Why Are Third World Countries So Poor?

I would like to start this topic with the following premise: there is no reason that the whole world cannot be as prosperous as the United States, and, there is no limit to the potential economic growth of the United States. The human population of our planet (currently at about 7.5 billion) is minuscule compared to its capacity, not only to sustain life, but to allow for every human on this earth to live a life in comfort and good health. But unfortunately, in many parts of the world we have squandered our natural resources and governments have used political and military force to subjugate the many while enriching the few.

The Modern Third World

In the 1970’s and 1980’s more than 90% of economic aid to the third world went to massive power plants; however, in many cases there was no fuel to run the power plants and except for roads, there was no infrastructure, no skilled labor or qualified management, no replacement equipment or spare parts if something broke down, and even if there had been, there was no maintenance personnel to fix the problems. Aid agencies were also clueless as to the international market niches that could be supplied by the products of third world countries. How then, could these economic weaklings develop into western-style industrial behemoths?

The simple answer is that we didn’t want the industrial competition or cheap labor that was and is abundant in the third world. What we wanted was compliant non-communist countries that wouldn’t nationalize their natural resources and would vote as desired by the U.S. when it came to the United Nations. Therefore, while our political leaders preached the ideals of democracy, our espionage agencies were instructed to topple democratically elected communist leaders in favor of authoritarian military thugs who could be bought with American dollars. In return, we were assured of cheap raw materials and agricultural products. The result was continued third world poverty, repression and subjugation. We replaced colonialism with an equally brutal neocolonialism that continues to exist today. And, unfortunately, those countries that did turn communist were often ruled by a different set of military thugs. Congo, Ethiopia, Mozambique, North Korea, Venezuela and Cuba are some current examples.

What the West failed to realize, however, was that in Sub-Saharan Africa alone, there is a population of almost one billion people. That means one billion potential new consumers with purchasing power. Just imagine the export opportunities for the United States. Not to mention the increased standard of living and quality of life for the African people.

Why Power Plants?

In some cases, they were needed to more efficiently extract, process and ship natural resources, as in the colonial era. In other cases, they were desired by the country’s elites in order to have modern conveniences. But in most cases, they were simply a way to funnel billions of dollars to big United States-based (and politically connected) construction, engineering, and consulting firms. The process worked sort of like this: consulting firms would send teams of economists to third world countries. The purpose was to evaluate the long-term economic benefits to various countries of building hydroelectric plants. The economists would write reports that were intended to sell the idea to the World Bank of loaning billions of dollars to third world dictators, who cared very little about economic development, but cared very deeply about billions of dollars. The reports were very detailed and accurate in describing a country’s current situation and the estimated costs of building a proposed power plant — but when estimating the economic impact of the investment and true benefits to the people, the reports were entirely self-serving and fictitious (Perkins, John, 2004 Confessions of an Economic Hit Man, 2006, Plume, a member of Penguin Group (USA), Inc.)

By 1994, third world debt was approximately $1.2 trillion, with interest accruing at $50 billion every year. Today, that debt has been cut in half, but is still economically crushing. Instead of raising overall standards of living, the money went to increase the wealth of third world elites, and to build hydroelectric plants that were never intended to power industrial awakenings. Instead of repaying the debt from business expansion, countries were forced to pay creditors by stripping and selling-off their natural resources.

What About International Aid?

Contrary to popular opinion, charity inhibits economic growth. First, if someone is willing to give you something for free, why work? Second, if you ship tons of free clothes, then local textile mills will never need to exist. Third, if you ship tons of free food, local farmers will go out of business. Finally, when the foreign aid ceases or is delayed, those in dependency will starve. Relief agencies are important as stop gap and emergency measures to provide food, medical attention and other necessities, however, much of the third world has become permanently dependent on the 3.7 million Non-Government Organizations (NGO’s) that control trillions of dollars from governments and other donors. What third world countries need is to be economically, politically and socially unshackled from the chains of oppression and war.

