Judging only by wealth per capita, most people might choose to live in Switzerland, Lichtenstein, or Luxembourg. But residency is tightly restricted in the smaller two nations of the three, and gaining permanent residency is Switzerland is not particularly easy. It is a small, landlocked country, for all the clean mountain air.
Discovering Why Particular Nations are Wealthy is More Difficult than Determining Which Ones are Richer
Below is a list of several books that attempt to answer the question. The authors of the books used a variety of criteria to explain why some nations are wealthy while others are not.
- Adam Smith — The Wealth of Nations
- David Landes — The Wealth and Poverty of Nations
- Gregory Clark — A Farewell to Alms
- Lynn and Vanhanen — IQ and the Wealth of Nations
- John Kay — The Truth About Markets
- Jared Diamond — Guns Germs and Steel
- Robert Cooter — Law and the Poverty of Nations
- Peter Zeihan — The Accidental Superpower
- Ruchir Sharma — The Rise and Fall of Nations
- Matt Ridley — The Rational Optimist
- Hernan de Soto — The Mystery of Capital
- David Warsh — Knowledge and the Wealth of Nations
- Nathan Rosenberg — How the West Grew Rich
- William J. Bernstein — Splendid Exchange: How Trade Shaped the World
- Acemoglu and Robinson — Why Nations Fail
Most of the ideas discussed in the books above can be summarised in reasonably short lists. But to understand the importance of the various factors, one must look at many examples and study the reasoning behind the more technical factors underlying success or failure. Your own level of interest must help you choose between a “CliffsNotes” understanding of the issue and a deeper, more detailed level of comprehension.
Example lists of reasons for why some nations are rich
- Worker productivity
- Technical expertise
- Appropriate population
- Committed and efficient workforce
- Efficient utilisation of natural resources
- Educated population
- Population actively involved in politics and running of society
- Stable government
- Resistance to outside interference
- Rule of law
Here is a shorter list of reasons for “Why Some Countries are Rich . . . :”
- Quality of Capital
- Quality of Labour
- Efficiency of capital and labour
- Economic and government institutions
Another short list:
- Technology and productivity
- Institutions and Culture
- Geography and natural resources
- Freedoms and Capabilities
If looked at closely, the above lists overlap and restate each other using different phrasings. They are the conventional reasons for why some nations are rich and others poor. Trade, natural resources, worker productivity, access to capital and technology, rule of law, geography, stable government etc. are all relatively non-controversial factors generally recognised as typically involved in national prosperity — and they are all discussed in detail within at least one of the above books.
Here is a short, non-controversial video course on why some countries are rich and others are poor, emphasizing the commonly accepted narrative:
But the quality of human capital is crucial, and most writers give short shrift to the reasons why some human populations contribute more to societal prosperity than others.
Examining Human Capital from the Viewpoint of IQ or Executive Function: Not Politically Correct
Correlations between GDP and average national IQ are quite obvious, although politically incorrect. Wealthy high IQ nations might consider “building a high wall to block illegal low-IQ immigration, and encouraging high IQ couples to have more children.”
But high average IQ may not be the most important ingredient for building human capital to support a prosperous, thriving society. A set of brain processes referred to as “executive functions” are at least as important as IQ.
Executive Functions (EF) are mediated by the pre-frontal lobes of the brain and other key brain centres. Examples of EF include:
- Those that involve planning or decision making
- Those that involve error correction or troubleshooting
- Situations where responses are not well-rehearsed or contain novel sequences of actions
- Dangerous or technically difficult situations
- Situations that require the overcoming of a strong habitual response or resisting temptation.
Executive functions have been found to be roughly 90% heritable, as opposed to IQ which is generally found to be between 50% and 80% heritable, with heritability of IQ increasing as a person ages. EF can be more important to life success than IQ, given a certain baseline intelligence level.
Much of a nation’s human capital is tied up in the genes which help determine IQ and EF. If populations of high average IQ and EF do not procreate, massive amounts of genetic wealth are being dissipated to no apparent benefit.
