National Economics in the Global Theater: A Brief Retrospection

Greetings dear readers, my name is Sayon Bhattacharya. My heartiest wishes to all the readers and warm welcome to Hexarius. Read on as we look into the fiscal disparity contributing to nations being rich and poor.

So, without further ado, lets unveil the truth behind the perpetuity of poverty.
As of 2018, there are some 196 countries in the world out which the top 20 nations are very rich meaning, having the average per capita income of over $ 100,000 per year. On the far side of the same spectrum we have the 20 nations where the per capita income is less than $ 1,000 per year or under $ 3 per day.

(Source)

Looking at the growth charts one might believe that all nations are on the path to grow, but the poor ones are growing really slow. So much so that if Zimbabwe continues at it's current growth rate, it is projected that Zimbabwe will only qualify as a rich country in 2722 years!

The question that we should ask is why some countries are more successful and other are not. Understanding this would be inherently beneficial to the macro as well as the micro economy of the poor or developing countries.

There are three factors which determines whether a country is rich or poor.

I- Institutions : Proper institutional management and presence is the most important of the three factors which determine the growth of a country's national economy. Broadly speaking, rich countries tend to have well managed and structured institutions while poor countries have poorly formed and ill managed institutions. Corruption is also a direct barrier to the growth of

a sound economy coupled with proper per capita income.

When countries are corrupt, proper taxation doesn't take place which makes the good institutions the country needs to escape the perpetuity of poorness very expensive. The most intriguing detail perhaps is that the half of the wealth  of the world's 20 poorest countries finds its way into offshore accounts (source). Lost revenues in this countries totals in tens of billions of dollars a year. Meanwhile without adequate tax base poor country cannot invest in police, education, health and transport.

But really what is corruption, in layman's terms?
Corruption really is all about clan based thinking. Suppose you are hiring someone-

1. In a rich country - You are supposed to pick the best suited candidate just and only just on the basis of the candidate's merit and irrespective of any personal connection whatsoever. 
2. In a poor country- Under the deadly sway of clan based thinking the aforementioned approach would itself be perceived as corrupt. It becomes the duty of the selector to disregard the "Best Candidate" from an anonymous sample in order to make way for someone from your own team. Your uncle, your brother, your second cousin, implying that everyone who gets in is someone related to you. Thus, poor countries don't allow themselves access to intelligence and talent of the whole population.

Clan based mentality can be largely attributed to the next point of discussion, it is the most pivotal of all and determines how progressive the population is. Let's hop onto the next point to understand more-


II. Culture : Very fabric of today was woven by the artisans of yesterday, our culture is the fabric of society that holds us all together and determines what goes on in your mind, your outlooks and beliefs. A rather interesting fact is made apparent from this map which shows how important religion is for people around the world-

One generalization that can be drawn about religion and wealth is that the less people believe, the richer they stand of being. According to survey data (source) by researchers from University of California, Berkeley- 20 of the richest countries in the world have 70% of their population saying that religion is not at all important to them. However, the exception here is,  unsurprisingly, United States of America. It manages to maintain great religiosity with huge wealth.


Conversely, the poorest nations in the world are also the most believing ones. This map shows how many people in the following countries believe that religion is deeply important.

 In the world's poorest countries, simply everyone is a believer!

Now, why is belief such a hindrance to wealth creation?
That is because the very purpose and teaching of religion(s) in general is connected 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. Which makes quite a bit of sense if you call this place your child's school-

 In the rich world on the other hand, people are generally great believers in their capacity to carve their destiny through effort and talent. Bringing in the anomaly of USA here, one has to understand that religion doesn't slow the economy down because it is a particular sort of religion, overwhelmingly protestant and very materialistic. The American god doesn't want you to build the new Jerusalem in the next world, he wants it built here and now.

However, culture can make or break a country if and only if it has sufficient resources to maintain it's growth. That brings us onto our last point.

III. Geography :  One can't fail to notice that an overwhelmingly large number of poor countries are located withing the tropical belt. This is no coincidence, life is in most ways, far more tougher than their colder counterparts.

The problems begins with agriculture.

Tropical crops are usually low bearers of carbohydrates, apart from that, poor countries have worse soil too.

