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March 27th, 2017

Insight

The Sanders-Pope Francis 'moral economy' actually reveals socialist selfishness

Charles Lane

By Charles Lane

Published April 14, 2016

Democratic socialist presidential candidate Sen. Bernie Sanders, I-Vermont, will depart soon for the Vatican, where he'll speak at the Pontifical Academy of Social Sciences, a previously obscure body whose ideological leanings are implied by the invitations it extended to Sanders and two other headliners, the left-wing populist presidents of Bolivia and Ecuador.

In keeping with Pope Francis's call for a "moral economy," Sanders has said he'll discuss "how we address the massive levels of wealth and income inequality that exist around the world, how we deal with unemployment, how we deal with poverty and how we create an economy that works for all people rather than the few."

It's a long flight from New York to Italy, so let's hope Sanders uses some of that time to review the relevant data. What he'll discover is a vast reduction in poverty and income inequality worldwide over the past quarter-century.

Specifically, the world's Gini coefficient - the most commonly used measure of income distribution - has fallen from 0.69 in 1988 to 0.63 in 2011. (A higher Gini coefficient connotes greater inequality, up to a maximum of 1.0.)

That may seem modest until you consider that the estimate's author, former World Bank economist Branko Milanovic, thinks we may be witnessing the first period of declining global inequality since the Industrial Revolution.

Note that this hopeful figure applies to the world's population as though every individual lived in one big country. When Milanovic assessed the distribution of income between nations, adjusted for population, the improvement was even more striking: a decline in the Gini coefficient from 0.60 in 1988 to 0.48 in 2014. The global middle class expanded, as real income went up between 70 percent and 80 percent for those around the world who were already earning at or near the global median, including some 200 million Chinese, 90 million Indians and 30 million people each in Indonesia, Egypt and Brazil.

Those in the bottom third of the global income distribution registered real income gains between 40 percent and 70 percent, Milanovic reports. The share of the world's population living on $1.25 or less per day - what the World Bank defines as "absolute poverty" - fell from 44 percent to 23 percent.

Did this historic progress, with its overwhelmingly beneficial consequences for millions of the world's humblest inhabitants, occur because everyone finally adopted "democratic socialism"? Was it due to a conscious, organized effort to construct a "moral economy" as per Vatican standards?

To the contrary: The big story after 1988 is the collapse of communism and the spread of market institutions, albeit imperfect ones, to India, China and Latin America. This was a process mightily abetted by freer flows of international trade and private capital, which were, in turn, promoted by a bipartisan succession of U.S. presidents and Congresses.

The extension of capitalism fueled economic growth, which Milanovic correctly calls "the most powerful tool for reducing global poverty and inequality." And he's no supply-sider, but instead a left-leaning critic of modern economic orthodoxy - as his new book, "Global Inequality," makes clear.

Like any complex economic process, globalization was not all upside for everyone and produced only limited benefits, or none at all, for many people - including lower-middle-class Americans in manufacturing towns whose understandable frustration has now curdled into the voter anger that fuels both Sanders's campaign and Donald Trump's. The fact that a small number of globalization's biggest winners - Milanovic calls them "the global 1 percent" - got a 60 percent boost in their real income over the past quarter-century certainly doesn't help matters, politically. Obviously, the spectacular 2008 financial crisis that led to the Great Recession also badly damaged capitalism's legitimacy.

Here, then, is the real challenge facing the world's leaders, be they bishops of Rome or senators from Vermont: how to preserve free-market institutions that have done so much good for the world, including the poorest, while pragmatically reforming them and curbing their excesses.

Perhaps Sanders will, at long last, articulate a plausible plan for meeting that challenge in his Vatican speech.

So far what he's done is crudely but crowd-pleasingly attack the market, echoing the pope's denunciations of money "worship" - and launching a simplistic attack on free trade, including the promising Trans-Pacific Partnership that President Obama negotiated with 11 other countries. In the latter respect, Sanders echoes Trump, a fact that should give The Bern's supporters more pause than it apparently does.

If Sanders got into the White House because of his protectionist promises, and kept them, it would threaten the very engines of global growth and prosperity that helped lift hundreds of millions from a poverty more grinding and miserable than anything even the worst-off Americans have experienced in recent years.

When you think about it that way, there's a certain selfishness about this socialist.

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