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1:07 pm
Thu May 24, 2012

What's Behind Economic Inequality Between Nations

Originally published on Thu May 24, 2012 2:39 pm

Transcript

NEAL CONAN, HOST:

This is TALK OF THE NATION. I'm Neal Conan in Washington. What makes some nations succeed while others fail? In his Pulitzer Prize-winner, "Guns, Germs and Steel," Jared Diamond looked back over thousands of years of human history and concluded that geography allowed Eurasia to get a big head start and develop agriculture, writing, bureaucracy and the military technologies that led to dominance over much of the globe.

His next book, "Collapse," investigated the historical and cultural factors. Now he's reviewed a new book called "Why Nations Fail: The Origins of Power, Prosperity and Poverty," which proposes some new ideas. Author Daron Acemoglu and James A. Robinson argue that inclusive economic and political institutions can be critical to success, and they describe an abundance of natural resources like diamonds or oil as a curse.

If you have a question for Jared Diamond on why nations fail, give us a call. 800-989-8255 is our phone number. Email us, talk@npr.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION. Later in the program, a peek inside the CIA's analysis process 10 years after they called it wrong on Iraq.

Jared Diamond, professor of geology and physiology at UCLA, joins us now by phone from Los Angeles. His piece on Acemoglu's and Robinson's "Why Nations Fail" appears in the New York Review of Books. Nice to have you with us again.

JARED DIAMOND: It's good to be with you from beautiful Los Angeles.

CONAN: Well, it's humid Washington, D.C. In the meantime, the book begins with an example many Americans will recognize: the cities of Nogales, Arizona, and just across the fence that marks the Mexican border, Nogales, Sonora.

DIAMOND: Yes, this is about the beginning, the first section of Jim Robinson and Daron Acemoglu's new book "Why Nations Fail," and it's a dramatic example. So here is Nogales, Arizona, and Nogales across the border in Mexico. You go five yards, and there's no change in atmosphere or in the environment, but you go from a Nogales in which elections work, and you're safe, and there's prosperity and reliable health care, and you cross the border, and you're in another Nogales, where people are much poorer, and elections are often rigged, and there's not reliable health care.

So that's a dramatic example that not just geography but also institutions, those differing between the U.S. and Mexico, have a big effect on national wealth and on personal incomes.

CONAN: And they conclude that it is economic institutions and indeed the political institutions that create those economic institutions, that's the difference.

DIAMOND: That's right. They argue, and they're certainly right in this case of Nogales, that political institutions in particular, whether political institutions mean that the whole mass of the population is included and feels that it has a say and is motivated, those political institutions create economic institutions that motivate people to work hard.

For example, if you can count on keeping what you earn rather than having it expropriated by a corrupt government, or if there is support for education. And so where you get good political institutions and good economic institutions, then you're likely to have a richer country. And a prime example is Norway, with great institutions, richest country in the world, about 500 times richer per person than the world's poorest country.

CONAN: Well, you can see other examples like that right across borders - North and South Korea, of course, the old East Germany and West Germany. The question becomes: Can that be extrapolated to places that aren't so similar?

DIAMOND: That's right. There are enthusiasts who would extrapolate the examples that you mention, North versus South Korea; Nogales, Arizona, versus Nogales, Mexico; cases where there's no doubt that institutions produce the different results across the border. And some enthusiasts would extrapolate that and say that institutions account for differences in national wealth around the world.

But there are other things. There's geography, of which a prime example is whether a country is in the tropics, which makes for poverty, or whether a country is in the temperate zone, like the United States, which is conducive to wealth.

CONAN: Why does the tropics, a location in the tropics seem to indicate poverty?

DIAMOND: It's interesting. It's not that it dictates poverty, but it's a strike against you, and there are two reasons. One is agriculture. One might naively think that the tropics are a great place to grow food - you lie under a tree and wait for the bananas to fall off - but in fact tropical soils are relatively infertile compared to temperate-zone soils.

And the tropics have all of these diseases, chronic diseases like malaria and yellow fever and sleeping sickness that make people die young and make them sick and unable to work all the time. So those are the two major reasons why all other things being equal, tropical countries are only about half as rich as temperate countries.

CONAN: There are also the factors, some of which you pointed out in "Guns, Germs and Steel," is a lot of these places in the tropics were colonized by those Eurasian powers that benefitted from their early development of agriculture, writing, bureaucracy and those other things.

DIAMOND: Right. Given the fact that temperate zones have an advantage, and so Europe starts off richer than tropical countries, that advantage is then multiplied when European countries colonized African countries and South American countries and then set up basically corrupt, exploitative institutions to make the local people work for the good of the colonial masters.

