Economics, Philosophy

Some Countries Are Much Richer Than Others. Is That Unjust?

Look at the GDP per capita across different countries and you will see staggering differences. The U.S, Denmark and Singapore all have (nominal) per capita GDPs of between US$50,000 and US$60,000 per annum. On the other hand, Ethiopia, Chad, Nepal, Tajikistan, and Niger all fall below $1,000 per annum. The average resident of Denmark produces more than 50 times as much per year, measured in terms of nominal exchange rates, than the average resident of Ethiopia!

When we look around the world and observe the massive wealth disparities between citizens in rich and poor countries, many of us are apt to conclude that the differences must have arisen because of colonialism, imperial warfare, or theft of raw materials like gold or oil. Of course, all of these things have happened at various points in time, and they can arguably explain some variation in the standard of living. Colonialism can be especially destructive of institutions that support peace and commerce. But a recent article by the philosopher Dan Moller casts doubt on the view that injustices like these can explain much of the observable differences.

Instead, Moller musters economic data to suggest that blatant injustices barely show up in the overall trajectory of economic growth in most countries over long periods of time. Specifically, Moller appeals to “the Great Divergence,” illustrated by graphs like this:

The basic idea is that rich countries got rich by pulling away from poor countries, not by making other countries poor. For the longest stretch of human history, most people lived in what we would today consider to be extreme poverty. However around the 18th century, some European countries started to diverge away from this low baseline. Eventually countries like Japan followed suit, and more recently, Hong Kong and China. On the other hand, today’s poor countries did not become poor for the most part (Zimbabwe and Venezuela are good counterexamples). Rather they remained poor.

Not surprisingly for economists, the main explanation for the Great Divergence is trade, fostered in part by favorable social and political institutions. This may seem obvious to those who understand that trade is a positive sum game, and that there are exponential gains from trade as markets expand and the division of labor becomes more fine-grained. The problem is that most philosophers who write about global poverty are convinced otherwise. They think that people in wealthy countries are in some sense responsible for poverty in less developed countries, and that we therefore have an obligation to do something about it.

Many philosophers therefore think that rich countries ought to provide substantial aid to poor countries, not simply because it would be a nice, altruistic thing to do, but because it is owed as a matter of justice. Others add that because global inequalities are caused by injustice, developed countries also ought to make it easier for people to migrate there from poorer countries. Again, this is not merely a benevolent thing to do, it is claimed, but rather is owed as a matter of justice.

So, who’s right? Moller thinks that if citizens in wealthy countries did not cause poverty among citizens in other countries, we are not violating any obvious moral duties by failing to offer aid.

Moller’s main argument is that if we get rich because of good political institutions, or because we live in a culture that encourages social and scientific experimentation, we are not doing wrong to others – even if none of us can take credit for the contributions or our ancestors. When people in one country create the conditions for endogenous economic growth they do not thereby cause people in other countries to fail to do so. If anything, over the long run, one country’s success makes it more likely that other countries will follow suit.

By analogy, suppose a family in a nearby community is not doing as well as we are, and that we know exactly what resources they need to improve their prospects – cash, a new car, or extra math tutoring. It is not obvious that by failing to provide these things for them, we are morally responsible for their relative poverty. To extend the analogy, if people in our neighborhood are wealthy mainly because we have a well-functioning Neighborhood Association and a robust trading network, our relative success is not causing people in nearby neighborhoods to fare worse than we are (especially if there are limits to the newcomers a community or nation can absorb without undermining its institutions).

Someone might say: “Wait a minute. You’re ignoring the possibility that today’s rich countries got rich primarily by exploiting poor countries and stealing their resources – by keeping them down rather than making them worse off. Without such exploitation, these poor countries would now be significantly better off.” This reply is implausible for two simple reasons. First, many modern rich countries did not have colonies (or anything akin to colonies) that they could have exploited to amass their wealth. Think of Iceland, Norway, South Korea, Singapore, and Taiwan. Iceland and Singapore today have per capita GDP levels well above those of France and the U.K., the two biggest colonial powers of recent history. Second, many once poor past colonies are extremely wealthy today – Hong Kong, Singapore, and Canada are good examples.

