Why some nations are rich and others poor (2016) | Hacker News Reader

Why some nations are rich and others poor (2016)

panampost.com

27 pointsnovaRom59 comments

Political institutions are part of it, but probably not the most important part. The excellent book Guns, Germs, and Steel[1] lays out very well researched reasons for the disparities we see today. Highly recommended reading!

Spoiler: What kind of crops and livestock you have paired to your climate over history is a big factor (number of calories you can raise per acre). What kind of livestock you had or didn't have also relates to what kinds of diseases might wipe you out (see Aztecs). And what kinds of raw materials you have available impacts what kind of commerce you can engage in. These factors over time have a huge impact on how civilizations advanced relative to each other.

There's a summary of the book on Wikipedia[2], along with some interesting criticisms.

[1] https://www.amazon.com/Guns-Germs-Steel-Fates-Societies/dp/0... [2] https://en.wikipedia.org/wiki/Guns,_Germs,_and_Steel

I agree that Guns, Germs, and Steel is an excellent book, but it does not explain modern economical disparities. It basically explains why Europeans were the ones to conquer the African and American continents in the 15th and 16th centuries, and not the other way around (and the arguments are solid). But it clearly does not explain why modern countries have large economical disparities today, or why some countries colonized by Europeans are highly developed economically (e.g. the US, Australia) while others are not (e.g. Brazil, South Africa).

As for the article, I believe there is more to economical success than political institutions as well, it is such a complex process that it cannot be reduced to any single factor.

The biggest power in the world at this time was the Ottoman Empire, and they controlled all land access to their markets, and had no urgent need to explore further than the outreach of their empire, unlike the Europeans, who were struggling to get access to India and China. Even though the Ottomans did poses a naval fleet, there was no real economical incentive. Ie. the Suez canal was a very old idea that the Ottomans considered but did not carry through etc.

I agree with your observation that reduction to single 'causal factor' is delusional. You may want to check chapter 1 of Lisa Lowe's _The Intimacies of Four Continents_ where a possible answer to why US and Australia v African colonies differ is presented -- that you cannot understand colonialism and imperialism as atomic parts scattered around the world. They are all intimate, organized around ideologies of hierachies.

I'd add Why the West Rules for Now by Ian Morris. https://en.wikipedia.org/wiki/Why_the_West_Rules%E2%80%94For...

It makes the (to me) convincing argument that geographic determinism, while important, doesn't really explain why the western core given that the eastern core surpassed the west on many measures after the fall of Rome. (Though it does explain why one of those two cores were probably ordained to win out.)

But the western core was in a better situation to exploit the Industrial Revolution which basically made everything before it almost irrelevant.

Neither book does much to explain why well-positioned modern states, e.g. Argentina, weren't able to better take advantage of their position and natural resources however.

In Argentina's case, decades of failing statism and economy intervention mixed with military dictatorships. Inflation rampant since the 40s with around only one decade (1990-1999) with 1 digit inflation.

Enterprising in Argentina is an absolute nightmare.

Argentina and Mexico were almost at parity with the US near the turn of the XX cent. Russia (Federation, Empire, Soviet Union) had and have massive natural resources and yet they lag behind many countries that have vastly fewer resources than they do (Japan, SKorea).

Poor Mexico, so far from God and so close to the United States.

It didn't help Mexico that they were being heavily exploited by American business interests, to the point where the American ambassador helped having President Madero killed, because he was a little too left-leaning for US business interests. Though, President Taft was quite upset, as Ambassador Wilson had orchestrated it on his own accord.

Mostly it’s lack of investment in industrialization and at fist finding a niche and growing from there.

The US was heavily regulated and oppressed by the British and we endured wars against world powers and fought an internal civil war, yet we still came ahead. Russia could have, China could have (and now are catching up).

You can be an empire and colonize and extract and do all kinds of bad things to your enemies but it doesn’t guarantee success (Portugal, Spain). It’s a complicated thing. Some countries get it right and some countries always find excuses.

Ya but that doesn't explain why the US was able to perform this exploitation and Mexico wasn't.

So you have an individual deed, but still no explanation.

