Why Some Countries Are Poor and Others Rich | The School of Life

Summary

This script examines why some countries prosper while others remain poor. It identifies three key factors: institutions, culture, and geography. Rich nations typically have good institutions and low corruption, while poor ones suffer from the opposite. Cultural beliefs, especially religious intensity, correlate with wealth; less religious countries tend to be wealthier. Lastly, geographical disadvantages like tropical climates, disease, and poor connectivity hinder development. The script suggests institutions account for 50% of a nation's wealth, culture 20%, and geography 30%, encouraging a sympathetic view of the complex challenges faced by poor countries.

Takeaways

• 🌍 There are 196 countries in the world, with 25 considered very rich (average wealth per person over $100,000 a year) and 20 identified as the poorest (per capita wealth under $1,000 a year).
• 📈 Rich countries generally have good institutions, while poor countries suffer from bad ones, often linked directly to corruption.
• 💼 Corruption prevents poor countries from collecting enough taxes to develop the necessary institutions to escape poverty.
• 🏛️ Clan-based thinking in poor countries leads to nepotism, which restricts access to the intelligence and talent of the whole population.
• 🔮 Culture plays a significant role in wealth creation, with less religious belief correlating with higher wealth in countries.
• 🌱 Geography is a key factor in a nation's wealth, with tropical regions facing agricultural challenges and diseases that hinder development.
• 🐂 Historically, the presence of large domesticated animals was crucial for wealth creation, but tropical diseases like trypanosomiasis have hindered this in Africa.
• 🚢 Poor countries often suffer from poor connectivity, being landlocked or having limited navigable rivers, which affects trade and economic growth.
• 🌋 Natural resources can be a curse for poor countries, leading to the 'resource trap' where they become dependent on extraction rather than developing diverse economies.
• 💡 The factors determining a nation's wealth are institutions (50%), culture (20%), latitude and connectivity (10% each), and geological fortune.
• 🌐 Understanding these factors can lead to a sense of modesty about individual success and sympathy for the complex challenges faced by poor countries.

Q & A

How many countries in the world are considered very rich with an average wealth per person of over $100,000 a year?

There are 25 countries considered very rich with an average wealth per person of over $100,000 a year.

What is the current growth rate of Zimbabwe, and how long will it take for it to become a rich country?

Zimbabwe continues at its current growth rate, it will qualify as a rich country in 722 years.

What are the three main factors that determine whether a country will be rich or poor?

The three main factors that determine the wealth of a nation are institutions, culture, and geography.

How does corruption relate to the wealth of a country?

Corruption is directly correlated with poverty. Rich countries tend to have less corruption, while poor countries are often more corrupt.

What is the impact of clan-based thinking on a country's wealth?

Clan-based thinking can limit a country's wealth by restricting access to the intelligence and talent of the whole population, leading to nepotism and disregard for merit.

What is the relationship between religion and wealth as discussed in the script?

The script suggests that there is a correlation between lower levels of religious belief and increased wealth, with 19 out of the richest countries having 70% or more of their populations saying that religion is not at all important to them.

How does the United States defy the general trend of religiosity correlating with wealth?

The United States combines great religiosity with huge wealth, which is attributed to its predominantly Protestant and materialistic religion that encourages building the 'New Jerusalem' in this world.

What challenges do tropical regions face that can hinder wealth creation?

Tropical regions face challenges such as less productive agriculture due to less carbohydrate-rich plants, poor soil, diseases, and the presence of the tsetse fly which devastates domesticated animals.

Why are natural resources paradoxically a problem for poor countries?

Natural resources can be a problem for poor countries because they can lead to a 'resource trap' where the wealth from resources can exacerbate corruption and conflict without requiring the cooperation of the whole society.

How does the script suggest allocating the relative importance of institutions, culture, geography, and other factors in determining a nation's wealth?

The script suggests that 50% of a nation's wealth comes down to the state of its institutions, 20% is due to its culture, and 10% each can be allocated to latitude, connectivity with the rest of the world, and geological future.

What personal takeaways does the script suggest for understanding the wealth of nations?

