Business books quarterly | Economic inequality

In sickness and in health

Measuring fairness

The Great Escape: Health, Wealth, and the Origins of Inequality. By Angus Deaton. Princeton University Press; 360 pages; $29.95 and £19.95. Buy from Amazon.com, Amazon.co.uk

IS THE world becoming a fairer as well as a richer place? Few economists are better equipped to answer this question than Angus Deaton of Princeton University, who has thought hard about measuring international well-being and is not afraid to roam through history. Refreshingly, Mr Deaton also reaches beyond a purely economic narrative to encompass often neglected dimensions of progress such as better health. “The Great Escape” he has in mind is the one from early death as well as deprivation that had begun with Britain’s industrial revolution. Mr Deaton’s account is broadly optimistic though he is careful to portray the casualties as well as the victors.

Pessimistic commentators will point out that income gaps between countries have failed to narrow over the past 50 years. This overall lack of convergence is surprising since in principle the more backward an economy the greater its scope for rapid catch-up growth. Some countries, such as Malaysia and Thailand, have realised that potential. But others, especially African states like Congo and Niger, have actually become poorer.

But focusing on gaps between states, many of which are small, neglects the fact that the two countries with the biggest populations, China and India, have been growing rapidly for decades. China’s economic miracle has been pivotal in bringing down global poverty from around 1.5 billion in the early 1980s to 800m. Even though China itself is becoming more unequal (as are advanced countries like America), the fast growth of such a big, poor country should be enough to bring down global inequality.

That appraisal rests on what has been happening to incomes or GDP per person, assuming that actual growth in China and India has been as fast as officially stated. One particular strength of Mr Deaton’s approach is that he does not confine his investigation to material living standards. Not only are people becoming more prosperous but also they are living longer and are taller and stronger. When improvements in health are taken into account, even more inroads are being made into global inequality. The gap between life expectancy in advanced countries and the developing world has shrunk since the second world war.

If the overall trend is encouraging, though, the list of countries lagging behind has grown longer. Countries and individuals who get going leave others behind. That inevitable consequence of progress can be beneficial by spurring the laggards to catch up. But Mr Deaton worries about recent trends in America where the rewards from economic growth are increasingly and visibly monopolised by the very well-off, leaving living standards for the majority stagnating. For Mr Deaton, America serves as an example of the economic and political threats to well-being that come from plutocracy.

The starkest evidence of the inequality arising from uneven progress is the plight of the billion or so people stuck in developing countries who still live in abject poverty and have low life expectancy. Should the more fortunate, enjoying longer and more affluent lives, give more money to help them? No, argues Mr Deaton in the most controversial part of his book. He takes aim at global aid, arguing that with the exception of some health programmes it generally does more harm than good (a critique made long ago by Peter Bauer of the London School of Economics).

Mr Deaton argues that the main barrier to progress in poor countries is not lack of resources but bad governments. Yet it is these governments that receive the aid either directly or indirectly. The flow of foreign money undermines governments’ incentives to raise money from their own taxpayers, which in turn requires growth-friendly policies and reformed institutions. Instead it shores up ill-functioning governments, the very misfortune holding back poor countries.

“The Great Escape” covers a lot of ground and there will be points that other scholars may dispute, such as what caused life expectancy to rise in countries like Britain before the medical advances of the post-war period. But the theme requires a big canvas and bold brushwork, and Mr Deaton capably offers both.

This article appeared in the Business books quarterly section of the print edition under the headline "In sickness and in health"

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