In the aftermath of the Great Depression and World War II, social democratic ideals including welfare, social rights and moves towards equality became the basis for the transformation of European and North American societies through governmental intervention in social and economic dynamics. Considering present US reticence to federal taxation and spending, it is hard to believe Franklin Roosevelt's New Deal. In the present crisis, the state of emergency is thwarting democratic debate to the extent that realist urgency, emergency and necessity are fast becoming the only currency of political debate, the only valid principles.
The economic policy of any government is one of the most politically charged elements of its portfolio. This should be an obvious point, but is not always fully appreciated by economists who deal primarily with data and, in the modern form of the discipline, through abstracted models. This point was also obscured for us all during the 2000s boom years when the rising tide seemed to lift all boats, and the great battles over economic policy appeared to be a thing of the past. Tweaks here and there to policy could be left to the technocrats and need not concern the electorate too much.
The decision to postpone the construction of the Keystone XL pipeline demonstrates that North America has not yet defined a workable compromise between competing demands to increase energy security, and reduce the negative environmental impacts of energy. The US$7 billion proposal by TransCanada to build a 1,700 mile pipeline from Alberta, Canada, to refineries in Texas has been delayed in the face of strong environmental protests and local opposition within Nebraska along the pipeline’s would-be route. The project, which has been strongly supported by the Canadian government, has now been pushed back until after the next US Presidential election.
Against the assertion that we live in financial times and that all policy, national and international, must yield to the commonsensical gods of finance, we must not forget that a lot is still dictated and informed by religious and political belief. To say that we are all animated by the same absolute truths and resulting interests is to forgo humanity, freedom and choice in favour of a single subjectivity. Navigating the new world order is about finance and trade, Foreign Office minister Jeremy Browne asserted at a recent Chatham House conference on foreign policy. Because we live in financial times, he reiterated for close to 90 minutes, Britain's international relations must focus on economic diplomacy. He went as far as arguing that a foreign policy based on the promotion of free trade is not a “zero sum game”. One is to understand that for the British government free trade will bring about greater freedom and promote “universal values” as a consequence of its resulting social dynamics.
The credit crunch and political paralysis in the western world has enhanced speculation about the future of China, a country which superficially seems to be doing so better than Europe or America. The headline economic growth rate in China in the three months to June 2011 was 9,5 per cent, against a figure of 0,2 per cent for Britain and 1 per cent in the US. It is little wonder that western politicians eyeball China’s trajectory enviously. Meanwhile, China’s growing economic weight has not only made it indispensible to solving global economic problems, but also seems to be translating into growing political and security influence as well. If one was needed, a reminder came recently with the launch of the country’s first aircraft carrier.
We all agree that development is a good thing, but how do we know if or when a given policy works? Poor Economics enters the debate by detailing how randomised controlled trials (RCTs) help us to evaluate microeconomic development policy, while simultaneously underselling the benefits of alternative methods. Nevertheless, the book is insightful and provides a more nuanced picture of the issues of poverty and development than is typical of the popular literature on aid and development.