Onward and Upward

Why economics -- the dismal science -- is far too pessimistic when it comes to analyzing the amazing gains in poverty eradication.

On Feb. 29, the World Bank came out with its latest estimates on global poverty. They suggest incredible worldwide progress against the scourge of absolute deprivation. In 1981, 52 percent of the planet lived on $1.25 a day or less according to the World Bank's estimates; today it is around 20 percent. In 1990, around 65 percent of the population lived on less than $2 a day; by 2008 that number had fallen to 43 percent. This is not just a story about China -- though 663 million people in that country alone have climbed out of poverty since the early 1980s. Poverty has been declining in every region, and for the first time since the World Bank began making estimates, less than half of the population of sub-Saharan Africa lives in absolute deprivation.

That may seem like news too good to be true, but in fact it's probably too pessimistic. First off, many experts argue that the World Bank's poverty numbers are too high -- not due to any conspiracy, mind you, but just because poverty is very hard to measure. Calculating a global poverty rate takes two steps: first, using surveys to calculate how much households consume a day in their local currency (cedis in Ghana, rupees in India, and so on); second, trying to work out how much a cedi or rupee buys you compared with what a dollar buys in the United States -- which is known as a currency's purchasing power. Neither step is simple. In respect to the purchasing-power question, working out how much a cedi buys compared with a dollar is not a simple case of going to the bank to look at the exchange rate. As anyone who has traveled in a developing country will know, your dollar goes a lot further in a poorer country. (Try buying noodle soup for 60 cents at a New York City restaurant.) Princeton University economist and purchasing-power guru Angus Deaton argues that the price data used by the World Bank to measure income in China, in particular, is too high -- making people there appear poorer in dollar terms than they really are. If that's the case, global poverty is even lower than suggested by the World Bank's latest numbers.

Similarly, economists Xavier Sala-i-Martin and Maxim Pinkovskiy of Columbia University and MIT, respectively, argue that the official poverty numbers for sub-Saharan Africa are far too pessimistic. They suggest that, on current trends, sub-Saharan Africa will halve the proportion of people living in absolute poverty between 1990 and 2015 -- a stronger forecast than the World Bank's estimates.

A second reason to think that the World Bank's new poverty estimates are too conservative when it comes to measuring the quality of life of the world's poorest is that the figures only measure private consumption of available goods. There is more to the quality of life -- or even a full measure of income -- than private consumption, and what people can buy changes over time. For example, in 1991, about 44 percent of children in the world's low-income countries (with gross national incomes under $1,000 per capita) completed primary school, according to World Bank statistics. A little more than half were vaccinated against measles. Today, about two-thirds of children in those countries complete primary education, and nearly four-fifths are vaccinated against measles. People not only have more money, but thanks to improved government services, they have more education and better health too.

Meanwhile, China this week probably surpassed the 1 billion mobile-phone subscriber mark, with India on about 900 million. Two decades ago, the vast majority of people in both countries lived some distance from a fixed-line public phone, at best. But now, across the developing world, people are able to stay in touch with families, call for help, find out wholesale prices to sell their wares at market, and even get cash on demand -- all advances that were unimaginable just 20 years ago. When it comes to mobile phones, the consumption-based poverty statistics only measure how much people spend on phone subscriptions and making calls. That significantly underestimates the impact that communications services have had on the quality of life of poor people worldwide. And it's not just the mobile phone. A lot of other technologies have rolled out as well: new vaccines and pills, more efficient engines, bed nets, better batteries, solar lanterns -- the list goes on.

All this good news in the march of global progress against poverty also has implications for the future. Not least, it suggests we should be far more optimistic than the average development economist about the likelihood of continued progress. Some of the most common tales told about development in economics classes involve the dead weight of history permanently depressing growth prospects across low- and middle-income countries. Slow-changing institutions -- things like culture and legal systems -- are now seen by many economists as the key to national and regional wealth. And a number of innovative, informative, and influential papers over the past few years have pushed back the date at which the current inequitable distribution of world income was determined by the impact of historical circumstances on those institutions.