And those then corrupt institutions have persisted until this day and left a bad legacy of colonialism, making it a double-whammy in the tropics.

CONAN: And then you have other kinds of colonies, though, where there were not extractive policies. There wasn't much to extract, at least not initially.

DIAMOND: Sure, the United States is a prime example. The Native American population in the United States, particularly after European diseases swept across, was lower in population density than, say, in Mexico or Peru so that Europeans who came to the United States had to work for themselves, and they set up institutions that rewarded them for working for themselves. Whereas in densely populated tropical countries, such as Mexico and Peru and Bolivia, Europeans set up institutions to extract work and money out of the local population, and those institutions have persisted and continue to impoverish the countries until this day.

CONAN: So we see different kinds of institutions and different kinds of political structure and economic opportunity as being hugely important. But do they dictate a country's future? You could see places that have, for example, vast mineral wealth being able to overcome these sorts of things.

DIAMOND: That's right. When one points out a disadvantage for a country, it's like pointing out a disadvantage for a person. A disadvantage for a person doesn't condemn you to being poor for the rest of your life. Instead, it may tell you what you've got to work on in order to get rich. And that's exactly what some tropical countries in Southeast Asia did, notably Malaysia and Singapore and Taiwan.

They - and now Thailand. They recognized that they're in the tropics, and so to get rich, they had to solve their problems of diseases. So they invested heavily in public health in stamping out malaria, and they also realized that they were not going to get rich by growing wheat. Leave that to the United States and Argentina. They've turned to other things, with the result that Taiwan and Singapore are first-world countries today, and Malaysia is well on its way. So that's an example of how knowing what penalizes you can help you fix it.

CONAN: But getting back to the argument about institutions, those are places that are blessed, relatively, with well-functioning institutions, political and economic.

DIAMOND: That's right. They do have well-functioning institutions, and their institutions are getting better. Singapore's democracy is not the same as American democracy, but nevertheless it's a democracy that rewards people for hard work.

CONAN: And what can you do to inculcate those positive infrastructure organizations? This seems to be, you know, a process of - that humans can do this, it's not geography. We can actually change that.

DIAMOND: Yeah, it's interesting to think of can we inculcate. Well, the United States can't inculcate something into another country any more than I, as a father, can inculcate something into my children: My children what do what I please. Similarly, countries will do what they please.

What is the case for countries is if they see examples of other countries near them that are getting rich through good institutions, they may prefer to learn from those other countries than from the United States. And a nice example is that in Africa, the country of Botswana, which used to be desperately poor 50 years ago, has gotten good institutions, has handled its diamond wealth well, is now one of the sixth-richest countries in Africa, and it's to Botswana more than to the United States that other African countries are coming to learn good governmental practices.

CONAN: We're talking with Jared Diamond, the author of "Guns, Germs and Steel: The Fates of Human Societies" and "Collapse: How Societies Choose to Fail or Succeed." He's with us to talk about a review he wrote of a book called "Why Nations Fail: The Origins of Power, Prosperity and Poverty" that appeared in the New York Review of Books. 800-989-8255. Email talk@npr.org. Bob's(ph) on the line with us from Reno.

BOB: Hi, I really - it's an honor to be speaking with you. I've devoured your books. And I had a question, too, about the - you know, if you could just take a look at our 50 states here in this country. Some are doing well; others are, like our state, Nevada, not doing so well. And can you - and just as geography, abundance of natural resources, things that determine these stronger, healthier nation-states, you know, can you extrapolate those down? Do they also indicate the health of constitute states in this country?

DIAMOND: That's a really nice example, and I'm glad that you brought this up. So you are in Nevada, and I am in California. California is, or was, one of the richest states in the United States. And Nevada was not so rich. And there are obvious reasons for that. California is blessed with fertile soils and reasonable amounts of rainfall, and as Nevada, mineral wealth, and California has got a coastline, so it's got I think the biggest port in the United States in the Long Beach area, whereas Nevada is landlocked.

Nevada does not have any ports to the ocean. Nevada has low rainfall. So it's no surprise that California is richer than Nevada, although California and Nevada are both part of the United States and have similar institutions.

CONAN: Bob, thanks very much, and keep working on that tunnel to the Pacific.

BOB: Thanks.

CONAN: All right, thanks very much. We're going to talk more with Jared Diamond after we come back from a short break about why some societies thrive and others wither, a topic he covers in his books, "Guns, Germs and Steel" and "Collapse" and he revisited in a recent piece in the New York Review of Books.

