Transcription of interview with Angus Deaton on October 7, 2013.
Douglas Goldstein, CFPÆ, Financial Planner & Investment Advisor
Angus Deaton is a Dwight D. Eisenhower Professor of Economics and International Affairs at
the Woodrow Wilson School of Public and International Affairs and the Economics Department of Princeton
University.
Douglas Goldstein, financial planner & investment advisor, interviewed Deaton on Arutz Sheva
Radio.
Douglas Goldstein: Youíre coming out with a new book and you actually study a lot of
very fascinating ideas in terms of both west and the east. In todayís world where technology
is improved at a much faster pace at any time in history, we see there are huge gaps between
the living standards in the east and west between the United States and Africa. Can
you give us a little perspective on that?
Angus Deaton: I think those differences in living standards have been there for a very
long time and the technology is working on those and actually weíve seen a very large
decline in the gaps in some sense between some countries particularly between India
and China which have grown very rapidly at least until very recently compared with whatís
happened to Europe and United States where growth has been sort of slowing down and thatís
clearly to do with the technology that was originally developed in the west being transferred
to India and China so that India and China can catch up. Itís much harder to do things
for the first time than it is to adapt what someone elseís done to your uncircumstances.
So I think the very rapid growth in India and China is part of [inaudible 0:02:15] and
that has caused two and a half billion people of many of them to come out of very desperate
poverty and to grow much closer to the living standards that we have, those of us who are
fortunate to live in western countries.
Douglas Goldstein: So youíre saying that thatís actually helping at even the lowest
level. Itís not simply that India and China are becoming richer so some portion of the
population gets rich and everyone else stays poor?
Angus Deaton: Yes, itís helping across the board so itís certainly true. One of the
things I talked about in my book is that we donít know as much as weíd like to know
from the data about the living standards of different groups but I think thereís no doubt
at all but the growth in India and China even though itís not as quietly spread as we might
like is indeed very widely spread. Itís certainly not true to say that whatís happened in India
and China is that all the growth is con to a tiny minority and very little has gone down
and has benefited the really poor. Thatís a much more accurate characterization of whatís
happening in the United States.
Douglas Goldstein: So in the United States youíre saying the haves versus have nots
is greatly helping the haves but not the have nots whereas in China and India, the have
nots are really benefiting?
Angus Deaton: Yes even though the haves are probably benefiting a little more or might
be quite a bit more in some cases than the have nots. What we think is true in the data
in the United States is that almost all of the growth has come in 1%. In fact one very
interesting things in people like me is United States has grown so much faster than France
in the last 20-25 years but if you look at the bottom 99%, the United States has actually
growth less rapidly than France
Douglas Goldstein: Thereís a study that came out recently that in India there are 800 girls
born for every thousand boys born which suggest a huge future social problems and current
probably economic problems. I understand this is an anecdotal comment but do you have enough
data to really make statistical study of this?
Angus Deaton: Certainly parts of it for sure. India is a very paradoxical place because
it has grown fast enough that the World Bank now classifies it as a middle income country
which is a great mark of success. Thereís a whole chain of successes in India. Malnutrition
is getting much worse. You very rarely see the extreme symptoms of malnutrition among
children. More than 95% of Indians when asked say they didnít have enough to eat throughout
the last years that of course doesnít mean that a doctor or a professional would think
theyíre getting enough to eat. There are whole areas of India where women never had
a chance to go to school but their daughters are going to school.
So there has been this huge progress and there is an increase in living standards at the
very bottom. On the other hand, this is a country where a third of all the people in
the world who live under a dollar a day lived so itís still enormous desperate poverty
[inaudible 0:06:05]. These people are among the shortest people in the world. Half of
all children in India are chronically malnourished according to the World Health Organization,
much worse than in most places in Africa. You got this paradox where there has been
a lot of growth, has benefited the living standards of the poor, but thereís a long,
long way to go and the place is just not working all
that long.
Douglas Goldstein: Fundamentally, why do these gaps really exist?
Angus Deaton: The book is called the Great Escape and itís about people escaping from
horrible poverty, horrible deprivation and real ill health, but if you think of an actual
escape like people getting out of the jail or the analogy I used is the movie about a
German prisoner in war camp, some people escape and not everybody escape so all that paradox
really comes to me very uneven. When in the middle of the 18th century in Britain, health
started improving and income started improving in a sustained way for the first time in history,
that opened up an enormous gap between those fortunate countries and everyone else and
those gaps in some sense have never really closed. Progress is not like [eagle]. I think
thatís the nature of the animal. What happens is if someone has a great new idea, some invention
that benefits mankind, it benefits the better mankind, it doesnít benefit all and so that
[audio glitch 0:07:53] gap but that is not so bad if what happens that really matter.
