Max Roser does great work at “Our World in Data”, virtually all of which I read and retweet approvingly. He has just written a paper calculating the amount of economic growth which will be required to lift people out of poverty. Lots and lots of growth, he argues.
I think it likely that lots of economic growth will be required, and am not questioning his thesis in growth terms. It is his particular explanations about the cause of poverty which I find unlikely. Here are some examples:
One of the most important insights of economics is that people live in poverty not because of who they are, but because of where they are. A person’s knowledge, their skills, and how hard they work all matter for whether they are poor or not – but all these personal factors together matter less than the one factor that is entirely outside of a person’s control: whether the place they happen to be born into has a large, productive economy or not.
It seems unlikely that all those personal factors matter less. Jews living virtually anywhere tend to do well, and usually very well. Also, the Chinese do well. The most important thing about Singapore is not the mosquitoes. It’s the Chinese. There are other economic elites, for example in India, who do far better than other Indians, and better than most people elsewhere. Roser implies that human capital, as economists call it, counts for relatively little, and geography counts for far more. Some people “happen to be born into” large productive economies. Some places happen to have those economies lying about, and other countries don’t. It is the luck of the draw where you are born.
A person who happens to be born into a country where the average income is low is almost certainly living in poverty.
Not necessarily. A Japanese person born in Brazil is unlikely to live in poverty. “Happens to be born” is an odd phrase. What is meant, I think, is that people are usually born in a national economy which their parents and grandparents have created. According to what they have built, children growing up in that country will have inherited a different set of circumstances which influence their opportunities. He seems to rank the location more important than the people. Furthermore, circumstances are not insurmountable. A nation state can eradicate mosquitoes if it puts its mind to it. American engineers built the Panama canal, where others had failed before, by the same intervention.
Another reason to think that many countries in the world can make progress against poverty in the future is to consider some of the reasons that were holding these countries back in the past. One important reason why a large number of people live in poverty today is that these countries were exploited by colonial powers that did not allow those economies to grow and instead impoverished them. The actions of rich countries still harm the prospects of poorer countries in many ways, but the end of colonialism was extremely important for the prospects of billions of people in the world and since the end of colonial rule many former colonies did substantially reduce poverty.
If colonial occupation is truly an important factor, then one would expect the nation which liberated itself most recently would be among the poorest, but that is not true of Hong Kong, which was liberated from British rule only in 1997. Also, it leaves out any comparison of the post-colonial achievements of different countries. East Asian countries have made gains which are larger than African countries, though at the time of gaining independence several African states like Kenya seemed to have better prospects than East Asian ones.
Also, if colonialism were an important reason for poverty in Africa then the bad management of a country up till say 1965 would seem to last for at least 56 years. I take 1965 as an average date for African countries throwing off colonial status. They have had 56 years of freedom, and the thesis is that their current poverty is in large part due to their colonial past.
That 56 year hangover would suggest that the exceptionally bad mismanagement of the leadership of Germany and Japan culminating in their destruction in 1945 would still be having deleterious economic effects on those countries in 2001, but in fact both were powerhouses of the world economy by then, and had already substantially recovered by the 1970s.
It is a sideline, but colonialism was practiced by different countries in different ways, and possibly with different apparent outcomes. Sociologists Lange, Mahoney and Hau (2006) have argued that mercantilist Spain colonized areas which were previously densely populated and developed, and Spanish colonialism had negative consequences for post-colonial development; liberal Britain colonized sparsely populated under-developed areas, which had positive consequences for post-colonial development. They did not consider human capital measures, but have a useful list of how long colonialism lasted for each country, and how extensive it was in terms of its influence, both helpful indicators.
A more cynical view held by many Africans is that after liberation the old colonialism was taken over by a new African tribe called the WaBenzi, who mistreated the people of Africa in the most terrible way, stealing from them, corrupting their institutions and destroying their economies. They were named after the cars they drove.
If colonialism is the source of poverty, then it would be good to look at the pre-colonial world, say in the year 1500. By common consent among economic historians, at that time sub-saharan Africa was already a poor part of the world. This is attributed to the fact that Sub-Saharan Africa, already handicapped by diseases, lacked the advantages of the advanced agricultural societies, productive agriculture, diversified manufacturing and the necessary institutional and cultural resources (writing, the maths needed for land surveying, a written legal code, etc) to advance. The slave trade and colonialism would only exacerbate the situation.
Although Roser mentions education, he does not give the comparative figures for different nations, particularly comparing the post-colonial scholastic achievement of former colonies. Asia does well, despite previous poverty, Africa far less so. Here are the Maths scores for countries, including former colonies, including African countries who most of them don’t take part in international assessments, in this case derived from TIMMS items which were included in pan-African scholastic tests. Note that Singapore and Hong Kong were colonies, but do exceptionally well. Malaysia was colonised by the Portuguese, then the Dutch, and does well. Much further down the list, Indonesia had the same colonial sequence. The pattern does not show a convincing primary effect of damaging colonialism.
An excellent economic history of the world was written by David Landes. His meticulous study included studying the history of industrialization in Africa, and the problems encountered. His tentative conclusions about the behaviours which lead to wealth could be summarised in one word: innovate.
Here are his more detailed suggestions.
Ideal case for material progress and general enrichment:
- Master new technology. Build, manage and operate instruments of production.
- Teach this knowledge to the young, by formal education or apprenticeships.
- Choose people for jobs by competence and relative merit; promote and demote on the basis of performance.
- Afford opportunity to individual or collective enterprise; encourage initiative, competition and emulation.
- Allow people to enjoy and employ the fruits of their labour and enterprise.
Gender equality, no discrimination on the basis of irrelevant criteria, preference for scientific rationality over magic and superstition.
Political and social institutions which favour progress and enrichment
- Secure rights of private property, the better to encourage saving and investment.
- Secure rights of personal liberty.
- Enforce rights of contract, explicit and implicit.
- Provide stable government, of laws rather than men.
- Provide responsive government, that will hear complaints and make redress.
- Provide honest government: no rents to favour or position.
- Provide moderate, efficient, ungreedy government, holding taxes down, giving back surpluses and avoiding privilege.
Landes was reluctant to talk about culture making a difference between one set of peoples and another. He was somewhat apologetic, saying that culture had sulphurous connotations. Odd. One should look for explanations wherever one can find them, and evaluate their contribution energetically. Culture is a collection of habits, both good and bad, which have developed over time in response to problems, and contain solutions of varying levels of appropriateness and success. People compare cultures, and pick up the ideas and products which they find useful. The wheel took a long time to invent. Some cultures never achieved it. Those that did gained an advantage. Some cultures are better than others in prospering in competition with each other.
Someone who did not fear looking at whether people and their cultures lead to wealth or poverty is Heiner Rindermann. His studies and conclusions can be found in “Cognitive Capitalism” (2018). We first worked together on that concept in 2011.
Here is his global model in one picture.
You will see that, in his analysis of a large country dataset, latitude and natural resources count for very little, but evolutionary background and cognitive ability have far more influence, mediated by downstream cultural factors. His view is based on the study of cognitive and scholastic levels, and to a lesser extent on historical indicators of innovation.
I think that when discussing why some countries are rich and others poor, one should consider a broader range of explanations than “happening to be born” in a place. If colonialism is proposed as a major cause, rather than a possible contributing factor, then specific evidence should be provided.