The Poverty of Nations: Technical Change in the New World Market Order

Of all the issues which political economy is called on to address, the most insistent, most persistent, and least answered is: why are the poor still with us? This paper develops to the fullest extent the earlier version presented at the 1996 conference of the EEA. It was written for submission to RRPE but I don’t recall submitting it. There is no sensible reason for poverty. We possess sufficient technical and natural resources to feed, clothe and house every person on the globe, yet by 1990, ten years before the new millenium, the average income of the poorest country in the world was one hundred and forty-one times less than the average income of the richest. This gap was three times larger than at the turn of the last century, the grim Victorian epoch which, the history books tell us, is dead and buried.[1] Every year now, more people die of deprivation than in battle throughout World War II. In short the gap between the technical potential and the economic reality is now more stark, more accentuated and more intractable than ever before. According to the political economy taught in our schools this cannot happen. All received wisdom on technical progress predicts that the benefits of technology should extend, through a process of diffusion which unfettered capital movement must necessarily accentuate, to all humankind. They have not done so. Why? The traditional Panglossian answer that the poor have chosen to be poor is as surreal an insult to the intelligence as it is to the dying. However the theory which produces this answer has no other. The process of technical change – the cause of inequality – is absent from the equilibrium models it uses. By definition an economic equilibrium is one in which all profits have equalised and all technical differences have been eliminated. But if in principle any producer, anywhere on the globe, has access to the same technical resources, why is their enjoyment of life so different? Marx’s value analysis charts an alternative approach in which the process of technical change itself, organised by the uneven movement of capital, is both the motor of economic development and the source of inequality. Unfortunately, the traditional marxist approach has closed the door on this insight by espousing, lock stock and barrel, the mathematical apparatus of neoclassical general equilibrium theory. Increasing evidence supports alternative non-equilibrium readings of Marx, promoted by a growing body of authors.[2] This reading not only removes the so-called ‘contradictions’ in Marx’s thinking but breaks free of the constraints which marxism itself has imposed on Marx. The aim of this article is to indicate how such an approach can shed new light on what is probably the central question of political economy.