What Makes Countries Rich or Poor?

Jared Diamond, best known for the Pulitzer Prize-winning book Guns, Germs, and Steel, recently reviewed Why Nations Fail by Daron Acemoglu and James Robinson, a book I’m deeply interested in that explores the question in the title: why are some countries prosperous and developed, while others seem chronically poor and unstable?

As you’d imagine, the answer is complex and debatable, and Diamond offers his own interesting two cents while reviewing the book’s central thesis that effective economic and political institutions play the most central role in determining a nation’s fate. It’s quite a long read, but I definitely recommend it. While there are many interesting points made — for example, that soil quality or climate are major factors in determining national wealth — here’s an excerpt that stood out to me:

But it’s obvious that good institutions, and the wealth and power that they spawned, did not crop up randomly. For instance, all Western European countries ended up richer and with better institutions than any tropical African country. Big underlying differences led to this divergence of outcomes. Europe has had a long history (of up to nine thousand years) of agriculture based on the world’s most productive crops and domestic animals, both of which were domesticated in and introduced to Europe from the Fertile Crescent, the crescent-shaped region running from the Persian Gulf through southeastern Turkey to Upper Egypt. Agriculture in tropical Africa is only between 1,800 and 5,000 years old and based on less productive domesticated crops and imported animals.

As a result, Europe has had up to four thousand years’ experience of government, complex institutions, and growing national identities, compared to a few centuries or less for all of sub-Saharan Africa. Europe has glaciated fertile soils, reliable summer rainfall, and few tropical diseases; tropical Africa has un-glaciated and extensively infertile soils, less reliable rainfall, and many tropical diseases. Within Europe, Britain had the further advantages of being an island rarely at risk from foreign armies, and of fronting on the Atlantic Ocean, which became open after 1492 to overseas trade.

It should be no surprise that countries with those advantages ended up rich and with good institutions, while countries with those disadvantages didn’t. The chain of causation leading slowly from productive agriculture to government, state formation, complex institutions, and wealth involved agriculturally driven population explosions and accumulations of food surpluses, leading in turn to the need for centralized decision-making in societies much too populous for decision-making by face-to-face discussions involving all citizens, and the possibility of using the food surpluses to support kings and their bureaucrats. This process unfolded independently, beginning around 3400 BC, in many different parts of the ancient world with productive agriculture, including the Fertile Crescent, Egypt, China, the Indus Valley, Crete, the Valley of Mexico, the Andes, and Polynesian Hawaii.

Pretty interesting stuff. As always, feel free to weigh in. 

The World’s Billionaire Cities

Right off the heel of my last post about the world’s poorest denizens, comes sobering article from PolicyMic that highlights the stark reality of global wealth inequality. It identifies the world’s most popular cities for billionaires, based on a recent report from Forbes.

Moscow remains the billionaire capital of the world, with 84 of the world’s richest people, together worth a total of over $366 billion. Of the other major cities on the list (some of which tied), five are in Asia (Istanbul, Mumbai, Seoul, Hong Kong and Beijing), two are in Europe (London and Paris), two are in the U.S. (New York City and Dallas), and one is in Latin America (Sao Paulo, Brazil).

According to the 2013 Wealth-X and UBS Billionaire Census, the first comprehensive study of the world’s billionaire population, the average billionaire holds $78 million in real estate, owns four homes (each worth nearly $20 million) and posses numerous luxury items, the most common being yachts, private jets and works of art.

Despite boasting many uber-rich residents, these cities also account for a disproportionate share of overall economic growth and rising income inequality, with many of them also hosting a large proportion of poor residents. According a report by Oxfam, 85 of the richest people in the world (most of whom live in these cities) control as much wealth as the poorest half of the world (3.5 billion people).

