By poor I mean the general standard of living.
I have heard before that Africa is 'the most mineral rich continent in the world'. While I find proving this seems to be exceedingly difficult (if even possible), I would at least concede that, in terms of mineral wealth, the African continent is probably no worse off than any of the others ...
So what gives? Why do I see TV personalities selling the plight of these starving people? Are Africans really unable to develop any sort of infrastructure to provide basic necessities like food, clothing, shelter, and medicine?
hayekianxyz:You're crazy if you think that the increase in production in America over the last 200 years is attributable to capital accumulation.
Capital accumulation + increased population with skills sets that adapt to the economy is what lead to all the economic advancement over the last 200 years in the US.
No doubt, that plays a part in the increase in per capita income, but analogous to the case of the developing country we would see a huge decrease in the return on capital, we haven't seen such huge decreases in interest rates.
I'm having trouble making sense of this sentence (a little ambiguity in there), but I'll chime in about what crosses my mind when I think about how a lack of capital formation is keeping Africa poor:
The lack of skill in impoverished areas, and lack of ability to use and maintain sufficiently advanced capital will actually make the advanced capital get a better return on investment in a developed nation.
Giving Texans a microprocessor development and manufacturing center will yield greater returns than one placed in the Congo, for obvious reasons. That's why people don't send such capital to impoverished parts of the world.
Now if you can guarantee that a sweatshop won't get destroyed in the Congo.. the returns on investment for that might be greater than setting one up in New York.
But if some people in some parts of the world are consistently hostile to capital, how will they realize a better standard of living?
hayekianxyz: Southern:I have always found these arguements lacking, especially considering Africa lagging behind is not a recent or modern phenomenon. In the grand scheme of things, it really is a recent phenomena. In fact, the growth of the western world in the last few hundred years has really been a one off in terms of human history.
Southern:I have always found these arguements lacking, especially considering Africa lagging behind is not a recent or modern phenomenon.
In the grand scheme of things, it really is a recent phenomena. In fact, the growth of the western world in the last few hundred years has really been a one off in terms of human history.
I only have a basic knowledge of African history and what I do know may be outdated. But Africa had brief periods of advanced civilization on par with Roman, Persian, or Chinese civilizaton centuries ago. However, there was little continuity and these civilizations short lived. Certainly societies in around the rest of the world went through these cycles, but in the rest of the world the collapses didnt return those societies to square one, where as in Africa it seems each cycle was almost a start from scratch.
Please correct me if I am mistaken.
hayekianxyz:But they have these machines in Africa
Do they have the same number of such machines per head as in the US for example?
You don't expect me to read an entire book now in order to validate your claim. What you are suggesting (or perhaps the book is) seems to be economically impossible. Machines need to be financed. Nobody would maintain and invest in these machines if they were just sitting idle or even operated at below optimal levels so that they could not justify their costs. If you or the book cannot offer any logical explanations, then most likely the book makes economically unsound claims.
Stranger: Marek K Nowak: In London, England in the year 1800, life expectancy was around 25 years old (and around 30 years old in france). That didn't prevent them from having the industrial revolution and rapidly raising their life expectancy. That was mostly caused by infant mortality. People didn't drop dead at 25 years old.
Marek K Nowak: In London, England in the year 1800, life expectancy was around 25 years old (and around 30 years old in france). That didn't prevent them from having the industrial revolution and rapidly raising their life expectancy.
In London, England in the year 1800, life expectancy was around 25 years old (and around 30 years old in france). That didn't prevent them from having the industrial revolution and rapidly raising their life expectancy.
That was mostly caused by infant mortality. People didn't drop dead at 25 years old.
1) Yes, there was very high infant mortality, but so is in Africa today. African countries today varies from 100 to 200 infant deaths per 1000 (with Zimbabwe at 260).
I found some statistics that quote infant mortality in the US (for whites) was at 216.8 per 1000 in 1850 (when life expectancy was 39.5 years old for whites).
So it was something comparable to today's Africa.
2) Life expectancy in Europe in 1800 was much lower than today in Africa, from 10 to 15 years lower than the poorest African countries.
Unless you come up with some statistics proving your case, life expectancy has to be completely excluded as a reason for Africa's lasting poverty.
I'm following this captivating thread with great interest.
At some point, a link was posted to Ron Paul's explanation of why Africa is messed up.
I sort of lost the jungle for the trees, so could someone tell me please:
Do you think his explanation is flawed? If so, why, and what is the real or fuller explanation?
He carries a lot of credibilty to me, so my default is to accept his version.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
Oh, something else, check out this source:
http://www.unicef-irc.org/publications/pdf/hisper_decline_infantmortality.pdf
That quotes infant mortality rates in England at around 160 per 1000 in the year 1800, which is actually very close to the average for sub-saharan african countries today.
scineram: De Soto's work.
