Why some countries are poor and some aren't

brianluce

I found this to be obvious and revelatory at the same time.

http://www.npr.org/blogs/money/2012/03/16/148680705/why-are-some-countries-rich-and-others-poor <<<<<<<<<<<<<<<<<<<<<

Why are some nations rich and others poor? In a new book called Why Nations Fail, a pair of economists argue that a lot comes down to politics.

To research the book, the authors scoured the world for populations and geographic areas that are identical in all respects save one: they're on different sides of a border.

The two Koreas are an extreme example. But you can see the same thing on the border of the US and Mexico, Haiti and the Dominican Republic, and dozens of other neighboring countries. In all of these cases, the people and land were fairly similar, but the border changed everything.

"It's all about institutions," Daron Acemoglu, one of the authors, explained. "It's really about human-made systems, rules, regulations, formal or informal that create different incentives."

When these guys talk about institutions they mean it as broadly as possible: it's the formal rules and laws, but also the norms and common practices of a society. Lots of countries have great constitutions but their leaders have a practice of ignoring the rules whenever they feel like it.

Acemoglu and his co-author, James Robinson say the key difference between rich countries and poor ones is the degree to which a country has institutions that keep a small elite from grabbing all the wealth. In poor countries, the rich and powerful crush the poor and powerless.

Think of a poor farmer in Haiti or the Congo today or medieval Europe 500 years ago. Sure, he could, maybe, irrigate his land and till the soil and grow more stuff. But they know that the institutions in place guarantee that a well connected member of the elite will show up and claim the spoils. So what's the point? The poor have no incentive to invest in land or businesses or to accumulate savings. The result - undeveloped land and a poor nation.

James said, "Ultimately, what needs to change is that those countries have to make a transition to having inclusive institutions. And that's not something that throwing money at them can achieve."

This can seem discouraging but their message does offer hope, too. Poverty is not the simple result of bad geography, bad culture, bad history. It's the result of us: of the ways that people choose to organize their societies. And, that means, we can change things.

Vitaliy_Kiselev

@brianluce

Mostly, it is total bullshit.
If you are in bad climate, have no useful resources, no energy, no structures will save you.
While organization structure matters. It is not the solution, as no one will allow this small countries to make proper structures and put proper people who'll defend their own interests.
Quite the contrary, as all such books mostly support real hidden idea to forcefully implement "proper" structures acting against interests of this countries.

brianluce

Then how do you explain the difference in N and S Korea? Haiti and DR? Been to Nigeria? Lots of oil but it's not a nice place. And then Singapore, what do they have that other places in SE Asia don't? Nothing other than robust institutions and look how nice it is.

I don't really understand your point, it seems contradictory, you say small countries actually need "Proper structure" but they're not allowed by "Power people". Isn't that the exact point of the paper? And how can you say these books have hidden agenda of supporting oligarchs when the paper says oligarchs are the problem???????

Vitaliy_Kiselev

Then how do you explain the difference in N and S Korea? Haiti and DR? Been to Nigeria?

By looking at their history and looking at economics.

Nothing other than robust institutions and look how nice it is.

Generally, "bad institutions" excuse had been used by banks to hit highly efficient and country specific S. Korea institutions as they needed to change few things in 1997-98 time. So, all this talks about institutions are fine, but unusable.

I don't really understand your point, it seems contradictory,

It is not.
Just read my words carefully.
They do not mention any "power people" or "oligarchs". As this can be just small amount of tools used, same as democracy (tm) and people rights (r).
They mention real interests of the countries and their people.

brianluce

Love the "Democracy (tm)". :)

CRFilms

@brianluce...it's not just government, but it's culture(which government is a part of). Mexico sucks vs the USA because the culture. I say this as a person of mexican descent(mom's mexican, I was born in Texas). I haven't been to Mexico since my parents stopped forcing me 15 years ago...it's a dump.

Your nations culture inspires you OR holds you down in ways most people don't even remotely realize. Also...remember Vitaliy is a conspiracy theorist type and most of his world view is filtered though that. Think Alex Jones, meets Doc Brown. :P So take his non Tech posts with a pound of salt.

