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?
DD5:Nothing is coherent about your thesis expect that it adheres to anything but logic.
Oh the flattery, honestly, you're too kind.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
hayekianxyz: DD5:Nothing is coherent about your thesis expect that it adheres to anything but logic. Oh the flattery, honestly, you're too kind.
No sweat.
Just waiting for you to actually address the issue by applying some actual economic logic as oppose to sociological fairy tales. I guess it isn't going to happen.
The answer is simple. Government is the reason why Africa is poor. Their leaders are busy enriching themselves at the cost of everyone.
DD5: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.
I think many people miss this, and don't realize this is the #1 reason why impoverished nations are impoverished. Instead of curing the problem with capitalism, people will claim that greed run rampant by capitalism has raped this nations of their natural resources and wealth.
Now dont kill the messenger and lets try to stay value-free here, but could possibly race or ethnicity have anything to do with it? There are the ominous race-IQ charts...
nandnor: Now dont kill the messenger and lets try to stay value-free here, but could possibly race or ethnicity have anything to do with it? There are the ominous race-IQ charts...
Even in libertarian circles, people tend to be PC about this. I don't get involved in any kind of race discussions here. (I used to get involved in them, but they ended up boring me, as there would usually be too much ignorance and hatred to go around to get anything scientific or meaningful from the discussion. The topic tends to bring out the worst in even some of the most principled people I know.)
Ethnicity possibly, race not likely. Even dumb races have a few smart individuals that can run things. If your ethnic customs are antithetical to private property and markets, on the other hand, only the destruction of your society can save you.
The fallacies of intellectual communism, a compilation - On the nature of power
Conza88:Imperialism.
That should be at the bottom of the list, as being poor is preciously what made them vulnerable to conquest.
But the term "African" is a purposely misleading aggregate. The continent is hardly homogeneous. For example, South Africa, Egypt, Liberia, Algeria.
Sub-Saharan Africa was poor because they existed in primative tribal societies. Imperialism, which continues to this day in the form of ruling classes educated in the European Marxist tradition and international "aid", is why it is still poor.
Peace
Here is the douschebag again:
How does he fit into your race/ethnicity theory?
And by the way, IQ between races has a smaller variance then IQ between individuals among the same race. Behavioral genetics have debunked these idiotic theories a long time ago.
DD5: 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.
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.
Well, you didn't really answer this point last time I attempted to get it across, so I thought perhaps you might if I reposted the argument in greater detail. I'm not really sure what you're saying here, my point is that if capital really was as scarce as you say it is, we'd expect to see interest rates of well over one hundred percent. Saying that the countries in question don't have clearly defined and well enforced property rights doesn't actually get to the heart of the matter, because even with very high expropriation rates, a return on capital of over one hundred percent would make a whole load of investments worth it.
So, let me ask you the question and put it as bluntly as possible, why haven't we seen as large reduction in interest rates across time and place as we'd expect to see if capital accumulation was the cause of the increase in standards of living.
By the way, I'm sure we agree on the underlying causes, and I'm sure we both agree that incentives matter. But the fact of the matter is that without the correct incentives in place nobody will invest in technology (in a very broad sense of the word). And if you want sources for any of the numbers I'm giving you, then I'll take a copy of Easterly's book out of the library.
DD5:Yes because China and former Soviet Russia really lacked the technology
Well, former Soviet Russia really didn't lack capital either did it? Definitely not in terms of sheer numbers of machines and the like.
DD5:Just waiting for you to actually address the issue by applying some actual economic logic as oppose to sociological fairy tales. I guess it isn't going to happen.
And there I was thinking you were just being flat out mean, fancy that...
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.
Agreed. A far more important question than, "why are Africans still so poor ?" would be, "why are some people suddenly so rich"? Answer that and the first question won't matter.
DD5 is right its because of all the standard economic explainations: capital, division of labor, etc. But that begs the question, why did that occur? Or better, what changed that allowed it to occur?