Others might argue that the world trade agreements of the past few decades, rather than old colonial empires, are chiefly responsible for global poverty. Such people then would have to explain how several countries have managed very recently to achieve spectacular growth and reduce poverty. Examples include China, as well as several countries from the former Soviet Union and Southeast Asia. The graphic below shows the rapid decline in extreme poverty in several countries over the past two decades.

Much of the discussion surrounding global justice also ignores the fact that many of the technological and medical advances that enable people to live better and longer lives originated from developed countries. Some examples include: the light bulb, the cell phone, antibiotics, and the polio vaccine. The benefits of these advances eventually reached poorer countries as well, and enormously benefited their residents. The chart below shows the dramatic increase in life expectancy over the last century. Note that the average life expectancy of Ethiopia, one of the world’s poorest countries, is much higher than that of the U.K. at 1900. This owes largely to medicine and technology transfer from the rich world.

Modern day Ethiopia also has fewer maternal deaths during childbirth than the U.K. in 1900.

None of this is to say that we shouldn’t help people in need, especially when we have a reasonably good idea of how to do so. In recent years, many scholars and activists have looked carefully at the ways in which some kinds of charitable donations can help the world’s poorest. If giving aid to poor countries is a way to improve standards of living and make the world a better place in the long run, maybe we should do so, though we should also keep in mind that many forms of aid are counterproductive.

But we shouldn’t automatically assume that wealth disparities across the world are unjust and that the developed world owes aid as a matter of justice. This is because the best way to make sense of the Great Divergence is that certain economic and political institutions, namely those that facilitated economic growth, arose in some countries and not others. Thus perhaps the benevolent among us should also try to encourage – by example rather than force – the development of such institutions in places where they do not exist.

Filed under: Economics, Philosophy

by

Hrishikesh Joshi earned his PhD at Princeton University and will be a Postdoctoral Fellow at the University of Michigan, Ann Arbor beginning in Fall 2017. Follow him on Twitter @RoundSqrCupola Jonny Anomaly is a lecturer in the Philosophy, Politics, Economics, and Law program at the University of Arizona.

23 Comments

  1. DiscoveredJoys says

    “Some examples include: the light bulb, the cell phone, antibiotics, and the polio vaccine. ”

    All arguably good recent technology. But you could extend the GPD per capita timeline back to 10,000 BC and include farming, markets, villages, and add towns, factories, and sanitation (the biggie in my opinion) to the last two millennia.

    Whether life in developed countries is a reliable guide to the ‘better life’ remains an open question.

  2. Ken Nielsen says

    DiscoveredJoys. I don’t really understand your points. Would you like to spell them out?

    • DiscoveredJoys says

      It’s a longer view of the history of specialization driving productivity. But since it is unguided there is a possibility that the independence from moral expectations *may* result in unfavourable outcomes.

  3. Lup says

    Wealth retention, by billionaires and millionaires, cannot be morally justified in a world of mass poverty and deprivation. That the rich do not help others when they easily could is indefensible.

    Wealth acquisition, under capitalism, is mostly exploitative and deeply unjust. Without protections, profit is maximized for the few by paying the many as little as possible. Global value chains–how Walmart, Amazon etc. function globally–work the same way. Hierarchies of oppression.

    • Eric the Half Bee says

      Your views, fashionable and boring as they are, have very little to do with the subject matter, which is how to create the conditions for wealth creation, rather than wealth acquisition. Why not come back when you’ve digested the article, if you have anything interesting or relevant to say then?

      • Lup says

        The piece argues that the existence of rich and poor countries–and rich and poor families, people, etc.–is justified because the two are not causally related. The rich are rich of their own making while the poor are poor because they have not yet become rich. Even if we accept that and ignore the intricacies of imperialism, foreign investment by global conglomerate, and the reality of global value chains being maximally exploitative, the question remains: is wealth inequality between countries (or people) unjust? Is it morally defensible?

        Notice, this is not a question of whether a country (or person) earned or deserves their wealth or not. This is a question of whether it’s justified to retain or withhold wealth when it could improve other countries (or people’s lives). If a developed country (or a rich person) has everything needed to help another country (or a poor person), they are morally obligated to do so. That is the righteous thing to do.

