Why Are Some Countries Rich and Others Poor?
research.stlouisfed.org
research.stlouisfed.org
I'm Turkish living in Switzerland, I can say that it is the same shit in every developing country and i can ensure you they won't be developed due to the facts that i mentioned above. We need really high numbers of citizens to break the borders.
Taking communist Poland as an example, people start revolution not when things are worst for them economically, but, paradoxically, when things start getting better, but not fast enough.
Polish people revolted against communists in 1980, which was at the end of the decade of economic growth, fueled by money that Edward Gierek borrowed from western banks.
Problem is developed countries don't want to see poor countries arm up. Especially w.r.t. nukes.
A policy change in itself can't change anything, unless, the change trickle down to the lowest level. And that rarely happens, because every level in the hierarchy has its own holes, inefficiencies, and corrupt practices.
They very much do, but they almost always do it in a cargo-cult fashion, imitating the appearance of western progress while remaining ignorant of or uninterested in the underlying mechanics. Take for instance Julius Nyerere, well-intentioned as he was, driving his country into the ditch not once but twice by uncritically accepting foreign ideologies of communist collectivisation first and then unchecked capitalism second, apparently thinking either was some kind of white magic incantation that would bring about prosperity, completely ignoring the systemic factors at work with ordinary Tanzanians.
It's also interesting that the 2 countries you mention are former British colonies but in the later the colonists essentially took over the ruling of the country and became the government. Essentially they did copy what what the developed country (Britain) was doing.
Take the contemporary Western assumptions that democracy is the best political system, the most natural system and one that ought to be implemented everywhere. Putting aside the question of whether these assumptions are true, consider that merely transplanting a democratic style of governance to a country of a different cultural and civilizational profile will not guarantee that that style of governance will function or last. Ultimately, democracy is a system that developed within the context of a particular variety of Western (particularly what Koneczny calls Latin) civilization. Whether democracy can survive for any meaningful length of time in any other civilization is not a given. It isn't even a given that it will survive in the West in its present form (its tenure has been rather short historically).
The impact of colonialism is studied
under the institutionalist approach
to growth theory
authors being Acemoglu and Robinson.
The submission doesn't elaborate on it,
but the literature is out there.
Growth theory, or rather development economics, studies how and why wealth grows. And here go ... pretty much any economic growth models. I really don't know how else to say it.
Finally, an institutional approach to development economics studies how institutions might cause nations either grow or not, depending on their institutions, and the guys who kick-started this approach were Daron Acemoglu of MIT and James Robinson, of Chicago University. They have a book on it called "Why Nations Fail", released in 2012, which has already been recommended by another commenter. Their main thesis being that certain patterns of colonialism induce certain patterns of institutions, which they call "extractive", by which a minority appropriates most of a country's wealth for itself, while setting the country on a low growth path. The classic example being a resource-based economy under either a minority or authoritarian rule.
If this all sounds really general, that's because it is. I haven't read much on institutional economics, much less on the economics of colonialism. But I know it's out there.
So no, it's not colonialism.
It has to be something less visible. Something that a country like Afghanistan for example severely lacks.
You might point to dictatorships, but I would point to South and North Koreas.
South Korea was ruled by a brutal dictatorship for decades, in a way not so different from Egypt today. Yet that did not stop it from developing.
Even North Korea fares a lot better than many third world countries that have little to no enmities with their neighbors. I suspect the only reason North Korea sucks is because of the pressures/blockades imposed on it by the US (mostly for historical reasons).
China has been the richest and most powerful countries in the world for 2000 years before European nations crippled it in the Opium Wars.
Finland was never a colonial power, by the way. Sweden was, but Finland was still largely tribal a bit over a century ago, and was kind of a colony of Sweden and Russia alternately. The rise of Finland to one of the most civilised countries in the world over the period of a century is really interesting.
I fear racism is also a big factor. White people in Finland are more likely to get a break from other white people than black people in Ethiopia are.
But culture is also a big factor. In Europe, the most powerful economies are in the traditionally protestant north, whereas the Catholic south tends to have somewhat weaker economies. But why? And why were Muslim countries rich, powerful and advanced in the Middle Ages, and now not anymore?