De Soto's work.
I'm sure.
liege: So what gives? Why do I see TV personalities selling the plight of these starving people? Are Africans really unable to develop any sort of infrastructure to provide basic necessities like food, clothing, shelter, and medicine?
Well since 1955 the population of Africa has quadrupled. So the image of starvation at least is totally misplaced. Starvation is a problem for only a tiny fraction of the populace and it only happens when it is brought on by some other disaster like war, locust or a record breaking drought.
hayekianxyz:To the OP, you mention natural resources. In fact, outside of the context of private property and the rule of law we might expect a negative correlation between natural resources and development, know as the natural resource curse.
Regarding this, are you basically trying to say that under some conditions being too rich in natural resources is a bad thing? I can't imagine how it could be, unless we were assuming said area was surrounded by more advanced neighbors who weren't averse to colonizing it. Does the "natural resource curse" have any relation to colonialism and possibly even the mercantilism that accompanied it in Europe's own history?
Regarding arguments for the geographic factor: no offense to those who offered, but I find these arguments more or less untenable. There are plenty of areas in the world that are completely inhospitable to travel and communication which, although daunting to surmount at first, were eventually taken care of. Greece for one was more fractured and fragmented than Africa. Also, if you look at the entire world, you could say that the Atlantic and Pacific Oceans are ridiculously inhospitable barriers to transportation and communication, yet they are still routinely traversed with relative ease in global markets. I still get to drive my Japanese cars! Plus, the difficulty in overcoming the oceans themselves don't appear to be responsible for the relative poverty of any nation in the world (that I can think of).
Regarding the Dr. Paul link which basically asserts that foreign aid is the cause of continued African poverty: what would be the repercussions of withdrawing all foreign aid to these dictators? Would institutions we're familiar with like private property and the rule of law find more fertile soil to take root in? (Yes, I know many of us might find the "rule of law" a bit ironic here )
Marko: liege: So what gives? Why do I see TV personalities selling the plight of these starving people? Are Africans really unable to develop any sort of infrastructure to provide basic necessities like food, clothing, shelter, and medicine? Well since 1955 the population of Africa has quadrupled. So the image of starvation at least is totally misplaced. Starvation is a problem for only a tiny fraction of the populace and it only happens when it is brought on by some other disaster like war, locust or a record breaking drought.
If its only a problem for a fraction of the population, and most of Africa can feed itself, then how come neighboring countries can't supply the increased demand for food through the normal market means? It seems to me that if you have people campaigning for donations halfway across the world, you have some sort of distribution or production problem. I guess this would make sense if all of Africa was at the subsistence level, but I doubt that is the case. As long as some of the food producers had surpluses earmarked for foreign export, they could easily make a tidier profit selling to a high demand area. But I guess that would only work if the potential buyers had money, which ... maybe they don't? And if they don't, and only foreign donations would solve the problem, then aren't we basically saying that no one is charitable enough in Africa to help out other Africans?
I mean, are the mechanisms preventing all of this really so intrusive and backwards that markets are barely able to function normally in most African countries?
liege: If its only a problem for a fraction of the population, and most of Africa can feed itself, then how come neighboring countries can't supply the increased demand for food through the normal market means? It seems to me that if you have people campaigning for donations halfway across the world, you have some sort of distribution or production problem. I guess this would make sense if all of Africa was at the subsistence level, but I doubt that is the case. As long as some of the food producers had surpluses earmarked for foreign export, they could easily make a tidier profit selling to a high demand area. But I guess that would only work if the potential buyers had money, which ... maybe they don't? And if they don't, and only foreign donations would solve the problem, then aren't we basically saying that no one is charitable enough in Africa to help out other Africans? I mean, are the mechanisms preventing all of this really so intrusive and backwards that markets are barely able to function normally in most African countries?
Refugees don't have money. If they had they'd be exiles.
liege: hayekianxyz:To the OP, you mention natural resources. In fact, outside of the context of private property and the rule of law we might expect a negative correlation between natural resources and development, know as the natural resource curse. Regarding this, are you basically trying to say that under some conditions being too rich in natural resources is a bad thing? I can't imagine how it could be, unless we were assuming said area was surrounded by more advanced neighbors who weren't averse to colonizing it. Does the "natural resource curse" have any relation to colonialism and possibly even the mercantilism that accompanied it in Europe's own history?
Generally speaking, that 'natural resource curse' is because natural resources are easier to exploit and help finance government than general taxation.
So countries rich in natural resources tend (and that's not a law, but just a tendency) to have more oppresive government.
In Russia, for example, there's a well discussed relation between oppressive state actions and the price of oil. When oil revenues are down, suddenly the politicians talk of free markets to help grow revenues, but when oils is sky high, other things are on their agenda than liberalizing the economy.
