POLS 373 Foundations of Comparative Politics

POLS 373 Foundations of Comparative Politics
Lecture: Why are Poor Countries Poor? October 31-November 7, 2006

Why are Poor Countries Poor?
“Theorizing” about poverty Let’s consider four basic explanations of poverty. As you read each one, think carefully about which, if any, you find most compelling. Which do you think provides the “best” explanation? Which is the least compelling? Why?

STATEMENT #1 Individuals or individual countries (communities, societies, etc.) are primarily responsible for their own economic fates. If a person works hard, saves money, invests wisely, has a decent education, and so on, he or she can achieve economic success; and what is true for the individual, is true for the larger group and for whole countries. In short, the only significant barrier to success to economic prosperity is the failure to do the “right” things.

STATEMENT #2 In poor societies, people have “learned” and internalized habits, attitudes, and practices that keep them poor. These attributes, it is important to understand, are usually a reaction to larger social, political, and economic conditions--conditions that impose poverty on certain groups through no fault of their own. However, even if these conditions change, poor people may remain poor. They may continue to behave in a way that keeps them poor, generation after generation. In such cases, we may say that a “culture of poverty” exists.

STATEMENT #3 Because of the way the economic system is organized, there will always be rich and poor people in the world. However, the reason for this division is not because the poor have less talent, less motivation, or a lesser desire to work hard, but because the economic system is inherently exploitative. In other words, the rich are rich precisely because there are a lot of poor people; the wealth of the rich, in fact, depends on the poverty of the poor. This relationship, unfortunately, cannot be changed unless the system itself is destroyed.

STATEMENT #4 A major source of poverty and inequality lies in predictable human behavior. In poor, under-industrialized countries, for example, it makes sense for the poorest and the least educated to have a lot of children, because more children means greater economic security for the parents. This rational behavior on the part of parents, however, means that they cannot invest as much in each child’s education and on each child’s health and nutritional needs. This creates a new generation in which the number of unskilled, uneducated people grows faster than skilled, educated workers. This brings down wages for the former group and perpetuates— unintentionally—the cycle of poverty.

SUMMARY OF EXPLANATIONS Statement #1: Poverty is a result of not doing the “right things” Statement #2: Poverty is a product of learned and internalized behavior, which creates a “culture of poverty” Statement #3: The wealth of some depends on the poverty of many Statement #4: Poverty is the unintended consequences of rational actions among poor people in poor societies

Some Facts and Figures on Poverty A quarter of the world’s population, 1.3 billion people, live in severe poverty (less than $1 a day in PPP term) 2.8 billion people--almost half the world’s population--live on less than $2 per day (in PPP terms) Nearly 800 million people do not get enough food, and about 500 million people are chronically malnourished. More than a third of children are malnourished In industrial countries more than 100 million people live below the poverty line, more than 5 million people are homeless and 37 million are jobless. In developing countries 160 million pre-school children are underweight 1.2 billion people live without access to safe drinking water.

Some Facts and Figures on Poverty The net wealth of the 10 richest billionaires is $133 billion, more than 1.5 times the total national income of all the least developed countries combined. In 1960, the 20% of the world’s people in the richest countries had 30 times the income of the poorest 20% — in 1997, 74 times as much. A few hundred millionaires now own as much wealth as the world’s poorest 2.5 billion people combined. The poorer the country, the more likely it is that debt repayments are being extracted directly from people who neither contracted the loans nor received any of the money. The developing world now spends $13 on debt repayment for every $1 it receives in grants

Some Facts and Figures on Poverty For more facts and figures on world poverty, see “The Causes of Poverty: Poverty Facts and Stats.” Available at:

Poverty: A Definition Poverty can be defined in many ways. Here’s one definition offered by the World Bank: Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not having a job, is fear for the future, living one day at a time. Poverty is losing a child to illness brought about by unclean water. Poverty is powerlessness, lack of representation and freedom …. Most often, poverty is a situation people want to escape. So poverty is a call to action -- for the poor and the wealthy alike -- a call to change the world so that many more may have enough to eat, adequate shelter, access to education and health, protection from violence, and a voice in what happens in their communities

Poverty: A Definition World Bank’s definition of poverty sounds good, but there are some problems, at least from the standpoint of social scientific analysis. What are these problems?

Poverty: Definitional Issues Basic “problem” stems from the inability to accurately measure certain aspects of the World Bank’s definition: How does one measure “powerlessness” or “fear for the future”? Because some concepts are difficult to measure, as with most institutions and scholars concerned with national and global poverty, the World Bank relies on basic economic indicators to measure poverty, the most important of which is the percentage of people living on less than $1 or $2 per day (adjusted to account for differences in purchasing power parity, or PPP, across countries). While imperfect, such statistics provide a reasonable sense of the seriousness and scope of “poverty” in the world. More to the point, such statistics provide a way to specify or operationalize the key subject—or dependent variable—around which this chapter is organized.