        The author writes: “None of this is to say that we shouldn’t help people in need, especially when we have a reasonably good idea of how to do so.” And yet, we don’t. Developed countries have everything they need to make the world a much better place. This piece presents a hideous argument for not doing so.

        • Why, because we belong within the same species, or do we have an obligation across all species? And is it more righteous to look for the greatest levels of absolute poverty in this worldview or to to determine that charitable giving should be done on a local or regional, rather than global basis?

          As the issues with aid indicate, giving money is often a short-term solution that contributes to a longer-term problem.

    • Geo says

      Your contention that wealth retention by millionaires etc cannot be morally justified is merely an assertion without argument or evidence. The wealth of any country is wealth no matter who happens to own it and more is morally better than less as it helps people escape poverty. “Wealth” is assets that are not being currently consumed by the owner and form part of the productive capacity of the country. It could be argued that a millionaire and more so a billionaire is likely to save a larger proportion of his income and thus more rapidly increase the productive capacity of a society than if the income were more widely spread. Wealthy people’s assets are invested in productive activity and do not sit idly in a bank. That would be a moral argument for a more unequal income distribution. Victorian society in the UK was very unequal but vast numbers were lifted out of poverty during that period.
      Any society is free to make strong redistributive income and wealth laws but any time that that has been tried in the past it has stifled growth and thus impovrished people more than societies where individuals were permitted to retain the fruits of their own labour, innovation etc. The most recent example of poverty reduction by the substitution of socialistic philosophy by Capitalistic philosophy is the rapid reduction in poverty in China as illustrated by the article. That addition to the common wealth by the creative free initiative of the individual helps all and is the moral basis of capitalism.
      That income and wealth distributions in rich western economies have returned to late 19th century levels is probably a result of globalisation and the consequent enormous increase in the supply of labour thus depressing its relative value as basic enconomics would predict. The answer to that is still being fought over and is far from clear. There is no easy answer based on your particular view of morality.

    • Paul E says

      Lup, do you think these “billionaires and millionaires” are keeping vast quantities of cash and gold in Scrooge McDuck like vaults to go swimming in? Their “wealth” is merely a representation of the productive assets the own, often created by them. Bill Gates doesn’t have $90 billion (or however many it is today) sitting in a vault doing nothing. It’s the value of the assets that are producing the things we need. Factories, patents, machines, etc. If we didn’t have billionaires and millionaires we would all be poor and hungry since no one would have enough wealth to create anything. Your socialist views have been disproved by real world applications too many times to count and invariably result in famine, poverty, war and death.

      • Lup says

        Gates owns stock in a bunch of companies who exploit their workers (like Walmart). And while all that stock represents ‘the assets that are producing the things we need,’ (and a lot of crap we don’t) there’s no rule that says billionaires and millionaires need to be the few who own it. And he could simply sell the stock and redistribute as fast as possible.

        ‘If we didn’t have billionaires and millionaires we would all be poor and hungry since no one would have enough wealth to create anything.’ That’s some real bad Stockholm Syndrome right there.

        • It’s my experience when writers start denigrating the personality of an opposing opinion, it’s a signal they’ve run out of arguements.

  4. I liked your over-all argument. You have a point. Aid doesn’t solve anything. But I have to disagree with you one point. Colonization did hamper the growth of countries. Just look at GDP per capita figures of India before and after British Raj, you’ll get my point.

    Not to negate that Rich countries become rich by pulling away from poorer countries.

  5. Alcibiades says

    How do you justify any purchases that you make that do not facilitate your immediate needs(we’re talking survival here)?

    If you can’t live by your own ethics-how do you expect anyone else to?

    • Alcibiades says

      Forgive me, this was intended to be a reply to Lup, whom I am convinced has not read the article in his haste to lay claim to the assets of others on “moral” grounds.

  6. CuriousChris says

    Free trade lifts people out of poverty, it does not place them there, I agree. In fact free trade probably benefits poor workers in poor countries more than poor workers in rich countries. So too, like you I am skeptical of the idea that western countries got rich by exploiting poor countries. The reasons for their economic success probably were endogenous as you argue.