Portraits of People Living on a Dollar a Day

As a lifelong citizen in a well-off part of a wealthy country (the U.S.), I’m doubly insulated from the miserable circumstances that are the norm for most of my fellow humans. Around 17 percent of the world’s population — that’s one out of six people — live on a dollar or less a day, lacking any stable source of food, medical care, housing, and other basic needs.

Not only do more than a billion people lack material goods and comforts, but they live a precarious existence in which they’re never certain when or if the next meal will come; in which they’re just one injury or illness away from deeper poverty or even death; in which housing is barely livable, if existent at all. And all this transpires practically invisibly, with few people truly understanding, much less addressing, this extreme level of poverty.

But not if people like Thomas A. Nazario, the founder of a nonprofit called The Forgotten International, can help it. He’s written a new book with Pulitzer Prize winner Renée C. Byer called Living on a Dollar a Day: The Lives and Faces of the World’s Poor, which offers a much needed window into these people’s everyday lives, ultimately calling for action on their behalf.

Mother Jones interviewed Nazario about his motivations for this book, as well as about bigger topics like global inequality and the pervasive savior complex of well-meaning humanitarians. The interview is pretty insightful, and the article is full of excellent photos shared from the book (which I’m interested in reading and perhaps reviewing here at a later date). I highly recommend you read the rest of it, but here’s the part that most stood out for me.

Which stories affected you the most?

 There are three. One was the kids who live on an e-waste dump in Ghana. That was quite compelling for a variety of reasons, but I think if you look at the book and see those photographs and read that piece, it’ll hit you pretty hard.

Another piece was a family in Peru that lives on recycling. That, in and of itself, is not a big deal. Recycling is probably the second-largest occupation of the poor. But [the mother's] personal story, about how she had been abused by two different husbands, how her boys were taken away because they were needed to farm, and she was given all the girls—and how her kids will probably not ever go to school. She gets constantly evicted from one place or another because she can’t find enough recycling to pay the rent. When we left her—we gave everybody a gift of at least some kind for giving us their time and telling us their story—we gave her $80, which is about as much money as she makes in two months. She fell to her knees and started crying. Not only did I learn that 25 percent of garbage produced in developing countries is picked up by individuals like her, but that one of the biggest drivers of global poverty is domestic violence, and how women and children are thrown into poverty largely for that reason.
Of course, even those of us who hear anecdotes like this or see vivid photos of unspeakable squalor do far less than we can to help. While certain psychological factors play a role in our collective apathy, there’s no denying the inherent exploitative and inefficient characteristics of the current global economic system, in which tremendous amounts of wealth continue to be allocated to a small minority of people who are largely disconnected and unconcerned in regards to the horrific reality of most of their fellow citizens.
But that’s a conversation for a different day.

The Bootstraps Myth

From Melissa McEwan of the blog Shakesville:

The Myth of Bootstraps goes something like this: I never got any help from anyone. I achieved my American Dream all on my own, through hard work. I got an education, I saved my money, I worked hard, I took risks, and I never complained or blamed anyone else when I failed, and every time I fell, I picked myself up by my bootstraps and just worked even harder. No one helped me.

This is almost always a lie.

There are vanishingly few people who have never had help from anyone—who never had family members who helped them, or friends, or colleagues, or teachers. 

Who never benefited from government programs that made sure they had electricity, or mail, or passable roads, or clean drinking water, or food, or shelter, or healthcare, or a loan. 

Who never had any kind of privilege from which they benefited, even if they didn’t actively try to trade on it. 

Who never had an opportunity they saw as luck which was really someone, somewhere, making a decision that benefited them. 

Who never had friends to help them move, so they didn’t have to pay for movers. Who never inherited a couch, so they didn’t have to pay for a couch. Who never got hand-me-down clothes from a cousin, so their parents could afford piano lessons. Who never had shoes that fit and weren’t leaky, when the kid down the street didn’t.

Most, maybe all, of the people who say they never got any help from anyone are taking a lot of help for granted.

