Why are some nations rich while others are poor?
Adam Smith's Central Question
Competing explanations abound. Specialists working from within numerous academic disciplines - e.g., economics, history, demography, geography, anthropology, sociology - defend claims regarding the sole, primary, or (more modestly) very significant causes of poverty. Differences in geography, culture and religion, local technological innovations, governance structures, and natural resource endowments are prominent examples of the major endogenous explanations. Others point to largely exogenous or external factors such as the legacy of colonialism, the cross-border spread of pandemics, population migration patterns, misguided international aid initiatives, and the counterproductive lending and development policies of highly influential global economic institutions.
This page offers a brief guide to documentary films, books, and other websites that provide either introductory accounts or more detailed treatments of these issues. No attempt is made to adjudicate these debates, but my assumption is that awareness of these discussions is important for anyone who wishes to explore issues of global justice. If the task of philosophical reflection on matters of justice is to offer answers to questions about the duties of various persons, nations, and institutions, either to relieve acute deprivations due to poverty or to alter the global economic and political institutions having significant impact on the global distribution of wealth, power, and opportunities, then some understanding of the underlying causes of wealth and poverty is essential.
Almost all of the attempts to provide fundamental explanations address three questions: First, how some nations got an initial head start. Second, whether the positive effects of that head start ensured longer-term prosperity through the present era. Third, whether an initial head start or some aspect or consequence of an enduring prosperity enjoyed by some nations is, in whole or substantial part, a cause of the current poverty of some other nations.
Less ambitious explanations attempt to identify contributing factors that either create pockets of poverty, sustain poverty and deprivation, or exacerbate existing poverty, and in some cases, the authors express some view regarding the proportion of current poverty and deprivation of well-being that can be attributed to these factors.
This page offers a brief guide to documentary films, books, and other websites that provide either introductory accounts or more detailed treatments of these issues. No attempt is made to adjudicate these debates, but my assumption is that awareness of these discussions is important for anyone who wishes to explore issues of global justice. If the task of philosophical reflection on matters of justice is to offer answers to questions about the duties of various persons, nations, and institutions, either to relieve acute deprivations due to poverty or to alter the global economic and political institutions having significant impact on the global distribution of wealth, power, and opportunities, then some understanding of the underlying causes of wealth and poverty is essential.
Almost all of the attempts to provide fundamental explanations address three questions: First, how some nations got an initial head start. Second, whether the positive effects of that head start ensured longer-term prosperity through the present era. Third, whether an initial head start or some aspect or consequence of an enduring prosperity enjoyed by some nations is, in whole or substantial part, a cause of the current poverty of some other nations.
Less ambitious explanations attempt to identify contributing factors that either create pockets of poverty, sustain poverty and deprivation, or exacerbate existing poverty, and in some cases, the authors express some view regarding the proportion of current poverty and deprivation of well-being that can be attributed to these factors.
The Enduring Legacy of Colonialism
One prominent explanation of the current global distribution of wealth, military dominance, and political power focuses on the 500 year head-start of former colonial powers. The following documentary, The End of Poverty, offers an introductory overview of this explanatory thesis.
One prominent explanation of the current global distribution of wealth, military dominance, and political power focuses on the 500 year head-start of former colonial powers. The following documentary, The End of Poverty, offers an introductory overview of this explanatory thesis.
Cultural Values and Personal Traits Necessary for Industrialization
click image for the book
Landes argues that the key to today's disparity between the rich and poor nations of the world stems directly from the industrial revolution, in which some countries made the leap to industrialization and became fabulously rich, while other countries failed to adapt and remained poor. Of particular note, however, his emphasis is not the sheer inability of lesser developed nations to overcome such a massive head-start - acquired in significant part by colonial rule itself - but differences in key cultural traits, without which industrialization is impossible to sustain.