    On the other hand, the reasons that the poor countries did not develop those same endogenous qualities that allowed Western countries to thrive probably was due to their exploitation at the hands of those Western countries (even though said exploitation wasn’t the primary driver of Western growth!) – colonial brutalization did weaken local institutions / governments and facilitated corruption, leading to economic and political circumstances more conducive to the stagnation that led to the Great Divergence than those in Western countries. The analogy of the “nearby family” fails to take into account the pernicious effect Western intervention had on the arc of many poor countries’ development. A more accurate analogy would be if your family drove to the home of the “nearby family,” beat the shit out of the father (impeding him from returning to work) and left the home in a state of disarray. Maybe the assault and robbery on the “nearby family” is not the reason that your family is rich. I think it quite possible that it IS at least part of the reason why that family remains poor.

    Perhaps there is an argument to be made for aid to correct for historical injustice.

    • bardhi says

      Do you know the pre-colonial history of Africa, do you know what form of regime or corruption level have the africans countries, do you know the number of: schools, universities, published books, inventions, hospitals, roads, railways, plants were in africa before the europian have brutally colonizated, and now how this have weaken local institutions / governments and facilitated corruption?! Do you know the African slaves trafficking before the Europeans take their first black slave, do you know which country abolishes slavery and cannibalism in africa, are you sure that arabs and african tribal leaders would abolishe spontaneously the slavery, Mauritania, the last african country criminalized the slavery at 2007.

      • Dennis says

        bardhi,

        Your tirade reveals more about your hopes and fears than your ability to analyze an essay carefully. Since you ask a series of rhetorical “Do you know…” questions, here’s one for you: “Do you know that Africans score, on average, significantly lower on metrics of heritable characteristics like IQ and impulse control than East Asians?” And “Do you know that these psychological traits predict a lot of what we see in Haiti, in Detroit, in Chicago, and Zimbabwe?” Do you see a common factor in these regions?

        QED

        • bardhi says

          Dennis
          really you are using a huge slippery slope to jump from my “Do you know…” in your “Do you know that Africans score, on average, significantly lower on metrics of heritable characteristics like IQ and impulse control than East Asians?” to divert the discussion on what could not be deduced from what I wrote. When you have shown that European colonialism has interrupted the natural progress of colonized African countries, when you have shown that both the Arabs and the African tribal chiefs were already abolishing the slavery before the British stopped them, and shown that the European colonialism is the root causes of the development failure of an entire continent, you are welcome!

          • Eric the Half Bee says

            bardhi – could you tell us about the pre-colonial railway network in Africa?

  7. Pingback: the case against guilt – The Politics of Nuance

  8. Btrang says

    Maybe I can’t read a graph, but I was comparing Ethiopia and UK in the point you were making above and I don’t see any data for Ethiopia’s life expectancy during 1900 in the graph. I mean Ethiopia’s data starts in the 1950’s.

  9. I don’t buy into the “Free trade makes the world rich”. The whole argument is hollow. Trading brings nothing new into the world, no more goods. Not saying that trade has no advantages, trade gives us access to good that we do not product ourselves.

    The real engine behind the growing wealth of the world is the fact that we produce more goods and services per work effort. One days work produces far more goods than we did in the past, and the cause of this is not economical theory, but science and engineering. It is science and applied science (engineering) that has given us revolutionary tools like mass production and automation, giving more products to distribute among the population. Attributing it to free trade is little but attempted theft of credit.

    Free trade is a double edged sword. It is good for the poor, since they produce cheap (cheap labor), though factories/robots are starting to out compete even this low cost level. This trades brings profit to the owners of the manufacturers, and possibly also the workers. The downside is that the workforce in the rich countries are out competed, and unemployment makes for serious social issues. Result, look at the US and the last election. Free trade is a theoretical beneficial framework for poor countries, but in practical terms must be somewhat moderated.

  10. I can’t speak to South Korea or Singapore, but, during the 19th Century, Iceland and Norway were part of the kingdoms of Denmark and Sweden that did have (smaller) colonies.

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