Olympic bragging rights aside, does the relative economic and political power of the country you live in really make your life better or worse? Charles Kenny’s new book, The Upside of Down, makes the case that it really shouldn’t.
By any measurable criteria, he argues, people in developed countries—and most developing ones—today are wealthier, healthier, and have more opportunities available to them than anyone else in history. What we think of as American or European “decline” is really a matter of other countries catching up—something we should really be happy about. If a few smart policy fixes are enacted—an admittedly big if—Americans need not suffer from America no longer being the world’s pre-eminent superpower.
This week I spoke with Kenny, a senior fellow at the Center for Global Development, about inequality, parallels between the U.S. and Britain—the country where he grew up—and how importing people is easier than making new ones.
Joshua Keating: So your book comes out at the same time as a year of commemoration for the beginning of World War I, and the early chapters reminded me a bit of Keynes’ famous quote about the comfortable English gentleman in 1914 who could make a phone call from his bed in the morning and have goods from the four corners of the world brought directly to him.
You make a convincing case for why we should feel extremely lucky to live where we do at this moment in history, but am I wrong to worry that we’re all just arrogant Edwardians on the brink of global catastrophe?
Charles Kenny: The thing about 1914 is that it was a particularly avoidable catastrophe. We didn’t actually need to go to war. Most of the pressing issues could have been dealt with. And more importantly, the way that globalization works now is different than how it was then. If you look at what Britain was importing in 1914, it was foodstuffs and raw materials. From there on through the manufacturing process, it was all in-country. The same was broadly true of Germany and all the major powers fighting the war.
If trade was severely disrupted by war today, China’s economy would grind to a halt because a lot of what it does isn’t the complete manufacturing process, it’s some bit of a larger supply chain. That makes the disruption of trade much more damaging to an economy. So, for that reason and because China is just much more integrated into the global trade system, I think that China would have to think a lot harder about declaring war on somebody than the United States did in 1914. (And by the way, the United States was busy invading lots of places in 1914.)
I think the world just looks very different. Interstate war, for instance, hardly happens anymore. There isn’t one going on at the moment, and that just is a sign of a change.
JK: So what do you think is behind the perception that the United States is threatened by other growing powers?
CK: Lots of people have something to gain from threats. Eisenhower was right about the military-industrial complex. There are lots of people who make lots of money out of worrying.
Also, there are lots of well-intentioned people who worry because it's their job. If you’re in the national security system, your job is to worry about national security. If the national security threat is much lower than it was 50 years ago, that doesn’t matter. Your job is still to find the things we need to worry about. I just think we’ve gone quite far down the list of things to worry about.
JK: So do you think there’s a need for a superpower in the world? Is the world more secure with a hegemonic power in it?
CK: I do think the United States in the ‘50s, though it did a lot of bad things, did play a very generous role in setting up international institutions. But having said that, the last 20 years have demonstrated that the U.S. doesn’t always play the most useful role, though it’s been fairly hegemonic—take climate change.
And there’s something to the idea that the reason Europe was so peaceful in the 19th century was because of the balance of power. So I’m not sure the lessons from history are terribly clear. But going forward we’re actually going to have to mean all this partnership stuff rather than just mouthing it.
JK: So the big topic is U.S. politics at the moment is economic inequality, and there’s certainly a perception that globalization primarily benefits—if not the wealthiest 1 percent—at least the top 10 or 20 percent of the population. Is that perception fair?
CK: That kind of has to be true of the United States. If you look at what’s happened to the incomes of the poorest people in the United States, they haven’t moved at all, even as there’s been a lot of globalization over the last 50 years. I do think that’s a problem.
Globalization is an opportunity, but who benefits from it is largely a matter of domestic policy. It’s not that globalization causes inequality, it’s globalization with a lack of policies to make sure everyone benefits.
So, yes, we need training programs, and universal pre-K, and higher taxes on the rich. But globalization in and of itself should be a benefit if you manage it right. We haven’t managed it very well.
Maybe I should have talked about that more in the book. I’m not an expert on domestic policy, but some things seem so obvious that you shouldn’t have to be an expert, like, over time, if you reduce the tax rates on the very richest, they get richer faster. You don’t really need an advanced degree in economics to get that.
JK: Well one thing you do talk a lot about in the book is immigration. Last weekend we saw Switzerland vote for new restrictions on immigration and other countries are considering similar measures. Is there a danger of governments missing out on the benefits you talk about?
CK: Yes! One of the interesting things about the Swiss result is that if you look at the cantons with the most foreigners in them, they were the ones saying, “No, don’t do this.”
That was a deeply saddening vote. Switzerland’s a weird country. When it comes to economic globalization and finance, its impact is largely negative because of all these secrecy jurisdictions. But on migration, it was kind of a world leader and now it’s blown that. I think that’s a sign of this being a deeply divisive social issue rather than anything economic. Because again, around the world, every single study shows that the economic impact of migration is absolutely positive.
Governments are definitely missing the boat on this for very short-term political gains.
JK: So the book makes the case that even in the world’s poorest countries, we’ve seen dramatic improvements on things like public health and education. But we still are seeing a growing economic gap between the world’s richest and poorest countries. Doesn’t this bode poorly for global stability in the long run?
CK: Well in the last 10 years we’ve finally started seeing some convergence, but you’re absolutely right that there remain some countries that remain left out and are as poor as they’ve ever been.
Despite the grim decade in the West, the absolute gap between the richest and the poorest is as large as it’s ever been. That statement must be true for every year back to 1900 or longer. But if you look at global instability over that time, it’s gone up and down, but at the moment the world is fairly stable. Yes, there’s Syria, Congo, the Central African Republic, but in global terms it’s a remarkably peaceful time so I guess I’d say that an easy link between country-level inequality and levels of violence doesn’t fit terribly well with the historical record.
Of course, if you look at the gap in incomes between north and south of the Mediterranean, that’s causing lots of people to die horribly drowning as they try to make their way across. So I’m not saying there’s nothing there, but so far we don’t have strong evidence to suggest this will cause global conflagration.*
JK: The book makes the interesting point that the world is returning to a situation where absolute economic power is correlated with population size, after an anomalous period where small European countries enjoyed outsized wealth. Does this imply that the people who worry about falling birthrates and population decline in the developed world have a point?
CK: Well it would be intriguing to watch Luxembourg try to become the world’s largest economy!
If you worry about the absolute size of economies—and part of the point of the book is that you shouldn’t—then sure you worry about that. So you could 1) encourage more people to have babies, or 2) import more people. Importing people is a much more straightforward way of doing it. Encouraging people to have sex—the data isn’t particularly strong that we know how. Anybody who has a baby because they think they’re going to get a child support credit is nuts.
So I would be encouraging more migration if you’re worried about this. But as a parent, let me say that if the government wants to throw more money at me, I’m happy to take it.
*Correction, Feb. 13, 2014: This post originally misquoted Charles Kenny as saying global economic inequality was not a problem.