow elite; patterns that have continued after independence.

Or, in the case of Afghanistan, were never formally colonised so missed out on institutional transfer and basic capital investment (such as roads and electrification). People act on the basis of what they know, and what they know about. European settlers not only knew about, but knew how to operate, certain types of institutional structures and acted accordingly.

With limited knowledge of what was possible—and still less knowledge of how to make such institutions work—of course people in non-Western societies act according to what they know and are used to, what actually operates in their societies. Which is why institutions cannot simply be transferred—there is a lack of the knowledge and normative base to operate them. But even sillier is the notion that if one “just adds capital” either the institutions will magically arise, or that development “will just happen” without the institutional structure—the fundamental patterns of social life—to go with them.

Modernisation is hard, but can only be expected to “take” if grows out of, and transforms from within, the actions and presumptions of the inhabitants of a society. The power of modernization is precisely the way it grabs peoples choices but it remains something from the outside impacting on unless those internal transformations can take place.

Indigenous policy as exemplar of the failure of aid
In the settler countries of the Anglosphere, indigenous policy provides telling—and tellingly drear—examples of these problems.

When people write of indigenous Australia as “Australia’s Third (or even Fourth) World” they say more than they typically know. Not only are the social outcomes among indigenous Australians “third world”, the policies applied fail in the standard way aid policies fail: due to perennial failures to seriously consider the cultural-institutional (i.e. human social ecology) dimension. (As I have previously posted, even the same grim jokes are applicable.)

That indigenous Australians are Australian residents and citizens leads even more easily than normal to glib, unexamined presumptions about how things will work. That, for example, indigenous Australians will treat housing in the same way as people from cultures which have been agrarian for thousands of years. But houses do not have the same significance for people whose cultural inheritance (however battered) has Paleolithic presumptions. Westerners are the product of centuries, of millennia, of cultural evolution. Perhaps we should take our experience seriously so that we can take other people’s experience seriously?

If anything, the projection of “noble savage” collectivist fantasies on indigenous Australians is even worse: it operates as a double fail. It fails to grasp how mainstream Australia (or mainstream US or Canada) achieve the social outcomes that indigenous Australia’s failure to achieve is regarded as so shameful while foisting on indigenous Australians collectivist social forms that are themselves the product of agrarian and industrial societies and have a relentless history of failure.

Read Why Warriors Lie Down and Die by Richard Trudgen for the full horror. In Trudgen's Why Warriors Lie Down and Die—there is the illustrative tale of the Galiwin ’ku fishing industry.

The Galiwin ’ku fishing industry consisted of several small fishing boats made from local timbers at Galiwin ’ku by the Yolηnu and mission staff. The Yolηu named these boats with holy names from their clain or riηgitj nation alliance. The boats were owned by the mission but were skippered and crewed by different clans. Some small clans would come together in a riηgitj alliance to make up a crew. …
These clan groups would use the boats and sell their catch to the mission for processing and re-sale to other places. The people clearly understood that what they caught was theirs until they sold it to the mission and they benefited directly from their catch. From the point of sale on, it belonged to the mission. This arrangement satisfied the legal requirements of both the Yolηnu and Balanda systems of law.
When the mission at Galiwin ’ku handed the fishing industry over to the Yolηnu council in 1974, everything proceeded well for a while because the mission staff also transferred to the council. For most Yolηu nothing really changed. Then in 1975 it was decided to get a loan from the government to develop the industry. The Aboriginal Development Comission ‘decided’ to bring in a consultant to look at the viability of the loan and how it could increase the efficiency of the industry. Following the consultant’s recommendation, one big, modern fishing trawler replaced the small boats. In the dead of night, the small boats were burned on the beach and one was cut adrift, to ‘convince Yolηu of the need to move up to the big boat’. Within six months the whole fishing enterprise at Galiwin ’ku had collapsed and Galiwin ’ku became an importer rather than exporter of fish products.
… from a Yolηu perspective the collapse happened because the separate clans and nation alliances found it impossible to work under one Balanda boss on the trawler, as the trawler captain now had to be licensed. Moreover, Yolηu were insulted and grieving over the destroyed boats. With no clear lines of ownership the people could not see that any authority had passed to them. …
To expect all the clans at Galiwin ’ku to believe they collectively owned the fishing company was like telling twenty-six Balanda companies that they collectively owned an industry incorporated as an association. … But this is not how community structures were set up. … The Yolηu fisherman did not see themselves as working for their own gain anymore; in fact, many now thought that the captain of the new trawler would reap the dividends. They had just become wage earners, and the incentive to work and build the industry for their own benefit was gone.
On top of all this, people had become confused about where these wages came from. In the past they saw a clear trade with the mission—so much fish for so much money. This trade was what the Yolηu were used to. Now they got wages no matter how many fish were caught. The steps in the development of a cash economy, with its system of wages-for-labour, are many. The Yolηnu were catapulted into the cash economy with little preparation.
With all this confusion, only conflict could occur, and economic development through industries like fishing was lost. (pp47-8)

Sound anything like what went on with the Helmland dam project’s attitude to the locals’ agricultural efforts?

If you want to understand the failure of indigenous policy, examine the failure of aid policy. And vice versa. It is the same problems with the same interlocking dynamics:

Failure to grasp how modernization happened, and what it is.
Failure to understand the centrality of human action: in particular, that technology operates according to how people understand and operate it.
Pervasive failures of communication.
Application of policies by people who do not suffer the consequences of what they do.

The failure of indigenous policy in Australia tells us what one needs to know about the failures of the Coalition’s “nation-building” efforts in Afghanistan because they are all manifestations of the failure of aid. The failure to understand that development is what happens (or not) in the minds of people. That technology (including capital as the produced means of production) is the product and benefits of that, it is not the thing itself. You have to understand where people really are—their presumptions, beliefs, incentives, expectations—and work from there in ways that look like a good thing to them from within their (evolving) worldview and will continue to do so after you are gone for development to “take”.

Otherwise it is just an expensive and wasteful game with other people’s lives. Adding guns to the mix does not change that.

ADDENDA There is a great irony in the Iraq v Afghanistan comparison. The Coalition intervention in Iraq has been generally much less popular with Iraqis, but was operating with potentially functional forms of modern government. The NATO intervention in Afghanistan is much more popular with Afghans (especially the non-Pashtun) but is operating with less modern forms of governance. The intervention in Iraq is broadly a success (Iraq is at least as functional as Pakistan, and much less disruptive to its neighbours), the intervention in Afghanistan appears to be failing: lack of useful government structures trumping what the locals think about the intervention--or, to put it another way, institutions matter more than attitudes.

UPDATE Michael Yon notes that the Coalition spends very little time or effort in the areas of Afghanistan where it is welcome.

The Ultimate Resource

I recently attended the inaugural screening of a new film society. The film screened was The Ultimate Resource from Free to Choose Media™. The title comes from a Julian Simon book title: that human inventiveness is the ultimate resource. The film starts with a West African ceremony celebrating the birth of a daughter (who has been declared likely to live and so no longer merely a visiting spirit). This hopeful and colourful ceremony is the lever to present the masses of children being born around the planet as potentially including those who will come up with ideas that may benefit huge numbers of people. It is a vision that presents people positively, rather than a plague species on the planet.

It is also a perspective that is positive towards other people’s ideas. (Having the view that your ideas show one to be morally and intellectually superior is antipathetic to such a perspective.)

The Ultimate Resource is divided into five vignettes, each treated informatively and positively.

The first, in a Ghanian fishing village, was Victoria’s schooling. We meet a fisherman whose father barred him from going to school while his wife’s father could not afford to send her to school. Their daughter, Victoria, wants to be doctor.

Government schools in their area have 75 student in a class, open for 4 hours a day, for boys and girls. Yet private schools dominate schooling (as they do in much of the developing world). They have less qualified teachers, but smaller classes and operate 7 hours a day. The parents send Victoria to “Supreme Academy”, Theophilus Quaye’s school that he started with a few students and now has almost 370 students.

The “pertinent expert” for the segment was James Tooley, Professor of education policy at Newcastle upon Tyne University. Prof. Tooley describes his discovery of private schooling for the poor in this excerpt from his book The Beautiful Tree.

We then move to the valley of Macchu Picchu in Peru and Eusebio’s dream. Eusebio is a small farmer, working land that three generation’s of his family. A man had come to his grandfather and claimed to own the land he worked. For two generations, they worked the land that someone else claimed to own.