The script suggests personal takeaways of modesty, recognizing the broader society's role in individual success, and sympathy for countries facing difficult problems that are often beyond their control.

Outlines

00:00

🌍 Wealth and Poverty: The Role of Institutions and Culture

This paragraph discusses the disparity in wealth among nations, highlighting the role of institutions and culture. It states that there are 196 countries in the world, with 25 being very rich and many others being very poor. The rich countries have good institutions, while the poor ones suffer from bad ones, often linked to corruption. Corruption prevents countries from collecting enough taxes to develop necessary institutions, leading to a poverty trap. The paragraph also touches on the cultural aspect, noting that less religious countries tend to be wealthier, suggesting a correlation between belief in the supernatural and a focus on the afterlife rather than wealth creation in the present.

05:01

🌱 Geographic Factors Affecting Wealth

This paragraph delves into the geographic factors that contribute to a nation's wealth, such as climate, disease prevalence, and connectivity. It explains how tropical regions face challenges like less productive agriculture, poor soil, and a higher prevalence of diseases, which hinder wealth creation. Additionally, it points out that poor countries are often landlocked or have limited navigable rivers, which affects trade and economic growth. The paragraph also discusses the paradox of natural resources, where they can either intensify wealth in countries with good institutions or deepen poverty in those with poor governance, leading to a 'resource trap'.

Keywords

💡Wealth per Capita

Wealth per capita refers to the average wealth of individuals within a country. It is a key economic indicator used to measure the prosperity of a nation. In the video, it is used to differentiate between rich and poor countries, with rich countries having an average wealth per person of over $100,000 a year and poor countries having under $1,000 a year.

💡Institutions

Institutions are the established laws, rules, and organizations that govern a society. The video emphasizes the importance of good institutions in rich countries, which are less corrupt and more effective at collecting taxes and providing essential services. Conversely, poor countries often have bad institutions, characterized by high levels of corruption and inefficiency.

💡Corruption

Corruption is the dishonest or fraudulent conduct by those in power, typically involving bribery or the abuse of authority. The video correlates poverty with corruption, stating that the poorest countries are also the most corrupt. Corruption prevents the collection of sufficient taxes needed for essential services and perpetuates the cycle of poverty.

💡Clan-Based Thinking

Clan-based thinking refers to the cultural practice of favoring one's own family or group members over others when making decisions. The video suggests that in poor countries, this mindset can be seen as a form of corruption, where merit is overlooked in favor of personal connections, limiting access to the intelligence and talent of the entire population.

💡Culture

Culture encompasses the beliefs, values, and customs that shape a society's behavior and outlook. The video posits that culture plays a significant role in wealth creation, with less religious or supernatural belief being associated with greater wealth. It suggests that a focus on the spiritual over the material can hinder economic growth.

💡Religiosity

Religiosity refers to the extent of one's religious beliefs and practices. The video highlights a connection between lower levels of religiosity and wealth, with the richest countries tending to have populations for whom religion is less important. However, it also notes the United States as an exception, where high religiosity coexists with wealth.

💡Geography

Geography influences a country's economic potential through factors like climate, soil quality, and the presence of natural resources. The video discusses how tropical regions, with their less productive agriculture and higher disease rates, can be disadvantaged compared to regions with more favorable conditions for growth and development.

💡Tropical Diseases

Tropical diseases are illnesses that thrive in warm, humid climates and can have a significant impact on a region's health and productivity. The video mentions that low-income countries are affected by multiple tropical diseases, which can hinder economic development by reducing workforce capabilities.

💡Landlocked Countries

Landlocked countries are those without direct access to the ocean, which can impede trade and economic growth due to higher transportation costs. The video uses Bolivia and Paraguay as examples, noting their status as some of the poorest nations in South America.

💡Natural Resources

Natural resources are materials found in nature that have economic value, such as oil, minerals, and metals. The video discusses the paradox that while natural resources can enrich countries with good institutions, they can also exacerbate poverty in countries with poor institutions, leading to what is known as the 'resource curse'.

💡Resources Trap

The resources trap is a situation where countries with abundant natural resources fail to develop economically due to over-reliance on these resources. The video illustrates this with the example of the Democratic Republic of the Congo, which despite its mineral wealth, suffers from ongoing conflict and corruption.