In the new millennia, reforms have been made, but the centuries of colonialism, neocolonialism, repression and subjugation have left an open wound on the third world that has not healed.

In the book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Daron Acemoglu and James A. Robinson argue that nations and their inhabitants are poor because for centuries they have been forced to survive under oppressive government regimes. They are not poor due to climate, geography, or innate human characteristics that are different from people in richer nations.

Human Nature

Every human on this planet shares a common ancestor. We are so closely related genetically that if we were dogs, we would all be the same breed. (Races are not even recognized as biologically valid entities.) In fact, scientists have now concluded that the DNA inherent in every human on earth is approximately 99.5% identical and that most of the variation is from humans within their respective populations! Therefore, while we are all members of the human race, we are also divided into several distinct racial groups, and within each race are sub-groups. Then of course each individual has inherited from his or her parents their own personalized genetic characteristics. That being said, the differences in culture, religion, language, and values are far more significant than the genetics of race or ethnicity. For example, a baby adopted from Korea by American parents will, as a teenager, behave and sound like every other average American teenager. On the other hand, the same Korean baby if raised in Korea will, as a teenager, behave and sound like every other Korean teenager.

As we mature, our brains are wired to be part of a group, similar to a dog’s brain, which is wired to be part of a pack. Therefore, it is a part of human nature to organize into groups, or what I refer to here as collectives. We can think of collectives as nothing more than extensions of our tribal instincts that developed over the 200 thousand years of our existence as a species. A side effect of this process is a collectivized form of “Ego-centrism.” Meaning that in diverse societies we cling to and trust those who are most similar to ourselves. In other words, those who look like us, sound like us and share the same values, religion and culture. Of course, this doesn’t mean that individuals, families, and other groups can’t and don’t cross racial, religious, or cultural bounds, but it does mean that they must find common threads that bind them together, superseding the differences, whatever they may be.

In spite of the fact that we are all born equal in the eyes of God and nature, our ego/collective-centric tendencies drive illogical feelings of superiority. We feel that our religion, political party, ethnicity, nationality, organizational affiliations, sports teams, sex, sexual orientation, tribes, clans, class, family, values and ideas (I consider all of the above collectives.) are the best, the most-right and the most-valid. And that our needs supersede the needs of others. Our competitive/territorial spirit cause us (at least to attempt) to dominate, convert, defeat, control or in extreme cases destroy competing collectives. Interestingly, we can easily detect these tendencies in others, but are often blind to our own collective/ego-centric inclinations. These factors, plus a quest by some for wealth and power, have caused almost all human struggles and political agendas. It is worthwhile to note that the same tendencies we demonstrate through human nature as individuals are extrapolated to collectives, since they are nothing more than groups of individuals.

The path to world peace and world prosperity is simple. In 1990’s parlance, we all just need to “get over ourselves.” Those in power need to fight their own collective/egocentric tendencies and ask the question what is best, not just for me and my collective, but for society and all humanity?

Of course, the United States is incapable of meeting all the welfare needs of the world and we cannot be responsible for remediating every evil. We should also remember that it is our tax dollars that fund the functionings of the United States government. Therefore, providing for the welfare, security and prosperity of U.S. citizens should be the first priority. With that being said, however, there is still an enormous amount of good that we can do around the world.

So, what role should the United States play in defending and enhancing world peace and in the process, international prosperity? The first is redefining our national interests to those that respect all people’s rights of self-determination instead of politically-based alliances. The second is strengthening international legal, economic and political bodies. The third is the gradual squeezing out of oppressive governments. The fourth is to support international efforts to peacefully fill political vacuums. The fifth is to encourage value-based governments and value-based economic systems to create value-based societies around the world. Finally, all governments need to respect private property, encourage foreign investment, foster entrepreneurship, invest in both infrastructure and education, levy fair and predictable taxes, provide for equal treatment under the law, vigorously engage in foreign trade, and then leave their people alone.

(From the book Greed, Power and Politics, the Dismal History of Economics and the Forgotten Path to Prosperity, by Daniel Cameron)


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