Douglas Goldstein: Do you think that governments are really the right bodies to be trying to
help make these changes as opposed to letís say the Bill Gatesí of the world who do spent
huge amounts of money in trying to improve situations letís say in Africa?
Angus Deaton: Iím not sure if governments are doing a very good job. Iím not entirely
convinced that Mr. Gates is doing a really good job either. Iím a great believer in
the fact that you canít really grow someone elseís economy from the outside.
Douglas Goldstein: There are certain countries like Nigeria or Angola which itís really
going badly for them. Do these people have any chance?
Angus Deaton: For sure, they have a chance although Iím not sure if itís a great chance.
There are positive things there. The poorest country in Earth, the so-called Democratic
Republic of the Congo where all the things weíre talking about are there. There are
wars, itís just sort of a catastrophe, but if you look in the long run of history over
hundreds of years, there are places that were incredibly poor that became incredibly rich.
Iím old enough to remember reading economics books that say ìWhy is Korea so poor and
does Korea have any chance at all?î You live in a country where a group of people who were
seen as traders who became successful militarily, who wouldíve thought of that? These things
happened and have happened historically so yes, thereís always a chance.
Douglas Goldstein: Are these sort of programs actually capable of creating any substantial change?
Angus Deaton: I donít think they are capable of creating substantial long change. I do
think for sure that there are circumstances in which they are certainly helping the children.
The obvious example would be antiretroviral drugs for people who are HIV positive which
are keeping people alive who otherwise be dead and itís hard to again say that. On
the other hand, I think long-term change comes from within. I do think though that those
of us who live in the rich countries can do it to help those countries by stopping doing
things weíre doing now that actually hurt them.
Douglas Goldstein: Like what?
Angus Deaton: Arms trade for instance. Weíre selling arms to those countries on a huge
scale. The Secretive Commerce of the US seems to be largely an arm sell [van]. Some of the
treaties we make involving pharmaceuticals are not so great for poor countries. We have
subsidies on cotton for example which hurt farmers in Africa. Thatís nothing to do with
giving aid and if we could dismantle some of those things or rolling back a bit, weíd
be in much better shape.
Douglas Goldstein: Do you think that the trend towards outsourcing a lot of things like having
someone in India design your website and setting up call center is a good solution or a good
direction?
Angus Deaton: No, I think itís not the solution. Itís certainly good for the Indians and itís
good for those of us who consume those services. Itís not so good for inequality of United
States for example. Thereís a lot of people who are doing those sort of jobs before but
donít have jobs anymore. Thereís almost no technological change or any important thing
that benefits everybody it seem.
Douglas Goldstein: For someone in America who is hiring a person in India or the Philippines
and paying dollar to an hour, did you feel bad and say ìThis is really a 10 dollar or
20 dollar an hour work, what a great dealî or should you say ìIím really helping to
change someoneís life and bring him up.î
Angus Deaton: I think you should say both of those things. You have to think through
both of those things when you [inaudible 0:12:07] probably what youíre going to do, but if
you donít do it someone else will so that would be on argument you might take into account.
Douglas Goldstein: China has big ups and downs over the past 15 years. Can you give us a
sense of which direction they are heading now?
Angus Deaton: Like India and several other developing countries are suffering from the
unwinding of the long run consequences of the great recession. I worry a lot about China
because itís not a democratic country. I think the leadership and the equilibrium that
exist there right now depends a great deal on economic growth and if that economic growth
were to falter for a large number of years then that would threaten leadership and who
knows what the leadership would do. I write in the book about the great famine of 1958
in China which was largely a manmade famine and killed 30 upwards million people which
was a politically made famine, mostly attributable to the [enter] of Mao Zedong. Iím not sure
if leadership in China is that different now from what it was then so I think thereís
great danger there.
Douglas Goldstein: How can people learn more about your work and your book?
Angus Deaton: My book is called the Great Escape: Health Wealth and the Origins of Inequality
and itís available in all good bookstores including Amazon.com.
Douglas Goldstein, CFPÆ, is the director of Profile Investment Services and the host
of the Goldstein on Gelt radio show (Monday nights at 7:00 PM on www.israelnationalradio.com.
He is a licensed financial professional both in the U.S. and Israel. Securities offered
through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA. Accounts carried
by National Financial Services LLC. Member NYSE/SIPC, a Fidelity Investments company.
His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered
at: www.profile-financial.com (02) 624-2788 or (03) 524-0942.
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