Highlights

There are 196 countries in the world, with 25 being very rich and the rest varying in wealth.

The 20 poorest countries have a per capita wealth under $1,000 a year.

Zimbabwe, if growing at its current rate, will become rich in 722 years.

Three main factors determine a country's wealth: institutions, culture, and geography.

Good institutions are crucial for wealth, with a direct correlation between poverty and corruption.

Corrupt countries struggle to collect taxes necessary for good institutions.

Clan-based thinking in poor countries can hinder access to the intelligence and talent of the whole population.

Culture plays a role in wealth, with a general trend of less religiosity correlating with wealth.

The United States is an anomaly, being both religious and wealthy, possibly due to its Protestant and materialistic culture.

Geography affects wealth, with poor countries often located in the tropical regions.

Tropical regions face agricultural challenges due to less carbohydrate-rich plants and poor soil.

The presence of the tsetse fly in Africa has hindered the development of technology and wealth.

Tropical diseases affect many low-income countries, impacting their ability to grow rich.

The optimal temperature for civilization is 16 degrees Celsius.

Poor countries are often landlocked or poorly connected, which negatively impacts trade and wealth.

Natural resources can be a curse for poor countries, leading to the 'resource trap'.

The Democratic Republic of the Congo's mineral wealth contributes to ongoing conflict and corruption.

A suggested breakdown of factors influencing a nation's wealth is 50% institutions, 20% culture, 10% latitude, 10% connectivity, and 10% geological fortune.

Policymakers should consider these factors when addressing wealth inequality.

Individuals should develop modesty and sympathy towards the challenges faced by poor countries.