bostonmike

Much of the problem in some countries lies with logistics..you can't expect to live on a farm say in the Amazon and have access to major metropolitan cities in the time it will take to be competitive with larger corporations. I also know quite a few Haitians who complain that the reason their country is poor is because people all flock to the cities in search of jobs that do not exist, instead of developing the rural areas...another factor in some countries is simply culture..just as a child grows up and learns respect for himself and others, or lack of it..so do nations...whole populations of people have certain cultural traits...and some aren't so good. Some people grow up in environments where they have to lie, cheat, kill, extort, etc to survive and provide for their families...take Nigerians for example who extort 90 year old widows out of their life savings by posing as cancer sufferers who need money...we've all got these emails..these people have no remorse for what they do because it is largely accepted in their culture. Any nation that embraces such a culture will never thrive. Any nation that accepts these people into their own will fail as well. I work with quite a few people from Caribbean nations and honestly, most move at a snails pace...we call it "island time", because the average American can do three times as much work in the same amount of time it takes them to do their 1/3 share in island time...how can you be productive as a nation when your people move like snails and fall alseep if left to their own devices? How can a nation accept people who move like this and expect that they are not going to drag that nations productivity down? Ireland was once one of the poorest nations around. What they had was a great culture and a damn hard work ethic. As one Irishman I knew said, they may not have had any money, but they could educate their children and raise them with a great work ethic before sending them off to other countries to find their own success.

bostonmike

CRFilms, good point! Just as I was saying, culture has a lot to with it. And I love Mexican culture in its purest form and I respect Mexicans because they are fellow Catholics as well, but people come to accept a certain level of degredation as being their norm and perpetuate it onto future generations. It brings everyone their whole culture down to a lower level.

Vitaliy_Kiselev

Vitaliy is a conspiracy theorist type and most of his world view is filtered though that

Here you are badly wrong.

Definition of CONSPIRACY THEORY
a theory that explains an event or set of circumstances as the result of a secret plot by usually powerful conspirators

Some definitions also claim that conspirators must be some secret group also :-)

First. Most things in the world are far from secret. If someone tell you with facts that reality is different from that mass media is telling you it is not called conspiracy theory.

Second. About some "powerful conspirators". Most of the top real bank-corporate rulers are widely known for many many years. Their connections to hundreds and thousands to owned firms had been tracked by various researches and appeared in mainstream media countless times. They do not hide much.

Third. It is pointless to focus on structures, culture, language, as most researches do. because this things play minor role. Major role always play real things - resources (and infrastrucure to process them), education, knowledge and, main thing, real soverinity of the country.

Mark_the_Harp

Doesnt culture, language and structure define what we do? I would have thought its just as "real" as anything else.

Vitaliy_Kiselev

Doesnt culture, language and structure define what we do?

Nope. Culture, language and structure help us to reach the goals, but not define that we do. If you do not have soverinity your structure key points will be defined by other people, not in the country interests, your education will be modified and your history rewritten in proper way, most of "culture preserving" guys won't be serving to people of your country, and will be doing bad things just to get payment by foreign rulers. And major thing is that no one will allow even to set proper goals, so, if somehow, by magic, you'll have all things to reach the goal with time it you still couldn't do it.

fetzu

Actually language and culture have an influence on our decision making process, and thus "define what we do". And please don't tell me they don't, I have tested that shit myself "scientifically". There is no way to deny "structures" play at least a little role in the way History unfolds.

But other than that you are right, most of the things in the world aren't secret. The issue seems that people don't seem to want to realized they are being constantly con'd (and when they do, they are usually taken for conspiracy theorists by people who accepted the status quo).

Dusty42

My 2 cents:

"While organization structure matters. It is not the solution, as no one will allow this small countries to make proper structures and put proper people who'll defend their own interests."

That is very very true. I have been following Free Speech radio on Haiti for sometime to know enough about its history. For those who think that Vitaliy is a "conspiracy theorist", I'd like to refer them to take a listen to Kevin Pina on Flashpoints. Go to www.kpfa.org and search for all Flashpoints archives on Haiti by Kevin. He can tell you how Haiti is so poor.

Duncanario

You can't begin to discuss the prosperity of countries without looking at the global politics around them. Take Latin America, since the Monroe Doctrine of 1823 the US implicitly claimed right of dominion over all of Latin America and then stated it explicitly with the Roosevelt Corollary in 1904. An example of the reach of this doctrine can be seen in the pre-revolutionary constitution of Cuba which, as a result of US intimidation, explicitly gave the US the right to intervene militarily in Cuba when it sought fit and indeed it invaded Cuba a total of 5 times in the 20th century.

Developed countries adopted this type of approach themselves and their aim was to keep their colonies providing cheap raw materials for their master's industrialised economies to process and make profits from. Any colony that tried to exert it's own independent rights would be stamped on and obliterated so that the multinational companies of the developed world could continue to exploit their resources. Look at Chile, Nicaragua, Guatamala, Vietnam, Ethiopia, Somalia take your pick of most of the world's former colonies. It is hardly a coincidence that the third world is made up of former colonies. We became rich on the back of our exploiting them. The IMF and World bank were not set up during the Bretton Woods conference to benefit the world as a whole but to ensure that the major western powers at the end of WW2 would maintain their economic powerbase.