Twelve years ago, Daron Acemoglu, Simon Johnson, and James A. Robinson argued that places where colonists could survive without succumbing to a range of tropical diseases developed into colonies with equitable institutions that fostered growth. Conversely, colonies that were a serious health hazard to European adventurers lent themselves more to smash-and-grab tactics -- whatever institutions were created were bent only on extracting wealth, which left unequal and underdeveloped economies in their wake. In 2010, economists William Easterly, Diego Comin, and Erick Gong suggested that the outcomes fostered by the colonial era were the result of earlier technological and social factors that determined who was colonized and who did the colonizing. Their paper in American Economic Journal: Macroeconomics suggested the wealth of nations was largely determined in 1000 B.C. by factors such as who had writing and iron tools at the time. Enrico Spolaore and Romain Wacziarg upped the ante further, suggesting it really all came down to prehistory. They argued in the Quarterly Journal of Economics that it has to do with the migration of humankind out of Africa -- countries with a comparatively short time elapsed since their populations' last common ancestors are also closer in terms of modern incomes. Spolaore and Wacziarg suggest this relationship is due to shared, inherited, cultural values that underpin economic institutions. So, Iceland and Norway, where everyone in both countries can trace lineage back to Eric the Red, have closer incomes than Iceland and Tonga (despite sharing a strong seafaring heritage).

But the evidence of widespread global progress over the past 10 years suggests those tales can't be the whole story. They might do a good job at explaining why some countries are richer than others today. But even poor countries are getting richer, fast. So the institutional impediments to growth must be less overpowering than usually suggested. Poor countries aren't doomed to be poor forever because the ancestors of their current populations made the mistake of hanging out in the Rift Valley a little too long.

And a linked cause of pessimism -- the poverty trap -- also looks weaker after the past 10 years of global progress. Poverty traps have been a subject in over 16,000 academic papers since 2010 alone, according to Google Scholar. If a cycle of low incomes leading to limited investment in education -- or health or roads -- in turn leading to low growth was a major factor in development, every place that was poor would remain poor. But that's simply not the case anymore, and thus the dreaded traps must be fairly easy to escape if the entire world is seeing less poverty. So economists should cheer up: The dismal science has got far too dismal on the subject of development.

Daniel Berehulak /Getty Images


The Return of the King

Why Europe needs another Napoleon.

Nearly 200 years after his death, Napoleon Bonaparte is finally getting the greatest honor our age can bestow: his own theme park. Napoleonland -- stop laughing -- was concocted by a former French minister to rival Disneyland in its immersive fun and totemic cultural status. Shopping! Dining! Re-enactments of the Battle of Austerlitz! Not a bad rehabilitation for an all-conquering megalomaniacal exiled emperor.

Truth be told, there's a serious lesson to be found in the fact that Europe will soon have a Napoleonland -- but never, for instance, a Hitlerworld. Unfortunately, Anglo-Americans are apt to unfavorably compare the head of the First French Empire to the leader of the Third German Reich. "A country which can still partly revere such a man surely has a problem," says British journalist Stephen Glover of France and Bonaparte. "We would probably be wrong to equate Napoleon with 20th century totalitarian monsters such as Hitler and Stalin, but he was nonetheless a new sort of terrifying leader" with what Glover calls a "destructive will." Historian Victor Davis Hanson does come close to equating the two, associating "the nightmarish spread of Napoleon's Continental System and the Third Reich" with the longing of "self-described European 'visionaries'" to unite Europe's peoples "under one grand -- and undemocratic -- system, willingly or not." And Claude Ribbe, a member of France's own human rights commission, even blasts Napoleon as genocidal.

But while both Napoleon Bonaparte and Adolf Hitler possessed hegemonic ambitions and left ruin in their wake, the contrasts between the two are rich with significance for Europe's future. Hitler, a plebian and civilian, sought to absorb Europe into a political party, not extend it with an empire. Bonaparte, a professional soldier born to Genovese nobles, spread his armies across the continent in a quest for political unity, not racial Lebensraum.

We'd do well to contemplate why the closest modern Europe has ever been to such unity is when it was Napoleonland. As the European Union's paltry political authority heads for the funeral pyre, German economic strength is still no match for the unifying power of historically French ideals and the relative legitimacy of French political leadership.

Yet influential Western commentators are holding fast to the idea that a veritable Fourth Reich of German efficiency is the only way to save Europe. Pro-German prognostications hold sway. In Niall Ferguson's imagining of Europe in 2021, the United States of Europe, which has replaced the EU, is dominated by Germany from a Viennese headquarters. "German officials talk excitedly about a future Treaty of Yalta, dividing Eastern Europe anew into Russian and European spheres of influence," Ferguson writes. Critics call new Europe the "Wholly German Empire." It's Deutschland über alles again, only economics is king.

Hanson, for his part, proclaims that the German national character will guarantee its future dominance. "Germany's new European order is clear: If you wish to live like a German, then you must work and save like a German," he writes. "Take it or leave it."

The prospect of Europe's German future is not only an Anglo-American dream come true -- it reassures all Westerners that their economic system isn't fundamentally broken. Those sturdy Germans show that if you play by the rules of prudence, you can sidestep financial apocalypse.

