Why Do The Poor Countries Always Stay So Poor?

It’s now more than sixty years since the independence movement in the late 1950s and early 1960s transformed nearly all of sub-Saharan Africa into independent countries. Hopes soared for a new era of progress and prosperity. But six plus decades on, with essentially no exceptions (maybe Botswana?), the 49 countries of sub-Saharan Africa are about as poor as ever.

The New York Times treats the subject in a big piece by Patricia Cohen a few days ago on September 18. Sorry if this is behind their paywall, but I subscribe to this stuff so that you don’t have to. In the treatment at the Times, this is just a case of the sad cruelty of nature, an extreme instance of “bad luck.” But we can learn a good deal about the true source of the bad luck by looking at clues that Ms. Cohen and the Times inadvertently drop in the course of their reporting, without even noticing that they are doing it.

The funny thing about the bad luck of sub-Saharan Africa is that it seems to afflict all 49 countries at the same time, even as elsewhere in the world at least a few countries (South Korea, Taiwan, Thailand) are able to find the magic recipe to rise out of poverty.

This week’s piece in the Times focuses particularly on the country of Ghana. The headline is “Crisis and Bailout: The Tortuous Cycle Stalking Nations in Debt.” The sub-headline is “The government of Ghana is essentially bankrupt, and has turned to the International Monetary Fund for its 17th financial rescue since 1957.” Seventeen financial bailouts in 66 years since 1957 would be more than one bailout every four years.

In Ms. Cohen’s reporting, the “tortuous cycle” of debt is just an inevitable fact of life for poor nations, one that somehow persists despite the best efforts of the very best and cleverest people. A few excerpts:

The government is essentially bankrupt. After defaulting on billions of dollars owed to foreign lenders in December, the administration of President Nana Akufo-Addo had no choice but to agree to a $3 billion loan from the lender of last resort, the International Monetary Fund. It was the 17th time Ghana has been compelled to turn to the fund since it gained independence in 1957. This latest crisis was partly prompted by the havoc of the coronavirus pandemic, Russia’s invasion of Ukraine, and higher food and fuel prices. But the tortuous cycle of crisis and bailout has plagued dozens of poor and middle-income countries throughout Africa, Latin America and Asia for decades.

The piece proceeds with heart-rending stories of Ghanaians seeing their lives up-ended as the currency collapses and the government defaults on its debts. For starters, here is the situation at a big construction project of an amusement park in the capital of Accra:

Emmanuel Cherry, the chief executive of an association of Ghanaian construction companies, sat in a cafe at the edge of Accra Children’s Park, near the derelict Ferris wheel and kiddie train, as he tallied up how much money government entities owe thousands of contractors. Before interest, he said, the back payments add up to 15 billion cedis, roughly $1.3 billion. “Most of the contractors are home,” Mr. Cherry said. Their workers have been laid off. Like many others in this West African country, the contractors have to wait in line for their money.

It’s a very sad story for the thousands of contractors who have done major work and are going unpaid. But wait a minute! The government is constructing an amusement park? And taking on upwards of a billion dollars of public debt to do it? Moreover, the full cost of the project must be well more than the $1.3 billion, since that is just the amount of unpaid bills currently outstanding. How could government financing of this project possibly make sense in an impoverished sub-Saharan country where the people lack for basic things like food, housing and electricity?

I would say it is completely obvious that no government should be in the business of financing and building amusement parks. Here in the U.S., I’m sure that a Disney or a Universal can hit up Florida or California for some tax breaks or other baksheesh from time to time for their big parks. But financing the whole thing with central government bonds? That’s ridiculous. And yet somehow Ms. Cohen and the Times don’t notice anything out of line.

As Ghana’s foreign reserves skidded toward zero, the government began paying for refined oil imports directly with gold bought by the central bank.

