Kitabı oku: «The Rational Optimist: How Prosperity Evolves», sayfa 3

Saving time

Time: that is the key. Forget dollars, cowrie shells or gold. The true measure of something’s worth is the hours it takes to acquire it. If you have to acquire it for yourself, it usually takes longer than if you get it ready-made by other people. And if you can get it made efficiently by others, then you can afford more of it. As light became cheaper so people used more of it. The average Briton today consumes roughly 40,000 times as much artificial light as he did in 1750. He consumes fifty times as much power and 250 times as much transport (measured in passenger-miles travelled), too.

This is what prosperity is: the increase in the amount of goods or services you can earn with the same amount of work. As late as the mid-1800s, a stagecoach journey from Paris to Bordeaux cost the equivalent of a clerk’s monthly wages; today the journey costs a day or so and is fifty times as fast. A half-gallon of milk cost the average American ten minutes of work in 1970, but only seven minutes in 1997. A three-minute phone call from New York to Los Angeles cost ninety hours of work at the average wage in 1910; today it costs less than two minutes. A kilowatt-hour of electricity cost an hour of work in 1900 and five minutes today. In the 1950s it took thirty minutes work to earn the price of a McDonald’s cheeseburger; today it takes three minutes. Healthcare and education are among the few things that cost more in terms of hours worked now than they did in the 1950s.

Even the most notorious of capitalists, the robber barons of the late nineteenth century, usually got rich by making things cheaper. Cornelius Vanderbilt is the man for whom the New York Times first used the word ‘robber baron’. He is the very epitome of the phrase. Yet observe what Harper’s Weekly had to say about his railways in 1859:

The results in every case of the establishment of opposition lines by Vanderbilt has been the permanent reduction of fares. Wherever he ‘laid on’ an opposition line, the fares were instantly reduced, and however the contest terminated, whether he bought out his opponents, as he often did, or they bought him out, the fares were never again raised to the old standard. This great boon – cheap travel – this community owes mainly to Cornelius Vanderbilt.

Rail freight charges fell by 90 per cent between 1870 and 1900. There is little doubt that Vanderbilt sometime bribed and bullied his way to success, and that he sometimes paid his workers lower wages than others – I am not trying to make him into a saint – but there is also no doubt that along the way he delivered to consumers an enormous benefit that would otherwise have eluded them – affordable transport. Likewise, Andrew Carnegie, while enormously enriching himself, cut the price of a steel rail by 75 per cent in the same period; John D. Rockefeller cut the price of oil by 80 per cent. During those thirty years, the per capita GDP of Americans rose by 66 per cent. They were enricher-barons, too.

Henry Ford got rich by making cars cheap. His first Model T sold for $825, unprecedentedly cheap at the time, and four years later he had cut the price to $575. It took about 4,700 hours of work to afford a Model T in 1908. It takes about 1,000 hours today to afford an ordinary car – though one that is brimming with features that Model Ts never had. The price of aluminium fell from $545 a pound in the 1880s to 20 cents a pound in the 1930s, thanks to the innovations of Charles Martin Hall and his successors at Alcoa. (Alcoa’s reward for this price cut was to be sued by the government on 140 counts of criminal monopoly: the rapid decrease in the price of its product being used as evidence of a determination to deter competition. Microsoft suffered the same allegation later in the century.) When Juan Trippe sold cheap tourist-class seats on his Pan Am airline in 1945, the other airlines were so insulted that they petitioned their governments to ban Pan Am: Britain, shamefully, agreed, so Pan Am flew to Ireland instead. The price of computing power fell so fast in the last quarter of the twentieth century that the capacity of a tiny pocket calculator in 2000 would have cost you a lifetime’s wages in 1975. The price of a DVD player in Britain fell from £400 in 1999 to £40 just five years later, a decline that exactly matched the earlier one of the video recorder, but happened much faster.

