The Paradox Of Wealth And Poverty

Mapping The Ethical Dilemmas Of Global Development

Daniel Little

• Publisher: Routledge
• Year: 2018
• ISBN:
  9780429975653
• Edition: 1
• Topic: Philosophy
• Subtopic: Philosophy History & Theory

We live in a time of human paradoxes. Scientific knowledge has reached a level of sophistication that permits understanding of the most arcane phenomena and yet religious fundamentalism dominates in many parts of the world. We witness the emergence of a civil, liberal constitutionalism in many regions of the world and yet ethnic violence threatens the lives and dignity of millions. And we live in a time of rapid economic and technological advance and yet several billions of people live in persistent debilitating poverty. In this book, Daniel Little dissects these paradoxes offering the clearest perspective on how best to approach international development.Using both empirical and philosophical approaches, Little provides a schematic acquaintance with the most important facts about global development at the turn of the twentieth century. In doing so, he explores what appear to be the most relevant moral principles and insights that ought to be invoked as we consider these facts and then draws conclusions about what sorts of values and goals ought to guide economic development in the twenty-first century.

1
Welfare, Well-Being, and Needs

ECONOMIC DEVELOPMENT IS AIMED AT improving the well-being of the people of the earth. But how do we understand the notion of human wellbeing? What is involved in improving a person's welfare? What is a human life, lived well? Such questions are foundational. Without compelling answers to this set of questions, we will have no convincing basis for advocating one form of economic development or another or assessing the obligations and rights that the various agents within the global economy have. Answers to these questions should serve to define the most fundamental priorities that ought to lead our thinking about economic development.

This chapter, then, focuses on these crucial questions: What is the nature of the good human life? What is it about human life that deserves our moral attention? What are the features of human existence that should guide the design and selection of public policies? Economic development is intended to increase the productivity and wealth of the many nations of the world. And the increase of the world's wealth in turn is expected to improve the life circumstances of the individual men and women who live within these nations. Economic development should result in improving the quality of life of the people affected; it should enhance the ability of all persons to achieve their full human potential; it should establish the conditions of free human expression and development. What is the most adequate way of characterizing the human good that we are aiming to advance through economic development policy?¹ How can we conceptualize the value of the human life lived well? Is it possible to assess the effects of various policies on the human good? What, fundamentally, is "quality of life"?

Several important paradigms for thinking about the human good have competed in debates over economic development. There is a sophisticated theory of social welfare that identifies the human good in terms of individual utility and preference. There is an influential literature within development economics that gives chief emphasis to the concept of basic human needs. And finally, there is a larger perspective on the good human life that emerges from an important philosophical tradition and that emphasizes the free, flourishing human person as the key to our thinking about the human good. The ultimate good of economic development, on this approach, is that it establishes the conditions under which persons can freely and fully develop their human capabilities. These frameworks can be classified as "subjective" (focusing on a feature of human psychology or preference) or "objective" (focusing on external or material factors that are thought to contribute to the good human life).

It is important for us to address the issue of the nature of the human good because that issue defines an important part of the large question of concern in this book—what factors or principles shape the moral orientation of economic development policy and process? What is economic development for? The assumptions we make about human well-being will have a significant effect on the priorities that we attach to various choices within development policy. If we conclude that there are intrinsic goods in play in the process of economic development, then it is natural to formulate a principle along the following lines:

• Economic development policy ought to be constructed so as to maximize the intrinsic good of development (welfare, well-being, human perfection, the satisfaction of human rights, the satisfaction of basic needs, and so forth).

Such a principle would serve as only a part of a full theory of the ethics of economic development because it is likely that principles of justice, equality, fairness of process, or other intrinsically important moral issues need to be taken into account as well. But it would be an important step forward because it would imply judgments along the following line:

• Absent countervailing moral considerations, the fact that policy A creates a greater sum of intrinsic good than policy Β is a compelling reason for choosing A over B.

In this scenario, then, A is morally preferable to B.

The Conception of the Person

How can we best investigate the conception of the good human life that ought to guide public policy (and economic development policy in particular)? How can we arrive at a principled resolution of the disagreements among theories of welfarism, basic needs, and human capabilities? Each of these theories corresponds to a conception of the human person—the assumptions that we make about what constitutes a good human life. The most convincing philosophical arguments that we can bring to bear on this set of issues will result from asking the more fundamental question: What is a human person? And which theories of the person are most compelling when fully articulated?

It has been observed that ethical theories almost always make presuppositions about the nature of the person, the nature of a good human life, and the nature and function of society.² Sometimes those presuppositions are explicit, and sometimes they are taken as unspoken assumptions. We can shed light on the adequacy of a given theory of the human good by focusing on these underlying assumptions and the fullness of the representation of the person in society that they offer. For example, an ethical theory that presupposes inherent racial inequalities would for that reason appropriately be challenged—even if the presuppositions are obscure in the explicit principles and findings of the theory. So let us examine the welfarist, basic needs, and capabilities theories in light of the theories of the person that they presuppose.