OK, why is the government paying for refined oil imports? Does the U.S. government pay for the imports of oil products into the U.S.? Maybe yes for a tiny percentage, perhaps for an overseas military base; but almost entirely, oil imports into (or exports out of) the U.S. are done by private parties. Again, Ms. Cohen and the Times don’t evidence any awareness that government pre-emption of such an economic sector can come to no good.

Obviously the government is way too involved in what should be private sector businesses, running up debts for uneconomic endeavors and then inevitably defaulting when the government lacks the ability (as all governments do) to run the businesses profitably.

So Ghana is falling back into the suffocating embrace of the IMF for the 17th time since independence. After all, as the Times says, they have “no choice.” And we all know what is the universal prescription of the IMF for impoverished countries: more government spending and higher taxes.

How could that possibly make sense? If you don’t immediately grasp the logic, you need an education in IMF-speak. I had a post back on June 19, 2017 covering this subject. The title was “The Important Work Of International Agencies: Keeping The Poor Poor.” That post highlighted a quote from then IMF head Christine Lagarde as to how higher taxes and higher government spending are the magic elixir for alleviating poverty. Note Ms. Lagarde’s weird bureaucratic terminology:

[W]e are here to discuss an equally powerful tool for global growth — domestic resource mobilization. . . . [T]axes, and the improvement of tax systems, can boost development in incredible ways. . . . So today, allow me first to explain the IMF’s commitment to capacity development and second, to outline strategies governments can use to generate stable sources of revenue…

“Domestic resource mobilization” — that’s IMF babble for higher taxes and higher government spending. After all, you need to get the resources out of the hands of the layabout private citizens and into the hands of the brilliant government bureaucrats to make sure that they are “mobilized” appropriately. Multiple decades of this, and every one of the 49 sub-Saharan countries remains poor.

Meanwhile, Ms. Lagarde has failed upward to become the head of the European Central Bank. Her replacement at the IMF, Kristalina Georgieva, has not changed anything as far as I can discern. After all, if poor countries did not default regularly, and need bailouts, what would the functionaries at the IMF do?

I would not expect the “tortuous cycle” of debt and poverty for Ghana, or for other poor countries, to change any time soon. Too many well-paid people at international bureaucracies have a vested interest in keeping the game going just as it is.

Thanks for your post. You aroused my curiosity on the different ways that the term "socialism" is applied.

But I want to raise questions about the the Heritage Foundation report, The 2023 Index of Economic Freedom, which ranks countries on the basis of "economic freedom".

One trouble with such sweeping global analyses is that international data sets are spotty at best. Plus judgement calls need to be made, but the study's analysts don't fully reveal the assumptions of their research. Plus the experts chosen to oversee such studies may come from "elite" academic institutions like Harvard.

And 27 years ago, this Report was originally produced by the Wall Street Journal, the bastion of America's big business interests, before the Heritage Foundation continued its annual publication.

To me, these are warning signs that there's room for a secret elite- and big-business-approved agenda in such a report.

To cite one example, the 2023 report says the quality of Labor Freedom in the United States has gone up since the last report.

And the report's methodology says the level of Labor Freedom is determined by nine factors (equally weighted) such as: Minimum Wage, Labor Participation, and Labor Productivity.

But the analysis of Labor Freedom absolutely fails to mention the crisis on the Mexican border. Millions of low income illegals are crossing the border and competing for jobs against American citizens.

Indeed, the word "immigration" appears nowhere in the Methodology? Why? I suspect because the authors are hiding its impact on America's "Economic Freedom" because big business wants illegals coming in to lower their labor losses.

But who can set the record straight? We know that Fox news, despite a few MAGA supporters among its commentators, is RINO country and worse.

So this is why independent voices like FR and commentators like Tucker Carlson and Richard Baris of the People's Pundit are so valuable to America's future.

NOTE: To understand the damage big business has wrought on American labor and local taxpayers over the decades, I suggest the book, The Great American Jobs Scam.

The full contents of each chapter in the book can be downloaded at the link provided above. For a quick view of the book, read the Foreword or the book's first chapter.

Why Do The Poor Countries Always Stay So Poor?

