The Wall Street bailout, LIHEAP, and Amartya Sen

Posted on Thursday, September 18th, 2008 at 10:47 pm by JTE

Lying in bed this morning listening to the national and local news: central banks around the world are shoveling hundreds of billions of dollars as fast as they can at the various financial corporations tottering on the brink of catastrophe; and meanwhile, in little ole Vermont, our Congressional delegation is working hard to get a few more millions of dollars added to this year’s LIHEAP (Low Income Home Energy Assistance Program) budget, to help people out who can’t afford to pay for the energy that helps them avoid freezing to death.

Propping up Wall Street is an ugly thing, but, sadly, necessary. (Is it too much to ask if this necessary evil is done the right way?) These guys really are “too big to fail,” at least the way the current economy is built. Let’s hope this all will help increase the pace of the Transition Movement, and other similar efforts, so that we aren’t all connected to the wellbeing of the global profiteers.

Helping people avoid freezing to death is also necessary, wouldn’t you say?

Being the nerd that I am, this juxtaposition of grand crisis vs. below-the-radar misery reminded me of some of Amartya Sen’s work. Sen is a Nobel Prize-winning economist, one of the more philosophical and less mainstream economists to have won the prize. One of his most “famous” (within economics circles, at least) research efforts had to do with the different ways that democratic and totalitarian states deal with problems. His main examples were of post-independence India and Maoist China.

In China, the government preferred to allow tens of millions of people to starve to death during the late-1950s famine, rather than reveal to the world that there was any trouble in the “workers’ paradise.” Given the Communist Party’s totalitarian status, it did not have to fear that it would lose power from within.

In India, on the other hand, the democratic function of politics meant that a government that failed to react to a crisis like a famine would be challenged severely and likely lose power. The result is that India has reacted swiftly (if not always quite swiftly enough) to famines. While famines killed many tens of millions during the British colonial period, they have not led to massive death counts since the country gained independence.

But democracy doesn’t come out all hunky dory in this story. While India (and democracies in general) are pretty good at reacting to large crises, they are often terrible at reacting to ongoing miseries. And so it is that in India, over the years since independence, millions of people have died from non-famine related malnutrition and other poverty-related problems. But because these deaths are not concentrated in time or location, there’s not a political movement that builds up to demand change. So ignoring, or at least not giving nearly enough attention, to the poorest of the poor can continue to be a democratic government’s policy for decades on end, even when this results in millions of cumulative deaths.

And the totalitarian states sometimes come out ahead on this angle: the Chinese Communist Party’s creation of a universal healthcare system and other pro-poor policies meant that, even under Mao, many of the poorest of the poor in that country received the help they needed under “normal” circumstances, and millions of deaths were avoided that would probably have happened without the Communist influence.

Alas, it’s a complicated world, filled with gray from top to bottom.

So here we are today, seeing the democracies of the world unite in the face of a common enemy: the “money famine” that has erupted following decades of insane deregulation of the financial industry, with the fallout from the housing market bubble (which was easy to perceive if anyone had cared to look for it) as the straw that broke the industry’s back. And here we are today, in “the greatest democracy in the world,” scrimping and scrounging to find the money necessary to keep our neighbors from freezing to death this winter.

If I weren’t so above partisan politics, I might just say this is time for some change we can believe in.

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