Reasons Why Nations Prosper or Fail

December, 2015 Monthly Get Together Lecture/Presentation by Dr. Shoeb Amin

Reasons Why Nations Prosper or Fail

The above was the topic of my talk at the Thinkers’ Forum meeting of 12/2015.

It is hard to incorporate everything said in a 30-40 minute talk but I’ll try.

 

I started out by taking the example of a city called Nogales which straddles the US/Mexico border. The northern half, in the state of Arizona has 3 times the household income, higher life expectancy, low crime, most teenagers in school and most adults are H. S. graduates; people have reliable public services, have programs like Medicare, WIC, social security and finally decent law and order. And even though the govt. is inefficient and somewhat corrupt, the political institutions are more robust, and people have it in their hands to change govt.

 

Just cross the fence into the southern half, in the state of Sonora, Mexico and the household income is 1/3 that of the northern neighbor, most teens are not in school, most adults are not H. S. graduates, life expectancy shorter, higher crime, poor public services, no Medicare and weak political institutions, much higher corruption. And Nogales, Mexico is more prosperous than the rest of Mexico, because of its proximity to Nogales, USA, because a lot of its income is derived from residents of the northern half

(Overall the per capita GDP of the US is 10 times more than that of Mexico) Which begs the question: Why are places so similar and in proximity to each other so different in their level of prosperity? The following are some of the reasons; you may attribute different levels of importance to each but they are all factors that contribute to the differences.

 

1) Geography: Jared Diamond in his book “Guns, Germs and Steel” and his other writings thinks your location on the globe – the latitude – is the most important factor. People in tropical climates will be poorer than those in temperate climates. The reasons, in brief, are:

  1. a) Hot temps make people lazy,
  2. b) There are more infections like malaria in tropics and most people are not at 100% efficiency because of frequent illnesses and
  3. c) The tropical soil is not as productive. All true reasons but some countries have overcome latitude; Singapore, one of the most prosperous countries in the world is in the tropics, so is Botswana and many ancient cultures like the Aztecs, Mayans, Incas, Angkor thrived in tropical climates.

 

2) Geology: By which I mean natural resources like oil, gold, and diamonds. Qatar has the highest per capita GDP in the world from oil revenues. Some at the meeting thought geology and geography are the same thing (yes and no).

 

3) Cultural: Some have claimed that the Protestant work ethic and the values that go with it have made Europe so prosperous. May be, but there are not many Protestants in Singapore, Japan, Hong Kong  and more recently China.

 

4) Ignorance: That the leaders of some countries do not know how to make their countries prosperous. This is not a very valid reason in our times when knowledge from a distant country can be acquired very easily.

 

5) Political & Economic Systems:  In their book “Why Nations Fail”  Acemoglu and Robinson argue these to be THE most important factors. They define two basic economic systems: “extractive” and “inclusive” economic systems. In the former, as in an old fashioned monarchy or in communism, the fruits of people’s labor goes to the king/queen or the state, the workers have no incentive to work harder. In the “inclusive” systems, as in a capitalist democracy, people do have an incentive to work harder because they are the main beneficiaries of that hard work. There are many examples of these two systems creating different levels of prosperity; the best is that of South and North Korea. The same geography but very different economic and political models and thus prosperity levels.

 

6) National IQ: This refers an estimated average IQ of all the inhabitants of a country. This theory is postulated by Richard Lynn and Tatu Vanhanen in their two book: a) IQ and wealth of nations (2002) and IQ and global wealth. These books are hard to get because they deal with a very sensitive topic but I have the link to the abstract.

https://lesacreduprintemps19.files.wordpress.com/2011/10/national-iq.pdf

In these books they argue that prosperity and many other desirable indicators of quality of life correlate directly with the AVERAGE IQ of the nation. There has been criticism of their work, in their methods and tests used to determine IQ’s and the number of persons used to arrive at the average IQ and they have improved their methodology in response to that criticism in their second book. I am including a link of a list of national IQ levels along with a list of per capita GDP (compiled by the World Bank). I’ll leave it to the reader to decide what role a national IQ may play in a country’s prosperity. My personal opinion is, in spite of the objections raised that IQ tests are a Western creation that intelligence is not just a number etc. IQ’s role is not an insignificant one.

http://www.photius.com/rankings/national_iq_scores_country_ranks.html

http://data.worldbank.org/indicator/NY.GDP.PCAP.CD

Also included is a comparison of Haiti and the Dominican Republic, both part of the same island yet so different. Just look at the demographics.

http://www.indexmundi.com/factbook/compare/haiti.dominican-republic