> Finland was never a colonial power, by the way.
That was the whole sarcastically made point of the grandparent comment. Rich non-colonizing states vs. poor non-colonized states.
Colonisation obviously does play a role. It's ridiculous to claim that pillaging or oppressing another country doesn't hurt it, nor enrich the country that takes the profits. But it's not remotely the only factor at play. And the further in the past some events are, the more they get overshadowed by more recent history. I don't think Italy has much remaining benefit from the slaves the Roman Empire took from the Kelts they conquered.
The article answers the question with the following two points:
- lack of strong institutions
- trade barriers
It provides an example of North vs south Korea in defense of the theory.
It's a ridiculously simplistic synthesis in my opinion.
It is almost like people expect comprehensive, bulletproof writing in under 1000 words.
I was once passionate about economics and public policy... If we are to be honest about it, at some point you just realize that the world is much less nice than I imagined, and it's that way because of people's greed.
That's not to say there aren't a fair good number of decent people out there, but those people are rarely found in powerful positions; and if they are, they are still susceptible to being corrupted.
Came here to say this. The poverty and richness (this word doesn't sound right) of every country can be directly tied to the greed (or lack thereof) of 1 or more rulers, aristocrats, businessmen, dicatators, prime ministers, presidents = "ruling class".
That's all there is to it. No amount of analysis or economic theories, justifications or "studies" can hide that.
"The system is perfect, the people are the problem."
And in cases where there isn't perfect competition, many times good regulation can remedy the problems very effectively.
I am very critical of many of the kinds of groupthink that exists in economics, but the idea that markets can work well is really not such a bad idea, especially when you compare it to the alternatives.
Then we agree, but that is the big point I see in this discussions "regulations are always bad, regulations destroy markets" and so on. Regulated markets are a useful tool. And like all tools they can be misused or overused.
To go on a bit of a rant--ufortunately it appears the trend is going the other way with Big Gov allied with Big Business, out of control banking empires and MIC, made possible by never-ending low interest rates and easy money policies from the Fed that mask it all.
Don't belive me? Real cost of living has increased to where 2 incomes are required for many to just keep their heads above water to afford what their parents had, despite more education and working longer hours. We have never ending wars, 26,000 bombs dropped last year, and the longest war in history and it was never even approved by congress. Our most popular media outlets tell us we need this so we have jobs[1].
1-https://theintercept.com/2016/09/09/wolf-blitzer-is-worried-...
We believe voting is essential to run a democracy, yet the management of companies is far from being democratic.
There is an interesting series of wikileaks from European embassies showing American pressure on wide acceptance of GMO. It seems a lot of money and effort went into this. See for example this one:
https://wikileaks.org/plusd/cables/06WARSAW107_a.html
> 8. (U) Spirnak's second lecture took place at the American Studies Center at Warsaw University. Approximately 20 students and faculty attended the lecture. Again, the students did not openly object to the idea of consuming GMO's but did reflect the typical European mistrust surrounding the issue. They asked about the purpose of altering the genetic structure of food, in what is essentially a "if it's not broken don't fix it" argument that is commonly made in Poland.
In other words, people are relatively happy with the crops and want to keep it that way. Then Americans come and are pushing the technology they're controlling down people's throats, reporting the results of their campaigns via diplomatic channels. People refuse, saying they're happy with what they have. Efforts continue - this time on EU level rather than lobbying individual countries.
> The beauty about free market economics is, [etc]
Unless you literally mean that they're making justifications for the ruling class and have them as their captive audience. Which, I'm ... rather tempted to agree. Unfortunately, people have a self-serving bias, and like paying people to say what they want to hear.
The article clearly contradicts itself on the point by showing how ineffective Qing dynasty policy reforms were in China while later even bigger changes in communist China worked.
And definitely does not address anything related to USSR or rise of the USA. Or further back, British empire. (Each employed very different policies was successful for a time.)
And then you have to look even further back...
Conclusions are therefore a joke toy model.
South Korea did receive quite a lot of foreign aid from US, UN.
South Korea is the only nation to transition from receiver to giver in international aid. https://poldev.revues.org/1535
South Korea really did have the Greatest Generation. Those who were were adults during the war and those born around that time. Really.
