Does wealth always improve your life?

Sir Angus S. Deaton

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, 2015

Few argue about the existence of the ‘one percent’ in society. And it’s easy to imagine that as well as financial success, these people have achieved happiness and wellbeing too. Sir Angus S. Deaton knows better. He has answers to questions that border on the philosophical, but his research on poverty and happiness is very much economic.

When it comes to nations, he insists that foreign aid doesn’t function in isolation from the internal concerns of the donor state; that a World Bank is not a World Bank when it’s dominated by the United States; and that despite economic growth, a country can have almost exclusively malnourished citizens.

Three words catch the eye when looking at Deaton’s bookshelf: The Great Escape. It could be the defining work of his life. Or it could be an agenda: to make the dream of wellbeing and prosperity come true for everyone and every nation. Deaton is a Scottish migrant, whose bow tie stands out in the flurry of business suits. Raised in a poor environment, he quickly learned his lesson: education, migration and hard work are the keys to progress; and may also lead to a richer life for us all.

Deaton’s piercing insight in terms of economic analysis can perhaps be attributed to his background. But the work he has produced over the course of his career stands on its own. His articles have been highly influential, and the Nobel committee has honored every single result he presented – ultimately calling his Nobel Prize a lifetime achievement award.

At a glance

Born: 
1945, Edinburgh, Scotland

Field: 
Microeconomics/development economics

Prize-winning work: 
Analysis of consumption, poverty, and welfare

Trademark: 
Colorful bow ties

Spoken Accent: 
Was mocked in school for having a Scottish accent

Addictions: 
Reading

Should the rich share with the poor?

The street leading to his white wooden house seems right out of a Norman Rockwell painting. Sprinklers water the perfectly mowed lawn, kids play basketball in the driveway, while small squirrels stay just out of range of the thumping ball. If there’s still an American dream, it lives right here, in front of Deaton’s door. Through his living room window, you can hear the economist playing on his grand piano: it’s Beethoven’s Moonlight Sonata. But Deaton doesn’t take his affluent life for granted, because his own path has taught him how long the road to this pretty area of Princeton, New Jersey really is.

It’s very difficult to overcome the simplistic view that if you’re poor and I’m rich and I give you money, that’ll make you better off.

It’s an idea that many people might find surprising. But today the economist isn't going to talk about the average Joe. "It doesn’t work for nations,” he points out, in the middle of an intense conversation covering foreign aid, globalization and dictatorships. If USAID or the World Bank donates money to a foreign country that seemingly deserves help, they’re in Deaton’s analysis, pumping money into a broken system. In his opinion, this influx of foreign money shifts the governmental responsibility towards the donors instead of the country. As a result, changing how governments function "makes development impossible".

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Is foreign financial aid useful?

Deaton gives an example: "Let’s say you’re living in a small village and someone moves in next door. That person is a man who belongs to a strange cult, he has strange religious beliefs, for example he sees his wife as a slave. The wife is very poor and has to do terrible things. So you would like to do something to make the woman’s life better, right? Foreign aid is like giving money to her husband. And it’s quite unlikely that it’ll help because the problem here is that the poor person, in this case the wife, is locked in a power relationship with someone who doesn’t want her to be well-off. Now, giving her the money probably wouldn’t do much good either, because the husband has power over her and will take it away. So, if you think of poor people in many countries as being locked in a relationship with a government that’s predatory, I think that’s a helpful analogy."

Deaton smiles wistfully. He knows that these are the moments when he comes off as more of a wise professor than a Nobel-awarded economist.

American foreign aid spending

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How can we measure poverty?

Poverty is a very complex issue, and not simply about a lack of money and investment. “You can have lots of money, but have very poor health, and think you’re poor.” While Deaton mentions only one aspect, he suggests the support of local parties, local organizations and institutions can help where it’s needed. The economy in India, for instance, is growing rapidly; but to Deaton this is no indication that the country is bettering the lives of its citizens.

Children in India are malnourished and the people are among the shortest people in the world, and yet their income and consumption are growing.

The problem is India’s economy requires a lot of manual labor, which leads to the true conflict: "You need a lot more calories when you’re working in the fields for many hours every day than if you’re not."

As Deaton witnessed during his childhood, having little money is also not necessarily an indication of poverty. "When I grew up, we were in an environment where there certainly was hardly any money," he remembers. "But I don’t think I was conscious of being poor. We didn’t have a car, but we had vacations and we did not live in a terrible slum, we lived in a very nice part of Edinburgh. In Britain in those days, in the 60s, not many kids went to university anyway."