Transcripts

there are a hundred and ninety six

countries in the world twenty-five of

them are very rich defined as having an

average wealth per person of over

$100,000 a year they are but far more

countries are quite poor and some which

we're considering here a very very poor

these are the 20 poorest countries in

the world where the per capita wealth is

under $1,000 a year or under 3 dollars a

day every country is now more or less on

a path to growth but the poor ones are

growing very very slowly

if Zimbabwe continues at its current

growth rate it will qualify as a rich

country in two thousand seven hundred

and twenty two years what we want to

know in this film is why some countries

prosper and other stagnate so that we

can understand what rich countries are

doing right and get a better grip on the

challenges and hurdles facing poor

countries there are basically three

factors that determine whether a country

will be rich or poor the first is

institutions institutions are beyond

important

broadly speaking rich countries have

good institutions and poor ones have

very very bad ones the correlation

between poverty and corruption is direct

the richest countries in the world are

quite simply invariably also the least

corrupt ones and the most corrupt

countries are also the poorest when

countries are corrupt they can't collect

enough taxes to get the good

institutions they would need to escape

the poverty trap half of the wealth of

the world's poorest 20 countries goes

into offshore accounts lost revenues in

these countries totals between 10 and 20

billion dollars a year meanwhile without

an adequate tax base poor countries

can't invest in police education health

and transport now a more generous way to

look at corruption is that it's really a

case of clan based thinking say you're

hiring someone in the rich countries

you're meant to do so simply on merit

interviewing lots of candidates then

picking the best one irrespective of any

personal connection but in poor

countries under the sway of clan based

thinking that approach would itself be

seen as corrupt it's your duty to

disregard the so called best candidate

from an anonymous Bunch

in order to pick someone from your own

team

your uncle your brother your second

cousin the guys from the same tribe as a

result poor countries don't allow

themselves access to the intelligence

and talent of the whole population

there's a second thing that keeps

countries poor culture what goes on in

people's minds their outlooks and

beliefs a striking statistic pops up

here in relation to religion if there's

one generalization you can make about

religion and wealth it's that the less

people believe the richer they stand a

chance of being 19 of the richest

countries in the world have 70% or more

of their populations saying that

religion is not at all important to them

the exception here is unsurprisingly the

United States which manages to combine

great religiosity with huge wealth more

on that in a second and conversely the

poorest nations in the world are also

extremely believing once here's how many

people think religion and the

supernatural is deeply important in the

following countries in the world's

poorest country simply everyone is a

believer why is belief quite so bad for

wealth creation because in general

religiosity is connected up with the

idea that the here-and-now

can't be improved so you should focus on

the spiritual and look forward to a next

world instead it makes quite a bit of

sense when you live here in the rich

world on the other hand people are

generally great believers in their

capacity to alter their destiny through

effort and talent incidentally to

explain the anomaly of the United States

religion seems not to slow down economic

growth here because it's a particular

sort of religion an overwhelmingly

Protestant and exceptionally

materialistic kind the American God

doesn't want you to think of building

the New Jerusalem in the next world he

wants it here and now in Kansas or

Houston there's another big factor that

determines the wealth and poverty of

Nations geography

poor countries are overwhelmingly

located in the tropical regions this

isn't a coincidence life is in many ways

simply far far tougher they're the

problems begin with agriculture tropical

plants are generally a lot less packed

with carbohydrates poor countries have

worse soil too also and perhaps

surprisingly a tropical climate can be

dis

Vantage's to photosynthesis historically

a key determinant in the likelihood of

societies growing rich was their

possession of large domesticated animals

such as horses and oxen which liberated

a huge part of the workforce from having

to plow by hand but in tropical Africa

domesticated animals have throughout

time been devastated by a further of

palling scourge that sits a fly this

small fly exclusively present in Africa

because of its heat and humidity knocks

out animals on an enormous scale making

them sleepy or inactive and has had a

profound effect on the ability of

Africans to develop technology increase

agricultural productivity and amass

wealth

it isn't just plants and animals that

suffer in the tropics in the middle

latitudes humans are open to a

terrifying array of diseases including a

hundred percent of low income countries

are affected by at least five tropical

diseases simultaneously the magical

temperature which has helped to make

rich countries rich is 16 degrees

centigrade however superficially

unpleasant that drop below 16 degrees as

autumn starts to bite is quite literally

a foundation stone of civilization

geography also encompasses transport and

poor countries are on the whole very

badly connected landlocked Bolivia and

semi landlocked Paraguay are the poorest

nations in South America Africa has only

one major navigable river the Nile and

hosts 15 landlocked nations 11 of which

have average incomes of $600 a year or

less not coincidentally the poorest

country in Asia Afghanistan is also

landlocked then there's the matter of

natural resources natural resources like

oil or precious metals can be real

trouble and paradoxically poor countries

tend to have them in spades these

natural resources are what economists

call intensifiers

they will help to make a country with

good institutions richer but one with

bad institutions get even poorer

precipitating what's called the

resources trap so the Democratic

Republic of the Congo is one of the

world's most mineral rich countries

holding most of the world's coltan which

every mobile phone has a bit of inside

but natural resource wealth helps

leaves to grab money without requiring

the cooperation of the whole society if

the only way to grow wealthy is to

assemble high-tech aero engines for

example you're going to need your whole

society to buy into the project but if

you just need to extract a few minerals

you can do so with a small labor force

some guns and an airstrip long enough to

ferry your loot out to market the wealth

from coltan keeps DRC armed rebels in

guns and corrupts every level of society

so how should one way up the relative

importance of all these different

factors institutional cultural and

geographic in determining the wealth of

nations there's no hard and fast rules

but as a guide one can suggest that 50

percent of a nation's wealth comes down

to the state of its institutions 20

percent is due to its culture and 10

percent each can be allocated to

latitude connectivity with the rest of

the world and geological future

if you're a policymaker this discussion

has wide practical implications but at a

more personal level one might take away

two things from it firstly modesty you

should have a better idea of what you

owe your individual success to which is

not so much your own hard work or fine

mind as the broader society you live in

which was produced over centuries and

which you now draw benefit from

unknowingly at the same time sympathy an

ability not to see failing societies

just as basket cases but rather as

countries facing comprehensible and

hugely difficult problems our sympathy

can be enhanced by reflecting that the

troubles of desperate lands are to a

considerable extent to do with malaria a

lack of navigable river and the horrific

buzzing of that city fly rather than

always some more intimate human failing

which we would ourselves never manifest

[Music]

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