From the book jacket of an earlier edition, there is the following summary: "Landes contrasts the characteristics of successfully industrialized nations--work, thrift, honesty, patience, and tenacity--with those of nonindustrial countries, arguing that until these values are internalized by all nations, the gulf between the rich and poor will continue to grow." For example, landes attributes the economic success of the West to "curiosity, toleration, and loose restraints on commerce," and he argues that other areas fell behind because of "xenophobia, religious intolerance, bureaucratic corruption, and state edicts that stifled enterprise."
From the book jacket of an earlier edition, there is the following summary: "Landes contrasts the characteristics of successfully industrialized nations--work, thrift, honesty, patience, and tenacity--with those of nonindustrial countries, arguing that until these values are internalized by all nations, the gulf between the rich and poor will continue to grow." For example, landes attributes the economic success of the West to "curiosity, toleration, and loose restraints on commerce," and he argues that other areas fell behind because of "xenophobia, religious intolerance, bureaucratic corruption, and state edicts that stifled enterprise."
A Multi-Causal Account
Click image for his NPR interview.
For criticisms of the strength and focality of the causal claims made by those who locate the sole or even primary origins of present deprivation in the effects from the long-term cumulative disadvantages conferred by colonial domination, look at Niall Ferguson's recent book, Civilization: The West and the Rest. The publisher's synopsis offers a helpful hint to his multi-causal, less condemnatory explanations of how some nations moved ahead while others languished.
"In Civilization: The West and the Rest, bestselling author Niall Ferguson argues that, beginning in the fifteenth century, the West developed six powerful new concepts that the Rest lacked: competition, science, the rule of law, consumerism, modern medicine, and the work ethic. These were the "killer applications" that allowed the West to leap ahead of the Rest, opening global trade routes, exploiting newly discovered scientific laws, evolving a system of representative government, more than doubling life expectancy, unleashing the Industrial Revolution, and embracing a dynamic work ethic. Civilization shows just how fewer than a dozen Western empires came to control more than half of humanity and four fifths of the world economy."
"In Civilization: The West and the Rest, bestselling author Niall Ferguson argues that, beginning in the fifteenth century, the West developed six powerful new concepts that the Rest lacked: competition, science, the rule of law, consumerism, modern medicine, and the work ethic. These were the "killer applications" that allowed the West to leap ahead of the Rest, opening global trade routes, exploiting newly discovered scientific laws, evolving a system of representative government, more than doubling life expectancy, unleashing the Industrial Revolution, and embracing a dynamic work ethic. Civilization shows just how fewer than a dozen Western empires came to control more than half of humanity and four fifths of the world economy."
The Impact of Global Economic Development and Lending Institutions
Click image: clip on agriculture
Critics of international development policies imposed on struggling debtor nations by the World Bank, International Monetary Fund, and various regional development banks argue that these institutions, by themselves, are among the most significant causes of of enduring poverty in may post-colonial countries. Critics argue that "structural adjustment" policies designed to balance domestic budgets, eliminate foreign trade barriers, deregulate private industries, and privatize various state activities and functions contribute to the long-term impoverishment of debtor nations, erode national sovereignty, and create economic and legal conditions conducive to external exploitation by more affluent nations and multi-national corporations.
The film is one that PBS describes as a documentary "with a point of view." The following summary is from PBS, the film's co-presenter, along with Independent Television Service (ITVS). "Using conventional and unconventional documentary techniques, this searing film dissects the "mechanism of debt" that is destroying local agriculture and industry while substituting sweatshops and cheap imports.
With a voice-over narration written by Jamaica Kincaid,adapted from her book A Small Place, Life and Debt (official website) is an unapologetic look at the "new world order," from the point of view of Jamaican workers, farmers, government and policy officials who see the reality of globalization from the ground up."
Click the image above for an excellent, edited collection of clips that focus on the effects of free trade policies in Jamaica. The selections are are meant to illustrate the potential for of structural adjustment policies to have devastating effects domestic agricultural industries, food security, and sustainable economic growth.
The film is one that PBS describes as a documentary "with a point of view." The following summary is from PBS, the film's co-presenter, along with Independent Television Service (ITVS). "Using conventional and unconventional documentary techniques, this searing film dissects the "mechanism of debt" that is destroying local agriculture and industry while substituting sweatshops and cheap imports.
With a voice-over narration written by Jamaica Kincaid,adapted from her book A Small Place, Life and Debt (official website) is an unapologetic look at the "new world order," from the point of view of Jamaican workers, farmers, government and policy officials who see the reality of globalization from the ground up."
Click the image above for an excellent, edited collection of clips that focus on the effects of free trade policies in Jamaica. The selections are are meant to illustrate the potential for of structural adjustment policies to have devastating effects domestic agricultural industries, food security, and sustainable economic growth.
The Failures of Global Economic Institutions
Click image to see the book
Few economists are as well positioned as Joseph Stiglitz to offer critiques of the policies of the major global economic institutions. He is a Nobel Prize winning economist, and served as chairman of the Council of Economic Advisers under President Bill Clinton and chief economist at the World Bank.
Stiglitz observed from the inside how the International Monetary Fund and other major institutions put the interests of Wall Street and the financial community ahead of the poorer nations - and how the various considerations of international politics from within the US and other developed nations guided policy decisions that depressed sustainable economic growth within debtor nations, entrenched political and economic elites and sold off state assets for their personal benefit, and caused substantial environmental damage.
His observations about how things went badly because of political interferences are not the sum of his critique. In addition, he reflects on the extent that trade liberalization ideals themselves were misguided and often not even in principle well-tailored strategies for achieving the best interests of debtor nations, and especially in Mismeasuring Our Lives: Why GDP Does not Add Up, he makes the case that global economic institutions also err in defining their most fundamental objectives in terms of maximizing GDP.
Stiglitz observed from the inside how the International Monetary Fund and other major institutions put the interests of Wall Street and the financial community ahead of the poorer nations - and how the various considerations of international politics from within the US and other developed nations guided policy decisions that depressed sustainable economic growth within debtor nations, entrenched political and economic elites and sold off state assets for their personal benefit, and caused substantial environmental damage.
His observations about how things went badly because of political interferences are not the sum of his critique. In addition, he reflects on the extent that trade liberalization ideals themselves were misguided and often not even in principle well-tailored strategies for achieving the best interests of debtor nations, and especially in Mismeasuring Our Lives: Why GDP Does not Add Up, he makes the case that global economic institutions also err in defining their most fundamental objectives in terms of maximizing GDP.
Re-thinking the Singular Path to Globalization
Click link for the book
Against the backdrop of familiar arguments that the policies of major global economic institutions - IMF, World Bank, WTO - erode sovereignty and often make both the economies and prospects for better governance of poor nations worse, Dani Rodrik offers the following challenge in the form of a trilemma.
The political trilemma of the world economy is that we cannot have deep economic integration (what he now calls "hyperglobalization"), national sovereignty, and democratic politics at the same time. We have to sacrifice one of the corners of the triangle. And for Rodrik, democracy is not the one to be jettisoned. What has to go is the ideal of hyperglobalization embodied in the purist's vision of free trade and unrestricted capital, These ideals of trade liberalization and deep structural changes in the laws of lesser developed nations are part and parcel of the policies and rules favored by the designers and overseers of the postwar system laid out at Bretton Woods. Instead of assuming that there is one set of national priorities that should inform the developmental path of all nations, we should recognize that different nations reasonably have different social priorities.
The political trilemma of the world economy is that we cannot have deep economic integration (what he now calls "hyperglobalization"), national sovereignty, and democratic politics at the same time. We have to sacrifice one of the corners of the triangle. And for Rodrik, democracy is not the one to be jettisoned. What has to go is the ideal of hyperglobalization embodied in the purist's vision of free trade and unrestricted capital, These ideals of trade liberalization and deep structural changes in the laws of lesser developed nations are part and parcel of the policies and rules favored by the designers and overseers of the postwar system laid out at Bretton Woods. Instead of assuming that there is one set of national priorities that should inform the developmental path of all nations, we should recognize that different nations reasonably have different social priorities.