Also, perhaps paradoxically, tropical climate is rather disadvantageous to photosynthesis. Till the advent of industrial revolution, a key determinant of of society's growing rich was their possession of large domesticated animals such as horses and oxes  which liberated a large part of the workforce from having to plow by hand. But in places like tropical Africa, these very tropical  large domesticated animals have been devastated by a further appalling scourge, the

The African menace. 

Tsetse fly. Exclusively present in Africa because of it's heat and humidity knocks out even the largest of animals in periodic pandemics by making them sleepy or inactive thus rendering them useless for any field work while still consuming fodder to stay alive. This is the very reason why Africans didn't develop technology, produce agricultural surplus and amass wealth.

It'd be very wrong to assume that the tropical toll is limited to plants and animals. In the middle latitudes, humans are open to a terrifying array of diseases to the likes of Tuberculosis, Leprosy, Ebola, Entamoeba Histolytica, Filariasis to name a few. A 100 % of low income countries are effected by at least 5 tropical diseases simultaneously. 

So, what is the temperature in which economies flourish? 

Statistical evidence shows that it is a sweet 16℃. Rather non-intuitively that drop below 16, as the autumn starts to bite, is quite literally the cornerstone of civilisation.

Geography also encompasses transport, and poor countries on the whole are very badly connected to the global markets. For example, Bolivia and Uruguay, the two poorest nations in South America, are landlocked countries. Africa on the other hand has only one navigable river, the Nile. There are 15 landlocked countries in Africa, 11 of which have average income less than $600 per year. Perhaps, no coincidentally the poorest country in Asia- Afghanistan, is also totally landlocked.  

Then comes the matter of natural resources. Natural resources such as essential minerals and fossil fuel can be a source of trouble, interestingly however poor countries have these in abundance. The economist's term for these resources is Intensifiers. If a country has good institutions, these intensifiers will make the country richer. However, one with bad institution get marginally poorer, precipitating what's known as the Resources trap. DRC or Democratic republic of Congo is one of the world's most mineral rich country. Having most of the world's coltan reserves which every mobile phone has traces of inside. But the very wealth generated by these natural resources helps the elites to grab money without requiring the cooperation of the whole society. Suppose, the only way to grow wealthy is to assemble high tech jet engines. In this scenario you as the elite will need the help and cooperation of the whole society.  You need to first pitch them the prospects of such a project. You will need engineers to make the machine, scientists to research the materials, doctors to look after the employees, cleaners to maintain the site, and many more staff. However, if you just need to extract a few minerals, you can do it with a small labour force, guns and an airstrip long enough to haul the loot from the source and to the market. The wealth from coltan is what keeps DRC armed rebels active and corrupts every level of the society. 

Conclusion

So how does the relative importance of all these different factors- Institutional, cultural and geographic, weigh in determining the wealth of nations? There is no set-in-stone rule. But from pre-existing data one can conclude that 50 % of a nation's wealth comes down to it's institutions, 30% to it's culture and the remaining 20% to it's geological fate. 

For any policymaker, this discussion has a wide array of practical arguments and it is healthy to spark up such arguments from time to time in order to better analyse our societal structure and function. But as an individual one must take away two lessons from this-

1. Modesty : One should realise that the individual success of oneself isn't just the hard work and intellect of a person but should be owed more to the broader society they thrive in. The very society we live in and draw benefit from unknowingly is what it is due to centuries of toil and effort.

2. Sympathy: The ability to not see failing societies as endless wells but as societies facing genuinely comprehensible and rather difficult problems would go a long way in ensuring harmony among all. Our sympathies can be enhanced by reflecting that the troubles of desperate lands are to a considerable extent to do with problems rich countries created and promoted for their own fiscal benefits along with certain elements of ill-fate.

As I draw this article to a close, I can't help but thank you readers for making it this far. This one was a long drawn argument, one whose primary focus was not to educate my readers but to make them realise that societies are not failing because of their destiny or the momentum of donward spiralling they are in. The intricacy of the global economic theatre requires compassion to understand and I shall consider this article to be a success if I could instill or enhance that feeling in you.

Thanks you,
Yours Truly.

Written by Sayon Bhattacharya for Hexarius ©️

This articles was inspired and researched with help of the following books. I suggest them for personal development and inspiration to do and earn more-

1- Think and Grow Rich -Amazon link
2- The Intelligent Investor -Amazon link
3- Heart of Darkness: and Selections from The Congo Diary  -Amazon link

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