The Other I

July 16, 2012

How do we get rich? Part I of $

Filed under: The Economy: a Neophyte's View — theotheri @ 2:58 pm
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Burundi is the world’s poorest country with an average per capital income of $170.  Norway is the richest country in the world with an average per capital income of $84,290, almost 500 times bigger than the average Burundi income.

Why?  Based on what you know at the moment, what factors would you look for?  Before reading some of the research on the question, my list of hypotheses would have included

  • natural resources
  • colonialism, past and present that effectively removes wealth from the country itself
  • government corruption
  • educational opportunities
  • level of health care available
  • cultural and religious factors, including role of women, work ethic

I have just read Jared Diamond’s review of Why Nations Fail:  The Origins of Power, Prosperity, and Poverty by Acemoglu and Robinson and am embarrassed at how on the one hand I could feel the injustice of so much inequality in the world and on the other understand so little about the systems that make such a difference.

I don’t know what your list of hypotheses might look like, but I have substantially reordered and amplified mine .

The first thing I would look at now are the economic institutions of government:  do they motivate people to bother to improve their lot by protecting private property rights, lead them to believe that contracts will be enforced, can they invest their money,  can they assume that its value will not be inflated away or degraded by currency regulations or effectively stolen by other means?

But Diamond points out that geographical factors are quite possibly as important as good government.

More than anything else, this blog is my way of thinking out loud, of teaching myself.  So my next two posts – IE lessons-to-myself – will be on these two factors.   I know it might sound boring.  But it really isn’t.  I can’t just go around clucking about the injustices of extreme poverty without understanding the systems both within and without that have either created it in the first place, or that continue to support it.  And that can make it better as well.

As the Chinese proverb says – Give a man a fish and he eats for a day;  teach a man to fish and he can feed himself for life.

That means we have to know how to fish in the first place.  And whether there are fish in the water.  Even if there’s am adequate supply of water.  Because we can’t just want to do the right thing.  We have to understand how to do it as well.

 

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2 Comments »

  1. my guess is that natural resources is not the reason why countries thrive/fail – look at the congo – norway heavily regulates her oil – monies are invested in education, health care, child care, care for the infirm, handicapped, seniors. taxes are high which also support the social system – up to something like 48% (that is what i would have been paying or close to it instead of 30 in us) tax on food (eating out) liquor is about 25% while there is almost no corruption in norway, it is vastly less than even the US 4 million folks are more easily managed in a country where 98 percent are literate.

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    Comment by kateritek — July 16, 2012 @ 8:05 pm | Reply

    • From what I’m reading, natural resources is a factor in prosperity, but just like good economic governance, it is by no means automatic. The diamonds in Sudan have not resulted in less poverty, while oil in Norway has. So one has to look at what makes the difference.

      BTW, I think you meant to say in your comment that there is “no corruption” in Norway. I’m changing it, but if I’m wrong about what you meant, do let me know. (But you will have an argument on your hands! I too believe that the corruption in Norway is far less than in the U.S.)

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      Comment by Terry Sissons — July 16, 2012 @ 8:14 pm | Reply


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