But that's a dangerously optimistic view, as Walter Russell Mead has cautioned. "The German political establishment," he warns, "seems willing to destroy Europe to avoid telling German voters the truth about how stupid it has been. Germany's leaders are doing everything possible to conceal the ugly truth that the mistakes that the German banking and regulatory establishments made in underwriting Club Med debts are as much a cause of Europe's woes as spendthrift Greeks."

Sweeping these embarrassing facts under the rug does more than reinforce the lie that there are merely economic solutions to what are deeply political problems. It misleads us into believing that the German regime created by the Allies after World War II has the future of Europe safely in hand. A few institutional tweaks to the European Union's treaty system cannot forge the legitimacy needed to get Europe's house -- or head space -- back in order.

The fact is, it will take more than economic arrangements to rebuild a shared political identity from the rubble of the EU. As Clifford Orwin rightly observes in his pessimistic take on the EU's future, "Europe remains a meddlesome abstraction embodied in an all-too-concrete bureaucracy."

That's where Napoleon and France come in. Orwin also argues that Europeans have no sense of shared identity: "Nothing in their modern history supported the elevation of their political allegiances to a continental plane." But Bonaparte proposed, and many accepted, just such an elevation of Europe's political allegiances to a continental plane. Even after he fell, the Germans opted not to expunge the Napoleonic Code he left behind. Just last year, Poles restored a commemorative monument to Bonaparte in Warsaw that reminds us -- along with another statue that still stands in the courtyard of Milan's city art gallery at the Palace of Brera -- of the Emperor's enduring reach. His conquests came and went, but Bonaparte's ability to focus the explosive popular power unleashed by the French Revolution and express it as something grandly European has left an indelible mark.

The French Empire fell not because Europe's peoples rose against him, but because Napoleon chose to march on Moscow instead of allowing Europe's new and greater unity to sink in. He gambled the continent and lost. And now, as a very different kind of gamble has Europeans fearing that all, yet again, will be lost, the importance of shared values that are more than platitudes grows.

Today, if Europeans wish to find concrete support for the values that unite them, it's France or bust. The usual alternative, Britain, is retreating from European politics -- reducing its military profile and leaning heavily on France in the process. Both liberal interventionists like U.S. President Barack Obama and wary conservatives gaining influence on the right are ready to shift America's military center of gravity decisively away from Europe. The limited U.S. intervention in Kosovo was controversial when America's strength and world domination were unquestioned. Today, there is no stomach for the deeper, more difficult interventions that will have to come in any European country where anti-austerity unrest spirals out of control.

Disillusionment with democracy-promoting interventions has led many Americans to warm to views associated with foreign-policy realism, such as relying on hard power sparingly applied. The concept of soft power, however, remains relevant with Europe, where many long for a political authority able to support the force of arms with something more reassuring than realpolitik. If disorder spreads across the continent, will struggling Europeans look to German history, German ideals, and German heroes? Nein. Any German claim to soft-power political leadership over Europe is not just too soon -- it's too thin. That's unlikely to change for ages. As Hitler and Bonaparte both demonstrated posthumously, collective memory stubbornly endures.

France's claims to soft-power preeminence, by contrast, are crystal clear and deeply intertwined. At a time when centuries-old monarchies and feudal aristocracies ruled the continent, the French revolutionary motto was a strange and frightening war cry. Today, it is better described as the common sense of the European people. Instead of a militant abstraction, it's a statement of the peaceable principles Europeans largely live out in real life (especially relative to their neighbors). Europe today is more a product of France's political creed than of any other nation's. In Europe, there is no closer cognate to America's "We the People" than "Liberté, égalité, fraternité" -- a phrase that captures France's attitude not only toward the French, but toward Europe and the world.

Uniquely, France has maintained this deep reservoir of soft power without having run short of hard power. It's the only nuclear-armed state east of Britain and west of Russia. It has more aircraft carriers than Britain, which is working to redesign its own to mimic the systems used by the French. And it's willing and able to intervene quickly in its near abroad, as in Ivory Coast, and take the lead in international military operations, such as in Libya. An internal high-level 2008 review of French military policy led to NATO reintegration on the one hand and a grand strategy devoted to "freedom of action" on the other. Today, Paris is at once more focused on the continent and more attentive to meeting the challenge of global threats. Intentionally or not, this strategic turn toward a non-isolationist Eurocentrism reflects a growing authority behind France's power position.

The precarious weakness of the EU now makes plain that European unity is to be found not in abstractions or bureaucracies but in the leadership of particular, flesh-and-blood human beings. When the alternatives to French leadership are either nowhere men dispatched from Brussels or bean-counters in Berlin, does French pride -- relatively more generous, powerful, and legitimate -- seem so outrageous?

If Europeans answer that question seriously, they just might be inspired to make more of Napoleon's legacy than a tourist trap.