The Lost Massey Lectures (3 page)

The instinct of the man from outer space has a great deal to commend it; he might be given a minor advisory role in either the United States or Canadian government. The distinction between the Communist and the non-Communist world is firmly grounded in the tradition of conventional diplomacy, the wounding recollection of Josef Stalin and the desire to show a negative reaction in the event of any future saliva test for loyalty. There are, certainly, differences between the Communist and non-Communist states, and it seems certain that this is a matter where one's relation to the society induces a certain measure of both vehemence and subjectivity. High Communist office holders, one senses, are more likely to emphasize the unique blessings of socialism than the average toiler in a factory or on a collective farm. Whatever the system, he belongs to the group that ends up working eight hours a day. And no one celebrates the values of capitalism so eloquently as the oil millionaire who has his taxes reduced by depletion allowances and capital gains unless it be the department store man who lives effortlessly on the dividends earned by his grandfather. But the similar reactions of the comfortable are not my case. I wish to argue that as much, perhaps more, of the behavior of people and nations is explained by their poverty or their well-being as by their political systems. To fail to see this is increasingly to misunderstand the world in which we live.

The first and most elementary effect of poverty is to enforce attitudes and behavior that make it self-perpetuating. Similarly the first effect of wealth is to allow the freedom of action that permits of the creation of more wealth. It has often been observed that very poor communities are intensely conservative—that, far more than the more fortunate, these people resist the change that is in
their own interest. Illiteracy, and the limited horizons it implies, is a partial cause of this; so is the inertia resulting from poor health and malnutrition. But poverty is an even more direct cause of conservatism. If there is no margin to spare, there is no margin for risk. One cannot try a new variety of wheat or rice that promises an additional twenty per cent yield if there is any chance that it is vulnerable to insect pests, disease or drought and thus in an occasional year might fail altogether. However welcome the extra twenty per cent, it is not worth the risk of not eating for a whole season, the consequences of which tend to be both painful and irreversible. Since there is a measure of risk in anything that is untried, it is better to stick with the proven methods—the methods that have justified themselves by the survival of the family to this time. The well-to-do farmer, by contrast, can accept some risk of loss if the prospect is for a greater gain. He is in no danger of starving whatever happens. Even within India the comparatively well-to-do Punjabis in the north are far more inclined to try new crops and new methods than the villagers in the poorer regions who live closer to subsistence. Needless to say, in the firm tradition of the fortunate, they attribute their progressiveness not to higher income but to higher intelligence.

But fear of loss is not the only cause of conservatism among the very poor. Any change is regarded with uneasiness—and also with reason. In our world, change is identified with new and better ways of producing things or of organizing production; it is an article of faith that the whole community benefits from the advance. If someone loses his job, he is told with great unction and some truth that his sacrifice is for the greater good of the greater number. As a result, to be against change is like being against God and perhaps worse for, of late, we have been more tolerant of religious than of economic heresy.

The experience of the poor community is with a very different
kind of change. Technical innovation is unknown; change when it has occurred has usually meant that some rascal more powerful, more ruthless or more devious than the rest has succeeded in enriching himself at the public expense. Change is associated with someone seizing land, exacting rents, levying taxes, provisioning an army or exacting tribute for his own benefit. In the language of my colleague, Professor A. O. Hirschman, the image of change is
ego-focused
.
²
This being the view of change, the instinct of the community is to resist it and to suspect even beneficial change.

These are the psychological effects of poverty; the biological consequences are equally profound. In all well-to-do communities, there is a strong tendency to limit the number of children in order to protect the given standard of living. Population increases with increasing well-being but never so rapidly as to threaten the improvement itself. Education, emancipation of women, the knowledge of birth control methods and the widespread availability of contraceptives all contribute to this controlled birthrate. In such communities, moreover, the available knowledge on infant care, epidemiology and public health is extensively applied. The life span may gradually lengthen from the development of new knowledge. It is unlikely to increase suddenly from the rapid application of existing knowledge.

In the poor country, things are almost exactly in reverse. If the standard of living seems already as low as it can go, there is no reason to protect it from further decline. And children will share the burdens of manual toil and, since old age pensions cannot be afforded, they are also a man's only hope for care in his old age. It is prudent to have as many as possible for, infant mortality being high, not many will survive. Nor is there much choice for neither
contraceptive knowledge nor contraceptives are available and—a somewhat neglected point—sexual intercourse plays a larger recreational role in the poor community than the rich. For the couple who come from the field to a hut devoid of newspapers, radio, light, even a comfortable chair, it may provide the day's only escape from a gray existence. To urge restraint is to leave very little in life.

But not only is poverty a strong inducement to procreation, modern medical science and public health research have provided a large reservoir of measures that reduce the death rate. Their application means a further sharp increase in population. This is one of the earliest effects of modernization. And in many countries this addition is to a population that is already massive. In this respect the problem of the countries now seeking development is unique. The industrial development of the United States and Western Europe was launched in countries of—by modern standards—almost negligible population. In 1770, on the eve of the Industrial Revolution, the population of England and Wales was not much over seven million. The United States seventy years later had fewer than twenty million. None of the western communities we now think of as developed had as many as thirty million when their industrialization began. India has now some 470 million and adds some ten or eleven millions—many more than the pre-industrial population of Britain—every year. Indonesia and Pakistan each have well over one hundred million. Poverty applies the greatest population pressure to those countries least able to absorb it.