Would Vietnam be poor today if instead of blowing it to smithereens, killing 2 million of its people and turning its country into a chemical wasteland the US had acknowledged its right to determine its own path and co-operated economically with them as they did South Korea. After all, the Vietnamese constitution itself under Hồ Chí Minh, borrowed heavily from the US constitution and it's ideas were greatly admired by the Vietnamese.

That US constitution itself was hugely influenced by the Scottish Declaration of Arbroath in 1320 that reminded the world of Scotland's independence. Scotland provides a lesson to all in this game of world domination. Seeing England become rich on the back of its colonies, in 1690 the so called noblemen of Scotland brought all of their money together and launched the 'Darian Scheme'. This was an attempt to set up a colony of its own by sending an army and ships to Central America. The existing powers of England and Spain blew them to pieces and the 'noblemen' were bankrupted. England as ever saw an opportunity and in return for money and access to English trade routes this 'Parcel of Rogues, ' as the nobles became known, sold out Scotland's independence and joined England through the Act of Union to become the united Kingdom. We lost our independence trying to take someone else's. In the meantime our 'noblemen' got to become rich again.

Things are never as simple as they seem. You have to look at the history of each country and how global politics formed the landscape. To accuse a country of being poor because its people are lazy is nothing short of an insult and the highest form of ignorance.

brianluce

I don't know what you guys mean by culture. I can assure you, places like Mexico, Nigeria, and Caribbean countries don't place a high social value on laziness and swindling. They're scorned just as they are every where. What those places lack aren't ethics, but accessible and quality socio-political institutions like public schools, health care, and legal systems. These are things known to allow more equitable distribution of wealth. As far as I can tell, Vitaliy agrees with this premise but he's just fingering international financial elites from banking giants. Oligarchs. Point is, wealth collects among an elite few in places that have corrupt or weak institutions. Where the Harvard/MIT scientist split from V is the idea that natural resources are critical to wealth -- the Harvard/MIT study says it's only a secondary factor. Duncanario and V give background on the how and why some countries lack the institutional architecture to create prosperity throughout different levels of society, but the bottom line is in today's world, these countries, and yes, many are former colonies (and many aren't), don't have adequate institutions to provide social economic justice and sovereignty.

Fulgencio

@CRFilms espero que tu madre no lea lo que escribes acerca de México... es muy triste que pienses así

If culture has something to do with wealth.. How do you explain diferences between south and north europe? Do you think sweden/norway/holland have more "culture" than Greece, Italy or Spain? Maybe you should go back to your history books

If Africa is not rich, and they lost their diamonds, it is not because they had bad goberments, but because other goberments stole their richness

Why some countries are rich? the answer is war, explotation, economical pressure, slavery...

Maybe Vitaly loves conspiracy... his taste for conspiracy has given us some beautiful hacks

brianluce

Btw, the new Harvard/MIT study says culture has very little to do with wealth disparity.

bostonmike

Brian, if you're looking at MIT/Harvard studies then you're more gullible than I thought. There about as noteworthy as the Huffington Post.

Vitaliy_Kiselev

@bostonmike

I really suggest you to stop trolling.

dizzbit

why some countries are rich?

i thought it was always because they dip their money in some magical chemical that turns it into hard currency.

they have yet to share this magical formula with the rest of the poorer countries.

brianluce

@dizzbit That's only true of of chocolate producing countries.

Rambo

Why some countries are rich? .... Natural Resources,, just look at Australia.

PixCanFly

@Rambo On the contrary, Singapore has zero natural resources and they are still freaking rich.

Vitaliy_Kiselev

Singapore has zero natural resources and they are still freaking rich.

Try to look at their history. Who owned them not long ago (and still control most finance sides)

It is the world's fourth-leading financial centre, the world's second-biggest casino gambling market, and the world's third-largest oil refining centre. The port of Singapore is one of the five busiest ports in the world, most notable for being the busiest transshipment port in the world.

brianluce

@Vitaliy Since when are casinos, ports, and refineries natural resources? They're all services. And the fact that Singapore is a former British colony also contradicts some earlier comments about countries handicapped by a colonial past.

Again, the key thing, according to the Harvard/MIT study, is not a country's amount of wealth, but how the country distributes it. If the wealth accumulates among an elite political class, most likely you'll find a poor country according to the research.

It's interesting that one can make an argument that resource rich countries are disadvantaged because they become targets of imperial powers like the USA and UK. Might be true, I'm sure a lot Iraqis think that.

The situation with North and South Korea is compelling because the culture, history and resources are identical and more importantly, it corroborates other examples such as Haiti and DR. Botswana, etc.

brianluce

Here's a radio discussion on NPR with the authors http://onpoint.wbur.org/2012/03/21/why-nations-fail

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