Even worse, politically correct governments are seeking to displace the “genes of prosperity” and to replace them with “genes of poverty, violence, and corruption.” It is not easy to displace intelligent, orderly, hard-working, and innovative populations in an open and transparent manner — and so governments often go about the process in very underhanded ways (consider immigration in Germany, the Netherlands, and Sweden, or US immigration under Obama).
Low IQ and low EF nations, such as those in sub Saharan Africa and the Caribbean, should look more toward improving their trade policies, economic/governmental institutions, legal systems, and toward cleaning up corruption [eg Zimbabwe]. Highly recommended for low-IQ nations is the policy of attracting market-dominant minorities through the use of free trade zones, where government kleptocrats are kept at arms’ reach. The opportunities that arise from the creation of “non-natural resource oriented private enterprises” will provide a broader economic boost within the population at large than current state-controlled enterprises.
When Considering the Lists of Reasons for Prosperity vs. Poverty, Don’t Forget the Effects of IQ and EF
The Credit Suisse global map of national GDPs at the top of this posting is a snapshot image of recent global economic data. But everything changes, and nothing is quite so dynamic as the flow of money and wealth. What goes up often comes down, and what is down sometimes goes up. Much depends upon decisions that are made in high places of government, and on disruptive technological innovations that are developed in favourable economic climates.
IQ roughly corresponds to intelligence, and EF roughly corresponds to self-discipline, goal orientation, impulse control, and self-starting. Both are highly heritable, and need to be trained early in childhood to achieve optimal outcomes in terms of life success and achievement. They are crucial ingredients of a nation’s human capital and future economic prospects, and are typically neglected by most western nations — out of leftist political correctness.
Perhaps US president-elect Trump can bring the balance of human investment back into a more rational range. You get less of what you tax and more of what you subsidise, after all.
But it is best for you yourself to take control of the future of your immediate world, if you can, and stop trusting authority to do things for you. That is what the Al Fin blogs have always been about, and at this time in particular, The Dangerous Child blog.
Choose a Good Location, and A Couple of Fallback Locations
In locations such as Europe and the Anglosphere, it is possible to choose prime and fallback locations for various eventualities — including general prosperity, recession, and outright depression/collapse. One should make preparations for most likely possibilities, including the worst and the best. Preppers and survivalists typically make the mistake of focusing exclusively on doom, and miss out on much of the expansive life they might have had. Cornucopians often make the opposite mistake by failing to prepare for inevitable setbacks, and suffer needlessly as a result.
Sometime around the year 1500 AD, the world entered the modern era of European ascendancy. This long-lasting turn of fortune is often referred to as “The European Miracle”, after a book by historian Eric Jones. The massive shift in global wealth away from Asia toward Europe, and the rise in broad European prosperity and influence that began around the year 1500 has puzzled and astounded mainstream conventional thinkers for centuries now.
Loosening of Governmental Ties Over Commerce
The conquest and development of “new worlds” by Europeans opened large areas for economic development far beyond the effective reach of established governments. The wealth thus created was applied to the creation of a much more loosely controlled system of commerce and practical economics which fed on itself to build whole empires of dynamic prosperity.
Thus over roughly one hundred years, the tiny relatively undeveloped former British colonies in North America developed into the most prosperous nation in the world, between 1790 and 1890. Since then, the US has saved Europe from itself twice (WWI, WWII) and from the USSR once (Cold War I). And now with the most recent ongoing decline of China, the US wealth gap is widening once again.
Peter Zeihan’s book, The Accidental Superpower, explains the many severe problems of Europe, China, Russia, Latin America, Africa, and most of Asia, and reveals why the US wealth gap is likely to widen significantly throughout the present century.
Such things as The European Miracle and The Accidental Superpower do not just happen without reasons.
All of the people who foolishly bet their money and aspirations on Russia, China, Brasil, Venezuela, Nazi Germany, or any other corrupt and despotic nations have clearly failed to learn the lessons of wealth creation over time.
Into the Future
Hope for the best. Prepare for the worst (and best). It is never too late (or too early) to have a Dangerous Childhood — wherever it may be.
Trans-border trade with Mexico offers many strong advantages to the current arrangement with China.
The cost of a “free press” south of the border