Russia has to balance control over commerce, because the US has a tendency of inciting rebellion in other countries. Divide and Conquer and all thag

I’m sorry but seeing discontent and rebellion with the backdrop of the Soviets and modern Russia doesn’t earn much in terms of “imbalance”.

I think the actual article hit it right by stating secure private property but we need to expand that property to include not only the land and goods you own but the that you are secure in the monetary wealth you create and secure in your right of yourself.

GGS lays out well reasoned arguments for historical disparities, though in the 21st century geographical burdens all but disappear.

Singapore and Hong Kong are two examples where they have few natural resources, but have developed massive economies, mostly by just allowing trade to happen without much red tape. Their location as ports plays a major role in this, but it's no coincidence that these two countries are consistently at the top of the economic freedom index. Why do these ports stand out above say; Shanghai, Kuala Lumpur, Ho Chi Minh, Jakarta or Manila?

They were both significant British ports chosen for their favorable location, benefited from economic network of the greater Empire while being protected politically and militarily by structures far beyond their local ability. Part of it was also geopolitics of the time that dictated which colonies were better development prospects due to competing spheres to influence, i.e. why HK was chosen over Weihaiwei. Schrewd governance and intersecting geopolitical interests allowed them to maintain the inertia after decolonization.

Is "inclusive political and economic institutions" always a good strategy? I am not convinced and the article doesn't point to any solid evidence to support this claim rather portrays a representative picture.

Does "rich nations" imply nations where the elite hold huge amount of capital or does it refer to nations where an average citizen lives in prosperity? The article doesn't reflect on the comarison of ecomomic divide in the nations.

The article's claim that "exclusive" institutions concentrate power in the hands of the few elite and hence the nations end up being poor. THe US could be considered a rich nation with "inclusive" institutions and yet there exists the concentration of power and wealth to the few. These correlations argument of very shaky.

The Adam Curtis documentaries [0,1] at their core point out the loss of control by the democratic government (elected to serve its people) to the private economic institutions (created to serve the elite).

[0] https://youtu.be/fh2cDKyFdyU [1] https://youtu.be/v-npoz1SgRQ

The United States inherited a great deal of political history from Britain that gave us a huge boost. As Newton said, "If I see so far, it's because I stand on the shoulders of giants." We Americans got that advantage. And Britain didn't come by it easily: from the Norman invasion to the American rebellion were 11 civil wars. Representative governance instead of dictatorship was hard-fought. We like to think we alone fought for our system, but that's drastically untrue.

Also many scientist flying Europe during and post WWII brought the best world technology to the USA.

And not less important is the fact that factories and other means of production where unaffected meanwhile Europe was bombarded flat. Giving the USA an industrial advantage.

And further investments in education and infrastructure shaped the future pushed by open democratic values.

France, too. Lots of the democratic ideas are from France. E.g. The Social Contract by Rousseau.

> Plainly put, poor countries are poor because those that have power make choices that create poverty.

Simple enough, almost sounds tautological. If truly all the causes listed in the beginning of the article don't amount to an explanation, then there's little left to point at than the governing powers.

I'd like some more proof before I'm convinced that inclusivity in government is _the_ smoking gun, but I don't think it is controversial to say "democracy good."

In a globalized world influenced by a US hyperpower for 60+ years, countries, especially small ones, are allowed to thrive with the beneficence or indifference of powerful countries. Taiwan, S.Korea, Japan all become rich and industrialized via protectionist authoritarians governments supported by US interests and protection umbrella. Opposite for US sanction countries. A lot of EU would not have recovered into wealthy countries postwar without similar US support.

Much of the geographic constraints stopped mattering when a unipolar country controls all trade routes and dictates winners and losers. Of course competent local governance determines whether beneficence could translate into long term wealth, and a host of cultural factors determine if interests with benefactors can align long enough for such wealth production systems to emerge, but whether that wealth equitably distributed is another question.

The US, already well on its way up in the 20th Century, was spared during WW1 and WW2, while many other countries were devastated.

It also had massive resources, nearly endless open land compared to Europe, oceans on two sides to guard it from any credible threats, and a lack of invaders or civil wars in the 20th Century.

The US also used to be a lot more welcoming, and benefited from many talented immigrants, Einstein being perhaps the most well known.