I can answer that question very easily.....corruption and theft.

Is anyone paying attention to what is happening in Western Africa? Burkina Faso, Niger, Mali? They just formed a security alliance. They are tired of foreign countries stripping their countries of any wealth they might have via minerals, precious metals, oil, etc.

Take Captain Ibrahim Traore of Burkina Faso. Listen to some of the speeches he’s made and what he wants for his country and its people. They’re tired of entities like the US Dept of State or whatever the French version of it is and their puppet master corporations coming in, making a ridiculous deal with corrupt government leadership, only to see the country be devastated.

Take the Congo. They have all the metal for EVs, do they not? Yet they’re still eating dirt. Why? The DRC could have the EV world eating out of its hand and could raise that country out of the poverty it’s in, but they choose not to. The leadership and select few are stuffing bank accounts in Dubai or Western Europe, the Chinese and Muck are raping the country, and when things turn, the leadership will be on a plane out of there, where they will live in luxury, while their country still eats dirt.

South Africa....that place is being absolutely raped by the current government. And now, guys like Malema are gaining even more traction as things get worse and worse.

I said IQ by itself isn’t a good predictor. IQ is actually the best single predictor we have in the social sciences (not counting a person’s credit score; but that is an index of many underlying bits of information). But, by itself, IQ has low predictive power. Repeating myself, you want to use IQ in conjunction with something like conscientiousness to have a decent ability to predict. Alternately, use SAT and high school GPA in college admissions. The first measures potential and the second effort. You kind of disagree. Would you say what is the predictive power of IQ by itself.

Your argument accords nicely with the World Bank’s argument. It says there are two main causes of poor nations: (1) corruption and the lack of the rule of law (what you say); and, (2) the deficits of highly advanced nations that diverts the savings of mankind from financing economic development.

I would add a third (or maybe expand on our understanding of corruption and the lack of the rule of law): (3) war and other forms of civil strife. In recent years, all the countries that have fallen from middle to low income have been involved in some kind of war. Off hand, I can think of Syria, Sudan and Yemen.

We are now down to 28 or so low income countries, and they are all eff’ed up countries. Many with foreign armies. You are absolutely rights about South Africa. It is fast going in the wrong direction. Also, Venezuela.

It is understandable that populists wouldn’t like the index of economic freedom as the index positively weights free trade. The problem for populists is that the free trade component of the index is positively correlated with standards of living and with rate of economic growth, either by itself or in a multi-factor analysis that includes the other components.

Hey, how did that Hawley-Smoot tariff turn out?

https://www.google.com/search?client=firefox-b-1-d&q=ferris+bueller+boring+professor#fpstate=ive&vld=cid:206806ad,vid:uhiCFdWeQfA,st:0

The first measures potential and the second effort. You kind of disagree. Would you say what is the predictive power of IQ by itself.

No. I'm not so sure I disagree. Maybe somewhat agnostic on your other factors is a better description.

My point is in reference to the book and the conclusion they reached that there was a direct correlation between IQ and what I call societal achievements. The factors you mention were not addressed in the book, as best I recall.

While I fully agree that the factors you mention play a significant role, I have never seen a source that measures them across all societies. That's not to say they don't exist -- only that they are not broadly measured (e.g. SAT is used in less than half the countries in the world).

So, in my mind, I fall back to the book that concludes that there is a direct correlation between IQ and a society's achievements -- which makes it a predictor. To me, anecdotally this is relatively easy to confirm.

You are demanding. Here’s a cross-cultural study of IQ and personality. It finds that the two explain 70 percent of the variation in GDP per capita across countries.

https://www.sciencedirect.com/science/article/pii/S0160289612001286?casa_token=6p5yrb64-00AAAAA:_63b774YWByiItdWC4LAcCI0JePoG5ZVnUq1kULNdZJPYQWVDa-BHz4aOsaMqPTiq33fmRLVcg

Now, I am going to ask you a logical question:

Let’s say the elite schools admit students on the basis of SAT and high school GPA, both. Then, the mezzanine schools admit student on the same basis, both SAT and high school GPA, from the students not selected by the elite schools.

