Better and Better

"Day by day, in every way, I am getting better and better." That mantra, invented by the self-taught psychologist Émile Coué in the nineteenth century, kept running through my head as I read Indur Goklany's new book on the relationship between economic growth and human and environmental progress, The Improving State of the World. Just as Coué told his patients that incessant repetition of his mantra would make it come true, Goklany seems to believe that saying often enough -- and in enough different ways -- that life today is better than ever will make it so.

Goklany depicts a global economy in which nearly all signs are positive -- and in which the problems that do exist, such as stagnation or setbacks in sub-Saharan Africa and the former Soviet Union, will be solved if economic growth and technological improvements are allowed to work their magic. Nor is this, in Goklany's account, a new phenomenon. He marshals an impressive array of historical data to argue that the trajectory of the twentieth century has been generally upward and onward. Taken as a whole, Goklany argues, humanity really has been getting better and better day by day, so that today, as his subtitle puts it, "we're living longer, healthier, more comfortable lives on a cleaner planet."

Seen from a broad historical perspective, this description is, for most people, accurate enough. Just about everyone living today is the beneficiary of what can almost certainly be called the single most consequential development in human history -- namely, the onset of industrialization. As the economic historian Angus Maddison has shown in a series of studies of economic development over the past two millennia, human economies grew very little, if at all, for most of human history. Between 1000 and 1820 or so, Maddison estimates, annual economic growth was around 0.05 percent a year -- which meant that living standards improved incredibly slowly and that people living in 1800 were only mildly better off than people living in 1000. But sometime around 1820, that all began to change. Between 1820 and today, world per capita real income grew 20 times as fast as it did in the previous eight centuries.

In the West, above all, the effects of this transformation have been so massive as to be practically unfathomable. Real income, life expectancy, literacy and education rates, and food consumption have soared, while infant mortality, hours worked, and food prices have plummeted. And although the West has been the biggest beneficiary of these changes, the diffusion of technology, medicine, and agricultural techniques has meant that developing countries have enjoyed dramatic improvements in what the United Nations calls "human development indicators," even if most of their citizens remain poor. One consequence of this is that people at a given income level today are likely to be healthier and to live longer than people at the same income level did 40 or 50 years ago.

In one sense, all of this should be obvious, since a moment's thought -- or a quick read of a nineteenth-century novel -- should suffice to remind you of how much better, at least in material terms, life is today than it was a century ago, let alone in the 1600s. But as behavioral economists have persuasively demonstrated, human beings quickly adapt to their surroundings and come to take their current state of affairs for granted. In other words, it is difficult, even after your life has changed dramatically for the better, to remain aware of just how much better it is, and even harder to truly appreciate how much better you have it than your great-grandparents did. So part of Goklany's project here -- and it is a valuable part -- is to make clear just how much real progress there has been over the past two centuries and even (in many places) over the past two decades in the life of the average human being.

THE ANTI-MALTHUS

Goklany's target is not just the natural tendency of human beings to take things for granted. His real opponents are what he calls the "neo-Malthusians" -- those who are convinced that there are natural limits to growth and that humanity has been butting up against them for quite some time now. The neo-Malthusians had their heyday in the 1960s and early 1970s, with works such as Paul Ehrlich's The Population Bomb and the Club of Rome's appropriately titled The Limits to Growth. Although their doomsaying about population growth and industrialization is no longer front-page news, their deep-seated skepticism about the virtues of economic growth and their conviction that the richer people get, the worse things become for the earth remain an important strand of modern environmentalism. If Goklany sees progress everywhere he looks, the neo-Malthusians see impending disaster: air pollution, the disappearance of habitats, the emptying of aquifers, the demolition of forest cover, and the proliferation of new diseases. Day by day, in every way, in other words, we are getting worse and worse.

