If we knew what factor are responsible for some countries being rich and other poor, that could guide poor countries (and entities like the World Bank) in figuring out the most promising ways to become rich. History can give us some guidance, because past societies constitute thousands of natural experiments with known outcomes. The answers involve both "external" factors (geographic and environmental) and human factors (e.g., the values pursued by he country s decision-makers).
So started the prelude for UCLA Professor Jared Diamonds discussion on What Will Make Countries Rich or Poor? Ian Johnson, the Bank s Vice President for the Environmentally and Socially Sustainable Development network, provided some introductory remarks. Johnson noted Professor Diamond s background is not just in physiology, but in ecology and evolutionary biology as well. Johnson said Diamond s book, "Guns, Germs and Steel" asked why the evolution of human societies proceeded differently in different places.
Professor Diamond said the question of what makes countries rich or poor has important policy implications. Part of the answer he said has to do with human institutions. He cited several examples of countries with the same or similar cultures but different human institutions which have led to different outcomes (i.e., South and North Korea, East and West Germany). Diamond said characteristics of good institutions include lack of corruption, the rule of law, unimpeded flow of capital, openness to trade, control of inflation, protection of private property rights, and investment in education and financial capital. Diamond said human institutions were only a partial explanation to why there is a difference between countries. Good institutions arose through a long chain of historical connections he said. Understanding this evolution is essential to recreating it in settings where such institutions do not currently exist. Environmental variables and public health also play a key role in this outcome. Also necessary for societies is to understand why economies collapse and contract, not just why they expand.
At the time of Columbus, European cultures had advantages over cultures in other continents because they already had complex state governments and market economies. In other continents, cultures were still agrarian and hunter gatherers. 13,000 years ago, Diamond said, all these societies were similar. Genetics, linguistics, cultural anthropology and chemistry all played roles in creating the differences thereafter. Surpluses in agriculture helped to feed non-food producing specialists, which allowed further specialization of both society and work activities. Market economies developed near areas with outstanding agricultural production and surplus. As a result, some regions of the world have thousands of years experience with state-societies, while the experience of other regions can be measured in decades. Research Diamond cited suggested regions with long experiences with agricultural production or state-societies were wealthier than their counterparts.
Diamond claimed there was also a reversal of fortune around 8500 B.C. in these agriculturally rich areas. Rich countries today are not those areas which were once agriculturally rich, but rather are countries adjacent to them such as the US and Europe. In settings such as Europe, agriculture arrived during early development but did not originate there. The original agriculturally rich areas were also environmentally fragile and were eventually destroyed. Diamond called the Fertile Crescent of Iraq, Iran and Syria one example.
Environmental factors affecting agricultural productivity and human health are additional examples of what may influence a country s wealth other than human institutions. The professor noted temperate climates with cold winters are helpful to human health by killing viruses and diseases that would survive year round in tropical settings. Disease can affect an economy by shortening the life span of productive workers, keeping many workers out because of illness, and lowering the percentage of productive adults supporting the economy. Countries in tropical settings that are experiencing rapidly expanding economies are the ones who have made significant investments in public health. Diamond cited Taiwan, Singapore and Malaysia as examples. These countries also focused their business investments in sectors outside of agriculture, where he said they realized they would not be competitive. Family planning and public health measures are cheap Diamond said compared to other economic assistance efforts to improve national economies such as dams and mines.
Next Diamond began to explore the vulnerability of societies where economies have contracted or collapsed. He cited a number of countries with damaged ecology s. Most of the same countries were also politically destabilized. Diamond said this was no coincidence. He cited five factors that contribute to economic collapses. They were the inadvertent impact of people on their environment, climate change, struggles with hostile populations, relationships with friendly societies who are suffering from their own economic difficulties, and whether members of an endangered society recognizes the difficulties faced. Societies that perceived environmental issues such as the Japanese in the 18th century and Germany in the 19th century fared well subsequently. Diamond asserted that in societies where the rich live separately from the poor is a blue print for poor policy decisions.
He concluded by stating that human institutions are critical to a society s well being but there are preconditions for them, and policymakers need to study these carefully. Environment and public health are important factors. Finally, it is necessary to understand the economics of collapse rather than only the economics of wealth. Professor Diamond then took questions for the audience.
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