The Global Poverty Trap

By Robert J. Samuelson
Wednesday, October 31, 2007

It's nature vs. nurture. One of the big debates of our time involves the causes of economic growth. Why is North America richer than South America? Why is Africa poor and Europe wealthy? Is it possible to eliminate global poverty? The World Bank estimates that 2.5 billion people still live on $2 a day or less. On one side are economists who argue that societies can nurture economic growth by adopting sound policies. Not so, say other scholars such as Lawrence Harrison of Tufts University. Culture (a.k.a. "nature") predisposes some societies to rapid growth and others to poverty or meager growth.

Comes now Gregory Clark, an economist who interestingly takes the side of culture. In an important new book, " A Farewell to Alms: A Brief Economic History of the World," Clark suggests that much of the world's remaining poverty is semi-permanent. Modern technology and management are widely available, but many societies can't take advantage because their values and social organization are antagonistic. Prescribing economically sensible policies (open markets, secure property rights, sound money) can't overcome this bedrock resistance.

"There is no simple economic medicine that will guarantee growth, and even complicated economic surgery offers no clear prospect of relief for societies afflicted with poverty," he writes. Various forms of foreign assistance "may disappear into the pockets of Western consultants and the corrupt rulers of these societies." Because some societies encourage growth and some don't, the gap between the richest nations and the poorest is actually greater today (50 to 1) than in 1800 (4 to 1), Clark estimates.

All this disputes the notion that relentless globalization will inevitably defeat global poverty. To Clark, who teaches at the University of California at Davis, history's most important event was the Industrial Revolution -- more important than the emergence of monotheism, which produced Judaism, Christianity and Islam; or the invention of the printing press around 1450, which spread knowledge; or the American Revolution, which promoted democracy.

Before 1800, says Clark, most societies were stagnant. With some exceptions, people lived no better than their ancestors in the Stone Age. Economic growth was virtually nonexistent. Then England broke the pattern, as textile, iron and food production increased dramatically. Since 1800, English income per person has risen by a factor of 10. Much of Europe and the United States followed.

Almost everything that differentiates the modern era from the preceding millennia dates from this point: the virtual end of hunger in advanced societies; the expectation that living standards will constantly rise; the creation of the welfare state to redistribute income; the destructiveness of contemporary warfare; industry's environmental spoilage. But why did the Industrial Revolution start in England?

It's Clark's answer that convinces him of the supremacy of culture in explaining economic growth. Traditional theories have emphasized the importance of the Scientific Revolution and England's favorable climate: political stability, low taxes, open markets. Clark retorts that both China and Japan around 1800 were about as technically advanced as Europe, had stable societies, open markets and low taxes. But their industrial revolutions came later.

What distinguished England, he says, was the widespread emergence of middle-class values of "patience, hard work, ingenuity, innovativeness, education" that favored economic growth. After examining birth and death records, he concludes that in England -- unlike many other societies -- the most successful men had more surviving children than the less fortunate. Slowly, the attributes of success that children learned from parents became part of the common culture. Biology drove economics. He rejects the well-known theory of German sociologist Max Weber (1864-1920) that Protestantism fostered these values.

Clark's theory is controversial and, at best, needs to be qualified. Scholars do not universally accept his explanation of the Industrial Revolution. More important, China's recent, astonishing expansion (a fact that he barely mentions) demonstrates that economic policies and institutions matter. Bad policies and institutions can suppress growth in a willing population; better policies can release it. All poverty is not preordained. Still, Clark's broader point seems incontestable: Culture counts.

Capitalism in its many variants has been shown, he notes, to be a prodigious generator of wealth. But it will not spring forth magically from a few big industrial projects or cookie-cutter policies imposed by outside experts. It's culture that nourishes productive policies and behavior.

By and large, nations have either lifted themselves or have stayed down. Societies dominated by tribal, religious, ideological or political values that disparage the qualities needed for broad-based growth will not get growth. Economic success requires a tolerance for change and inequality, some minimum level of trust -- an essential for much commerce -- and risk-taking. There are many plausible combinations of government and market power; but without the proper cultural catalysts, all face long odds.

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