The problem with neo-Malthusianism, as Goklany appropriately suggests, is that it has consistently underestimated the beneficial effects of technological change. The e = mc2 of the neo-Malthusians was introduced three decades ago, when Paul Ehrlich and John Holdren invented the equation I = PAT. Environmental impact (I) was said to be the product of population size (P), level of affluence (A), and technological efficiency (T). According to this logic, not only are population growth and economic growth bad for the earth, but so, too, is technological change, since it has a multiplier effect on the other two factors. The only way to save the planet, from the neo-Malthusians' perspective, is to set strict limits on human behavior, doing everything possible to rein in businesses and consumers.

The I = PAT formula was not pulled completely out of thin air. As societies get richer and more populous, they do consume more resources, and, especially in the early phases of economic growth, they do so with a measure of indifference to the overall impact on the environment. But what the equation misses, and what Goklany spends a good chunk of his book demonstrating, is that technology can actually reduce environmental impact, thereby diminishing the demands made by affluence and population growth. A classic example of this effect is the massive expansion in the efficiency of agricultural productivity over the past 40 years. Productivity gains have dramatically reduced the environmental burden of farming (at least on the land -- there have not been similar advances in the efficient use of water) and shrunk the amount of land needed to feed the world. More recently, technological improvements in the scrubbing of power-plant smokestacks have brought about a sharp reduction in the amount of sulfur dioxide in the air. Improvements in the efficiency of wind and solar power have reduced (albeit only a little) the demand for fossil fuels. And although the impact of these innovations has been felt most strongly in the developed world, they have also improved conditions in the developing world, at least with regard to things such as access to clean water and some types of air emissions. Goklany may be exaggerating somewhat when he says that the entire planet -- as opposed to just the developed world -- is cleaner, but it is in fact not an outrageous claim.

The paradox here is that technological change is generally associated with (or is actually the result of) increased affluence, which makes it likely that an economy will get cleaner even as it gets richer. And empirically, that does seem to be the case. After all, developed countries do generally have cleaner air, cleaner water, more forest cover, and less cropland devoted to food production than developing countries do, even though the latter are much poorer. The obvious, and important, exception is CO2 emissions and the broader problem of climate change. But Goklany -- who spends too much of his book offering an overly familiar critique of excessive action in response to global warming -- argues that now that Americans are increasingly concerned about climate change, technology will soon help mitigate the problem.

All of this does not mean that the United States is less polluted than it was in 1787, let alone than it was when it was inhabited only by Native Americans. But it does mean that the United States is arguably less polluted today than at any time in the last 100 years and that the last 40 years or so, in particular, have seen a dramatic improvement in the quality of air and water. And the same is true, to lesser and greater extents, in the rest of the developed world. One hypothesis for why this has historically occurred is demonstrated by what is called the environmental Kuznets curve (EKC). When graphed, the relationship between prosperity and environmental degradation looks like an upside-down U. Initially, as countries grow, they trade off environmental well-being for economic growth -- that is, as they get richer, they also get more polluted. At some point, however, they become prosperous enough to shift their priorities and begin to seek out ways to grow more cleanly. Goklany suggests a variation on the EKC, the "environmental transition hypothesis," which tries to account for time and technology as well as affluence. The invention and spread of new technologies, he suggests, make it easier and more likely for countries to get on the right side of the U-curve quickly, even before they have become rich; the "green revolution," for instance, allowed poor countries to reduce the environmental burden of farming.

FREE MARKETS, FREE PEOPLE

The environmental transition hypothesis is a reasonable way of thinking about the relationship between prosperity, technology, and people's expectations about the environment. And Goklany's rebuttal to the environmental doomsayers is both welcome and convincing. So why, then, is his overall take on the world -- and in particular on how we got to where we are and what we need to do to keep things moving in the right direction -- unsatisfying in that Couéist way? The simple answer is that Goklany's account leaves out too much that matters and pretends that incredibly complex phenomena can be explained away with a few catch phrases. In its overly sanguine and simplistic take on globalization, regulation, and the role of state and economic power, The Improving State of the World is symptomatic of what has become, in the eyes of many, a quintessentially American point of view -- a view according to which the task of creating a better world can ultimately be boiled down to the motto of the Wall Street Journal editorial page: "free markets and free people."

