Can Capitalism Save Poor Countries?

           Why are some countries extremely rich while others remain destitute? I believe the analysis of economic development must begin with first determining how countries developed wealth. For most of human history we have lived in relative poverty. It wasn’t until 200 years ago that humans began to accumulate wealth. The graph below shows the sudden and dramatic increase in per capita economic growth over the past 500 years. 

            First we must determine what caused unbalanced unprecedented international economic growth. Insight reveals that the primary determinants of wealth accumulation are arbitrary. Key variables in this puzzle of economic development are – but not limited to: military strength, access to sea/trade routes and natural resources. Next we will analyze the importance of these variables and how they have influenced the development of India.

Military Strength and Exploitation

            When you consider the past of nations with high per capita GDP (United States, France, England, etc.), historical military dominance is a noticeable characteristic. It is not a coincidence that these countries have experienced enormous economic prosperity over the last 200 years (due to the industrial revolution). Even though these countries are now democratic/capitalistic, they have historically accomplished their economic advancements through colonialism and exploitation. The United States, for example, financed their agricultural revolution by exploiting African labor (through the implementation of slavery) and natural resources. All the economically developed countries of the present have exploited other countries and their own citizens in the past.

            Das discussed how India was the country predominantly exploited to finance England’s industrial revolution, thus, stunting future economic growth in India. Historical barriers have made economic prosperity difficult to achieve for India. As mentioned above, it is rare for a country to achieve economic wealth without exploitation. Since India became Independent in 1947, the government has been mindful to not place anyone in an economic disadvantage. This has allowed for India to maintain a relative constant distribution of wealth – but at what cost? The burden has been placed on the economy itself, the poor, and especially the rural poor. The poor in India were affected by famines that were common through the 1960s until the Green Revolution took place in India. This agricultural revolution took place so late in India because they had no slave labor or authoritative dictator to mandate farming.

Trade Routes and Natural Resources

            Emphasis must be given to the geographical variables that determine economic opportunity. Both trade routes and natural resources have played (and continue to play) a large role in the development of countries. The United States has been fortunate enough to inhabit a land with vast amounts of natural resources and coastlines. This has provided the national economy with many opportunities to expand. Densely populated India has faced much more difficult challenges in regards to natural resources. The opposite can be said for landlocked countries, especially those in Europe.

            India has unique pasts in both subjects because of their ancient history; India has always been a desired trade destination. Even the Himalayas were unable to stop foreigners (good or bad) enter the country. India’s favorable geographical location with wide access to the coast has been a valuable asset.

Future

            To respond to the title of this blog, the answer is clearly not a “yes or no.” Currently, it appears the capitalism will over time (very long run) improve per capita GNI and thus, increase the national standard of living. The development of capitalism in India has not been a natural or smooth process. It is important to acknowledge that the English laid part the foundations for the development of capitalism. The struggle between socialism and capitalism has been prevalent in the past. If other developed countries are indicators, India’s economy will continue to grow and modernize over time.

            What happens until the “long run”? Will we know when India reaches it? These are important questions to consider because as mentioned earlier, some people are left behind in the development of capitalism. I believe it is our responsibility as citizens of wealthy countries to contribute as much as we can to those who are being left behind. Being mindful that economic development takes time, there are still plenty of things we can do to stop unnecessary loss - providing immunizations for curable diseases, for example. Supporting nongovernment organizations, micro-credit financing, investment in primary education and investment in infrastructure are all great ways to immediately contribute. I feel there is a moral obligation to support those who need assistance. As we saw above, the determinants of wealth accumulation are arbitrary – we got lucky. We are not inherently better than anyone else – so why not help out as we can?

Sources

Maddison, A. (2001). Historical Statistics of the World Economy.

University of Groningen.

Sachs, J. (2005). The End of Poverty: Economic Possibilities for Our Lifetime.

New York, NY: Penguin Press.