It's a great book that tries to explain why.
Interesting to read, and it seems like it comes down to:
- Because they have extractive political and economic institutions.
- These are difficult to change though they can be successfully challenged and altered during critical junctures.
- The roots of modern world inequality lie in the emergence of inclusive institutions in Britain and the fruits of this - the industrial revolution - spread to those parts of the world that had similar institutions (settler colonies) or quickly developed them (Western Europe).
- Other parts of the world languished with extractive institutions which have persisted over time and thus remain poor today.
- History is not destiny.
- Effective reforms towards inclusive institutions possible.
- But it often necessitates a minor or major political revolution.
Two examples:
1 End of Southern equilibrium in the United States
2 Botswana
- In 1445 in the German city of Mainz, Johannes Gutenberg invented the printing press based on movable type. Spread rapidly throughout Western Europe.
- In 1485, the Ottoman Sultan Bayezid II issued an edict to the effect that Muslims were expressly forbidden from printing in Arabic.
https://en.wikipedia.org/wiki/Race_and_intelligence
IQ is a culture thing not a brain thing
The summary of this is that rich country figured out low hanging and easy fruits of services(for them that is, as if it was easy for others they could not hope to sell such services.) they could provide for a fortune and use those proceeds from those services to chase after high hanging fruits of services they could deliver to the world as those one's usually require intense capital.
Poor countries therefore either have not figured out services they could provide for the world or they have figured it out but are not investing the proceeds from it in the infrastructure and well-being of their country, being a Nigerian I would say most poor African countries are poor not because of the former but the later due to corruption,tribalism,e.t.c.
Around the turn of the XX century, many struggling economies today were on par with middling countries in Europe.
Think Czech, Finland, Hungary, Polen, Japan. Brazil, Mexico, etc., were competitive with them back then, but now, the latter are seen as basket cases of mismanagement. And empire and colonialism didn't give even Japan aby advantage till the 30s, arguably one could say that sapped their vigor. On the other hand LatAm had become independent from Iberian powers while inheriting a system of government (not the best but arguably better than monarchies), yet with the exceptions of Chile and Uruguay, the rest have underperformed.
The key strength of the West, IMO, is, as others have said, the things you don't see. Trustworthy institutions that mean you're not always second-guessing whether or not something is as it seems.
That's why it's so important for us Westerners to be vigilant to attacks on the integrity of our institutions and systems.
0. http://www.businessinsider.com/wef-ranking-of-best-school-sy...
You misread the comment, that's not what they claimed.
this guy says that the output of people is what determines the wealth of a country. this confuses me a little because isnt it true that if all the countries in the world were filled with productive people, there might not be enough demand for all of their services? would a large chunk of people not be left behind? and, according to my introductory economics textbook, if such demand exists that every person on this earth can be employed at a high salary, would that demand not have already been naturally met in this global free market of nations that has existed for some time now? and lastly, here in the united states, a very rich country, most people have relatively meaningless jobs. people are wildly overpaid for the work that they do here in many cases. there are professors of womens studies and social network or engagement experts who are paid a lot of money to essentially do nothing. i would be happy to be corrected.
I once read a wonderful thought experiment on the Mises page about a Dorothy sized storm. Imagine a tornado swept by and grabbed a large number of hard working and smart people randomly and placed them in a random town.
While people are temporarily shuffled, the brain surgeon(or some highly skilled technical person) is forced to pick up another trade like carpentry or any other less technical job in the meantime to provide and be productive in this new economy/town. The storm swept up and carried him elsewhere and so is temporarily stopping his highly skilled activity to become productive in some other one.
The same is to be said of the economy at large. People are shuffled due to many events and will never be at "full" productivity due to unforeseaable events, for example, a bad weather event. Jobs come and go. Same goes for industries. Even more so for trends.
Don't stop there. Throw in Austria, Switzerland, Finland, Sweden, Norway, the Czech Republic, Slovakia, Croatia, Hungry, etc.
> Some are really poor because they've been exploited by the countries mentioned above (Africa and former German, British, Belgian, French colonies
Including Ethiopia, right?
> Some are poorer because they've been destroyed by war multiple times (Poland).