So you see countries like switzerland and germany, japan, etc.. being very poor in natural resources, but very prosperous, while others like Russia, and Africa being basket cases.
Of course, you have major counter examples like the US, Canada, Australia, etc...
liege: Regarding the Dr. Paul link which basically asserts that foreign aid is the cause of continued African poverty: what would be the repercussions of withdrawing all foreign aid to these dictators? Would institutions we're familiar with like private property and the rule of law find more fertile soil to take root in? (Yes, I know many of us might find the "rule of law" a bit ironic here )
I have nothing against private foreign aid, but the problem is that Western government foreign aid is mostly from government to government, propping up corrupt regimes that would simply collapse without it.
liege:Regarding this, are you basically trying to say that under some conditions being too rich in natural resources is a bad thing? I can't imagine how it could be, unless we were assuming said area was surrounded by more advanced neighbors who weren't averse to colonizing it. Does the "natural resource curse" have any relation to colonialism and possibly even the mercantilism that accompanied it in Europe's own history?
The argument basically goes as follows, under certain institutional settings (such as private property rights and rule of law) natural resources will be a blessing to the economy. However, lacking these conditions large endowments of natural resources will cause government to be more predatory and corrupt. Essentially it leads to centralization of resources and economic activity and all the rent seeking and other forms of corruption that result.
A similar argument holds for foreign aid, when a country is given large amounts of foreign aid people will compete to obtain it, resources that would have otherwise been used to provide goods and services to the public are wasted in lobbying and bribery. Moreover, when governments have received these funds it may adversely affect the likelihood of various beneficial economic reforms that may have otherwise been necessary.
Marek, I'd sort of appreciate it if we could keep terms like economically illiterate out of the discussion.
As far as I'm aware you'd agree with me that the interest rate is a price like any other, and as such is determined by the forces of supply and demand. Now, of course, I'm not denying that the discount rate of people within society determines the demand for capital, but I think you'd have a hard time denying that if the capital stock was suddenly wiped out interest rates wouldn't rise.
Like I said, I don't deny that part of the increase in standards of living is attributable to increases in the capital stock, there is certainly more capital per worker in the USA than there is in Angola, for example. But whilst I don't remember the exact magnitudes or countries in questions, I believe that in order to account for the differences in income per capita, the US would have to have 300 times more capital per capita than India, which I find difficult to believe.
If capital really was scarce then presumably one would expect to see huge rates of return on capital and as such capital rushing from the developed to the developing world. Well, that doesn't happen. If you'd like some more exact estimates of international capital flows I'll post some when I get my new copy of Easterly's book. I'm not really sure what part of Solow's analysis you'd disagree with here, would you disagree that capital runs into diminishing returns? Because that's basically the crux of his argument. Since capital is a small part of the overall production process (one third) one would expect it to run into diminishing returns fairly quickly, as such we must find another source of long term growth between countries.
Now, I think technology is part of that explanation. Casual empiricism would seem to corroborate this. Technology is a broad term, and as long as one includes economic reasons (lack of intellectual property rights, lack of private property rights, lack of rule of law etc.) for the adoption of various technologies then the explanation is coherent.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
hayekianxyz:If capital really was scarce then presumably one would expect to see huge rates of return on capital and as such capital rushing from the developed to the developing world. Well, that doesn't happen.
Here is the same argument again. Does it become more self explanatory just because you repeat the same argument again?
Have you thought about the possibilities that the lack of private property rights just may have something to do with private capital not flowing into these corrupt and impoverished States? Your assumption about rate of returns assumes free markets. It assumes private investors feel secured about future investments in those regions and not have to worry about government confiscation and wars destroying their capital. But we know that in reality, these places are very hostile to private property.
So the end causal element is always the same: Amount of real capital per capita.
hayekianxyz:Because that's basically the crux of his argument.
It sounds like the crux of his argument is basically - they're just stupid. A marvelous contribution to economic thought.
hayekianxyz:Since capital is a small part of the overall production process (one third) one would expect it to run into diminishing returns fairly quickly, as such we must find another source of long term growth between countries.
What in the world is this about? 1/3??????
hayekianxyz:Now, I think technology is part of that explanation
Yes because China and former Soviet Russia really lacked the technology. Soon you're going to claim that they lacked scientists and engineers. Or maybe that they are genetically inferior.
hayekianxyz:Technology is a broad term, and as long as one includes economic reasons (lack of intellectual property rights, lack of private property rights, lack of rule of law etc.) for the adoption of various technologies then the explanation is coherent.
Nothing is coherent about your thesis expect that it adheres to anything but logic.
he should probably also explain how 'instantiated technology' is something other than capital.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring