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Why Some Countries Are Poor and Others Rich

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08:47   |   Nov 24, 2014

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Why Some Countries Are Poor and Others Rich
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  • There are 196 countries in the world. 25 of them are very rich, defined as having
  • an average wealth per person of over $100,000 a year.
  • They are:
  • But far more countries are quite poor, and some - which we’re considering here - are
  • very very poor.
  • These are the 20 poorest countries in the world: where the per capital wealth is under
  • a $1,000 a year, or under three dollars a day.
  • Every country is now more or less on a path to growth, but the poor ones are growing very,
  • very slowly. If Zimbabwe continues at its current growth rate, it will qualify as a
  • ‘rich country’ in 2722 years.
  • What we want to know in this film is why some countries prosper and others stagnate:
  • - so we can understand what rich countries are doing right
  • - and get a better grip on the challenges and hurdles facing poor countries.
  • There are basically three factors that determine whether a country will be rich or poor.
  • The first is:
  • INSTITUTIONS
  • Institutions are beyond important. Broadly speaking, rich countries have 'good
  • institutions' and poor ones have very, very bad ones.
  • The correlation between poverty and corruption is direct. The richest countries in the world
  • are quite simply invariably also the least corrupt ones.
  • And the most corrupt countries are also the poorest.
  • When countries are corrupt, they can’t collect enough taxes to get the good institutions
  • they would need to escape the poverty trap.
  • Half of the wealth of the world’s poorest 20 countries goes into offshore accounts.
  • Lost revenues in these countries totals between $10 and $20 billion dollars a year
  • Meanwhile, without an adequate tax base, poor countries can’t invest in police, education,
  • health, transport.
  • Now, a more generous way to look at corruption is that it’s really a case of clan-based
  • thinking. Say you’re hiring someone. In the rich countries, you’re meant to do so
  • simply on merit, interviewing lots of candidates then picking the best one irrespective of
  • any personal connection.
  • But in poor countries under the sway of clan-based thinking, that approach would itself be corrupt:
  • it’s your duty to disregard the so-called best candidate from an anonymous bunch, in
  • order to pick someone from your own team: your uncle, your brother, your second cousin,
  • the guys from the same tribe.
  • As a result, poor countries don’t allow themselves access to the intelligence and
  • talent of the whole population.
  • There’s a second thing that keeps countries poor:
  • CULTURE
  • - what goes on in people’s minds, their outlooks and beliefs...
  • A striking statistic pops up here in relation to religion.
  • If there’s one generalisation you can make about religion and wealth, it’s that the
  • less people believe, the richer they stand a chance of being.
  • 19 of the richest countries in the world have 70% or more of their populations saying religion
  • is not at all important to them.
  • The exception here is - unsurprisingly - the United States, which manages to combine great
  • religiosity with huge wealth (more on that in a second).
  • And conversely, the poorest nations in the world are also extremely believing ones. Here’s
  • how many people think religion and the supernatural is deeply important in the following countries:
  • In the world’s poorest country, simply everyone is a believer.
  • Why is belief quite so bad for wealth creation?
  • Because in general, religiosity is connected up with the idea that the here and now can’t
  • be improved, so you should focus on the spiritual and look forward to a next world instead.
  • It makes quite a bit of sense when you live here.
  • In the rich world on the other hand, people are generally great believers in their capacity
  • to alter their destiny through effort and talent.
  • Incidentally, to explain the anomaly of the United States, religion seems not to slow
  • down economic growth here because it is a particular sort of religion: an overwhelmingly
  • Protestant and exceptionally materialistic kind. The American god
  • doesn’t want you to think of building the new jerusalem
  • in the next world, He wants it here and now in Kansas or Houston.
  • There’s another big factor that determines the wealth and poverty of nations:
  • GEOGRAPHY
  • Poor countries are overwhelmingly located in the tropical regions. This isn’t a coincidence.
  • Life is, in many ways, simply far far tougher there.
  • The problems begin with agriculture:
  • Tropical plants are generally a lot less packed with carbohydrates.
  • Poor countries have worse soil too. Also, and perhaps surprisingly, a tropical
  • climate can be disadvantageous to photosynthesis.
  • Historically, a key determinant in the likelihood of societies growing rich was their possession
  • of large domesticated animals (such as horses and oxen) which liberated a huge part of the
  • workforce from having to plough by hand.
  • But in tropical africa, domesticated animals have throughout time been devastated by a
  • further appalling scourge: the Tsetse fly.
  • This small fly—exclusively present in Africa because of its heat and humidity— knocks
  • out animals on an enormous scale, making them sleepy or inactive - and has had a profound
  • effect on the ability of Africans to develop technology, increase agricultural productivity
  • and amass wealth.
  • -- It isnt just plants and animals that suffer
  • in the tropics. In the middle latitudes, humans are open to a terrifying array of diseases
  • including
  • 100% of low-income countries are affected by at least five tropical diseases simultaneously.
  • The magical temperature which has helped to make rich countries rich is 16 degrees centrigade.
  • However superficially unpleasant, that drop below 16 degrees as autumn starts to bite
  • is quite literally, a foundation stone of civilisation.
  • Geography also encompasses transport and poor countries are, on the whole, very badly connected.
  • Landlocked Bolivia and semilandlocked Paraguy are the poorest nations in South America
  • Africa has only one major navigable river, the Nile and hosts 15 landlocked nations,
  • 11 of which have average incomes of $600 or less.
  • Not coincidentally, the poorest country in Asia, Afghanistan, is also landlocked.
  • Then there’s the matter of natural resources.
  • Natural resources (like oil or precious metals) can be real trouble - and, paradoxically,
  • poor countries tend to have them in spades.
  • These natural resources are what economists call intensifiers: they will help to make
  • a country with good institutions richer, but one with bad institutions get even poorer,
  • precipitating what’s called the resources trap.
  • So the Democratic Republic of the Congo is one of the world’s most mineral rich countries;
  • holding most of the world’s Coltan, which every mobile phone has a bit of inside.
  • But natural resource wealth helps elites to grab money without requiring the cooperation
  • of the whole society. If the only way to grow wealthy is to assemble high tech aeroengines,
  • for example, you’re going to need your whole society to buy into the project but if you
  • just need to extract a few minerals, you can do so with a small labour force, guns and
  • an airstrip long enough to ferry your loot out to market.
  • The wealth from Coltan keeps DRC armed rebels in guns and corrupts every level of society.
  • So how should one weigh up the relative importance of all these different factors, institutional,
  • cultural and geographic, in determining the wealth of a nation.
  • There’s no hard and fast rules, but as a guide, one can suggest that:
  • 50% of a nation’s wealth comes down to its institutions
  • 20% is due to its culture. and 10% each can be allocated to latitude,
  • connectivity with the rest of the world, and geological good fortune.
  • If you’re a policy maker, this discussion has wide practical implications. But at a
  • more personal level, one might take away two things from it;
  • Firstly, Modesty: you should have a better idea of what you owe your individual success
  • to - which is not so much your own hard work or fine mind, as the broader society you live
  • in which was produced over centuries and which you now draw benefit from unknowingly.
  • And at the same time, Sympathy: an ability not to see failing societies just as basket
  • cases, but rather as countries facing comprehensible and hugely difficult problems. Our sympathy
  • can be enhanced by reflecting that the troubles of desperate lands are to a considerable extent
  • to do with malaria, a lack of navigable river and the horrific buzzing of the tsetse fly
  • - rather than always some more intimate human failing which we would ourselves never manifest.

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The reason why some countries are rich and others poor depends on many things, including the quality of their institutions, the culture they have, the natural resources they find and what latitude they're on. For gifts and more from The School of Life, visit our online shop: https://goo.gl/dXpOl4
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