

Ask HN: How do countries get out of poverty? - refrigerator

I know this is very &#x27;off-topic&#x27; but I&#x27;ve tried Googling this and didn&#x27;t manage to make much sense of what was returned.<p>I&#x27;m currently staying in Malawi (one of the poorest countries in the world) for a few weeks and I don&#x27;t understand how the country can improve economically. I&#x27;m hoping there&#x27;s a development economics&#x2F;someone who knows a lot about this stuff who can explain it in simpler terms than Google could.
======
metastart
Study countries like Singapore, Korea. They are countries that in the last 50
years or so were able to escape poverty in just one or two generations. Maybe
even Vietnam or Thailand which I think are not quite in poverty so not nearly
as prosperous as Singapore or Korea.

The education system in both countries is really really intense -- like Korean
kids go to school at 8am and get back home at 9pm!!!

It's very hard to say -- obviously or there wouldn't be poor countries! For
example, there are a lot of attempts to explain China's success versus India.
Indians will blame corruption -- but there's massive corruption in China. Some
observers say that it's China's iron-fisted rule that gets things done that's
driven development instead of India's clunky not-so-effective democracy. But
most observers seem to find and you would expect that democracies tend to have
economically better off populations.

India to some extent has become internationally famous as a hub for software
development -- and it's certainly helped India and positions India
fantastically well for the future as softwares gets more and more important.
But if you look at India's accomplishment to date and the IT industry -- it
looks really pathetic actually!! But that's how you start. India's whole IT
industry is around $100 billion/year in revenues for something like 2.5
million people. IBM does that much in revenues with maybe 400k people or 16%
as many people!! Google does $60 billion/year or 60% of the entire Indian IT
industry with something like 3% as many people...so Google is like 20x more
efficient!!! So the Indian IT industry is literally just throwing cheap labor
at problems -- not very creative or intelligent. But anyway, that's how you
start. I wonder if you can go back and look at when China's manufacturing hub
was $100bn/year -- maybe sometime in the 1980s and see how it evolved versus
India's IT industry growth, and also how wages increased. Maybe India can
follow such a trajectory as China did. China now wants to build up IT!

Just a few thoughts, observations!

------
ahi
Ask the World Bank/IMF for advice. Then do the exact opposite.

More seriously, historically it has required a strong industrial policy with
selective and targeted trade barriers / industry support. With poor governance
this is incredibly difficult to pull off without it devolving into
kleptocracy.

Unfortunately, the n for countries that have gone from poverty to OECD level
wealth is very small so history might not be a useful indicator. Frankly, I
think Malawi is probably just screwed. Limited resources, landlocked,
difficult neighbors, extreme ethnic diversity, etc

~~~
refrigerator
I noticed during my Googling that everyone seems to hate WB/IMF - how come?

------
bikamonki
In the same way that you'd get out of poverty: by transforming resources into
products and/or services and selling them. Your resources might be time
(labor), skill/knowledge and capital (land/natural resources), same with
countries. Take into account that many countries are rich (i.e. full of
resources) but can't manage to climb out of poverty due to mental/social
obstacles like corruption, religion, culture, etc. I am not an expert, just my
opinion.

------
yen223
Poor countries need to make strategic long-term investments that will enable
future economic growth, and somehow resist the urge to blow whatever resources
they have on white elephant projects. I'm talking about investing in
infrastructure, healthcare, and education; not in building the world's tallest
tower or golf courses in the desert.

------
known
A nation cannot productively govern no more than 2 million citizens.

Decentralize World into Cantons as in Switzerland
[https://en.m.wikipedia.org/wiki/Cantons_of_switzerland](https://en.m.wikipedia.org/wiki/Cantons_of_switzerland)
which will create more local jobs in the economy.

------
slambam
I think it is energy? I live in Canada and our middle class has the highest
income in the world but we also use the most energy per capita. That's the
simplest, other than entropy, life is about reducing entropy, richer people
spend more money on insurance. Civilization tries to reduce surprises for its
citizens.

------
known
To Curb Global Poverty Every 3rd World Currency Should Be Pegged To OPEC Oil
For 4 Years

------
massappeal
This is a very complex question; I'll see if I can help.

Before I begin though, let me just say that you could take an entire undergrad
and postgrad course on the economic, social and political development of
Africa, because non-African nations have almost as much to do with the current
state of Africa as the African nations.

Let's start by addressing why some countries are poor. There are many reasons
some countries are poorer than others, and I would hate to over-generalize,
but I'm going to. Access to International Trade, having resources worth
trading Internationally for, the domestic resources available to develop a
valuable workforce and a stable and effective form of governance.

Generally speaking.

Malawi for instance. Even if it had some tremendous resource it could sell in
International markets, there aren't any regional buyers to pay for the
development of further infrastructure. It doesn't have direct access to major
trading centers and routes. If it wanted to develop a workforce to export
something of value that wasn't dug up from the ground, it would need
investment in order to pay for the education, infrastructure, etc. And that
gets us into foreign aid and development banks, but we're just going to avoid
that for now.

But even if it had all of that, the purchasing power of International markets
greatly effect the International distribution of wealth.

Great example: The U.S. is one of the top oil-producing countries in the
world. Despite this, we continue to import almost all of our oil. Why is this?
Because American energy companies make more money by selling our oil
internationally than they would domestically, so they do, and we end up buying
cheaper oil from somewhere else.

Even if Malawi was swimming in some resource, maintaining domestic ownership
of said resources and making it cheap enough to compete with countries that
heavily subsidize certain industries can make it impossible to repeat.

Another great example of this: NAFTA.

The North American Free Trade Agreement is a FTA between Canada, U.S. and
Mexico. We promised Mexico that by enacting this agreement, American companies
would move all their factories from Asia to Mexico, employing millions. What
happened though was that even after NAFTA, it was still cheaper for us to
manufacture in Asia. But what the U.S. and Canada got in exchange for the
"promise" was the removal of import tariffs on Financial Capital and Corn,
among other things. As it happens, the U.S. subsidizes the Corn industry here
to the tune of $9-12b per year.

As a result, it became cheaper for Mexico to import Corn from the U.S. than it
was to buy domestically. And in case you don't know this, Corn ("maize") is a
huge staple of Mexican agriculture. They make everything out of corn. So now,
all of a sudden, Mexico has millions and millions of unemployed farmers. Who
do you think has been rushing to the American borders all these years?

On top of that, by allowing us to freely invest in Mexican companies without
tariffs, American banks purchased controlling interests in almost all of
Mexico's highest-grossing companies. So anytime a Mexican company makes money,
the revenue flows back to NYC, rather than back into Mexico.

I tried to keep that simple and direct. I'm sure I missed some details on a
lot of that, so please correct where I erred.

Hope this helped!

