Why are we so rich and they so poor?

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Why Are We So Rich and They So Poor?


At the risk of tipping my hand, I shall argue that most answers to the question posed by my title fall into one of two lines of explanation. One says that we are so rich and they so poor because we are so good and they so bad; that is, we are hardworking, knowledgable, educated, well-governed, efficacious, and productive, and theyare the reverse. The other says that we are so rich and they so poor because we are so bad and they so good: we are greedy, ruthless, exploitative, aggressive, while they are weak, innocent, virtuous, abused, and vulnerable. It is not clear to me that one line of argument necessarily precludes the other, although most observers and commentators have a strong preference in the matter. What is clearis that, insofar as we may want to do something about the gap between rich and poor, each of these explanations implies a very different strategy.


In the beginning was Adam Smith, and he told us not to worry about economic growth: it would take care of itself. Left alone, people would sort things out, do what they did best, make appropriate choices to maximize return. The market wouldtake care of the rest, rewarding reasons and quickness and knowledge and punishing the opposite. All of this, moreover, would work to the general advantage, augmenting the wealth of nations and leading them through a natural progression of stages from agriculture to industry to commerce. Long live the invisible hand!

To be sure, this sense of immense possibilities of improvement did not last.Malthus and Ricardo in particular developed theses of limits to growth that did much to earn for economics the name of dismal science. Malthus stressed the tendency in the long run for population to increase to and beyond the limits of subsistence, and linked this unhappy outcome to the inexorable operation of arithmetic. For Malthus, natural and man-made disasters-famine, disease, war -were thenecessary winnows of a biosphere in disequilibrium. He was not a complete pessimist and recognized the small possibility that self-imposed restraint in reproduction might solve the problem, but given the force of human nature and the prevailing contraceptive technology (to say nothing of the absence of television and other compensating diversions), he was not very hopeful.

Ricardo took thestick from the other end: the limits to the extension of cultivation. As demand for food increased, he argued, everpoorer land would be brought into cultivation, thereby raising the cost of food and wages, reducing profits, inflating rents, and crowding out other uses for capital. The motor of growth would simply seize up. The result would be the stationary state.

It would be rash to argue thatMalthus and Ricardo were not an integral part of the classical paradigm. Yet their pessimistic lessons were in fact dismissed or, more precisely, were put away to be revived another day. In the heady days of nineteenth-century expansion, they seemed at best misguided. It is true that population was growing faster than before (although there were any number of misconceptions about what had passedbefore), but food was apparently no problem. On the contrary, the famines of yesteryear disappeared, for many reasons: new staple crops (the potato, maize); the application to the soil of outside nutrients; better rotations; virgin lands in and out of Europe; improved transport. And those regions where population pressed on subsistence were able to export their surplus eaters: the opening offrontier areas overseas seemed to provide an indefinite solution to the Malthusian dilemma.

As a result, the theme of limits to growth simply receded from the intellectual consciousness.
Occasionally a lonely voice like that of Jevons was heard, warning of the exhaustion of the coal supply, but his anxieties were dismissed as parochial, especially after the technological innovations of the Second...
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