At least in the case of India, colonization ensured that the local population was decimated in terms of access to education and industrial revolution for nearly 200 years.

After colonization ended, while they inherited British institutions, arbitrary boundaries (which affect them even today) and a closed economy (coming from protectionism and fear of western colonizers) ensured that they couldn't rise from the ashes as fast as other Asian countries.

"Poor countries are poor because they are ruled by narrow elites that organize society for their own benefit at the expense of the citizenry."

Seems to me he got cause and effect backwards.

The same thing that causes countries to be poor also make them "easy picking" for elites who want to exploit them.

"Why Nations Fail" is an excellent book on this topic. There's a cycle between poverty and exploitation, and the book does an excellent job detailing many historical examples.

This is why I am skeptical about the long term threat/success of China. With Xi now effectively chairman for life he will put more energy into maintaining his position than governing.

Personally I think it's less about how much energy is put into maintaining your position, and more about how the system adapts to the presence of an individual.

When an individual is in power for an extended period of time, the system adapts to them being there. The longer they're there, the more the system comes to rely on them being there instead of an arbitrary person being in that position.

This, I think, is one of the reasons that the transition period in long running monarchies is so dangerous. All of the plans that relied on the specific qualities of the former leader just went out the window.

Unfortunately for the governed there is a lot left to drain out of their reservoir. Take Venezuela for example. It’s been going on 20 years too long but it keeps going.

On the flip side - it also means that if we have a bad president or two in the United States, we’ll still probably be ok. With multiple branches of government there’s only so much damage that can be done in 4/8 years.

I used to think that. Then this term happened. Or I still do but severely underestimated "only so much damage".

A proper experiment is obviously infeasible but there are countries that a) went from poor to rich and b) have had strong citizenry even back when they were poor.

And what, in your view, is it that causes countries to be poor?

> The tools of extractive economic institutions include abolition or severe limits on private property, state-run enterprises, excessive regulation and taxation, and more.

> Acemoglu and Robinson acknowledge that, under some conditions, growth can occur under extractive political institutions as in the case of China.

So I suppose that's not a very good definition of "extractive political institutions," then, is it? Perhaps wealth extraction can even occur in countries that claim to be for free market capitalism.

First, "extractive" isn't a binary, it's a continuum. All economies are extractive to some degree - everybody's got taxes. But some are considerably more extractive than others.

Second, China. China's economy was very extractive under Mao. (If you don't like the term "extractive", call it "state dominated" instead.) Under Deng, they became less so, and the economy prospered. If there's enough latent potential in the economy, you don't have to go all the way to "100% non-extractive" to tap it. Just less extractive will get you some of the gains.

Now, I grant you that the results are not a good definition of "extractive". But "abolition or severe limits on private property, state-run enterprises, excessive regulation and taxation" are in fact a reasonably good definition.

I'm just anticipating the ideological implications there: once again conflating reasonable goventment solutions with radical socialism.

Obviously authoritarianism is bad, especially when it does not care for economic realities, but does that really mean anything for western democracies?

It means: Don't become authoritarian. Don't ignore economic realities. That applies to both the government, and (since it's a democracy) to the people.

Some nations will always be poor, if nations are rich it means their imports are lower than their exports, which means other countries have be the opposite. The whole system is rigged in that way to give the illusion all countries can get richer but in reality even though they can get richer e.g American then China etc, it is like a game of whackamole where another country will suffer somewhere else.

This... article seems to use the phrase "inclusive political and economic institutions" a lot.

To the point where it doesn't mean anything.

"Te running of the country by few elites that eventually become corrupt/extractive". Is one of the reasons... but not THE reason. Otherwise Singapore should be poor, but they are not.

often, it can be explained with the inability of a government to govern, and individuals are left to their own devices....

Favelas are a demonstration of it (lack of proper housing policy and urban organization by the government). Also a lot of the chaos of post Communist Europe....

You can have the greatest laws in the book, but if you can't effectively enforce them, or govern, then it doesn't matter. Corrupt elites just accelerate poverty, but they are not the only cause of it.