Rational Choice Perspective Starting Assumption: People don't choose to be poor … … and yet, there’s a lot of poverty in the world

Rational Choice Perspective If people don’t choose to be poor, then why are there so many poor people? Isn’t poverty a fundamentally irrational outcome for both the individual and society?

Rational Choice Perspective Before answering the questions, let’s consider one more basic observation: The route to economic prosperity is not at all mysterious--i.e., countries, leaders, people know, in a general sense what is necessary to achieve national prosperity. In short, they know what they need to do, yet they still don’t or can’t do it.

Rational Choice Perspective Given all these basic observations, rational choice theorists want to tell us why people, countries, and leaders continue to behave in ways that keep them poor. One (very basic) argument: Poverty is the result of decisions made by people who, while acting in an individually intentional and rational manner, generate an unintended and socially irrational outcome at a collective level.

Rational Choice Perspective To this basic argument, we can add the closely related claim that … poor countries are poor because they are unable to overcome the problem of creating the public or collective goods needed to make development on a national scale possible.

Rational Choice Perspective The first part of the rational choice argument suggests that people in poor countries are subject to important __________________ on their behavior. Answer: constraints

Rational Choice Perspective Discussion Question: What are some constraints (or obstacles) that poor people face in poor countries?

Rational Choice Perspective Taking constraints into consideration allows us to explain why some individuals and some countries may end up doing things that tend to perpetuate their poverty.

Rational Choice Perspective Consider what one writer has to say: “For good reasons, the poor and the less educated tend to have more children. As is to be expected in these poor households, spending per child on nutrition, health, and education declines with the number of children. Less spending on the children of the poor creates a new generation in which the number of unskilled workers grows faster than skilled workers, bringing down wages for the former and thus perpetuating the cycle. In societies with high population growth (Africa, for example), the education levels of mothers are a major determinant of fertility rates. As poorly educated mothers have many more children than their well-educated sisters, the cycle of high fertility and poor opportunities for their children continues, helping perpetuate inequality in their societies.”

Rational Choice Perspective Another example from the book on how individually rational behavior can lead to collectively irrational outcomes: the practice of scattering plots Small agricultural plots in Vietnam. Looks romantic, but small-plot farming is inefficient and labor intensive. Vietmam has 10.5 million household farms and as many as 75 million small agricultural plots of land. By contrast, New Mexico, which is rough the same size as Vietnam, has only 15,000 farms in total.

Rational Choice Perspective: Scattering Plots

Rational Choice Perspective To repeat key point: Individual farmers are acting rationally, but, at the collective level, the outcome is irrational in that farming is far less productive than it otherwise could be This is a very simple, but also very important insight that rational choice analysis offers us

Rational Choice Perspective Returning to earlier point: Poor countries are poor because they are unable to overcome the problem of creating the public or collective goods needed to make development on a national scale possible. To understand this point, we need to begin by answering a basic question: What is a collective good?

Rational Choice Perspective Definition of collective good: Any good that, once created, is available to everyone, regardless of their individual contribution Examples: National security and domestic security are collective or public goods; street lighting, clean air, roads (in general), are also collective goods Certain infrastructural projects can also be considered collective goods: a national system of railroads, a port system, a communications system and power grid, dams, an interstate highway system, and the like

Rational Choice Perspective Discussion Question: Why are collective goods relevant to the question of national poverty?

Rational Choice Perspective Discussion Question: So, if public goods--e.g., a strong infrastructure--are so important, what’s the problem? Why don’t poor countries invest in public goods?

Rational Choice Perspective The “Free Rider” Problem Military service represents a good example of the free rider problem in practice: in a volunteer army, it is difficult to recruit individuals because most people prefer to free ride on the duty of others. After all, why should I risk death or injury, if someone else will do it for me?

Rational Choice Perspective The Free Rider Problem: Basic Explanation Individuals will seek to free-ride on the efforts and contributions of others whenever they believe they can “consume” the public good without contributing to the costs of its formation. This happens everywhere, but in poor societies, the free rider problem can be a particularly debilitating and pervasive issue. Why?

Rational Choice Perspective Answer: The lack of an organization that essentially force individuals to contribute to the creation of public goods. Practically speaking, this means the lack of effective state The logic here is simple: States are the preeminent public institution; as such, they have alone have the capacity to secure the greater contribution to the formation of public goods—in large part, because states can make, implement, and enforce laws either universally or selectively To put it simply, states can force citizens to contribute

Rational Choice Perspective Thus, to answer the question--“Why are poor countries poor?”--we might say that they are poor because they lack an effective state

Rational Choice Perspective Discussion Question: Is there a problem with the argument that poor countries are poor because they lack an effective state?