They imagine that everyone has the same basic foundations that they had—and, if you point out to them that these kids over here live in an area rife with environmental pollutants that have been shown to affect growth or brain function or breathing capacity, they will simply sniff with indifference and declare that those things don’t matter. That government regulations which protect some living spaces and abandon others to poisons isn’t help. 

The government giving you money to eat is a hand-out. The government giving you regulations that protect the air you breathe is, at best, nothing of value—and, at worst, a job-killing regulation that impedes the success of people who want to get rich dumping toxins into the ground where people getting hand-outs live.

What are your thoughts?

Twenty-One Children and Their Bedrooms From Around the World

PolicyMic is featuring the engaging works of James Mollison, a Kenyan-born, English photographer based in Venice whose 2011 photo book, Where Children Sleep, collects photos of various children and their sleeping quarters. It was meant to draw attention to each child’s “material and cultural circumstances” and to put perspective on the class, poverty, and the diversity of children worldwide.

I strongly suggest you check it out here; it’s well worth your time. Some of these images are pretty powerful, highlighting the vast discrepancies in standard of living between (and within) countries around the world. Many of the subjects have a lot of personality and character as well (which is no doubt why they were chosen.

The Best Way To Solve Poverty: Just Give the Poor Money

It seems deceptively obvious, doesn’t it? Poverty is absence of wealth, so the solution is to simply give the poor money. The problem is that, in addition to the misery that comes with scarcity, the poor suffer the added stigma of victim-blaming: their economic state is widely seen as a personal failing, a product of laziness, irresponsibility, or stupidity (especially among Americans).

But if one accepts the fact that poor people are no more or less likely to be savvy with money than the rich, then it simply becomes a matter of boosting their material conditions, albeit in a far less paternalistic and bureaucratic fashion than is typically prescribed. Indeed, traditional approaches to welfare are no more effective than the Right’s contention that poor would be better off in a freer market (or spurred into action by cut benefits).  As Bloomberg Businessweek — hardly a leftist source — reports:

A growing number of studies suggest…that just handing over cash even to some of the world’s poorest people actually does have a considerable and long-lasting positive impact on their incomes, employment, health, and education. And that suggests we should update both our attitudes about poor people and our poverty reduction programs.

In 2008, the Ugandan government handed out cash transfers worth $382, about a year’s income, to thousands of poor 16- to 35-year-olds. The money came with few strings—recipients only had to explain how they would use the money to start a trade. Columbia University’s Chris Blattman and his co-authors found that, four years after receiving the cash, recipients were two-thirds more likely to be practicing a trade than non-recipients, and their earnings were more than 40 percent higher. They were also about 40 percent more likely to be paying taxes.

In a second study, Blattman and colleagues looked at a program that gave $150 cash grants to 1,800 of the very poorest women in northern Uganda. Most began some sort of retail operation to supplement their income, and within a year their monthly earnings had doubled and cash savings tripled. The impact was pretty much the same whether or not participants received mentoring; business training added some value, but handing over the money it cost to provide would have added more.
Findings from around the world suggest that giving cash over goods or in-kind transfers is cheaper and more cost-effective, too. Economist Jenny Aker has found that cash transfers are better used than food vouchers in a comparison in the Democratic Republic of the Congo. Unsurprisingly, giving people a food voucher means they purchase more food than they do if you give them cash. But give them cash and they are able to save some of the money and pay school fees, all while consuming as diverse a diet as those who got vouchers. And the cash-transfer program is considerably less expensive to run.

Keep in mind that these are societies where poverty is widespread and endemic, and yet still most recipients knew how to use their money effectively. A presumed “culture of poverty” did nothing to undermine their ability to be self-sufficient when given the opportunity. This success isn’t limited to the developing world either:

Back in the 1970s, the U.S. federal government experimented with a “negative income tax” that guaranteed an income to thousands of randomly selected low-income recipients. (Think of today’s Earned Income Tax Credit, only without the requirement to earn income.) The results suggested that the transfers improved test scores and school attendance for the children of recipients, reduced prevalence of low-birth-weight kids, and increased homeownership. Early analysis of a 2007 cash transfer program in New York City suggested that transfers averaging $6,000 per family conditional on employment, preventative health care, and children’s educational attendance led to reduced poverty and hunger, improved school attendance and grade advancement, reduced health-care hardships, and increased savings.