Even granting for the sake of argument that the whole continent of Africa is dumber than, say, Germany, how big is the spread really? 5 points out of 100? 10?
You don't have to be a Norman Einstein to run a viable economy. A bunch of normal average people will do fine. It might not be the world's best, but it won't be a disaster.
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It's easy to refute an argument if you first misrepresent it. William Keizer
hayekianxyz: 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.
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.
So is this what passes for economics these days?
hayekianxyz: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.
Society would start over, billions would die of starvation, and we would go back to barter. So I don't understand your point here.
hayekianxyz: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.
That number is completely arbitrary and meaningless. The degree, technical sophistication, remoteness of its employment, and certain capital combination's all contribute to the productivity of capital. But poverty is always the result of a defunct economic system which is unable to accumulate, structure, and maintain an adequate structure of production. India is poor because it spent the better part of the last century under communism, and before that, under serfdom.
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.
Denying scarcity these days? Either way, that statement presupposes the ceteris paribus condition. Our international monetary system, with perpetual inflation, suppression of interest rates, illusory comparative advantages, and massive (arbitrary) capital flight makes such a statement meaningless. Without sound money, a functional price mechanism, and an adequate defense of property rights (major source of risk), you can't have rational allocation of resources. You have chaos.
hayekianxyz: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.
Again, a given amount of capital does not yield constant output; it can be arranged and rearranged in different orders reflecting different degrees of roundaboutness, which will yield different input-output results. The mainstream doesn't have a capital theory, they ignore the heterogeneity and complementarity of capital, and thus turn to mysticism and sociology.
"If we wish to preserve a free society, it is essential that we recognize that the desirability of a particular object is not sufficient justification for the use of coercion."
hayekianxyz: Marek, I'd sort of appreciate it if we could keep terms like economically illiterate out of the discussion.
Marek, I'd sort of appreciate it if we could keep terms like economically illiterate out of the discussion.
Sure, as long as you refrain from starting your replies by 'You're crazy if you think..."
hayekianxyz: 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.
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.
hayekianxyz: [...] 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.
I'm not sure where you get that capital is a third of the production process, but I bet it's from GDP figures, where it shows that consumption goods are ~ 70% of goods produced.
This statistic is fatally flawed because the GDP is reallly not a 'Gross' statistic, but rather a 'net' one, that hides most of economic activity happening in a given year - about 50%. A better statistic would be a Gross Domestic Output (GDO), that shows capital good industries at about 70% of the goods produced. You can read De Soto about the subject.
A long debate, but anyway, the point being is that the proportion of capital goods produced in a year vs final consumption goods has nothing to do with the contribution of the entire capital stock to the final amount of goods produced.
If you want to look at the difference between the capital stock of the US vs an African country, compare the size of the stock market valuations for domestic companies, that you will get at a much, much larger number than 300 times more per capita.
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.
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.
When you write 'technology is a broad term', I read 'I'm not defining precisely what is technology, which may include capital goods'.
See, if technology is the knowledge of how to use combine resources to obtain a given result (water + heat = water vapor, for example), it's clear that once technology is produced, it is not scarced anymore, and can be shared by everyone on earth (only learning the technology might be have some cost).
If technology was really the issue for Africa's poverty, you would see something like western countries keeping secrets where no one that knows western technology (engineers, scientists, etc...) are allowed to share it in any way (books, classes, internet, etc...) to people in those African countries.
Obviously, it is far from the case. (Almost) any western person is free from traveling to those countries, teaching, sharing and providing them with our technology. Even more, companies are free to go and import their existing capital stock with them - which includes technological knowledge!
The reason why they don't do it - while they do it in China (or Dubai), by contrast - is they are guaranteed to be plundered by African governments enough so their investment will be un-profitable.
There is an interesting book I borrowed from my library a little while back:
I didn't get a chance to read it, but I did skim through the book. It mainly focuses on Africa and gives four reasons for their problems:
1) conflicts & war
2) the natural resource trap
3) landlocked by bad neighbors
4) simply bad governing
It is a 4.5 start book at Amazon.