The Poverty Trap Explanation
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Jeffrey Sachs argues that the global poor are caught in a "poverty trap" The poor are poor because they lack the critical threshold level of money and resources necessary for long-term social investment of the sort likely to have a positive and sustainable effect on economic development. Because the global poor cannot get out of the poverty trap on their own, Sachs concludes that it will be necessary for rich countries to transfer large lump-sum amounts of money to poor countries. Sachs in this and other recent books is aimed at persuading Western governments, and particularly the US, to live up to their obligations of spending 0.7 percent of each nation's GDP on aid.
His central focus is on the one billion poorest individuals around the world who are caught in a poverty trap. The poverty trap, however, involves much more than mere lack of resources. Its full understanding requires the recognition that with grinding poverty of the poorest of the poor comes physical isolation, environmental stress, political instability, and lack of access to capital, technology, medicine, and education. The goal is to help these people reach the first rung on the "ladder of economic development" so they can rise above mere subsistence level. To do this, Sachs proposes a number of highly specific steps, many of which resemble the UN Millenium Goals, for which he is an enthusiastic supporter. However, his list of concrete, pragmatic steps has been criticized as narrowly technological interventions of limited long-term utility because they fail to take into account some of the main structural impediments to success.
His central focus is on the one billion poorest individuals around the world who are caught in a poverty trap. The poverty trap, however, involves much more than mere lack of resources. Its full understanding requires the recognition that with grinding poverty of the poorest of the poor comes physical isolation, environmental stress, political instability, and lack of access to capital, technology, medicine, and education. The goal is to help these people reach the first rung on the "ladder of economic development" so they can rise above mere subsistence level. To do this, Sachs proposes a number of highly specific steps, many of which resemble the UN Millenium Goals, for which he is an enthusiastic supporter. However, his list of concrete, pragmatic steps has been criticized as narrowly technological interventions of limited long-term utility because they fail to take into account some of the main structural impediments to success.
The Counter-Productivity of Some Forms of International Assistance
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William Easterly argues that the poor are poor because they are unwilling to undertake what would be necessary to move out of poverty. Thus, if you follow Sachs's advice - and indeed, continue with the well-intentioned but demonstrably ineffective forms of international aid currently in fashion - the poor will consume any transfers of money and resources for their immediate needs rather than using it for long-term betterment. But the blame does not rest simply with the condemnation of the choices of the poor; the mechanisms by which aid is administered are unlikely to produce any other result.
White Man's Burden is a follow-up to his earlier book, The Elusive Quest for Growth, a devastating barrage of criticisms of Western organizations that did not sit well with his then-employer, the World Bank. One can see from the following summary from an American Library Association review why the book's reception has been so cold in some official quarters:
"[Easterly's] evidence suggests that in some countries--including Haiti, Zaire, and Angola-- foreign aid has actually intensified the suffering of the poor. By examining the tortured history of several aid initiatives, he shows how blind and arrogant Western aid officers have imposed on helpless clients a postmodern neocolonialism of political manipulation and economic dependency, stifling democracy and local enterprise in the process."
White Man's Burden is a follow-up to his earlier book, The Elusive Quest for Growth, a devastating barrage of criticisms of Western organizations that did not sit well with his then-employer, the World Bank. One can see from the following summary from an American Library Association review why the book's reception has been so cold in some official quarters:
"[Easterly's] evidence suggests that in some countries--including Haiti, Zaire, and Angola-- foreign aid has actually intensified the suffering of the poor. By examining the tortured history of several aid initiatives, he shows how blind and arrogant Western aid officers have imposed on helpless clients a postmodern neocolonialism of political manipulation and economic dependency, stifling democracy and local enterprise in the process."