What do people need to be happy?

His own experience has led him to a further question: how do you define wealth? Deaton is sitting in his living room chair surrounded by an interior that oozes European chic. On the surface, the image offers the usual picture of prosperity. But in the middle of his precious antiquities, Deaton describes happiness as a complicated issue. "Have I had a lot of happiness in my life? Yes. Have I had a lot of sadness in my life? Yes. Have I had a lot of misery in my life? Yes. So I think the good life, actually, has a lot of bad emotions in it as well as good emotions."

The happiest countries in the world

Usually when people talk about themselves, they mention their mother or father, whose hardships in life became the inspiration for their personal values. Deaton had such a father, but private anecdotes are always accompanied by meditations on the lives of others. He might be talking about people in Rwanda, or the Chinese man he once met who didn’t have shoes as a child and is now a multimillionaire. Fairytales? No, but examples that confirm an escape is always possible. "Lots of people made that escape," Deaton explains. But he insists that to help society, it’s not only one person who needs to make a change, others must as well.

The great tragedy is that there are many people around the world who are still extremely poor. So the question is, what’s to be done about that? And who should do it?

How can foreign aid be delivered effectively?

Of course, developed countries are investing in foreign aid as many statistics and organizations show. But when should rich nations, Deaton asks, stop transferring money to poor nations and how could they start investing in things that serve us all? Is there even a type of help that is unselfish and useful to us all – aid that promotes the wellbeing of everybody?

Maybe health is one obvious example. But this issue also reveals how nations still think of the health of their citizens first, since more money is spent on researching diseases that afflict people of a certain populace. "The U.S. doesn’t spend a huge amount of money on malaria research, for instance, compared to cancer or heart disease, which are the things that really afflict Americans." Deaton cites one example where wealthier nations didn’t completely fail. The global AIDS crisis prompted the use of aid in developing anti-retroviral drugs for people who are HIV-positive. The global community could learn from these kinds of past successes and replicate them in similar situations.

Does extremism force us to develop a new form of idealism?

Faltering economic growth and rising inequality, in any country, makes people feel left behind. Their anger becomes an engine for political alternatives, and anger, in the end, harms our humanity and affects us all. Whether it’s rightwing exclusionism or leftwing radicalism that leads to terrorism in its cruelest forms, the results have an impact on all of us.

Maybe that’s why economists like Deaton remind us to think about everybody, not just ourselves. He reminds us that humanity has no universal, one-size-fit-all idealism: peace and love isn’t for everybody. We must be inclusive enough to also pay attention to the needs of those who harbor anger and resentment against others.

It requires a lot more sympathy for the plight of people who are being left behind than I’m seeing in the United States. These people may have views that we really don’t like and find morally reprehensible in lots of ways, but they have a real grievance. Bad things have been happening to them for quite a long time. I think we have to stop that.

By making America great again? Deaton hesitates, and looks worried. "I would prefer to make politics work again for the people who are being left behind rather than try for a whole new form of party." For Deaton, this is true not only in America, but also in Europe. "I don’t know what a whole new form of politics is, fascist dictatorship does not seem to me a desirable new form of politics." Falling into silence, he nods, lost in his thoughts.

Is a rich life possible for everyone?

As an economist, Deaton has already made a difference by being one of the few laureates who was not awarded the Nobel Prize for one specific piece of work. In 2015, his wide range of topics created a new understanding of consumption, poverty, and welfare. But even the prize comes at a price. Deaton confesses that perhaps he wasn’t as good a father as he wanted to be, and that he often feels guilty about not having had enough time for his daughter and son. A rich life, as he said before, combines the whole panorama of emotions, and this exists in every class of society.

There may be many reasons to get trapped in worry and pessimism, but Deaton doesn’t finish a conversation without some parting inspiration. The great escape that occurred within his own family tree hints at how the needs of the present can create a better future. "My father was born in 1918 in this mining village in England and now his great-granddaughters and great-grandson will probably be alive a hundred years from now, given the amount of progress. This is a huge escape for our family and it’s worked through education, it’s worked through migration, and it’s worked through hard work."

Do we really have more opportunities for greater happiness and wellbeing than our ancestors? No one knows for certain. But we do have diverse opportunities for success. As Deaton heads back to his home office, it’s time to leave that ‘American Dream Avenue’ in Princeton, New Jersey. Time to roll up the sleeves and get back to the job – this world isn’t going to save itself.

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