Sunday, October 07, 2007

What keeps the rich rich and the poor poor?

You will have heard this put in other ways (rule of law, trust, education) but a recent study by the World Bank has sought to quantify it (there's an article about it here). If their figures are in any way credible, the difference made by those factors is incredible.

Put it this way. If you were Mexican, you'd be mad not to make a break for the border. It's not so much that the average American has more money in his bank account; it's the "intangible capital" that the American can draw on that makes the difference: $418,000 compared to $34,000.

The "intangibles" are broken down into the rule of law, which accounts for 57%, and education, 36% of the total. Countries are then rated on each. On the rule-of-law index, for example,

The members of the Organization for Economic Cooperation and Development—30 wealthy developed countries—have an average score of 90, while sub-Saharan Africa's is a dismal 28.
The article quotes the development economist Peter Bauer who in 1972 wrote a book called Dissent on Development (Currently unavailable on Amazon UK). In it, he said
If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid.
I've got no idea how the World Bank came up with these figures, and I probably wouldn't understand it if they told me, but the basic insight seems irrefutable.


Hazar Nesimi said...

See my early post:

IN some cases (e.g some in Africa) we cannot expect that the conditions for development will ever be present. So we have only a moral question on our hand: to give aid and offer compassion or ignore people's plight. There are other cases where aid will be counterporductive,

Hazar Nesimi said...

I would vouchsafe for Riri by saying that Algeria is not really a poor country as assumed but a middle income one.

Yes I agree with positive influence of capitalism, and with giving aid more cleverly. In fact in most cases, that is what one HAS to do to help another human, empower him. BUT I dont think that pure heart charity is always bad as some seem to imply, sometimes it wakes the recepient to action, and sometimes it is just that - a charity for the sake of it. It is needed.. You sympathise with an injured cat, what about a human being, dejected or handicapped.. Why not help him/her. Without waiting for reward or a responce. and without feeling good for it.

NoolaBeulah said...

That attitude is right for one individual faced with another. If you apply it to states, it often just ends up being a subsidy to the most corrupt and inefficient elites who have managed to gain power. It may make you feel better, but it doesn't do anything for those who actually need it.