What do you think is the predictive power of IQ alone in the remaining students, those not accepted by either the elite or mezzanine schools? Basically, high IQ and low GPA students?

Why are you so resistant to the obvious fact that high potential and low effort = loser. In a sense, we might suspect a more culpable loser since they have the potential. But, more often than not, upon investigation you find that there are reasons for their lack of effort, such as personality disorders, addictive disorders, and trauma.

Some schools think they can turn such students (high potential, low effort) around; at least, they’re willing to try if parents or some other third party is willing to pay enough money.

It’s funny, how these things work out. Sometimes we call it the price of genius. Indeed, that some among the most gifted are in some ways dysfunctional is a trope. But, the correlations between IQ and many aspects of personality are simply random. You’re as likely to be pretty and smart; and, pretty and not smart. But, people are fixated on Albert Einstein and Marilyn Monroe.

Getting back to the topic, are race gaps in IQ genetic, Charles Murray in 2012 used the results of the NAEP to track races gaps. Back then, he saw that the race gap was falling among 4th graders in math. Updating his observation, the gap was 15 percent back in 1990; and was 10 percent in 2019 (I’m avoiding the 2022 figures because of the significant decline). This correlates with my argument that the race gap in IQ is declining and, therefore, cannot be genetic. It’s a result of welfarism.

You are demanding.

That is not my intent.

We seem to be talking past one another.

Here is my point again. The message from the Bell Curve was that there is a correlation between IQ and societal achievements. I don't dispute your other points.

While I certainly do not dispute the other considerations, all of your sources seem to point to measurements across less than half the world. I used an example of the SAT in my last comment. Do they use SAT in most African countries or even China? The last source you quoted was from 51 countries, which represents about 25% of the countries in the world.

My point is that the book uses one measure, IQ. And it shows a correlation. That's all.

In other words, while I agree the points you raised are valid and will improve the accuracy of prediction, there is no consistent measurement of them across 195 nations in the world. The Bell Curve did not measure those issues and was able to make a reasonable prediction with IQ alone.

They are tired of foreign countries stripping their countries of any wealth they might have via minerals, precious metals, oil, etc.

These countries are stripped of their wealth bacause their governments are corrupt... filled with people like Bob Menendez, Hunter, Kerry, and Joe Biden...

People willing to sell out their countries to line their own pockets. No one is forcing these poor countries to create thugs, goons, secret police and criminal politicians. We can't look down on them anymore since that's the direction democrats and their ' intelligence' filth are taking us...

This correlates with my argument that the race gap in IQ is declining and, therefore, cannot be genetic. It’s a result of welfarism.

While I certainly don't disagree with most of your points, I would take issue with this point.

There are many factors that shape genetics. One of those is natural selection, which is a significant contributor.

Take the Ashkenazi Jews (just one example), who have been a persecuted ethnic group for much of history as we know it. They were challenged for the survival of their group early on in history (and continue to be challenged by the world), they became the so-called bookkeepers for merchants using Roman numerals to do their math (later to become merchants on their own), etc. So, through environmental factors and natural selection, they became more intelligent (a genetic trait). Yes. Environmental conditions such as their society, culture, cohesion, and focus on education are significant contributors, but genetics play a major role.

By the way, I am not Jewish but a lowly Anglo. But I so admire some of their traits/success.

You have me surrounded. First, you say effort doesn’t matter, only IQ. Now you say taking effort into account isn’t enough. I surrender. You win.

My friend. Sorry you feel that way.

The comments I made were simply to clarify my thoughts -- not attack yours.

I'm not trying to win anything, only to confirm the facts of the book, the Bell Curve -- which, to me, is truly a brave and well-documented tome that effectively and accurately proves its theory.

Anyway, I'm through.

Good luck to you.

PS - I appreciate and respect your comments.

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