Review: Economic history makes a happier return
By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It is easy to tell grim stories about the world economy. A billion people still live in desperate poverty. The world’s rich are pulling further away from the poor. Many developed economies are still in a rut, five years after a financial crisis. In “The Great Escape”, Angus Deaton provides a more optimistic, and much more accurate, narrative.
The Princeton economics professor offers a helpful mix of statistics, explanation, analysis and anecdote. He starts with the tale of his own family’s five-generation transition from impoverished Yorkshire agricultural labourer to American hedge fund manager. Expand that example by a factor of a million and you have the economic history of much of Europe, Japan and North America. Magnify by the billion and you get the likely future trajectory for most of the world.
Like most development economists, Deaton is most comfortable with numbers, particularly levels of GDP and GDP growth rates. In places, a more qualitative discussion might have been more persuasive. What is important is not whether a poor country’s GDP is more accurately described as 20 or 40 percent of the U.S. level, but whether the people there are well fed, housed and educated. Yet his graphics and statistical explanations are clear and his technical discussions are accessible.
Deaton dedicates almost half the book to the history of health. The numbers he deploys are illuminating and his digressions on various professional puzzles bolster what amounts to a great story. As he shows, there have been massive improvements in health in rich and most poor countries. The improvement, moreover, shows no sign of stopping.
The author is clearly worried by the increase in global inequality that shows up in GDP calculations. He might have taken more comfort from the spread of the most important products of industrial prosperity – clean water, good food and basic goods. Deaton seems only intermittently aware that inequality in adjusted cash income is quite different from inequality in enjoyment of the fullness of economic life.
“The Great Escape” sometimes seems to try to be gloomy. The historical facts Deaton presents are undoubtedly encouraging. Human ingenuity has solved so many problems that were once considered intractable. No wonder that after admitting the inevitability of “bad things”, Deaton concludes the book with modest but firm optimism: “I expect those setbacks to be overcome in the future, as they have been in the past.”
In many ways, the best chapter of the book is the last. “How to help those left behind” is a thorough and thoughtful condemnation of foreign aid. The basic arguments – that direct aid mostly does not help and often makes bad governments worse – are hardly new, but they are presented succinctly, fairly and clearly. Foreign aid, he says, is largely a salve for the donors’ consciences. There are much more effective ways to help equalise the world economy. For example, Deaton suggests subsidies for the development of drugs against such diseases as malaria, which mostly plague poor people. His agenda also includes a more generous attitude to immigration.
As the title of his book suggests, Deaton sketches out the story of how many people have escaped from poverty and early death. It is a powerful tale. In Deaton’s hands, the all too frequently forgotten accomplishments of the last century are given prominence that is both refreshing and welcome.