For richer or poorer

I want to write about a topic I don’t fully understand. In my defense, it seems like nobody else does, either. But the posts to follow will be as much about documenting my own learning process as about sharing what I already know.

Why are some countries rich, and other countries poor? That’s the question I’m interested in. How did that state of affairs come about? Why does it persist?

I’m not alone in being interested.* Big international organizations like the World Bank are nominally dedicated to addressing the question. Many academics dedicate their careers to studying it, often under the tag of ‘development economics’ or just ‘development.’

And of course, it’s far from just an academic question. For people from developing countries, it has a burning practicality. Why can’t their friends and family enjoy the same advantages as those that citizens of wealthy countries take for granted? It’s quite literally a life-or-death question, but it’s about the quality of life lived, too.

For people from wealthy countries, it can be easy to assume that less-wealthy countries are just somehow ‘different.’ But it’s hard to pin down what that difference might be. After all, people are more or less just people, wherever you go. And it’s not necessarily the case, for instance, that countries with more natural resources tend to be richer. In fact it tends to be the opposite.

The mystery deepens when you look back in time and notice that it wasn’t always this way. In fact, the current distribution of wealth in the world is, to some extent, an inversion of the ‘normal’ state of affairs that prevailed up until a few hundred years ago.

But we’re getting ahead of ourselves. An important question deserves a good answer, so let’s start from the start.

The first step is to check that the question is well-formed. Are its implicit assumptions correct? ‘Everyone knows’ that some countries are wealthy and others poor, which is immediate grounds for suspicion.

We can use Gapminder, the chirpily convenient source for comparing statistics of different countries. On the vertical axis is income per person as of 2012. On the horizontal axis, the most arbitrary statistic I could find, how far a country’s geographic position is to the north.** Note that the vertical income axis is logarithmic (otherwise the low-income countries would all be squashed together at the bottom and impossible to see).

Gapminder-IncomeVsLatitude

Taken from Gapminder.org

Interestingly, I think you can read several stories into this plot. Certainly, some countries in our world are rich and some are poor. The average income of a Luxembourger at $70k per year is about 10 times that of an average Colombian, and a staggering 100 times higher than that of someone from Niger.

But it’s hard to neatly divide the datapoints into ‘rich’ and ‘poor’ clusters. Luxembourg is clearly much wealthier per capita than Colombia; but Colombia is still much wealthier than Niger. Looking at the data as a whole, it seems like one can find countries at all income ranges in between our two extremes of wealth and poverty. It seems like, yes, there are truly rich countries, and truly poor countries, but also a lot of middle ground.

What can we say about the rich countries? Let’s look, somewhat arbitrarily, just at those with average incomes greater than $20k a year. We can put most of them into a few groups:

  • The countries of Western Europe (orange).
  • A few former European (in fact, English) colonies: Australia, New Zealand, the US, and Canada (red and yellow).
  • Several east Asian countries: Japan, South Korea, Taiwan, Singapore, Hong Kong (now part of China, but shown separately here), as well as Brunei (red).
  • The states of the oil-rich Arab gulf (green).

A not unfamiliar pattern, which conforms to our naïve expectations. Can we explain why the world’s wealth is distributed that way? I’ll pick up that question in another post.


*In fact, after I typed it, I found ~7000 Google hits just for that exact wording.

**It doesn’t look so arbitrary! You can see where the term ‘Global South’ comes from.

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