Falling consumer prices is what enriches people (deflation of asset prices can ruin them, but that is because they are using asset prices to get them the wherewithal to purchase consumer items). And, once again, notice that the true metric of prosperity is time. If Cornelius Vanderbilt or Henry Ford not only moves you faster to where you want to go, but requires you to work fewer hours to earn the ticket price, then he has enriched you by granting you a dollop of free time. If you choose to spend that spare time consuming somebody else’s production then you can enrich him in turn; if you choose to spend it producing for his consumption then you have also further enriched yourself.

Housing, too, is itching to get cheaper, but for confused reasons governments go to great lengths to prevent it. Where it took sixteen weeks to earn the price of 100 square feet of housing in 1956, now it takes fourteen weeks and the housing is of better quality. But given the ease with which modern machinery can assemble a house, the price should have come down much faster than that. Governments prevent this by, first, using planning or zoning laws to restrict supply (especially in Britain); second, using the tax system to encourage mortgage borrowing (in the United States at least – no longer in Britain); and third, doing all they can to stop property prices falling after a bubble. The effect of these measures is to make life harder for those who do not yet have a house and massively reward those who do. To remedy this, governments then have to enforce the building of more affordable housing, or subsidise mortgage lending to the poor.

Happiness

As necessities and luxuries get cheaper, do people get happier? A small cottage industry grew up at the turn of the twenty-first century devoted to the subject of the economics of happiness. It started with the paradox that richer people are not necessarily happier people. Beyond a certain level of per capita income ($15,000 a year, according to Richard Layard), money did not seem to buy subjective well-being. As books and papers cascaded out of the academy, Schadenfreude set in on a grand scale among commentators happy to see the unhappiness of the rich confirmed. Politicians latched on and governments from Thailand to Britain began to think about how to maximise gross national happiness instead of gross national product. British government departments now have ‘well-being divisions’ as a result. King Jigme Singye Wangchuck of Bhutan is credited with having been the first to get there in 1972 when he declared economic growth a secondary goal to national well-being. If economic growth does not produce happiness, said the new wisdom, then there was no point in striving for prosperity and the world economy should be brought to a soft landing at a reasonable level of income. Or, as one economist put it: ‘The hippies were right all along’.

If true, this rather punctures the rational optimist’s balloon. What is the point of celebrating the continuing defeat of death, dearth, disease and drudgery, if it does not make people happier? But it is not true. The debate began with a study by Richard Easterlin in 1974, which found that although within a country rich people were generally happier than poor people, richer countries did not have happier citizens than poor countries. Since then the ‘Easterlin paradox’ has become the central dogma of the debate. Trouble is, it is wrong. Two papers were published in 2008 analysing all the data, and the unambiguous conclusion of both is that the Easterlin paradox does not exist. Rich people are happier than poor people; rich countries have happier people than poor countries; and people get happier as they get richer. The earlier study simply had samples too small to find significant differences. In all three categories of comparison – within countries, between countries and between times – extra income does indeed buy general well-being. That is to say, on average, across the board, on the whole, other things being equal, more money does make you happier. In the words of one of the studies, ‘All told, our time-series comparisons, as well as evidence from repeated international cross-sections, appear to point to an important relationship between economic growth and growth in subjective well-being’.

There are some exceptions. Americans currently show no trend towards increasing happiness. Is this because the rich had got richer but ordinary Americans had not prospered much in recent years? Or because America continually draws in poor (unhappy) immigrants, which keeps the happiness quotient low? Who knows? It was not because the Americans are too rich to get any happier: Japanese and Europeans grew steadily happier as they grew richer despite being often just as rich as Americans. Moreover, surprisingly, American women have become less happy in recent decades despite getting richer.

Of course, it is possible to be rich and unhappy, as many a celebrity gloriously reminds us. Of course, it is possible to get rich and find that you are unhappy not to be richer still, if only because the neighbour – or the people on television – are richer than you are. Economists call this the ‘hedonic treadmill’; the rest of us call it ‘keeping up with the Joneses’. And it is probably true that the rich do lots of unnecessary damage to the planet as they go on striving to get richer long after the point where it is having much effect on their happiness – they are after all endowed with instincts for ‘rivalrous competition’ descended from hunter-gatherers whose relative, not absolute, status determined their sexual rewards. For this reason a tax on consumption to encourage saving for investment instead is not necessarily a bad idea. However, this does not mean that anybody would be necessarily happier if poorer – to be well off and unhappy is surely better than to be poor and unhappy. Of course, some people will be unhappy however rich they are, while others manage to bounce back cheerful even in poverty: psychologists find people to have fairly constant levels of happiness to which they return after elation or disaster. Besides, a million years of natural selection shaped human nature to be ambitious to rear successful children, not to settle for contentment: people are programmed to desire, not to appreciate.

Getting richer is not the only or even the best way of getting happier. Social and political liberation is far more effective, says the political scientist Ronald Ingleheart: the big gains in happiness come from living in a society that frees you to make choices about your lifestyle – about where to live, who to marry, how to express your sexuality and so on. It is the increase in free choice since 1981 that has been responsible for the increase in happiness recorded since then in forty-five out of fifty-two countries. Ruut Veenhoven finds that ‘the more individualized the nation, the more citizens enjoy their life.’

Crunch

And yet, good as life is, today life is not good. Happy statistics of recent improvement sound as hollow to a laid-off car worker in Detroit or an evicted house owner in Reykjavik as they would to a cholera victim in Zimbabwe or a genocide refugee in Congo. War, disease, corruption and hate still disfigure the lives of millions; nuclear terrorism, rising sea levels and pandemic flu may yet make the twenty-first century a dreadful place. True, but assuming the worst will not avert these fates; striving to continue improving the human lot may. It is precisely because so much human betterment has been shown to be possible in recent centuries that the continuing imperfection of the world places a moral duty on humanity to allow economic evolution to continue. To prevent change, innovation and growth is to stand in the way of potential compassion. Let it never be forgotten that, by propagating excessive caution about genetically modified food aid, some pressure groups may have exacerbated real hunger in Zambia in the early 2000s. The precautionary principle – better safe than sorry – condemns itself: in a sorry world there is no safety to be found in standing still.

More immediately, the financial crash of 2008 has caused a deep and painful recession that will generate mass unemployment and real hardship in many parts of the world. The reality of rising living standards feels to many today to be a trick, a pyramid scheme achieved by borrowing from the future.

Until he was rumbled in 2008, Bernard Madoff offered his investors high and steady returns of more than 1 per cent a month on their money for thirty years. He did so by paying new investors’ capital out to old investors as revenue, a chain-letter con trick that could not last. When the music stopped, $65 billion of investors’ funds had been looted. It was roughly what John Law did in Paris with the Mississippi Company in 1719, what John Blunt did in London with the South Sea company in 1720, what Charles Ponzi did in Boston in 1920 with reply coupons for postage stamps, what Ken Lay did with Enron’s stock in 2001.

Is it possible that not just the recent credit boom, but the entire postwar rise in living standards was a Ponzi scheme, made possible by the gradual expansion of credit? That we have in effect grown rich by borrowing the means from our children and that a day of reckoning is now at hand? It is certainly true that your mortgage is borrowed (via a saver somewhere else, perhaps in China) from your future self, who will pay it off. It is also true on both sides of the Atlantic that your state pension will be funded by your children’s taxes, not by your payroll contributions as so many think.

But there is nothing unnatural about this. In fact, it is a very typical human pattern. By the age of 15 chimpanzees have produced about 40 per cent and consumed about 40 per cent of the calories they will need during their entire lives. By the same age, human hunter-gatherers have consumed about 20 per cent of their lifetime calories, but produced just 4 per cent. More than any other animal, human beings borrow against their future capabilities by depending on others in their early years. A big reason for this is that hunter-gatherers have always specialised in foods that need extraction and processing – roots that need to be dug and cooked, clams that need to be opened, nuts that need to be cracked, carcasses that need to be butchered – whereas chimpanzees eat things that simply need to be found and gathered, like fruit or termites. Learning to do this extraction and processing takes time, practice and a big brain, but once a human being has learnt, he or she can produce a huge surplus of calories to share with the children. Intriguingly, this pattern of production over the lifespan in hunter-gatherers is more like the modern Western lifestyle than it is like the farming, feudal or early industrial lifestyles. That is to say, the notion of children taking twenty years even to start to bring in more than they consume, and then having forty years of very high productivity, is common to hunter-gatherers and modern societies, but was less true in the period in between, when children could and did go to work to support their own consumption.

