The Other Middle Class

Foreign aid is a tricky thing. While it can often be a shining example of humanitarianism and compassion, it can also smack of real politik; who gives to whom, how much, and when is often more a reflection of geopolitical strategy than of objective need. Further, various development types (notably William Easterly) will tell you that aid doesn’t do a whole lot of good for its recipients. Nonetheless, most of us would broadly agree on the importance of development assistance and humanitarian aid. But who should pay for it?

For the first time in history, more poor people live in middle-income countries than in poor countries. This was not the case when the World Bank was founded nor when the Gates Foundation was founded.  Think more around the time MethodLogical was founded. While there is no perfect definition for poor or rich countries (or those in between), the World Bank takes a stab at it. What it and others have been finding is that countries are rapidly industrializing and ascending from the “poor” category to the "middle-income" one, resulting in this demographic shift.

It should be noted that this trend may be somewhat exaggerated. Given that China and India account for about a third of the world’s population, any demographic shift that includes both of them is likely to have a significant global impact. And indeed, both China and India have recently graduated to middle-income status, bringing loads of poor citizens along with them (as well as a hefty amount of incoming aid dollars). Disproportionately large though they may be, China and India are not alone.  27 countries have made the shift since 2000. And by and large, this is a good thing.

The problem is—as anyone who has traveled to India or China or Brazil could tell you—a surging economy doesn’t erase all poverty. National growth may be good for most people (including the poor), but it’s no silver bullet. But as these countries add to their coffers, is it still the responsibility of wealthy nations to give them aid? Or is it time for these blue-collar countries to take care of their own?

Is she doing her part to aid her countrymen?

Firstly, we must ask if they are fully able to address their own needs. China has the money to spend a ton on its military, but if redirected, would it be enough to radically help the hundreds of millions of poor people inside its borders? If so, is it still the responsibility of developed nations to step in if a middle-income country is using its wealth irresponsibly? But what about Botswana, which spends quite a bit less on its military, but is still groaning under the weight of its HIV epidemic and widespread unemployment?

We also have to look at inequality. Though maligned, the Gini index is the best estimate of income inequality in a country. China and India fall in the middle third of nations, though the top third features quite a few middle-income countries. Addressing inequality has been a vexing question for all countries, rich and poor alike; some advocate redistribution while others prefer to let the free market do the heavy lifting. Regardless of method, it doesn’t hurt to have good governance, human capital, and an efficient bureaucracy in place. Capacity to address inequality does not materialize just because a country is manufacturing and/or exporting a lot. Perhaps this is an area where some newly minted middle-income countries suffer, as economic gains may outpace a nation’s ability to train the personnel necessary. It is reasonable to expect this capacity to lag behind economic growth (especially if the growth is a result of private sector success and takes time to translate into revenue for the state), and international assistance may be a reasonable bridge in this period.

I remain pretty agnostic on most of this, mostly for lack of definitive data. Perhaps more critical is the issue of how accurate the World Bank’s categorizations are. MethodLogical contributor Jason Kerwin has argued that these economic measures are far from perfect, while MethodLogical contributor Jason Hopper has mused on the usefulness of other measures, such as the Human Development Index or the Multidimensional Poverty Index. But as countries (if not individuals) acquire wealth, the dynamic of developed-developing countries will continue to evolve. The question of how best to aid the poor remains the same, but perhaps our methods must evolve as well.

How Does Happiness Measure Up in Development?

Happiness is everywhere in development these days. France called in a team of hotshot economists to reorient its economic policy and now the Prime Minister of the UK says he wants to develop a happiness measurement for the UK. But before France, and before the UK, the idea of happiness was making a name for itself in a much smaller and out of the way place—Bhutan.

Gross National Happiness (GNH), the Bhutanese incarnation of the idea, came about after the 4^th King’s glib remark about the limits of Gross National Product (GNP). GNP was the dominant measurement of development at the time, one very similar to GDP. Bhutan, the king said, cared more about GNH than GNP, because economic growth alone was not what was important. Even back in the 1970s when he made the comment, Bhutan’s king was far from the first to remark on the limitations of GNP, GDP, and the models of economic growth that accompanied them. Many before had noted that GNP and its successor GDP left out negative externalities, environmental impacts, and inequality.

The main point of GNH was that it questioned the ends of development and the conventional wisdom of the time. Should we place limits on growth? Was economic output the only measurement that concerned a developing country? What should a just society look like? In Bhutan’s case these were more about Bhutan’s development and direction. In fact Bhutan developed its own vision of development that included inequality, the environment, and cultural preservation alongside economic growth. Although designed for Bhutan, the thinking behind it was more broadly relevant which is part of the reason I think it caught on globally.

Word to the wise: Do not try to pay your hotel bill in happiness.

What GNH did, essentially, was remind us that it is not wealth itself we value, but what it brings us and our concern should be on how well we are meeting those ends. To get old school for a minute, this insight goes all the way back to Aristotle. In Nichomachean Ethics Aristotle states that “wealth is evidently not the good we are seeking; for it is merely useful for the sake of something else.” It is also an insight that has not been lost on some modern economists—Amartya Sen’s work comes to mind.

However, recently in Bhutan, as well as in France and the UK, the idea of GNH has been reduced to a metric. This is, I think, a problem for several reasons. To begin, economics and economists already have alternative metrics to deal with other elements of development we may care about. For inequality, there are measurements like the Gini coefficient, and for the environment, well, there's a lot of literature devoted to just how to value the environment and its degradation. Similarly, there are a plethora of alternative measurements for development, PQLI and HDI to name two, that try to incorporate elements of development other than economic output. So, to begin with I’m skeptical about the need for another metric.

Perhaps more fundamentally, there’s the problem of measuring happiness itself. I have to admit the very idea of measuring happiness as a basis of economic policy is preposterous to me. Much like Catherine Bennet at The Guardian and Jamie Whyte at the Wall Street Journal, I find serious problems with the idea of a standardized definition of happiness, both across individuals and cultures within a society and for those individuals and cultures across time.

In Bhutan this obsession with measurement has led to some fairly absurd consequences. The GNH survey conducted here consists of thousands of questions that take a ridiculously long time to administer. To give you an idea, the shortening of the survey is described like this on the official website: “The pilot survey questionnaire, which was found to be too lengthy, was pared down to a questionnaire that took half a day to interview.” A half a day still seems like an unreasonably long survey to me. The are other problems with the survey, which I invite you to explore.

But aside from the specific problems with a GNH survey in Bhutan or the difficulty measuring happiness in general there is something else that bothers me about this way of incorporating happiness into development. To begin, it shifts development from an open and complex discussion about what the ends of development should be and whether they have been achieved to a simple calculation. Instead of discussing just or fair development, or, to note Brad’s post, whether we care about the environment and other species as ends in themselves, and then evaluating, we merely have to see if our GNH index has gone up.

The second problem is that a GNH metric opens itself up for fundamentally undemocratic misuse. On the one hand, the metric moves discussions of the good life off the table and assumes whoever designed the metric knows what happiness is. Jamie Whyte (mentioned earlier) at the Wall Street Journal notes this is fundamentally illiberal and authoritative. But the other problem is that it opens the possibility of dismissing social problems. Much to my chagrin, my American-written sociology textbook here in Bhutan told my students that people in slums in India were poor, but happy and basically okay with their lot in life. A GNH index that “proves” this with numbers, I worry, would make it all the easier to dismiss concerns like poverty or the slashing of social programs because people are "happy" without them.