Additionally, the Canadians also experimented with unconditional cash transfers, with similar success. It seems that no matter the culture or society, most individuals will use whatever resources they have at their disposal as effectively as possible (or at least make the attempt, which would regardless undermine the assumptions made about the competence of the poor).

Most cash-transfer programs do impose conditions—like requiring kids to go to school or get vaccinated, which does improve school attendance and vaccination rates considerably. But Blattman’s research suggests conditions aren’t necessary to improve the quality of life of poor families. In fact, while analysis by the World Bank’s Berk Ozler shows that making cash transfers conditional on kids being in school has a bigger impact than a no-strings-attached check, even “condition-less cash” considerably raises enrollment. Conditional programs increase the odds of a child being in school by 41 percent; unconditional programs, 23 percent. Other studies of cash transfers in developing countries have found a range of impacts that had little or nothing to do with any conditions applied: lower crime rates, improved child nutrition and child healthlower child mortality, improved odds of kids being in school, and declines in early marriage and teenage pregnancy.

So even the fairly successful conditional cash transfers implemented in places like Brazil and Mexico are, in a sense, unnecessary. While they’re definitely great steps, ultimately most poor people don’t need to be told the best way to spend their money. Indeed, as the article concludes:

It is comfortable for richer people to think they are richer because of the moral failings of the poor. And that justifies a paternalistic approach to poverty relief using vouchers and in-kind support. But the big reason poor people are poor is because they don’t have enough money, and it should’t come as a huge surprise that giving them money is a great way to reduce that problem—considerably more cost-effectively than paternalism. So let’s abandon the huge welfare bureaucracy and just give money to those we should help out.

Of course some will inevitably squander it out of greed, negligence, or simple error — and again, they won’t do this any more than many wealthier people do — but by and large, the majority will put it to good, sustainable use. They’ll put into the economy, which is driven by consumer demand, or into small businesses and education, which will also benefit the economy. In essence, such cash transfers are an investment.

Obviously, such an approach won’t resolve the systemic factors responsible for poverty — the lack of well-paying jobs, an economy driven too much by short-term profit and consumerism, the increasing expensiveness of education and healthcare, and so on — but it’s a fairly simple start, and the money wasted on inefficient programs — among other things — might be better spent going straight into the hands of poor people just waiting to tap into their own potential.

What do you think?


The Poverty Trap

Another great article from The Atlantic explores how living in a state of poverty entails a vicious cycle from which most victims struggle to escape — often for the rest of their lives and to no avail. The problem is worsened by the persistent (and arguably growing) social stigma attached to poverty: in addition to dealing with the financial and psychological hardship that comes with scarcity, America’s poor must contend with cruel assumptions about their character and social worth:

By the Reagan era, it had become a cornerstone of conservative ideology that poverty is caused not by low wages or a lack of jobs and education, but by the bad attitudes and faulty lifestyles of the poor.

Picking up on this theory, pundits and politicians have bemoaned the character failings and bad habits of the poor for at least the past 50 years. In their view, the poor are shiftless, irresponsible, and prone to addiction. They have too many children and fail to get married. So if they suffer from grievous material deprivation, if they run out of money between paychecks, if they do not always have food on their tables—then they have no one to blame but themselves.

In the 1990s, with a bipartisan attack on welfare, this kind of prejudice against the poor took a drastically misogynistic turn. Poor single mothers were identified as a key link in what was called “the cycle of poverty.” By staying at home and collecting welfare, they set a toxic example for their children, who—important policymakers came to believe—would be better off being cared for by paid child care workers or even, as Newt Gingrich proposed, in orphanages.