The Welfarist Model

A standard answer to the question—what is the human good?—underlies most economic reasoning. This response holds that economic policy should be designed to maximize social welfare and that social welfare is a sum of the achieved utilities of a group of individuals. Individuals are able to experience pleasure and pain, they are able to experience happiness and satisfaction, and they have preferences about states of the world. Individuals are better off with a greater balance of pleasure over pain, a higher level of happiness and satisfaction, and a greater satisfaction of their preferences. It is sometimes thought that the welfare theory comes close to being a direct logical or semantic implication of the very concept of "personal well-being," along these lines: Outcomes produce different levels of happiness in the individual. The individual knows what makes him or her happy. The individual prefers the outcome that makes him or her more happy. We can therefore infer that if the individual prefers O₁ to O₂, then he or she is better off when O₁ occurs; thus, bringing about O₁ instead of O₂ has the effect of improving his or her welfare or well-being. Consequently, satisfying more of the individual's preferences improves the individual's welfare and makes him or her happier (than would otherwise be the case).

The welfarist or utility-based approach faces a variety of substantive problems, but it is a simple theory. It proceeds on the assumptions that each individual's happiness or utility can be represented as a single quantity (a utility function); that it is possible to aggregate individual utilities into a measure of social welfare; and that the goal of economic policy is to maximize social welfare.³ Utilities are sometimes interpreted in psychological terms, but the problem of establishing a basis for interpersonal comparison of subjective utilities has led economists and philosophers to understand the theory of utility in terms of the satisfaction of consumers' preferences (Elster and Roemer 1991), According to the social welfare approach, social policy ought to be directed toward maximizing the aggregate utility of society (or possibly the average utility of society).⁴ The individual is regarded as a "vessel" that can be filled with more or less utility, and the goal of policy is to permit individuals to achieve a maximum quantity of utility, in the aggregate.

To assess competing policy choices, we need to be able to measure the effects of alternative choices on the overall welfare of the entire group. The theory of utility and preference as a conception of individual welfare can be applied fairly directly to the topic of social welfare (that is, the welfare of a group of individuals). If we can solve the problem of interpersonal comparisons of utility, then we can regard the welfare of the group as the sum (or average) of the utilities of individuals. If we regard this problem as unsolvable, then we can measure the group's welfare as the full set of individual utilities and preferences. On the first approach, the "best" policy is the one that creates the greatest total utility for the group. On the second approach, we also regard the welfare of the group as a composite of the welfare of the individuals, but because the individual utilities are not comparable, we must provide an accounting that keeps them distinct but still permits comparison of the effects of alternative policies.

This problem brings us to the crucial concept of a "Pareto improvement" of a policy on a group of persons. Intuitively, we can observe that the two outcomes O₁ and O₂ may have different effects on different members of the group. If O₁ is universally preferred to O₂, then we can also conclude that the group is better off with O₁. But what about the more common instance where some but not all prefer the first option and some but not all prefer the second option? Economists introduce the concepts of Pareto improvement and Pareto optimality to handle this typical problem of defining social welfare without interpersonal comparison, O₁ is said to be a Pareto improvement over O₂ just in case at least one person prefers O₁ and everyone else is indifferent between the two choices. A policy incorporating O₁ improves the welfare of the group, in this scenario, because it leaves at least one person better off and no one worse off. An outcome is a Pareto-optimal outcome just in case no remaining Pareto-improving choices can be made.

It is important to notice just how weak the concept of Pareto optimality is. It does not correspond to a more general notion of a social optimum—an outcome best for the group as a whole, all things considered or "the common good." This is true for several important reasons. First, the process of adjusting policy through a series of Pareto-improving steps is highly path-dependent; the outcome depends on which improvements were adopted early in the process. So it is entirely possible that there are outcomes that are manifestly better for the group as a whole but cannot be reached through Pareto-improving steps. But more fundamentally, the framework of Pareto optimality is deeply insensitive to issues involving equity in the distribution of resources. On intuitive grounds, a distribution of income that assigns Sally 10 units and Bill 1 unit is inferior to one that assigns Sally 9 and Bill 6. But there is no Pareto-improving pathway from the first outcome to the second, since Sally is less well off in the second scenario. (The second scenario would be preferred by a utilitarian because the total utility is greater in that scenario.)