Poland is poorer, but not poor. It's in the top 50 of countries ranked by GDP adjusted for PPP: https://en.wikipedia.org/wiki/List_of_countries_by_past_and_...
Switzerland, Finland, Czech Republic, Slovakia, Croatia -- none of them had colonies.
"Hungry"
That's not even a country (though can't argue that it would be a fun name).
In the post-WWII era, the countries that have prospered have done so because they have enjoyed stable government and long periods of peaceful relations with their neighbours. This allows for an educated populace, fruitful use of their natural resources and human ingenuity, and remunerative trade with other nations.
I do not know for other countries but in France what is told in schools and in media is that France had abolished slavery in 1794.
However it had slavery inscribed in its legal system for West Africa up until the beginning of the 20th century.
Even in metropolitan France, slavery was reinstated by Napoleon in 1802 and was not abolished for good until 1848 (in metropolitan France!).
In west Africa it was only in the beginning of the XX century that an end of slavery was declared by the colonial French administration ( 1905 in Mauritania).
In African states like Mali that are still controlled by France, at least by its military forces and its financial system (CFA/West African Franc), slavery was only legally forbidden in 2003.
Quoting https://en.wikipedia.org/wiki/Slavery_in_Britain#Triangular_... :
> By the 18th century, the slave trade became a major economic mainstay for such cities as Bristol, Liverpool and Glasgow, engaged in the so-called "Triangular trade".
Further details from https://en.wikipedia.org/wiki/Atlantic_slave_trade :
> Bristol and Liverpool merchants became increasingly involved in the trade.[92] By the late 17th century, one out of every four ships that left Liverpool harbour was a slave trading ship.[93] Much of the wealth on which the city of Manchester, and surrounding towns, was built in the late 18th century, and for much of the 19th century, was based on the processing of slave-picked cotton and manufacture of cloth.[94] Other British cities also profited from the slave trade. Birmingham, the largest gun-producing town in Britain at the time, supplied guns to be traded for slaves.[95] 75% of all sugar produced in the plantations was sent to London, and much of it was consumed in the highly lucrative coffee houses there. ...
> By far the most financially profitable West Indian colonies in 1800 belonged to the United Kingdom. ...
> It has been estimated that the profits of the slave trade and of West Indian plantations created up to one-in-twenty of every pound circulating in the British economy at the time of the Industrial Revolution in the latter half of the 18th century
However, the fact that the period to which your refer is some 250 years in the past supports my wider point that it is specious to claim that the the wealth of current-day first world nations derives from the historic use of slave labour.
How many years does it take for the benefits of slavery to disappear? I think it's far longer than you do.
British slavery meant more income to the government, which lead to a better navy, which lead to the ability to defend the triangle trade. A better navy helped advance British imperialism. How might Trafalgar have turned out with a weaker British navy?
British control of sugar production was built on slavery. But even once the slaves were free in a legal sense, the black population of ex-slaves was still at the bottom of the social ladder. The white landowners kept political and economic control for generations, and the profits went to Britain.
In the US, institutionalized racism, not just in localized Jim Crow laws and sundown towns, but also in federal policies like redlining, prevented generations of blacks from getting the same economic benefits as whites. (See Richard Rothstein's “The Color of Law”; interview at http://www.npr.org/2017/05/03/526655831/a-forgotten-history-... .) I know less about British history, but I do know how many thought the "Anglo-Saxon race" was above all others.
You earlier wrote: "Furthermore, the civil war that was waged to end slavery ultimately brought economic ruin to the southern States that had relied on slave labour."
I don't think you appreciate the full impact of slavery on the US or British economies. Quoting https://en.wikipedia.org/wiki/Slavery_in_the_United_States#A... :
> slavery was entwined with the national economy; for instance, the banking, shipping and manufacturing industries of New York City all had strong economic interests in slavery, as did similar industries in other major port cities in the North. The northern textile mills in New York and New England processed Southern cotton and manufactured clothes to outfit slaves. By 1822 half of New York City's exports were related to cotton
and from https://en.wikipedia.org/wiki/King_Cotton#History
> By 1860, on the eve of the American Civil War, cotton accounted for almost 60% of American exports, representing a total value of nearly $200 million a year.