The difference today is that intergenerational transfers take a more collective form – income tax on all productive people in their prime pays for education for all, for example. In that sense, the economy (like a chain letter, but unlike a shark, actually) must keep moving forward or it collapses. The banking system makes it possible for people to borrow and consume when they are young and to save and lend when they are old, smoothing their family living standards over the decades. Posterity can pay for its ancestors’ lives because posterity can be richer through innovation. If somebody somewhere takes out a mortgage, which he will repay in three decades’ time, to invest in a business that invents a gadget that saves his customers time, then that money, brought forward from the future, will enrich both him and those customers to the point where the loan can be repaid to posterity. That is growth. If, on the other hand, somebody takes out a loan just to support his luxury lifestyle, or to speculate on asset markets by buying a second home, then posterity will be the loser. That is what, it is now clear, far too many people and businesses did in the 2000s – they borrowed more from posterity than their innovation rate would support. They misallocated the resources to unproductive ends. Most past bursts of human prosperity have come to naught because they allocated too little money to innovation and too much to asset price inflation or to war, corruption, luxury and theft.

In the Spain of Charles V and Philip II, the gigantic wealth of the Peruvian silver mines was wasted. The same ‘curse of resources’ has afflicted countries with windfalls ever since, especially those with oil (Russia, Venezuela, Iraq, Nigeria) that end up run by rent-seeking autocrats. Despite their windfalls, such countries experience lower economic growth than countries that entirely lack resources but get busy trading and selling – Holland, Japan, Hong Kong, Singapore, Taiwan, South Korea. Even the Dutch, those epitomes of seventeenth-century enterprise, fell under the curse of resources in the late twentieth century when they found too much natural gas: the Dutch disease, they called it, as their inflated currency hurt their exporters. Japan spent the first half of the twentieth century jealously seeking to grab resources and ended up in ruins; it spent the second half of the century trading and selling without resources and ended up topping the lifespan league. In the 2000s the West misspent much of the cheap windfall of Chinese savings that the United States Federal Reserve sluiced our way.

So long as somebody allocates sufficient capital to innovation, then the credit crunch will not in the long run prevent the relentless upward march of human living standards. If you look at a graph of world per capita GDP, the Great Depression of the 1930s is just a dip in the slope. By 1939 even the worst-affected countries, America and Germany, were richer than they were in 1930. All sorts of new products and industries were born during the Depression: by 1937, 40 per cent of DuPont’s sales came from products that had not even existed before 1929, such as rayon, enamels and cellulose film. So growth will resume – unless prevented by the wrong policies. Somebody, somewhere, is still tweaking a piece of software, testing a new material, or transferring a gene that will make your and my life easier in the future. I cannot know who or where he is for sure, but let me give you a candidate. In the week I wrote this paragraph, a small company called Arcadia Biosciences in northern California signed an agreement with a charity working in Africa to license, royalty-free to smallholders, new varieties of rice that can be grown with less nitrogen fertiliser for the same yield, thanks to the over-expression in the roots of a version of a gene called alanine aminotransferase borrowed from barley. Assuming the varieties work in Africa as well as they do in California, some African will one day grow and sell more food (for less pollution), which in turn means that he will have more money to spend, earning the cost of, say, a mobile phone, which he will buy from a Western company, and which will help him find a better market for his rice. An employee of that Western company will get a pay rise, which she will spend on a new pair of jeans, which were made from cotton woven in a factory that employs the smallholder’s neighbour. And so on.

As long as new ideas can breed in this way, then human economic progress can continue. It may be only a year or two till world growth resumes after the current crisis, or it may for some countries be a lost decade. It may even be that parts of the world will be convulsed by a descent into autarky, authoritarianism and violence, as happened in the 1930s, and that a depression will cause a great war. But so long as somewhere somebody is incentivised to invent ways of serving others’ needs better, then the rational optimist must conclude that the betterment of human lives will eventually resume.