This perception hasn’t gone away, even as the recession has eliminated the number of decent jobs once held by well-educated and hard-working people, who upon joining the swelling ranks of the unemployed, are now subsequently seen as irresponsible, lazy, or otherwise at fault for their predicament (economic structural changes outside their control be damned).

The meager if still noticeable growth in jobs hasn’t changed much, given that most new position are in low-wage sectors like retail and fast-food that simply don’t offer enough to survive, nor provide much in the way of upward mobility.

What I discovered is that in many ways, these jobs are a trap: They pay so little that you cannot accumulate even a couple of hundred dollars to help you make the transition to a better-paying job. They often give you no control over your work schedule, making it impossible to arrange for child care or take a second job. And in many of these jobs, even young women soon begin to experience the physical deterioration—especially knee and back problems—that can bring a painful end to their work life.

Depending on where you live, such jobs are pretty much all there is to choose from, and employees have few resources or time available to the training or education they need to expand their options (and in any case, those alternatives are no longer as likely to improve your circumstances as they once were; if anything, the subsequent debt most people would need to take on to go those routes could worsen their predicament). This leads to the crux of the article:

I was also dismayed to find that in some ways, it is actually more expensive to be poor than not poor. If you can’t afford the first month’s rent and security deposit you need in order to rent an apartment, you may get stuck in an overpriced residential motel. If you don’t have a kitchen or even a refrigerator and microwave, you will find yourself falling back on convenience store food, which—in addition to its nutritional deficits—is also alarmingly overpriced. If you need a loan, as most poor people eventually do, you will end up paying an interest rate many times more than what a more affluent borrower would be charged. To be poor—especially with children to support and care for—is a perpetual high-wire act.

Most private-sector employers offer no sick days, and many will fire a person who misses a day of work, even to stay home with a sick child. A nonfunctioning car can also mean lost pay and sudden expenses. A broken headlight invites a ticket, plus a fine greater than the cost of a new headlight, and possible court costs. If a creditor decides to get nasty, a court summons may be issued, often leading to an arrest warrant. No amount of training in financial literacy can prepare someone for such exigencies—or make up for an income that is impossibly low to start with. Instead of treating low-wage mothers as the struggling heroines they are, our political culture still tends to view them as miscreants and contributors to the “cycle of poverty.”

If anything, the criminalization of poverty has accelerated since the recession, with growing numbers of states drug testing applicants for temporary assistance, imposing steep fines for school truancy, and imprisoning people for debt. Such measures constitute a cruel inversion of the Johnson-era principle that it is the responsibility of government to extend a helping hand to the poor. Sadly, this has become the means by which the wealthiest country in the world manages to remain complacent in the face of alarmingly high levels of poverty: by continuing to blame poverty not on the economy or inadequate social supports, but on the poor themselves.

It’s practically a coping method: instead of coming to terms with the intrinsic inequities and flaws of our economic system — which would require tremendous changes and considerable public investment — it’s much easier to view the matter on a individual level of analysis, which places the onus on the individuals  (or perhaps a particular, often marginalized, subculture) to change. But given what few avenues there now are to improve one’s socioeconomic status, what more can the poor do?

Sure, a good number manage to climb out one way or another; we all know of at least one anecdotal or famous rags-to-riches stories. But those stand out precisely because they’re rare occurrences. The ranks of the poor are growing concurrently with the rise of inequality, the decline in well-paying jobs, and the gutting of programs once dedicated to providing assistance. It seems clear that as long as the means of self-sufficiency are out of reach, poverty will remain.

Sadly, I don’t have time to explore the issue further, but as always, I invite you to share your views.

Most Poor Children Will Never Escape

The only thing more tragic than being born into poverty is being trapped in it. Were the United States actually as socially mobile as it once was, than most poor children could at least look forward to escaping their dire conditions with enough hard work. Unfortunately, this increasingly isn’t the case, as the following image soberingly shows.