Rational Choice Perspective States are often the problem, not the solution

Rational Choice Perspective What is the rational choice response? Basic answer: In general, rational choice scholars agree that states are more often the problem than the solution. This is because those who control the state may face a severe disincentive to engage in socially beneficial goals. In short, rational choice recognizes that corruption is rational.

Rational Choice Perspective Evidence on the Significance of Corruption: A Report on Africa “Corruption is one of the main reasons Africa is so deeply in debt and poverty, and famine and deaths are increasing, Adama Dieng, a governance expert for the African Union (AU), said in the Ethiopian capital Addis Ababa yesterday. A direct consequence of this is the emergence of a small, young class of billionaires while the vast majority of the population is wallowing in misery.” Africa's foreign debt is estimated at more than $300 billion. In a report prepared last year, but not made public, the AU estimated corruption on the continent increased the costs of goods by as much as 20%. Billions of dollars leave the continent each year for secret bank accounts in countries of the north.”

Rational Choice Perspective Repeating Key Point: Corruption is rational It is rational because the political leader’s goal is to remain in political power, but doing so requires that surplus capital be used for purposes that undermine rather than promote national development Corruption is also rational when political leaders are generally unaccountable to the citizenry. This is particularly the case in non-democratic regimes

Rational Choice Perspective What’s the solution to world poverty? What would a rationalist say?

Cultural Perspective Cultural explanations of poverty begin with the assumption that culture is more than just a reflection of economic or political forces. What does it mean to say the culture is more than just a reflection of economic or political forces?

Cultural Perspective Cultural explanations must begin with the assumption that culture has at least some degree of separateness (or independence) from other social, political or economic forces. At the same time, few serious culturalists would argue that culture explains everything. Instead, they tend to agree that there is a highly interactive relationship among cultural factors, politics, and economy.

Cultural Perspective Early culturalist arguments based on the work of Max Weber, and especially his well know argument on the “Protestant work ethic.” This is especially well reflected in modernization theory, which was one of the first academic theories that used culture to explain poverty.

Cultural Perspective Modernization scholars essentially divided culture into two categories: modern and traditional

Cultural Perspective Based on the crude classification, modernization theorists asserted that poor countries were poor because they had the wrong set of values

Cultural Perspective For a long time, no one really questions the tenets of modernization if only because the issue of change didn’t seem relevant. But, eventually some exceptions emerged, one of the most notable of which was Japan

Cultural Perspective The economic rise of Japan, especially in the post-World War II period, forced a fundamental rethinking of modernization Why?

Cultural Perspective Since the demise of modernization, other cultural frameworks, including within the post-modern school have emerged At the same time, even during the height of modernization, some scholars already had developed a more sophisticated understanding of culture, including, most prominently, Oscar Lewis.

Cultural Perspective “The culture of poverty”: The basic argument Part I. Lewis observed that the attributes, values, and practices that people in poor communities embrace tend to be very similar. Specifically, poor people are generally (though not uniformly) apathetic, hedonistic, present-time oriented, irresponsible, impulsive, provincial, unreliable, suspicious of outsiders, ill-educated, and fearful of authority.

Cultural Perspective “The culture of poverty”: The basic argument Part I. Most generally, Lewis argued that poor people are characterized by a lack of effective participation and integration in the major institutions of large society.

Cultural Perspective “The culture of poverty”: The basic argument Part I. At a national level, whole cultures of poverty are possible. It is usually the case that the country was a former colony, and as a colony, the traditional culture may have been dramatically reshaped by an outside power, which used power to destroy old practices and replace them with new structures designed to ensure the servility, inferiority, and powerlessness of the indigenous population.

Cultural Perspective “The culture of poverty”: The basic argument Part II. The second component of Lewis’s argument is implicit in this last point: that is, cultures don’t just emerge from people’s minds or some long-forgotten past, but are generally reactions or adaptations to objective conditions. In this sense, certain types of “slum culture” are not the cause of poverty, but a consequence of oppression. In other words, Lewis was arguing that cultures of poverty are a reflection of more basic forces in society.

Cultural Perspective “The culture of poverty” But to say that culture is a reflection of deeper forces seems to go against the assumption we started off with--that is, that culture has to have “some degree of separateness (or independence) from other social, political or economic forces.” How can this “contradiction” be reconciled?