An Institutional Explanation
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Acemoglu and Robinson develop an "institutional explanation" of why similar-looking nations differ both in their paths to economic development and their capacities to sustain prosperity over time. The authors reject the libertarian purist's case for maximally unencumbered free markets as well as explanations that emphasize the importance of the vast quantities of extractive wealth amassed by systems of colonial rule.
One reviewer observes: "Through a broad multiplicity of historical examples, they show how institutional developments, sometimes based on very accidental circumstances, have had enormous consequences. The openness of a society, its willingness to permit creative destruction, and the rule of law appear to be decisive for economic development.” —Kenneth Arrow, Professor Emeritus, Stanford University, Nobel Laureate in Economics, 1972.
Herbert Gintis summarizes one strand of the argument as follows: "[poor] countries remain poor because their governments are predatory, exploiting the citizenry by refusing to make investments in productive infrastructure, by direction all profits to cronies, and by permitting rampant corruption that renders creative entrepreneurship unprofitable. According to this school, to which I admit to being very favorable, the supply wallahs [Sachs et al] are wrong because the resources throw into the system will be appropriate by the rich and powerful, and the demand wallahs [Easterly et al] are wrong because the poor are actively maintained by the oligarchy in their position of servitude."
One reviewer observes: "Through a broad multiplicity of historical examples, they show how institutional developments, sometimes based on very accidental circumstances, have had enormous consequences. The openness of a society, its willingness to permit creative destruction, and the rule of law appear to be decisive for economic development.” —Kenneth Arrow, Professor Emeritus, Stanford University, Nobel Laureate in Economics, 1972.
Herbert Gintis summarizes one strand of the argument as follows: "[poor] countries remain poor because their governments are predatory, exploiting the citizenry by refusing to make investments in productive infrastructure, by direction all profits to cronies, and by permitting rampant corruption that renders creative entrepreneurship unprofitable. According to this school, to which I admit to being very favorable, the supply wallahs [Sachs et al] are wrong because the resources throw into the system will be appropriate by the rich and powerful, and the demand wallahs [Easterly et al] are wrong because the poor are actively maintained by the oligarchy in their position of servitude."
Geography, Agricultural Achievement, and All that These Factors Make Possible
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Diamond's thesis is a complex one, made up of a chain of linked but historically contingent events. He argues that the peoples who gained a head start in producing food owed a great deal of their initial success to favorable climate and geography. But how did that initial success cascade into European dominance over much of the rest of the world?
The next step in his argument draws upon evidence linking germs to domestication of animals, germs that Eurasians then spread in epidemic proportions in their voyages of discovery. But the adverse impact of germs brought along on these voyages are not the whole story. Other productive technological factors, made possible only by successful agriculturally based stable societies, in turn, enabled them societies to gain the global upper hand through conquest, displacement, and genocide. These are the core claims of his positive causal thesis. Diamond's negative thesis is one aimed at dismantling alternative explanations that draw upon assertions of innate racial and biological differences. The two theses are logically independent. Even if his positive thesis has limits in its explanatory power, the evidence offered in support of the negative thesis stands as a powerful element in the refutation of familiar biological determinist explanations.
Diamond's NYRB review of Why Nations Fail illustrates some important areas of overlap in explanations with Diamond asserting that the institutional thesis offered by Acemoglu and Robinson may explain as much as half of the causes of wealth and poverty within most nations. However, he asserts that their argument cannot be the whole explanation. Here he brings to bear his own set of explanatory claims, in particular the importance of geographical factors such as natural resources, soil and climate favorable to nutrient-rich forms of agriculture, and access to fresh water. Much of his challenge lies in the simple question: what explains why some societies developed the kinds of institutions that contribute heavily to longer-term prosperity? You can read the review from the July 7, 2012 issue here. The conversation continues in the August 16, 2012 Exchange between Robinson and Acemoglu and Diamond.