If you'd like to join us about this conversation, 800-989-8255. Email talk@npr.org. You can also go to our website, npr.org, and click on TALK OF THE NATION. Stay with us. I'm Neal Conan. It's the TALK OF THE NATION from NPR News.

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CONAN: This is TALK OF THE NATION from NPR News. I'm Neal Conan. Our guest is Jared Diamond, the Pulitzer Prize-winner of "Guns, Germs and Steel." He also wrote "Collapse" and other books. He spent much of his career studying what makes some countries prosper while others go poor.

The answers, as we've heard, are as varied as they are complex. If you'd like to join the conversation, 800-989-8255. Email talk@npr.org. You can also join the conversation on our website. That's at npr.org. Click on TALK OF THE NATION. Let's go next to Cathy(ph), and Cathy's with us from Denver.

CATHY: Hi, I just had a question about how he defines success and failure, if it's purely in economic terms, or if he took into consideration things like distribution of wealth, gender equality, access to democratic institutions, because it seems like a lot of that might be subjective measurements, but might also give a more complete story of whether a nation was successful or not.

DIAMOND: You're right, Cathy, that's a really good observation. Social scientists, politicians, political scientists and economists usually define success and failure in terms such as economic strength, average income, political power, whether this country conquers that country, or that country conquers this country. So that's one definition.

Another definition of success or failure is demographic: Does your population grow, or does your population crash because of disaster or inability to cope? But going back to your point, Cathy, there are countries that define success or failure in terms of human happiness, and for example the Himilayan country of Bhutan, B-H-U-T-A-N, the king of Bhutan has proclaimed that the goal of Bhutan is not to maximize gross national product, an economic definition, but gross national happiness. That is to say Bhutan is not aiming for an income like Norway's, but it is aiming to maximize the happiness and the cultural satisfaction of the people of Bhutan.

So you're right, Cathy, that there's more to success and failure than just economic measures.

CONAN: But don't - doesn't access to some of those, you know, what Cathy was talking about, the widespread access to economic institutions, doesn't that, to some degree, lead inevitably towards more prosperity?

DIAMOND: You are right, and again that's a very interesting point. If you do a graph of measures of happiness such as life expectancy and access to health care, if you plot that against national income, naturally richer countries tend to be happier than poorer countries. But what's interesting is to look at the deviations from that pattern.

There are countries that are - whose people are happier than you would expect from their income and vice versa. And the outstanding example of a country happier than its income is Cuba. So Cuba's income, average income is one-sixth that of the United States, but nevertheless the Cuban people have a life expectancy and child survival and access to education and medical care comparable to that of the United States, and that's because of policies of the Cuban government.

While on the downside, a country in which happiness is lower than what you would expect from the income measures, is the United States. Americans are not as happy, measured by access to health care and pension security in old age, as you would expect from their income compared to, say, European countries that have made different choices.

CONAN: Cathy, good question, thank you.

CATHY: Thank you.

CONAN: Let's see if we can go next to - this is Emanuel(ph), Emanuel with us from Birmingham.

EMANUEL: Thank you for taking my call.

CONAN: Go ahead.

EMANUEL: Yes, my question is: Why do you think natural resources is a problem to one country and not to the other? For example, take a country, Botswana, or Norway for example, they are doing well economically, and then you take Nigeria as a country that has natural resources, but they've having - why is it so?

DIAMOND: A great question. Again, natural resources can either be a boon or a disaster. Some countries have prospered from natural resources, and you've mentioned two examples, Norway that's handled its natural gas very well, Botswana that's handling its diamonds well; whereas Nigeria, the people of Nigeria have not profited from their oil wealth, nor have the people of the Congo profited from their mineral wealth.

There are basically two reasons. One is that some - three reasons, really. Some natural resources promote corruption, and others don't do so. So diamonds are a prime example of a resource over which it's easy to fight and is an invitation to corrupt governments.

A second difference is whether a country has other things besides natural resources. The United States has lots of mineral wealth, but the United States is not a poor, corrupt country, and that's because we have a lot else going for us besides mineral wealth.

And then the final thing is that it's the choice of the citizens and the leaders of the country. So in Botswana, when they discovered diamonds, the leaders of Botswana made good decisions that the money from those diamonds was going to get distributed to all the citizens of Botsawa in a 15- or 70-year economic plan.

So those are the three reasons why natural resources can either be a curse or a blessing.

CONAN: You also point out in the article that iron, a mineral, well, that can lead to development, as opposed to being a curse.

