Global Reform and the Social Sciences

David Smiley

[2006 / For a copy of the material described, contact the author at smileyd@bigpond.com.au]

THE CHALLENGE

"Count up the results of 50 years of human rights mechanisms, 30 years of multi-billion dollar development programmes and endless high level rhetoric and the general impact is quite under-whelming…this is a failure of implementation on a scale that shames us all." (Mary Robinson, UN Human Rights Commissioner, quoted in Geoffrey Robertson, Crimes against Humanity, 1999, p. 32). But failure of implementation implies failure of design which implies failure of the expertise, drawn from across the social sciences, that designed these huge global regimes, including those targeting the environment and conflict resolution. In 1996 Olson was already probing this failure by turning the neoclassical development model on its head. In a landmark paper he showed that differences between rich and poor, people and countries, depended far less on differences in endowments in labour, capital or natural goods (land and natural resources), than on differences in institutions (Journal of Economic Perspectives, V10. N2).

THE PROJECT, supported for ten years by the Department of Economics at Macquarie University, has researched a set of institutions concerning natural goods, and related ambiguity in the social sciences. These institutions appear critically to govern the outcomes of all four regimes, and the social sciences need to provide unambiguous answers to two questions: who collects the rent of natural goods, and what are the socio-politico-economic effects of how this rent is sought., for example:

Landed institutions. Countries that have achieved land reforms seem to be the least aggressive, most egalitarian and the most efficient, raising per capita income growth from near zero to an unprecedented ten percent per annum. In Japan, Taiwan, South Korea, and in China after 1976: "The groundwork for both fast growth and the income equality that eased the social strains of development was laid by a radical land reform." (Economist, 29 June, 1991, p. 16). In contrast, unequal distribution of land and natural resources, both within and between countries, seems to be associated with poverty, inequality, high, especially youth, unemployment, and all forms of armed conflict.

Resource rent seeking institutions. "The star economic performers of the past 30 years have been resource-poor countries in East Asia such as South Korea, Taiwan, [China] and Hong Kong" those countries rich in oil or minerals exhibiting low or even negative growth. (Economist, The Natural Resources Myth, 23 December, 1995, p. 102).

Some perverse incentives. In national accounting, the depletion of natural resources and degradation of the environment are usually added to, not subtracted from, the wealth of nations. Tietenberg (Environmental Economics), while explaining how to realign individual incentives to make them compatible with collective objectives, regrets that 'as self-evident as this approach may be, it is controversial'. At the domestic level, a plethora of tax breaks tends to transfer real estate wealth from the poor to the rich. At the international level, agricultural support bankrupts third world farmers while trans-national corporation and World Bank development aid projects often increase the value of land held by a local minority, thus raising rents payable by the majority. Rural migrants, fleeing the pressures of over-population, technological change and avaricious landlords, now pay rapidly rising urban rents to those who were there first. And, at all levels, the appropriation of increasingly scarce land, water, energy and mineral resources seems inexorably to lead to armed conflict (Klare, Resource Wars). Collectively, these perverse incentives, by reducing average incomes, also make human rights legislation and environmental treaties appear unaffordable to poor countries.

Reform options. Land redistribution in the tiger economies relied on dictatorial reallocations of property rights, unacceptable in a democracy. But land value taxation can achieve similar efficiency and equity goals (Samuelson, Nordhaus, et al, Economics: land rent) without disturbing property rights. Most other taxes discourage productive output and, in targeting elusive tax bases of low visibility and high mobility, tend to be inefficient and inequitable. For land value taxation the opposites are true. And taxing the extraction and uses of natural resources encourages sustainable development. In a model of such tax shifts for the G7 economies, average incomes rose between 23 and 47 percent (Plassmann and Tideman, in Harrison, (ed) The Losses of Nations). Though no equivalent general equilibrium model exists for poor countries, much higher growth rates might be expected there. Such tax shifts would, incidentally, provide revenue to offset perceived costs of environmental and human rights initiatives, while helping to achieve conflict resolution goals (Low and Smiley, 4th Annual Global Conference on Environmental Taxation Issues). But these taxation principles appeared poorly understood in some of the social sciences.

THE SOCIAL SCIENCES found to have contributed to the four regimes include anthropology, behavioural psychology, demography, economics, history, jurisprudence, domestic and international law, political science, and sociology. Within any one of these disciplines, professional research generally addresses simple, limited, local problems, clearly defined by, and well within the scope of, that discipline's methodology. Complex overlapping global problems are someone else's business, the UN and non-governmental organizations and, regrettably, an enormous academic literary and educational offering that purports to explain "global" problems from the standpoint of one discipline. In these cases two sets of problems may arise that constrain organizational outcomes or compromise academic credibility. First, different methodologies commence from different definitions, leading to different causal sequences, thence different predictions and therefore different recommendations. Second, definitions of natural goods as forms of capital obscures distinctions between public and private components, rent for example, of these goods. Therefore, integration of the social sciences demands a common language, of rigorous logic but understandable from within any one discipline. This language should unambiguously define natural goods and the agents that employ them, define the mechanisms of economic rent and rent seeking that explain this employment and, borrowing from environmental and natural resource economics, define taxation and other instruments that might realign private incentives with social objectives.

A SOCIAL SCIENCE LABORATORY

The author once helped design and then teach a highly successful graduate diploma course for professionals drawn from across the physical and social sciences. In a laboratory environment, quite complicated building blocks, described in plain English, were assembled into information processing structures with the help of context diagrams.

A similar approach has been developed here, using a common language and methodology with which to explain Robinson's failures, Olson's enigma and, specifically, the role of tax reform in driving efficient and equitable development, making human rights and environmental initiatives affordable and, in the long term, reducing incentives for conflict.

A preliminary version, written in Visual Basic, now assembles and drives established models from the social sciences, within a framework of property rights in natural goods, in order to identify and explain unintended outcomes. It is therefore seen as an appropriate educational and research tool for students of, and those already engaged in, the range of professions touching on problems of development, human rights, the environment, and conflict resolution.