Free markets and free people are, to be sure, wonderful things. But what Goklany offers up in his book is a fundamentally deterministic take on the world: as countries get richer and more technologically advanced, their citizens (all, or almost all, of them) naturally get healthier and better educated, eat better, live longer, and care more about the environment. The free market, recognizing people's resulting desires, delivers the goods they want.

The environmental transition hypothesis is the most striking example of this view, since it postulates that environmental improvement happens, as it were, naturally. The reality, of course, is that the fight over environmental regulation, at least in the United States, was -- and remains -- a fierce one and that environmental skeptics and businesses have done their best to prevent regulations such as the Clean Air and Clean Water Acts from ever becoming law. It is also the case that without those regulations, the "cleaner planet" Goklany sees today would not exist. Goklany attempts the argument that air and water pollution in the United States were declining long before regulations were put into effect. Unfortunately, his own evidence shows that emissions for a host of pollutants peaked right around 1970, when the Clean Air Act was passed, or after, and myriad studies demonstrate that the United States' rivers and lakes are dramatically more swimmable and fishable today than they were before the Clean Water Act.

The point is that far from being the inevitable product of a strong economy, environmental improvement is often the result of political struggles that could very easily have gone the other way. It is also unlikely to occur in the absence of a strong state that is accountable to its citizens. Yet Goklany's entire work -- perhaps not surprisingly for someone at the libertarian Cato Institute -- is predicated on the idea that the state mostly functions as an obstacle to the benevolent workings of the market. This assumption is especially peculiar in the context of a discussion of pollution, since economic theory tells us that polluters, in the absence of regulation, have no reason to take the costs of their emissions into account. Pollution is the quintessential case of a negative externality and, accordingly, of market failure: since polluters do not pay the cost of their pollution, they will produce more than is socially optimal even if they may reduce their emissions as a byproduct of improvements in overall efficiency. The only way, ultimately, to reduce pollution is to constrain polluters to do otherwise. It is not, in other words, free-market-driven economic growth and technological change alone that make the I = PAT equation false; it is those things coupled with the right incentives, incentives that the market by itself cannot provide.

The same facile assumption that the unfettered market is the solvent for all serious problems pervades Goklany's discussion of globalization and its impact on global well-being. As Goklany points out, correctly, it is a myth that the advent of globalization has been accompanied by a rise in poverty and inequality. In fact, the percentage of the world's population that is poor has actually fallen over the past two decades (although 2.7 billion people still live on less than $2 a day). And inequality -- at least among individuals globally -- has actually declined some as well. The surprisingly persistent picture of globalization as a process whereby the developed world exploits and immiserates the developing one is just wrong.

The problem, however, is that the number of countries that have dramatically improved their standards of living in the era of globalization is surprisingly small -- and most of them are in Asia. So even if economic growth is, as it seems to be, fundamental to "the improving state of the world," we have not done a very good job of figuring out how to spread the benefits of that growth around the globe. As Goklany acknowledges, the economies of sub-Saharan Africa and the former Soviet Union have in many cases not just stopped growing but actually shrunk over the past 15 years or so. Most of Latin America has seen only trivial economic growth in the past two decades, while even Asia's "little tigers" (Indonesia, Malaysia, and Thailand) -- whose economies have grown rapidly since the 1970s -- have spent much of the past seven years recovering from the damage wrought by the 1990s Asian financial crisis. It is true that most of these countries have nonetheless seen their human development indicators improve, thanks to the diffusion of technology and health care. But outside of Asia (and a few places such as Botswana and Chile), the economic benefits of globalization have been hard to find, which is precisely why there has been such a backlash against what has come to be known as the Washington consensus. Goklany argues that it only makes sense to attack globalization if there is evidence that rich countries are getting richer on the backs of the poor. But it is not surprising that people are made unhappy by the sight of others getting richer while they stay the same or actually get poorer.