In 1969, the Peruvian state nationalised the land and created cooperatives. Eusebio said things got worse, because now they worked for for low pay for the cooperative directors appointed by Lima bureaucrats while the cooperative directed wealth to the directors, who did not work but lived off the labour of peasants like Eusebio.

Now, a process of giving individual titles is operating, based on the advocacy and ideas of Peruvian property rights advocate Hernando de Soto (founder of the Institute for Liberty and Democracy) who talks of billions of people being locked out of the capitalist system by the lack of property rights. We see the process where individual titles are handed over. Eusebio says “I am 47 years old and I have finally seen my title. My parents have died and they did not see it”. It was the very moving satisfying of peasant land-hunger.

Then it is on to Pennies a day about a married pair of weavers, Minara Begum and husband, in a small village in Bangladesh, the benefits of microcredit and the work and vision of the Muhammad Yunus and Grameen (“Rural”) Bank (joint winners of the 2007 Nobel Peace Prize). Professor Yunus had been teaching elegant principles of economics while poor people were struggling and starving around university.

He studied what was happening (and not happening) in the villages. Getting hold of even small amounts of money was a big problem, due to the only credit available being high interest loans from moneylenders.

The answer was micro-credit. Now the Grameen Bank makes 96% of its loans to women: they find that the women are cautious, have a family-focus, with long-term aims. The bank requires a village centre meeting each week. At these meetings, friends are developed, information swapped. The system works on peer pressure and individual pride with the required 16 principles being recited each centre meeting.

As Muhammad Yunus says, people “discover themselves and their creativity comes out.” As for the effect of lending to women, “now she has the power of money”. The loans average $85, with a 99% payback rate.
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We then have quite a change of context to Estonia Freedom’s Sound and the Estonia Piano Company. We get a sense of how bad things were under the Soviets (and the Nazis) and how different it is now. As one of the workers in the company says of the Soviet era, “just to buy an orange you had to know someone”.

The “visiting expert” was Johan Norberg from Sweden, the most “rah, rah” speaker in the film. The Estonia Piano Company had existed under Soviet Union. With the break up of the Soviet Union, their market disappeared. From 500 pianos a year, production dropped to 94 in 1997. A young pianist bought up the stock as it fell in value. When he became the majority owner, he revitalised the company by getting it to focus on quality. Now the Estonia Piano Company’s pianos rank close to Steinway™ in quality at about half the price. His father, Venno Laul, a choirmaster (whose father was executed by the Nazis) helped to improve the piano quality. The father was eloquent on how a free society was worth any price.

The final vignette was a 34 year old computer game entrepreneur, Sir Hai, owner of Snailgame™, a computer game company using 3D animations: his wife Jo is the company’s chief financial officer and The people’s economy. This segment had a more mixed overall tone than the other segments. The “talking head” was an economics professor from Fudan University, though his role was notably less than the other experts, both in screen time and content.

This is the China that has the fastest-growing major economy in world history. There are estimated to be 300,000 millionaires in China. Full of enthusiasm for the economic growth, the segment also notes the problems of corruption, rural poverty, underdeveloped legal system, the problems with political freedom (of which Sir Hai says “that is a difficult question”, the perennial code for “this can get me into trouble). Sir Hai makes the striking observation that “our generation is like the generation in Japan after WWII”.

The Ultimate Resource is both informative and uplifting. Rarely has a film had such a cheering and encouraging effect. It is also a powerful film, particularly as it addressed the real situation of the poor: things that mattered in their lives.

There was a discussion afterwards, which brought up various issues. It was the sort of the discussion where I found myself, in the one set of comments, pointing out that Peter Walsh held that working on his farm helped teach him to learn economics, that I preferred the term ‘free commerce’ to ‘free market’, that the among indigenous Australians during the 1960s and 1970s there had been a debate roughly between women (who wanted to develop their community’s internal resources) and men (who wanted to see how much money they could get from grants) and how notions of the possibility of change and progress enter into developing societies.

One of those present was able to provide further details on how the Grameen Bank work: in particular the existence of small circles were the next person does not get a loan until the previous one has been paid back and the centrality of the 16 points (which a lot of Muslim conservatives/fundamentalists strongly opposed to). Muhammad Yunus was the most impressive speaker in the film.

There will more documentary films put on by the film society: the organiser, has tapped into an “below the radar” movement of pro-liberty documentary makers.