Naked Economics by Wheelan, Charles (spanish books to read .txt) 📕

Middle Eastern neighbors that have large petroleum reserves. Israeli GDP per capita is $28,300 compared to $20,500 for Saudi Arabia and $12,800 for Iran. Meanwhile, resource-poor countries like Japan and Switzerland have fared much better than resource-rich Russia.22 Or consider oil-rich Angola. The country takes in some $3.5 billion a year from its oil industry.23 What has happened to the people who might benefit from this treasure in the ground? Much of the oil money goes to fund a never-ending civil war that has ravaged the country. Angola has the world’s highest rate of citizens maimed by land mines (1 out of 133). One-third of Angola’s children die before age five; life expectancy is forty-two. Large swathes of the capital have no electricity, no running water, no sewers, and no garbage pickup.24

These are not anecdotal examples carefully picked to make a point. Economists believe that a rich endowment of natural resources may actually be a detriment to development. All else equal, it is great to discover the world’s largest zinc deposit. But all else is not equal. Commodity-rich countries are changed by the experience in ways that can do more harm than good. One study of economic performance in ninety-seven countries over two decades found that growth was higher in countries that were less endowed with natural resources. Of the top eighteen fastest-growing nations, only two were rich in things that can be taken out of the ground. Why?

Mineral riches change an economy. First, they divert resources away from other industries, such as manufacturing and trade, that can be more beneficial to long-term growth. For example, the Asian tigers were resource-poor; their path to prosperity began with labor-intensive exports and progressed into more technology-intensive exports. The countries grew steadily richer in the process. Second, resource rich economies become far more vulnerable to wild swings in the price of commodities. A country built on oil will have a rough stretch when the barrel price drops from $90 to $15. Meanwhile, demand for a nation’s currency rises as the rest of the world begins to buy its diamonds or bauxite or oil or natural gas. That will cause the currency to appreciate, which, we now know, makes the country’s other exports, such as manufactured goods, more expensive.

Economists started referring to the perverse effects of abundant natural resources as “Dutch disease” after observing the economic effects of an enormous North Sea natural gas discovery by the Netherlands in the 1950s. The spike in natural gas exports drove up the value of the Dutch guilder (as the rest of the world demanded more guilders in order to buy Dutch natural gas), making life more difficult for other exporters. The government also used the gas revenues to expand social spending, which raised employers’ social security contributions and therefore their production costs. The Dutch had long been a nation of traders, with exports making up more than 50 percent of GDP. By the 1970s, other export industries, the traditional lifeblood of the economy, had grown far less competitive. One business publication noted, “Gas so distended and distorted the workings of the economy that it became a mixed blessing for a trading nation.”25

Last, and perhaps most important, countries could use the revenues from natural resources to make themselves better off—but they don’t. Money that might be spent on public investments with huge returns—education, public health, sanitation, immunizations, infrastructure—is more often squandered. After the World Bank helped to build an oil pipeline that originates in Chad and runs through Cameroon to the ocean, Chad’s president, Idriss Déby, used the first $4.5 million installment of oil money to buy weapons for fighting rebels.26

Democracy. Does making the trains run on time matter more to the economic growth of poor countries than niceties like freedom of expression and political representation? No; the opposite is true. Democracy is a check against the most egregious economic policies, such as outright expropriation of wealth and property. Amartya Sen, a professor of economics and philosophy at Harvard, was awarded the Nobel Prize in Economics in 1998 for several strands of work related to poverty and welfare, one of which is his study of famines. Mr. Sen’s major finding is striking: The world’s worst famines are not caused by crop failure; they are caused by faulty political systems that prevent the market from correcting itself. Relatively minor agricultural disturbances become catastrophes because imports are not allowed, or prices are not allowed to rise, or farmers are not allowed to grow alternative crops, or politics in some other way interferes with the market’s normal ability to correct itself. He writes, “[Famines] have never materialized in any country that is independent, that goes to elections regularly, that has opposition parties to voice criticisms and that permits newspapers to report freely and question the wisdom of government policies without extensive censorship.”27 China had the largest recorded famine in history; thirty million people died as the result of the failed Great Leap Forward in 1958–1961. India has not had a famine since independence in 1947.

Economist Robert Barro’s seminal study of economic growth in some one hundred countries over many decades found that basic democracy is associated with higher economic growth. More advanced democracies, however, suffer slightly lower rates of growth. Such a finding is consistent with our understanding of how interest groups can promote policies that are not always good for the economy as a whole.

War is bad. Now there is a real shocker. Still, the data on the proportion of extremely poor countries involved in armed conflict are strikingly high. Paul Collier, head of the Oxford Center for the Study of African Economies and author of the book The Bottom Billion, points out that nearly three-quarters of the world’s billion poorest people are caught in a civil war or have recently been through one. It’s hard to run a business or get an education in the midst of a war. (Obviously the causality runs in both directions: War devastates countries; nations in a shambles are more likely to collapse