Why countries remain poor.

Published on 7th June 2005

Why do some countries remain poor? Is it because they lack adequate resources? This was a popular reason sometime. Is it due to overpopulation? The most populous country in Europe is the Netherlands, and the most populous state in the US is New Jersey. Both are among the most prosperous. Could it be lack of brains? India has many skilled people who cannot find jobs.

Every year technology gives the world new ways of doing things with less labor and usually with less consumption of material from other parts of the economy. The fact that the standard of living of the average American worker is incomparably more satisfactory than that of the average Hindu worker, and that in the US working hours are shorter and children are sent to school and not to the factories, is not an achievement of the government and the laws of the country. It is rather an outcome of the fact that that the capital invested per head of the employees is much greater than in India and that consequently the marginal productivity of labor is much higher. This is not the merit of social policies. It is the result of laissez faire methods of the past which abstained from sabotaging the evolution of capitalism.

Blaming the European powers for the poverty of the masses in their former colonial empires yet do nothing about the status quo is like sitting by the rivers of Babylon and weeping, but like the proverbial four lepers who were banished from mingling with the rest of their country folk, we should ask ourselves, Why sit here till we die? Economic backwardness in countries endowed with rich natural resources hurts the interests of those whose standards of living could be raised if a more appropriate mode of utilizing this natural wealth was adopted. The conflict between the haves and have nots is  real but it is present only in a world in which any sovereign government is free to hurt the interests of all peoples by depriving the consumers of the advantages of better exploitation of the country’s resources. It is not sovereignty as such that makes for war, but sovereignty of governments not entirely committed to the principles of the market economy.

A country will fail to progress economically if there is an insatiable unproductive income sink. Whatever extra income the country gets will go into this sink. Some countries are dominated by the sink of oppressive and unproductive nobility that conquered the country and regards its people as part of the machinery. The sink of shying away from technology, ever increasing regulation, lawsuits and commissions of inquiry that never bear fruit is prevalent. There is always a way out for those with will and resolve.

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