I turn now to the effect of poverty on economics—on what is recognized by all right-thinking people as the queen of the social disciplines. One fact of economic life is common to capitalist, socialist and Communist societies, or for that matter Catholic,
Presbyterian, Pentecostal, Buddhist or Animist, and is not subject to controversy as between economists of any shade of color or opinion. This is that any purposeful increase in future production requires saving from current consumption. Only from such saving can the people be supported who are making the machines, building the factories, constructing the dams, digging the ditches or otherwise elaborating the capital which makes possible the increased future output. Saving can be by the highly regarded men of thrift who put a little something by for their children or their own rainy day, or by the rich who are under no great pressure to spend all they receive, or by corporations which plow back revenue before it ever gets into the hot and eager hands of those who might spend it and by governments which, by a variety of devices of which taxes are the most important, can restrict consumption and thus enforce saving by their otherwise profligate citizens.

But while there must be savings in all societies if there is to be economic advance, the difference in the degree of difficulty in getting savings as between the rich countries and the poor is so great as to be a difference in kind.

In the rich country, to refrain from consumption may be inconvenient, difficult or well beyond one's power of will. It rarely involves physical deprivation—hunger, exposure, pain. And a great deal of saving is automatic or a by-product of motives and preoccupations that have little to do with national progress. Thus, concern for personal security puts income into life insurance, pension funds, and the social security trust funds of governments. The business prestige that comes from heading a growing corporation pours earnings back into expansion. Recurrently our problem is to offset by sufficient investment (or by public or private spending) all that we are disposed to save from high levels of income; for if we fail to offset savings, income and output will
decline and unemployment will rise. The reduction in taxes in the United States in 1964 was part of such a strategy to offset the high level of savings—some induced by taxation itself—which we now get at a high level of income and economic activity.

Thus, saving in the rich country not only comes easily; it may be excessive. The country must invest these savings (or offset them with increased consumption) if it is to avoid unemployment. Economic progress, it follows, is something it gets more or less automatically in the course of preventing unemployment. Unemployment is the ogre which stalks the politician and which he bends every effort to exorcise.

Here we have the explanation of the remarkable course of economic events in North America and Western Europe since World War II. Although there have been variations in detail, in all countries there has been a large and well-sustained increase in output. This has far exceeded anything in earlier experience. Faithful to the vanity of politicians, and the economists who advise them, this excellent showing has been attributed in each case to the remarkably astute economic policies being followed. This has been so even though the policies avowed in different countries have differed by at least 180 degrees. West Germany brought off her economic miracle by (it is alleged) rigid adherence to free private enterprise. Norway did almost equally well by an intelligent application of the principles of socialist planning. France has done yet better in recent years, some suggest, by eschewing commitment to any principle. In fact, in all of these countries, as in the United States, comparative wealth made saving easy. Given this, and a policy of maintaining full employment, growth came with comparative ease. It would have required considerable determination to have failed.

The situation of the poor countries is sadly different. Here to forego consumption, as I have said, is to suffer pain and the pain is
not eased if the government enforces the saving through taxation. In the rich countries, the poor do little saving; in the United States only a negligible amount comes from those in the lower half of the income brackets. In the poor countries, nearly everyone is poor. And even the few who are rich may not be a very good source of savings. The landed feudal tradition of the well-to-do minority in South America and the Middle East is one of easygoing and often lavish expenditure. And finally, there is the exceptional visibility of the rich man. This, and his resulting insecurity, may cause him to invest his savings not in farms, factories and power plants, but in a numbered account in a Zurich bank.

This picture is not all black. India and Pakistan paid off and dispossessed their princes, rajas, zamindars and jagirdars—a company which had included some of the world's most conspicuous spenders. These spendthrift feudal classes were, in effect, put on a dole. And their industrialists, while they doubtless have some precautionary funds abroad, invest heavily at home.

Nonetheless the broad generalization stands. Saving in the poor country, on which progress depends, is painful to obtain and the amounts obtained, even painfully, are meager. As a result the economic advance which comes easily and automatically in the rich country comes at great cost and is wretchedly slow in the poor country.

On this somber note, I must end the first of these lectures. Next time I will begin with the obvious question which is whether, and to what extent, this painful shortage of savings can be eased by transfer from the countries where saving is easy and perhaps excessive.

In the last lecture I spoke of the effect of poverty on various facets of human behavior—of its effect in making people mistrustful of technological and social change and of its effect in making the savings, on which all economic advance depends, painful to obtain even in meager amounts. This latter is in striking contrast with the rich countries where modern economic policy consists, in very large measure, in designing policies that insure the use of all available savings. For if savings are not fully used, the result is unemployment. And unemployment, I noted, is the specter which haunts all modern governments and especially those that are taking a thoughtful view of an approaching election.

The obvious question, it follows, is whether savings cannot be transferred from the countries where they are abundant to those where they are so scarce. In the last century there was a substantial
flow of savings from the relatively rich countries of Western Europe to the Americas and later on to parts of Africa and the Far East. This was largely under private auspices; Canada and the United States were major beneficiaries. The Pre-Cambrian shield and the Canadian prairie were partially bridged by such savings. At least until recently some Englishmen (or their descendants) who supplied money to that monument to the eternal optimism of investors, the Grand Trunk Railway, were still hoping to be paid. All prophets of the commonplace, a remarkably numerous group whenever economic development is discussed, continue to call for a new flow of private capital from the rich countries to the poor. The chances that it will take place are very slight.