I'd love to believe the premise of this article, but this seems easily falsified by the real world. China has become rich, and is becoming more so, and it is controlled by a small elite.

how about the history of imperialism where some countries came in, exploited the local population and their natural resources, and reaped the benefits of historical, compounding wealth?

how about the history of how those wealthy countries then turned around and squashed democratic uprisings in order to install oppressive, right-wing regimes that were more friendly to their interests?

how about the history of trade sanctions which further cripple countries which are already disempowered and exploited?

these social darwinist explanations always seem to miss the simple facts of history

So Cuba must very rich having sent its armies and advisors throughout the world fomenting revolution, overthrowing governments and installing puppet governments.

My comment describes the damage that imperialism has done and the consequences it's had for global wealth distribution.

You say that Cuba has done bad things too.

Therefore imperialism doesn't have consequences?

Can you fill in the blanks for me in your nonsequitur?

My point is imperialism is a distraction. The Koreas, Taiwan even Singapore were under Japanese imperial rule and were destitute countries —one of them isn’t even officially recognized as such, yet have prospered. And the Koreas provide a “twins study”. SKorea even went through military rule (arguably Taiwan too) yet they’ve prospered.

The imperialism that has transpired in Latin America and Africa is different from that in Asia, so the consequences have been different. Some areas of difference include: the degree of plunder and destruction; how the occupying country treats the colonies; the degree of future exclusion in global trade; which dominant powers it finds among its allies.

If we don't consider a country's history of being exploited and oppressed, then we are in danger of creating an ignorant and bigoted explanation for the differences in outcomes.

Japan colonized areas of northeast Asia and Southeast Asia pretty brutally over the course of 50 years or so. In addition they forced some of the population to learn Japanese. It wasn’t a kid gloves colonization.

For that matter the US was a colony of the British Empire and yet came to do well. Russia had suitors attempt colonization a few times but as history tells us that failed, they have vast resources, they have had some great minds yet have come up short. I think imperialism is a distraction. From your POV Korea should be dump. It was colonized by Japan and later had US approved military dictators -a big no no in your books. But see where they are today.

Disparities in wealth in Latin America and Africa can be traced directly to their history of exploitation and colonization. That there are other countries that have had brutal occupations and have prospered more is irrelevant to this fact. Myriad historical factors, including the other ones that I cited in my comment (such as treatment in global trade, ongoing exploitation, allyships with dominant powers, etc), still distinguish these countries and their histories. There is no checklist approach to history, the details matter and when you look at the history of impoverished areas in Latin America and Africa, it is plain to see the connection to their present circumstances.

Vestiges of feudalism is a big factor in all those examples, including Russia and Ukraine. China was very feudal too, till the republic --and then became a satellite to Japan and back to a Communist feudal system and back out. Chile, Uruguay not so feudal.

Systems that retained vestiges of feudalism and were late to adopt industrialization suffer. But things can turn around quickly, if the countries pursue a strategy that works for them.

Myanmar/Burma is one such place. They could quickly industrialize or they could waste their opportunity --it's up to them. We'll see.

Have you tested this hypothesis? It seems that South Africa is wealthier than neighbors, for instance.

South Africa has the single worst inequality in the world [0], and up until very recently there was apartheid ruled by the descendents of dutch colonizers. This still fits the pattern of imperialists coming in, and enriching themselves at the expense of local populations. It's just that in this case the occupying population hung around permanently. But they're still hoarding the wealth.

[0] https://www.cnn.com/2019/05/07/africa/south-africa-elections...

By hording the wealth you mean drastically increasing GDP?

The cape was literally a restocking hub for the global trade hegemon (Dutch) and later served similar purposes for the following hegemon (British). Of course it had higher rates of capital accumulation. This was seen even into the 60s

Because South Africa and its neighbors were not all colonized?

I’m not sure what SA being relatively wealthier is supposed to tell us.

Which of South Africa's neighbors was not colonized?

Luck?

While sort of a throwaway comment, you don't really deserve all the downvotes. Once you get beyond broad historical trends, some of which were geographically pre-ordained, there's a lot which looks a lot like random confluence of events.

At this point it appears to be birth control, and cultural acceptance of birth control.

Are you going to elaborate or just leave it at that?

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