A final issue that is relevant here concerns the concept of cost-benefit analysis. It is recognized that various actions or policies improve the welfare of some persons and harm the welfare of others. Consider the situation of Bill and Sally, and interpret the units as income. For vividness, suppose that the economic circumstances are that Sally owns two sewing machines and Bill owns none; each derives income from his or her labor and tools. The total income of this small society would increase significantly with a redistribution of the sewing machines, and Bill would in fact be able to compensate Sally for her lost income as a result of the redistribution. So Bill should be able to make an offer to Sally involving a transfer of the second sewing machine to him and a transfer of some quantity of income from him to Sally—say, 2 units. With the resulting distribution, we find Sally with 11 units of income and Bill with 4 units. Each has improved his or her welfare. We can now generalize the example as an exposition of the logic of cost-benefit analysis of competing policies Ρ₁ and P₂. Suppose that neither is a Pareto improvement over the other. To perform a cost-benefit analysis of the policies, we need to estimate the incomes created by the policies for all members of the group and then ask whether the gains of the winners in one policy or the other suffice to permit them to compensate the losers. If so, then the policy could result from a free agreement between winners and losers, and it would be reasonable to judge that adoption of the favored policy leads to an improvement in the welfare of the group. This is the case in actual compensation. But cost-benefit analysis has been more controversial when applied to cases where compensation is not actually provided. Economists have taken a second and more questionable step in arguing that the possibility of hypothetical compensation is sufficient to establish that one policy is better than the other.⁵

This theory of the human good has a very significant advantage in the context of economic development policy. It provides a simple and powerful linkage between the theory of neoclassical economics and the specific challenges confronting economic development. If preferences and utilities constitute the human good and if free exchanges within a competitive market lead to efficient equilibria in the allocation of resources, then we can conclude that social welfare is maximized by efficient markets. We might also infer that progress toward improving the efficiency and universality of markets will have a positive effect on human welfare; more precisely, we might argue that the fact that a set of allocations of resources and incomes has come about through the workings of free-market exchanges demonstrates that the outcome is a welfare-enhancing one. However, if we find that this theory of the good is flawed or incomplete, then these inferences about the beneficent qualities of free markets—and associated recommendations for policy directions—will be undermined.

So let us consider the theory of the person represented by the welfarist framework. According to this theory, the person is understood as a rational decisionmaker who has a set of preferences about various outcomes and a set of beliefs about the properties of the world and who chooses actions on the basis of those preferences and beliefs. The individual is a utility consumer; in the simplest version, the individual acts so as to maximize satisfaction, pleasure, or happiness. And the good human life is conceived as the life that achieves the largest sum of utilities (or satisfies the greatest number of preferences). Putting the view in the language of preference, the individual is a rational preference-maximizer and charts a course through life based on reasoning about which actions will lead to the highest degree of preference satisfaction. Economic theory normally incorporates one additional feature: the idea of self-interest. Individuals are assumed to evaluate outcomes on the basis of the effect that various actions have on their own self-interests.⁶

Difficult philosophical issues arise in the endeavor to explicate the concept of preference. Are preferences entirely arbitrary and subjective? Or is there a principled relationship between an individual's fundamental values, plan of life, and conception of the good, on one hand, and his or her preferences (or a subset of them), on the other? Is there a principled basis on which others may criticize the individual's scheme of preferences? And finally, is there an objective basis for saying that some of a person's preferences are more important than others—or that one person's preferences are more important than another's?

Utilitarian philosophers adopt much of this set of assumptions about rationality, utility, and preference as a first-order description of human happiness and desire. But utilitarianism drops the assumption of egoism. Instead, it holds that it is possible for individuals to recognize the interests, preferences, and happiness of others and to choose to act so as to bring about the greatest overall balance of happiness over unhappiness among all affected by the action.⁷ Further, it stipulates that moral action consists in choosing that action or policy that maximizes happiness. Utilitarianism thus assumes the possibility of other-regarding action, or altruism. But what other-regarding actions are oriented toward is something very similar to the simple "Homo economicus" model: the utility or degree of preference satisfaction of the individuals included in the calculation. Utilitarianism also views the individual as a vessel for utility or happiness. Outcomes have the effect of increasing or reducing the individual's happiness. And those actions and policies that create the greatest amount of utility should be chosen.

The welfarist model has the virtues of simplicity and plausibility. But it also confronts profound problems, both internal and external to the theory.⁸ The internal challenges include the problems of defining utility, defining a theory of preference, and interpreting the task of interpersonal comparisons of utility. What is involved in "measuring" my current state of happiness or utility? How is my happiness related to my preferences among choices? And how can we meaningfully compare my level of utility with yours in order to arrive at a sum representing both of us?⁹

A more profound set of criticisms derives from the theory of the person that utilitarianism presupposes. In its paradigm formulation, utilitarianism appears to assume that persons live for happiness or subjective satisfaction, that there are no morally s...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• Illustrations
• Acknowledgments
• Introduction
• 1 WELFARE, WELL-BEING, AND NEEDS
• 2 WHAT IS ECONOMIC DEVELOPMENT?
• 3 GOALS AND STRATEGIES FOR ECONOMIC DEVELOPMENT
• 4 JUSTICE
• 5 HUMAN RIGHTS
• 6 AID, TRADE, AND THE GLOBAL ECONOMY
• 7 DEVELOPMENT AND THE ENVIRONMENT
• 8 DEMOCRACY AND DEVELOPMENT
• 9 CONCLUSION: TOWARD A GLOBAL CIVIL SOCIETY
• References
• Index