The Natural Resource Curse
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Economists and astute observers of international politics and trade have long noticed that some poor nations blessed with natural resources - especially when blessed with large amounts of one scarce resource - often fare worse economically than other poor nations. Why? We should think that rich reserves of natural resources needed by the developed world offers an exceptional opportunity to get out of poverty. However, the truth is that non-renewable resources invite exploitation from the outside, enable autocratic leaders and their cronies to finance their own lifestyles and build up arms and infrastructure that allow them to remain in power through repression and systems of bribery and patronage.
Much of the wealth created is not realized in the sale of raw materials, but firms from developed countries pay little for those resources and add most of the market value through the processes of manufacture and fabrication that led to commercially tradable goods sold to the global affluent. Moreover, much of the wealth that stays in the country does not get distributed to the poor or invested for the sake of improving the well-being of future generations. The "resource curse" may not be the primary explanation of why some nations are rich while others are poor, but it is an important factor. Collier's book examines in granular detail when resources are most like to be a curse and what institutional or other factors tend to mitigate or prevent the adverse consequences so often observed.
For more information on the resource curse, its origins, and possible remedies, see the Resource Curse page on this website.
Much of the wealth created is not realized in the sale of raw materials, but firms from developed countries pay little for those resources and add most of the market value through the processes of manufacture and fabrication that led to commercially tradable goods sold to the global affluent. Moreover, much of the wealth that stays in the country does not get distributed to the poor or invested for the sake of improving the well-being of future generations. The "resource curse" may not be the primary explanation of why some nations are rich while others are poor, but it is an important factor. Collier's book examines in granular detail when resources are most like to be a curse and what institutional or other factors tend to mitigate or prevent the adverse consequences so often observed.
For more information on the resource curse, its origins, and possible remedies, see the Resource Curse page on this website.
The Choices Available to the Global Poor - and the Options for Aid Agencies
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In Poor Economics, Abhijit V. Banerjee and Esther Duflo, explain how the stress of living on less than 99 cents per day encourages the poor to make questionable decisions that feed—not fight—poverty. According to the authors, their book "is ultimately about what the lives and choices of the poor tell us about how to fight global poverty."
The book is not intended as yet another grand explanatory theory meant to rival the main competitors who currently hold the field. Instead, they offer a variety of fine-grained observations indicating some of the neglected reasons that aid programs aimed at long-term sufficiency tend to fail. The book contains chapters on a variety of topics addressed in international development policies: food, health, education, savings, micro-credit, and insurance. What we learn from the authors is that many of the things we think likely to be a magic bullet work only under specific social and economic conditions (e.g., mircrolending), that many of the educational goals we have for the developed world are not as feasible as we might suppose, and that there are many unimagined (from the outside) impediments to the sorts of behavioral changes (e.g., in health) we hope to foster through well-meaning international programs.
While many of our assistance programs may not be the fundamental explanation of poverty or even the main reasons for its persistence, the authors point to instances where poverty alleviation efforts may be designed in ways that are ineffective or even counterproductive.
The book is not intended as yet another grand explanatory theory meant to rival the main competitors who currently hold the field. Instead, they offer a variety of fine-grained observations indicating some of the neglected reasons that aid programs aimed at long-term sufficiency tend to fail. The book contains chapters on a variety of topics addressed in international development policies: food, health, education, savings, micro-credit, and insurance. What we learn from the authors is that many of the things we think likely to be a magic bullet work only under specific social and economic conditions (e.g., mircrolending), that many of the educational goals we have for the developed world are not as feasible as we might suppose, and that there are many unimagined (from the outside) impediments to the sorts of behavioral changes (e.g., in health) we hope to foster through well-meaning international programs.
While many of our assistance programs may not be the fundamental explanation of poverty or even the main reasons for its persistence, the authors point to instances where poverty alleviation efforts may be designed in ways that are ineffective or even counterproductive.