Growth/Redistribution for Poverty Solution

Growth and distribution for poverty alleviation
Hello, IPErs
Some days ago, Emilio wrote to the list:
the case with neo-liberals, or neo-classical grandchildren, is that they
are not able to address properly the theme of distribution in economics so
they reduce the whole social problem to a question of growth, which in many
cases is also needed, but is only part of the picture. [... etc.]

And Julio Huato replied in a letter (I mix arguments to reply in order):
"Marx's view seems reasonable to me: Significant changes in the income
distribution patterns under capitalism over time are constrained by
productivity growth and, as said above, the pre-existing patterns of wealth
distribution. ..... But that's not all. Marx did consider a way to improve 
the living conditions of direct producers under capitalism without eroding 
profitability (capital's
driving force): "relative surplus production."

Chaves answer:
I am not a marxologist, but read carefully in the past, not one, but several 
times, the chapters in Capital, Vol.1 where Marx introduced the concept of 
relative surplus. What I found is that Marx starts from some initial firm 
conditions with its own productivity, then he increases productivity, let's 
say to a double value, and computes an artificial virtual new equilibrium in 
which the whole new production is sold at the same price. This is a gross 
mistake, IMO, and it is the origin of many problems faced by Marx later when 
he speaks about technical productivity, trends of rates of profit, relation 
surplus rate to organic composition, etc.
When a sector doubles productivity and puts it in the market there follows a 
process of readjustments that may come accompanied by lower prices, changes 
in competing landscape, sector underproduction, old machines and 
techonologies sold to peripheric nations as "investment", etc. As far as I 
know neither Marx, neither you have ever checked that assert with any 
concrete measured case.
However, absolute surplus value and surplus-rate may be easily measured in 
concrete cases, national or global accounts, and those concepts are really 
valuable ones for analysis.
In summary, I can not follow your point on distribution from your 
argumentation. I just read it and get my private conclusions.

Julio also said:
Then -- ultimately -- "properly addressing the theme of distribution" 
requires a subversion of the foundations of capitalism. But then the 
question is: When is such a subversion possible and sustainable? Are such 
conditions in sight, say, in Latin America? "
The main question about patterns of distribution is a statistical subject. 
Once you understand what Pareto's distribution mean in economy and its math 
implications, then we might discuss about how to subvert the poor theories 
held by Keyness, neoclassicals, and neoliberals around employment and 
distribution. Marx never had enough econometric info about it. Given that 
Julio knows where to find my papers on the subject since 1996, it is only a 
question of time.
Curiously, neoclassical concept of macroeconomic equilibrium is rooted on 
the concept of Pareto's optimality, which says that once equilibrium is 
obtained in market, distribution obtained is unique and optimum, thus any 
change on it will conduce to an inferior outcome. This is like to say: 
market is perfect, gets equilibrium, defines prices, and the best possible 
attainable distribution, so let's forget about last one. Quite an arbitrary 
step, but that is the way they handle it.
I think that Keynes theory and proposals centered on state policy, 
investments etc. is also centered on growth, showed at least some concern 
for unemployment, but never for the pattern of distribution, neither for the 
problem of workers exploitation. About Keynes economics I have serious 
reserves, it was much better for peripheries than today's neoliberal 
globalization, mainly because unions and peasants fought harder then. It 
also came with imperial atacks on small nations, imposed extraterritorial 
laws, huge militar budgets, support to tyrans, elite's corruption, etc.

About the subversion of the foundations of capitalism, conditions in sight, 
and possible regions, I only think that there are good reasons to believe 
that capitalist economics is approaching to its most serious theoretical 
bankrupt, if not yet, eventhough they are the real power. Given that I am 
neither a determinist of history, neither an strategist or leader, neither 
have a crystal ball, all I know is that we have to change at a global scale 
because what it's at stake is simply human life as a species.

Then Julio quotes David Romer saying:
"The welfare consequences of long-run growth swamp any possible effects of 
the short-run fluctuations that macroeconomics tradition! ally [i.e., models 
that address stabilization issues] focuses on.  [...] If real income per 
person in India continues to grow at its postwar average rate of 1.3 percent 
per year, it will take about two hundred years for Indian real incomes to 
reach the current U.S. level. If India achieves 3 percent growth, the 
process will take less than one hundred years. And if it achieves Japan's 
average growth rate, 5.5 percent, the time will be reduced to only fifty 
years."

Emilio answer: In my opinion the quotation is just a mathematical excercise 
based on average income, and growth trends, not on patterns of distribution. 
Ask Roemer about his intentions. I do not believe that India people wish is 
to get US standard of life and culture. It is ecologically and culturally 
dangerous.  My general thesis is that we may need a combination of selective 
growth with redistribution through state, or globally applied policies. I 
may also build math excercises like: the world year product or income of 
2000 was around 36 trillion US dollars for its 6 billion people; if for some 
reason the richs and poors decide to produce the same next year and 
distribute it as a statistical uniform distribution instead of its paretian 
shape, then, in only one year, each inhabitant of the world would have an 
income of 6000 dollars per year, much bigger than the 365 dollars that 
define the missery line, so poverty and hunger might be solved in just one 
year.


Sorry if this was a too long post to the list. So I better stop here. OK, 
Julio. You raised important topics that deserve further analysis. Thanks.
Regards, Emilio



Emilio José Chaves
Address: Edif. Los Héroes Apto. 604
               Av.Panamericana, Pasto (N)
               Colombia, S.A.
Tel.      +(92)7222889
email:    chavesej@hotmail.com

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