Goklany suggests one response to this critique: the problem is that there has been too little globalization, not too much, and that what governments need to do is step out of the way and let the market be free. There is no doubting the virtue of the free market as a wealth-creation machine, and it is certainly the case that in many countries bad policies (often designed to protect established interests) have discouraged entrepreneurship and scared away capital. Nonetheless, here, too, the evidence is far more ambiguous than The Improving State of the World implies. Take China and India, which together are responsible for almost all of the reduction in poverty in the world in the past two decades. They are great success stories, but when it comes to understanding what they say about how to attain economic growth, they are complicated rather than straightforward stories. China is a long way from a true free-market economy, and it has followed almost none of the rules that the Washington consensus set down. A huge number of its enterprises remain state-owned, the allocation of capital in the country remains largely determined by politics, the country's capital markets are not truly open, there are limitations on foreign ownership, the currency is not convertible, and so on. India, similarly although less dramatically, still has massive tariffs, strict legal restrictions on foreign ownership and on new businesses, and an aggressive regulatory state. The core message of Goklany's book is that economic growth and technological change are the keys to improving people's lives. But the success of China and India suggests that no one really knows how to bring these achievements about, which makes Goklany's wide-eyed optimism about the future seem misplaced.

THE NEW PRAGMATISM

What is missing from The Improving State of the World, in the end, is a sense of just how complex societies and economies really are. Paradoxically, for a book dedicated to celebrating the enormous progress the world has made in the past two decades, it does not sufficiently acknowledge just how miraculous the success of the West and Japan has been and how far from assured it is that the rest of the world will enjoy anything like it. That is not necessarily cause for pessimism -- the opponents of globalization, and the proponents of the immiseration thesis, overlook the very real improvements in everyday life that even some of the world's poorer countries have enjoyed as a result of the spread of technology via globalization. But in some important sense, Goklany's book feels like it might have been written 15 years ago, when the Washington consensus was still all the rage and when it seemed that solving the developing world's problems was just a matter of lowering trade barriers, privatizing industries, and allowing capital to flow freely. Goklany pretends to a certainty about the path to prosperity that no one, at this point, can have. The experience of the last two decades has had a chastening effect on the expectations of many of globalization's most ardent advocates -- even those in places such as the International Monetary Fund. Goklany, apparently, has remained immune.

Again, the point is not to return to the bad old days of protectionism and import-substitution industrialization. The point, rather, is that we simply know a lot less than we thought we did. Take, for instance, Chile and Botswana, two of the only non-Asian developing countries to enjoy meaningful, sustained economic growth in the past 20 years. Chile, under Augusto Pinochet, implemented many free-market reforms, and the privatization of its social security system has made it a darling of free marketeers. But a sizable portion of Chile's wealth actually comes from its copper holdings, which even Pinochet did not privatize. And Chile also limited the flow of so-called hot capital into its markets. Is it the adherence to markets or the deviations from them that account for Chile's success, or is it the combination of the two? Or is it something else entirely, something about Chilean attitudes toward time and work and entrepreneurship? The truth is no one is sure. Botswana, similarly, has followed orthodox economic policies and has a limited state and low levels of corruption, all of which presumably have something to do with its success. But Botswana also happens to have huge diamond supplies, which account for around 40 percent of its annual output. Botswana's intelligent economic policies almost certainly have helped it reap greater benefits from its natural resources (unlike the many countries that fall victim to "the resource curse"). But you can hardly hold it up as a model that other nations could follow, unless you plan to endow them with massive diamond supplies, too.

The fact that every country's experience is different does not mean that there are not deeper truths to be uncovered by looking at the experience of the world as a whole. But the truths thus far uncovered are relatively few in number and often limited in impact. So, yes, free trade is a good thing, subsidies to agriculture and official corruption are bad things, and so on. And policymakers should be aggressive in implementing those practices and policies that there is a good reason to think will work. But they also need to be cautious about taking theoretical pronouncements for reality, and they should be pragmatists rather than evangelists. After decades of misplaced certainty, it may be time to recognize the limits of our own knowledge -- at least if we want the state of the world to continue improving.