Cultural Perspective “The culture of poverty” Key point: Culture can be both cause and effect; it can be both an independent and dependent variable An example … In the Terminator, a computer network based on artificial intelligence is produced by scientists (I.e., it is the product of outside forces). Once created, however, it becomes sentient: it not only “thinks,” but acts to defend itself. It takes on a life of its own. It becomes an independent variable in terms of explaining the future of humankind.

Cultural Perspective “The culture of poverty” Another illustration: Envision a “poor” person who wins $500,000 gambling (or through lotto) In the illustration, the poor person’s return to poverty is clearly not the product of “deeper forces” conspiring against him or her; rather, it is the product of a certain set of values, beliefs and practices that profoundly shape the behavior of that individual In addition, we may say that the actions of the individual were “rational,” but rationality does not tell us how and why the individual would choose to be poor again, nor does it tell us from where the individual’s “preferences” came from

Cultural Perspective Summing up: Conditions of oppression (i.v.) poverty (d.v.) particular set of cultural values and practices (i.v.)  reproduction of poverty (d.v.)

Cultural Perspective Comparing two cultural accounts There are a number of points to comparison between the modernization account and Lewis’ argument My position, as should be clear, is that Lewis’ argument represent a far better, conceptually and empirically superior position than modernization. But what makes Lewis’ argument superior? (Discuss)

Structural Perspective Perhaps the best way to summarize the structural position is to say that poor countries are poor because rich countries made and keep them poor.

Structural Perspective Dependency Theory Dependency theory primarily developed to explain the relative poverty of Latin America. To dependency theorists, the long term and continuing poverty of Latin America was the product of an unequal and exploitative relationship with the West, and the United States specifically.

Structural Perspective The Development of Underdevelopment One of the most prominent early dependency theorists, Andre Gunder Frank, was quite blunt on this point: he argued that the past and current development of the West was/is premised on the underdevelopment of the third world, a condition which he called, “the development of underdevelopment.”

Structural Perspective The Development of Underdevelopment To Frank, colonialism was simply the starting point of this unequal and exploitative relations. But even after the formal end of colonialism, Frank argued that the basic economic relationship never ended. Instead it was replaced with a less obvious, but equally effective relationship whereby the poorer countries of Latin America were kept largely dependent on the richer countries of the West for capital, technology, markets and goods.

Structural Perspective The Development of Underdevelopment Frank also introduced the idea of metropolis-satellite model. He argued that this model defined relationship both between poor and wealthy countries and within poor countries. It helped to explain why there are always enclaves of wealthy, westernized elite in poor countries. To better achieve their goals, in other words, western capitalists need local “allies.”

Structural Perspective The Development of Underdevelopment To put it more bluntly, local elites, in essence, act as the “muscle” for Western elites. They keep the local population in line, using force and violence when necessary. Unlike ordinary “muscle,” however, local elites are extraordinarily well-compensated for their efforts, often building assets comparable to their western allies.

Structural Perspective Dependency Theory Simply asserting that the poor are poor because of the rich, however is not enough: in order for the dependency approach to hold water, it must also show how the relationship of dependence operates In other words, it must show why poor countries are dependent on rich countries, and why this relationship must persist over time.

Structural Perspective Dependency Theory Illustration: Scenes from the documentary, Life & Debt Pay particular attention to the discussion of international debt, and how that debt creates a cycle of poverty that is almost impossible to break

Structural Perspective Dependency Theory: Evidence of Dependence

Structural Perspective Dependency Theory: Evidence of Dependence The rich get richer, while the poor get poorer. Is this just an accident? Or is it the product of the system itself?

Structural Perspective Dependency Theory: Evidence of Dependence The graph shows that developing countries are actually sending more hard currency to the richest countries of the world, rather than the other way around. To Dependency theorists, this is the product of the developing world's financial, industrial and technological dependence on the West.

Structural Perspective Dependency Theory: Problems Dependency scholars argued that the nature of dependence was an essentially permanent relationship, and poor countries were forever locked into positions of poverty and subordination. But, there was a problem with this claim, which was? Ironically, the same problem that modernization scholars faced: the economic rise of East Asia.

Structural Perspective Dependency Theory: Problems The economic rise of East Asia represented a profound empirical problem. The issue was simply that, according to dependency scholars, it was impossible for formerly poor countries to “break the bonds” of dependency and to develop a relatively strong, dynamic and even autonomous economy. Japan by itself may have been an explainable exception, but Japan was not by itself: Taiwan, South Korea, Singapore, and Hong Kong also demonstrated remarkable economic growth.

Structural Perspective Dependency Theory: Problems Dependency scholars developed new models that seemed to account for the possibility of development among formerly poor countries. These new arguments, however, were overshadowed by the development of another structurally-based argument: World-systems Theory

POLS 373 Foundations of Comparative Politics

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