Even though slavery was banned in the British Empire, Britain still profited from slave labor carried out elsewhere. The cotton mills of Lancashire produced a huge fraction of the world's processed cotton. You know where that cotton came from? The forced labor of American slaves.
Quoting now from https://en.wikipedia.org/wiki/Lancashire_Cotton_Famine :
> When the slave-owning Southern States of America demanded secession from the United States of America and declared war in 1861, the cotton supply was interrupted at first by a Southern imposed boycott and then a Union blockade. The South's thinking was that it could force British support through an economic boycott. ... Of the 1,390,938,752 lb of raw cotton 1,115,890,608 lb came from America.(80 %) ... Confederate flags were flown in many cotton towns.
Britain's economy profited from American slavery even until the 1860s, and they knew it.
Yes, I do. I concede that you have demonstrated that economic benefits from slave labour continued to accrue to the UK economy until the 19th century. However, it is simply not true to flatly claim, as did the OP, that "Most rich countries are rich because they build their wealth on free labor (slavery)".
> French traders were heavily involved in the slave trade. From 1721-30, French ships took 85,000 enslaved Africans to the plantations in the Americas and the Caribbean. In the 1730s, they carried more than 100,000. Altogether, about 1,250,000 enslaved Africans were taken by French ships. Even after France abolished the trade, 500 French ships continued slave trading illegally between 1818 and 1831.
Quoting now from https://www.washingtonpost.com/world/europe/france-confronts... :
> In the 18th and 19th centuries, France was among the major European slave-trading nations, capturing and selling an estimated 1.4 million people before leaders outlawed slavery in 1848.
> The country’s coffers grew rich from colonial conquests in Africa, Southeast Asia and the Caribbean, where slave labor generated the commodities that French merchants then sold in Europe.
> When metropolitan France finally outlawed slavery — a generation before the United States — liberation brought freedom only in theory for many blacks in French territories overseas.
> “Slavery was abolished, and the old slaves became citizens,” said the historian Frédéric Regent, a renowned expert on the French slave trade. “They even elected deputies. But the plantation economy continued with the same masters, who then became ‘employers.’ ”
> “What was different between that and slavery?” Tin asked. “Nothing.”
> This form of economic subjugation overseas persisted well into the 1960s, when France, crippled by two world wars, lost its former empire. Many argue that the injustice persists today in the form of socioeconomic disparity between young whites and blacks, increasingly confined to peripheral suburbs and low-paying jobs.
> “It’s from slavery that we have the discrimination we have today and the racism we see in France today,” said Myriam Cottias, a historian and member of the government-sponsored foundation, in a telephone interview from Martinique.
> “It’s not yet totally done in France. France has many, many institutional links to slavery.”
Yet again, even though slavery was officially abolished, the "economic benefits from slave labour continued to accrue". Even to the present.
I agree that it's an exaggeration, and even that it's wrong, but it's not absurd.
The further back in time you go, the more the framework changes. How did those nations become relatively wealthy in the first place?
How much was due to serfdom? Combined, of course, with the new political philosophy which centralized absolute power for the sovereign.
(As https://en.wikipedia.org/wiki/Supplementary_Convention_on_th... helpfully points out, the United Nations 1956 Supplementary Convention on the Abolition of Slavery also prohibits serfdom.)
But by doing that, the problem is that most areas in Europe had serfs. I think in Europe only some of the Nordic countries did not. (On the original topic, Sweden's era as a great power was funded by its copper export, and not from slaves or serfs.) And many cultures had slaves or participated in the slave trade, including those that weren't great powers, so slavery, serfdom, and other forms of forced labor are not really diagnostic.
Do you have an idea of how much of the those nations' wealth derives from slavery? I don't think it's an easy thing to answer. It's clearly not "zero".
> The Dutch role in the slave trade is said to be minor, but Kwame Nimako shows that although the Dutch colonies in the Americas might have been few and small compared to the Spanish, Portuguese and British colonies, the Dutch were, because of their well-built vessels and good seamanship, very active in the actual transport of slaves both for their own colonies and for others. Between 1600-1650 the Netherlands replaced Britain as the second major transatlantic transporter ...
