Naked Economics: Undressing the Dismal Science pdfdrive com

The wealth and poverty of nations
L
et us briefly contemplate the life of Nashon Zimba, a twenty-five-year-old
man who lives with his wife and baby daughter in Malawi. There is no question
that Mr. Zimba is a hardworking man. He built his own home, as The Economist
describes:
He digs up mud, shapes it into cuboids and then dries it in the sun to
make bricks. He mixes his own cement, also from mud. He cuts branches
to make beams, and thatches the roof with sisal or grass. His only
industrial input is the metal blade on his axe. Working on his own, while
at the same time growing food for his family, Mr. Zimba has erected a
house that is dark, cramped, cold in the winter, steamy in summer and
has running water only when tropical storms come through the roof.
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For all that work, Mr. Zimba is a poor man. His cash income in 2000 was
roughly $40. He is hardly alone. Malawian GDP per capita was less than $200 at
the time that story was written. Even today, the nation’s entire annual economic
output is only about $22.5 billion—or about two-thirds the size of Vermont’s
economy. Lest anyone naively believe that there is something pleasantly simple
about this existence, it should be pointed out that 17 percent of young children in
Malawi are malnourished; children in Malawi are eighteen times more likely to
die before their fifth birthday than children in Sweden.
According to the UN’s Food and Agriculture Organization, there are 815
million people in the world who don’t get enough to eat. The vast majority are in

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the developing world. How is that possible? At a time when we can split the
atom, land on the moon, and decode the human genome, why do 767 million
people live on less than $1.90 a day?
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The short answer is that their economies have failed them. At bottom,
creating wealth is a process of taking inputs, including human talent, and
producing things of value. Poor economies are not organized to do that. In his
excellent book on economic development, The Elusive Quest for Growth, World
Bank economist William Easterly describes a street scene in Lahore, Pakistan:
People throng the markets in the old city, where the lanes are so narrow
that the crowds swallow the car. People buying, people selling, people
eating, people cooking. Every street, every lane crammed with shops,
each shop crammed with people. This is a private economy with a lot of
dynamism.
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It is also, he notes, a country that is largely illiterate, ill housed, and ill fed. The
Pakistani government has built nuclear weapons but is unable to conduct an
immunization program against measles. “Wonderful people,” writes Mr.
Easterly. “Terrible government.” And it is a terrible government that has become
increasingly dangerous for the rest of the world. We can (probably) safely ignore
Malawi. Not Pakistan.
Every country has resources, if only the wits and hard work of the people
who inhabit it. Most countries, including some of the poorest nations on earth,
have far more resources than that. There is good news on the global poverty
front. One of the Millennium Development Goals promulgated by the United
Nations in 2000 was to cut the proportion of the world’s population living in
poverty by half before 2015; that target was hit in 2010—five years early. The
world has become significantly less poor, both the proportion of the global
population living in poverty and the absolute number of poor people, in large