In a perfect meritocracy — as the U.S. is traditionally seen to be — our parents’ income should have no impact on our own, and people who work equivalently hard are just as likely to get ahead. Of course there will always be those who never make it out for reason or another, but a fair number should still nonetheless success.

Instead, a mere four percent of kids born into the bottom quintile make it into the top one. For sources, data, and an explanation as to why this is, click view this report by the Economic Mobility Project of the Pew Charitable Trusts

A Poor Person Gives Her Perspective On Poverty

Socioeconomic issues like poverty are almost always academic discussions, in which the poor themselves oddly have very little say on the matter. Of course, this isn’t surprising, given that poverty in itself makes the poor invisible — after all, they don’t have access to the same mediums of power and communication that other groups have. And given the growing geographic and psychological gap between rich and poor, many people don’t even have poor acquaintances to inform them.

AlterNet has published a sobering and personal account of what poverty is like for someone who’s actually living through it day to day. I’ll leave you to click the hyperlink and read it for yourself. It helps explain why the poor make the seemingly foolish decisions that they do (hint: it’s not because they’re stupid) and how poverty extinguishes one’s personal and professional potential. It’s something to keep in mind next time you hear some pundit or politician speak on behalf of the impoverished classes they scarcely take the time to learn about.

Banning Sick Leave Becomes a Growing Trend

As if working a low-paying and often benefit-lacking job weren’t bad enough, many workers — a full 40 percent of the private-sector work force — have to make due without any paid sick leave. As you’d imagine, the consequences on both an individual and societal level are heavy, as this report by the Economic Policy Institute (EPI) notes:

These employees commonly go to work sick, or leave sick children home alone, out of fear of dismissal. Even when they are not terminated, the loss of pay takes a dramatic toll—particularly since jobs without sick pay are concentrated among low-wage workers. A typical family of four with two working parents who has no paid sick leave will have wiped out its entire health care budget for the year after just three days of missed work.

Furthermore, there’s the public health risk of having sick people handling your food or caring for your loved ones, since most jobs without paid sick leave are in “interactive” sectors like retail, child care, and dining. Workers who strain their health by avoiding rest and treatment may also exacerbate their conditions and in turn strain the healthcare system.

Well, to make matters worse, a growing number of states are taking steps to make it harder for workers to fight for paid sick leave. As the same EPI reports found:

Ten states have adopted laws that ban any city or county within the state from establishing a right to sick leave. In Wisconsin, legislators repealed the city of Milwaukee’smandatory paid sick leave law, which had been established by a referendum supported by 69 percent of voters in 2008. In each of the ten states, the bills’ sponsors included members of the American Legislative Exchange Council (ALEC). And in each case, the bills were adopted following vigorous advocacy by corporate lobbies such as the Chamber of Commerce, National Federation of Independent Business, and Restaurant Association.

To get an idea how quickly this trend has grown, look at the following graph:

Granted, it’s too soon to tell whether momentum will continue to build past 2013, but there’s no reason to assume it won’t — baring national legislation or a federal court overturning such initiatives, it seems likely that other states will follow suit, especially considering the pervasive nature of corporate influence. This is despite the fact that a large majority of the public not opposes these bans but feels that workers should be legally guaranteed paid sick days:

These bans fly in the face of public opinion: 75 percent of Americans—including 59 percent of Republicans—think there should be a law guaranteeing all workers a minimum number of paid sick days. Yet, the nation’s most powerful corporate lobbies remain adamantly opposed, and have been pushing bans on paid sick leave legislation in one state after another.

Read EPI’s new report The Legislative Attack on American Wages and Labor Standards, 2011–2012 to learn more about the growing number of business-backed legislative initiatives aimed at lowering labor standards, weakening unions, and eroding workplace protections. If so many people are opposed to these measures, there’s no reason they should be dominant. Hint — the public needs to start taking action.