> The state was very much involved in the slave trade: brokerage and pilot fees were required by the state, gifts to rulers were sometimes required, permits had to be purchased and agreements with other enslaving nations were made. There was government protection of sugar refining between 1650-1680 (p.73). The slave ships required a crew twice the size of a normal commercial ship, since ‘unwilling passengers’ might revolt. The transportation of slaves was never a normal business but needed state support. ‘The treaties that shaped the formation of some of the major European states in the seventeenth and eighteenth centuries were tied to control of or negation about the Atlantic slave trade, annexation and colonisation of other people’s land and subjugation of other people’ ...
> The Dutch colonies of Suriname and the Dutch Antilles had their complement of slaves, though these were fewer in number than in the British colonies. ...
> Unlike Britain, in Holland there was no movement for the abolition of slavery. The Dutch ignored the 1794 French declaration of liberty for slaves, even though they adopted many French laws when under French control in the Napoleonic period. ...
> Nimako shows that, contrary to supposition, the Dutch still found slavery profitable at the time of abolition, since they deferred the latter until after the produce had been harvested. Further, the slave-owners wanted compensation for the loss of their slaves after abolition. The enslavers were compensated, but the former slaves received nothing, not even the much smaller amount they were supposed to receive. In fact the compensation granted to the enslavers came from the enslaved and most went not to the colonies but to slave owners living in the Netherlands
Still, I do not find it an absurd generalization.
How many rich countries do you think are rich because they built their wealth on slavery?
While it's not slavery, does that number change if it were generalized to include indentured servitude or forced labor?
For example, Belgium benefited from forced labor in the Belgium Congo. Quoting https://en.wikipedia.org/wiki/Belgian_Congo :
> After the First World War, ... the colonial state gave private companies, to a large extent, a free hand. This allowed, in particular, the Belgian Société Générale to build up an economic empire in the colony. Huge profits were generated[by whom?] and for a large part siphoned off to Europe in the form of dividends. ...
> The necessary work-force was recruited in the interior of the vast colony with the active support of the territorial administration. In many cases, this amounted to forced labour, as in many villages minimum quotas of "able-bodied workers" to be recruited were enforced. In this way, tens of thousands of workers were transferred from the interior to the sparsely populated copper belt in the south (Katanga) to work in the mines. In agriculture, too, the colonial state forced a drastic rationalisation of production. The state took over so-called "vacant lands" (land not directly used by local tribes) and redistributed the territory to European companies, to individual white landowners (colons), or to the missions ...
> During the First World War (1914-1918), the system of "mandatory cultivation" (cultures obligatoires) was introduced, forcing Congolese peasants to grow certain cash crops (cotton, coffee, groundnuts) destined as commodities for export.[31] Territorial administrators and state agronomists had the task of supervising and, if necessary, sanctioning those peasants who evaded the hated mandatory cultivation
I mean, it's a fair assumption: slavery was abolished in France in 1794, in the United Kingdom in 1833 and in the United States in 1865. Germany mainly traded with it's European neighbors, which didn't use slave labor in their territories.
Then how can all these different countries have similar levels of GDP per capita and similar growth paths, despite their different levels of exposure?
Furthermore, there currently poor countries which relied on slave labor for much longer. Brazil only abolished slavery in 1888. Morocco, in 1922. And if we include serfdom, Russia, in 1861.
Unless you mean metaphorical slavery.
I grant that it would take much more sophisticated analysis in order to properly exclude any confounding factors, but that's kinda the point, really. I don't think you really thought this through.
Kind of ironic to hear the Democrats wringing their hands now out of "compassion" for the oppressed people...
The other question is how those tiny kingdoms organise into bigger structures to have economy-of-scale, while still retaining their sovereignty on internal matters.
Source: living in a country that run away from bigger brother few decades ago.
Just look at Austro-Hungarian Empire, Yugoslavia, etc. You can't force cultures to merge, a problem also acutely experienced in the EU at the moment.
Personally, I think this definition is bad because it progress free. Anxiety free is has no scale. If you are massively anxious I. Country A, and mildly anxious in B, both fail.
Need to rethink this.