DIAMOND: That's right. Iron is an example of a resource that is much more favorable to development than diamonds. Diamonds you can hide in your pocket. They're concentrated. They're an invitation to secede and to a corrupt government, whereas iron, it's big and heavy. Iron is distributed all over the place. So iron does not foster corruption. Diamonds does, gold does, oil does, copper does not.

CONAN: Emanuel, thanks very much.

EMANUEL: Thank you.

CONAN: Let's see if we can go next to - this is Nieb(ph), Nieb with us from Loma Linda in California, also, I assume, the weather's nice there, too.

NIEB: Yes it is, thank you very much for taking my call. Good afternoon. This is a great thrill to be able to speak to Professor Diamond, whom I greatly admire. Dr. Diamond, I have a very quick question. I was wondering if, in your analysis, you have ever come across a correlation between the religiosity of a given country and its success or failure. Thank you. I'll take your response off the air.

CONAN: Thanks for the call.

DIAMOND: So the question is the relation between the geography of a country and success or failure?

CONAN: Religiosity.

DIAMOND: Oh, religiosity. That is interesting, and a quick answer would be there is no simple relationship. Some religious countries are rich and happy. Some religious countries are not rich. Some countries with low religion are relatively prosperous. Some religions promote education and promote acquisition of wealth. Some religions get in the way. So there is no simple relationship between religion and success or failure.

CONAN: Let's see if we can go next to - this is Scott(ph), Scott with us from Sacramento.

SCOTT: Gentlemen, thank you both for taking my call. I was wondering if Mr. Diamond was familiar with the book, it's called "Kicking Away the Ladder" by Ha-Joon Chang. And the conclusion he reaches is basically the developed countries of today - the U.S., the U.K., Germany - used pretty protectionist trade and economic policies in their development, and nowadays these same countries don't want developing countries to use these same measures, but instead want developing countries to open up their economies to trade, presumably for the, you know, the richer nations.

And I was wondering if Mr. Diamond was familiar with the book and if he agrees with the premise or whether or not he thinks that affects the development of countries. I'll take my answer off the air.

CONAN: OK, Scott, thanks.

DIAMOND: I'm not familiar with that book, but I can certainly comment on the subject of the relation between developed, wealthy countries and developing countries. If I told you that there was a simple relationship, you would know that I'm a liar, and you should turn off and stop listening.

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DIAMOND: The relationship is complex. On the one hand, technology tends to arise in developed countries and flows from them to developing countries. In addition, developed countries often exploit the resources, notably for example wood and forest products and seafood, from developing countries.

On the other hand, developed countries often offer foreign aid and advice to developing countries. We could go on and on, this side, that side, but it boils down to, as many other things in life, it's a mixed bag.

CONAN: There are a couple implications of Robinson/Acemoglu's conclusions that are pretty interesting, and one of them is for economic development, for I guess, trying to engineer prosperity.

DIAMOND: Yes, Jim and Daron conclude their book with a somewhat pessimistic take on economic development. In, I believe, their final chapter, they discuss economic development efforts, which are often devoted to, say, providing money to develop industries, providing advice, et cetera, et cetera. And Jim and Daron conclude that a basic problem holding back many countries, is instead the institutions, and that if you don't address the institutions, corrupt institutions that deprive people of incentives, then pouring money into development schemes is not going to succeed. So that's a pessimistic conclusion.

I would step back, though, and look at countries like Botswana, and Trinidad and Costa Rica, South Korea, countries that were poor several decades ago, but are either in the First World or well on their way there today. So I see some hope.

CONAN: There is also a question about the future of China, which, of course, is in an economic boom of something we've not seen before on this planet, I don't think, but at the same time does not have the kinds of institutions that they're talking about.

DIAMOND: Yeah. Jim and Daron have an interesting discussion of China. So, on the one hand, China is the most rapidly growing major economy in the world; and, on the other hand, China does not have what we in the United States or Europe and Japan would recognize as good institutions. China is notorious for corruption. There's not an open political process.

So why is China growing so fast, and what can be the future of China? China is growing fast because it has some good government policies, along with some terrible government policies. And as for the future of China, we Americans tend to be paranoid and afraid that China is going to take over the world. But Jim and Daron's take is more measured.

They think that China is going to run out of steam because they point out that, historically, dictatorships like China, can often make money for a while, but without open institutions that motivate people to participate in the political process, they will run out of steam. And that's what Jim and Daron are cautiously predicting for China.

CONAN: So dictatorships, like China, like the old Soviet Union, can get by for the present, but because there's no incentive, they can't develop the technologies of the future.

