Dire straits

Richard Davies's book is divided into three parts - survival, failure, future - each of which subdivides into three case studies about specific places

An adage in the legal profession holds that hard cases make bad law. The premise of Richard Davies’s Extreme Economies is that, at least with respect to economics, this notion is mistaken and strange outlier cases like the tsunami-ravaged Indonesian province of Aceh or the severe urban decline of Glasgow can teach us valuable general lessons about the world we live in.

Davies, a former economics editor of The Economist who’s also done stints as an adviser at the Bank of England and to the chancellor of the Exchequer, brings that magazine’s signature virtues to bear. His book is divided into three parts — survival, failure, future — each of which subdivides into three case studies about specific places. All nine studies are engagingly written and genuinely interesting, each a dive into a corner of the world you don’t hear much about that conveys, briefly and clearly, a sense of how this far-off place works.

Davies’s visit to Zaatari, a massive, hastily built camp for Syrian refugees in Jordan, is fascinating reportage on its own terms and also a brilliant illustration of Adam Smith’s observations about the power of the natural human tendency to “truck, barter and exchange one thing for another.”

Davies describes a setup in which aid organisations give each family a kind of debit card that controls five separate accounts — one for food, one for clothing, etc. — that can be used at whichever of the camp’s two supermarkets a family prefers. Since donors don’t want to support unhealthful habits like smoking, there is no account for cigarettes. And since the accounts are segregated from one another, there is no way to economise on food to get extra clothing or vice versa. The supermarkets also don’t always stock the brands or products that Syrian customers want. But the refugees are huge buyers of powdered milk imported from New Zealand because bulk commodities turn out to be the answer to their problems: “Families buy a large bag of powdered milk for 9 dinars on their e-card and sell it immediately to a smuggler for 7 dinars in cash,” Davies explains. “The smuggler then slips out of the camp … and resells the milk for 8 dinars to Jordanians driving past, who are happy to buy at this price.” Once in possession of actual cash, the refugees can participate in a thriving economy of small shops and service providers in the camp. 

Another such lesson comes from the Darien Gap region straddling Panama and Colombia, where the Panamanian government, in a well-intentioned effort to halt deforestation, launched a subsidy programme to encourage landowners to plant trees. “But the policy was badly designed,” Davies writes, “rewarding any tree planting rather than specifying that native species must be replaced.”

The result is that rather than reviving cleared rain forest land with new rain forest, Panama is growing massive teak plantations. Real rain forests have multiple layers of canopy, with light filtering down to support a vast ecosystem. “By contrast, a teak tree’s massive leaves shade the forest floor completely, and when they fall and start to decompose they release an acid that kills insects. Stop at a teak plantation and you find that under the canopy there is nothing, and it is deathly quiet. Drained of water, starved of light and scorched by leaf acid, the soil is parched.”

Which is not to say that Davies is a free-market dogmatist. His chapter on Santiago, Chile, indicts both the effects of economic inequality that plague the country and, specifically, the privatised education system as an important source of its problems.

But one may be left wondering exactly what it amounts to. “People like to trade and are good at it,” Davies writes in the final paragraph, “but the markets we create can destroy value — the only way forward is a new middle way.”

One hardly has to rack up this many frequent-flier miles to reach such a banal conclusion. And I’m struck by how frequently the issue at hand has less to do with economics than with power and cruelty. His description of the underground economy in the Louisiana prison system is riveting, but his explanation for why the authorities tolerate it is infuriating. 

This is a state where prisoners are made to work for a government-owned corporation, Prison Enterprises, for a pay rate of between 2 and 20 cents an hour — wages that were set in the 1970s and have never been adjusted for inflation. Rather than depending on an underground economy to help keep the prisons calm, perhaps Louisiana should reconsider some of its cruel, exploitative criminal-justice system.

None of this is at odds with Davies’s account, but it does suggest a different take on the world — one a bit less inflected with the peppy neoliberalism of the global ruling class and a bit more animated by the thought that injustice stems not just from “mistakes” of judgment but from malice and indifference on the part of the powerful.

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