DIAMOND: That's right. That's exactly what Jim and Daron say, and they point out that Russia is a good example. So Russia progressed greatly, economically from 1918, the time of the revolution against the czars, to the communist times. It helps to start from a very low base if you want to progress far. But Russia did not develop, itself, technology that would enable Russia to outstrip First World countries, and Russia did not have a broadly based political process. So, in fact, development in Russia did run out of steam, and then the Russian political system fell apart.

CONAN: We're talking with Jared Diamond about his piece in The New York Review of Books, reviewing "Why Nations Fail: The Origins of Power, Prosperity, and Poverty." You're listening to TALK OF THE NATION from NPR News.

And we have a caller from Saudi Arabia. Numan(ph) is on the line with us.

NUMAN: Yes. How are you?

CONAN: Good. Thanks.

NUMAN: Yes. I just wanted to find out if Saudi Arabia has been measured, you know, because of the happiness index, and the research include, you know, parts of these regions, you know, the Gulf countries, you know, because, you know, the oil belong to the government and, you know, where Saudi Arabia falls in this equation.

CONAN: Jared Diamond?

DIAMOND: Interesting question. Saudi Arabia, with respect to this question, is about as one would expect. That's to say, incomes in Saudi Arabia, average incomes, have been rising. And so measures of happiness such as life expectancy and survival of children in Saudi Arabia are not up to those in the United States, Europe and Japan, but they're considerably above what they were decades ago when they're considerably above what they are in African countries.

A downside is that precisely because Saudi Arabia has been getting relatively affluent, people have changed their eating habits and are acquiring, at a rush, diseases of the Western world. So that, for example, some of the highest rates of diabetes in the world now are in Saudi Arabia and neighboring countries, precisely because with rising affluence, people have access to more food, but the understanding of the importance of healthy habits has not yet caught up.

CONAN: Numan, thanks very much for the call. Appreciate it.

NUMAN: You're welcome. Thank you.

CONAN: And I wanted to end, Jared Diamond, by asking you about another piece you wrote, "Three Reasons for Japan's - Why Japan's Economic Pain Is Getting Worse." And there are three of them: low marriage rates, very low birth rates. There are the demographic, the aging of the population and the decline to welcome immigrants in a very homogenous society. And there is also, you discussed, the future of Japan, which seems to have a stultified - it is, of course, one of the richest countries in the world, but a stultified political system.

DIAMOND: Yeah. Japan is a country that really interests me. I have Japanese - my wife has Japanese relatives. I visited Japan. And Japanese today are even more concerned, with good reason, about the future of their country than are we Americans. Japan has the highest ratio of government debt to national product, national economic product of any major country, it's much higher debt than even Greece or Spain or Italy.

And that's, for fundamental reasons - namely that Japan has the lowest birth rate in the world, it has the longest life spans in the world, which means fewer and fewer young workers to support more and more old people - Japan is not adopting the European or American solution to those problems of welcoming immigrants to make up for a low birth rate.

And then Japan is continuing with its centuries-old policy of trying to assert its access to the world's resources without realizing, now, that everybody is grabbing for the same pile - same pie of the world's resources. And you can't just grab. You have to manage resources.

And so, paradoxically, although the Japanese just love tuna and sushi - and particularly tuna from the Mediterranean - you would think that the Japanese would be the country most concerned with preserving Mediterranean tuna stocks. But, in fact, Japan's government considered it a triumph that a year ago they defeated a resolution to help preserve Mediterranean tuna stocks. So Japan is a really interesting country and a problem for the future.

CONAN: And has turned off all of its nuclear reactors for reasons we can all understand, but nevertheless now finds itself importing all of its energy needs again.

DIAMOND: Exactly. If you turn off your nuclear reactors, you still need energy somewhere. And yes, nuclear reactors have terrible problems, but burning coal also has guaranteed terrible problems. Where at least with nuclear reactors, if like the French, are ultra careful, the French haven't had any trouble with their nuclear reactors for the last 40, 50 years.

CONAN: Jared Diamond, as always, thanks very much for your time today. We appreciate it.

DIAMOND: You are welcome.

CONAN: Jared Diamond, a professor of geography and physiology at UCLA. He joined us from his home in Los Angeles, which he describes as beautiful. We were talking about a piece he wrote for the New York Review of Books, reviewing Daron Acemoglu and James L. Robinson's book "Why Nations Fail." Stay with us. When we come back, Tom Gjelten on the CIA and what it's learned after the weapons of mass destruction debacle. This is NPR News. Transcript provided by NPR, Copyright National Public Radio.

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