Why are some countries rich and some poor? Economists have been trying to answer that doozy for decades. Adam Davidson thinks we're close to an answer.
Davidson, best known as co-founder of National Public Radio’s popular "Planet Money" radio show and podcast, argues that poverty doesn't stem from commonly accepted causes like overpopulation or rampant disease, closed markets or colonization.
Blame the lack of strong national institutions—government, judicial systems and education, among them.
"About 400 or 500 years ago, we were all at about the same level of poverty," Davidson said in a recent interview with Global Envision. "So why do we have such incredible levels of inequality now?"
Davidson will share what we know about inequality from history and how we got here—global financial crisis and all—at 7 p.m. Sept. 26 at the Mercy Corps Action Center in Portland, Ore.
"If national institutions give even their poorest and least educated citizens some shot at improving their own lives—through property rights, a reliable judicial system or access to markets—those citizens will do what it takes to make themselves and their country richer," Davidson said.
The absence of strong institutions is at the root of the “poor country--rich country” conundrum, Davidson wrote in a New York Times column. He supports the argument made by Daron Acemoglu, economist and author of “Why Nations Fail,” who believes that a strong constitution and social norms must be in place so the rich can’t simply ignore the rules, leaving the poor without recourse.
How does this play out in developing countries? Take the plight of poor farmers in Colombia. Farmers have no incentive to invest in better seeds or equipment when local political institutions don’t guarantee those farmers’ property rights, or make it all but impossible to secure a title to the land.
Without restraining rules and government, large agricultural companies owned by Colombia’s political elite feel free to displace farming families, taking the land for more “productive use.” Local government supports the big companies -- or at least turn a blind eye to the inequities.
This isn't hypothetical: 10 percent of Colombia's population is currently displaced as a result of land disputes, according to The Guardian.
In Colombia, Mercy Corps staff work with village councils to peacefully settle land disputes. The organization also works with state and national government leaders to accept the decisions of the village councils, and clearly communicate the kind of documentation required to ensure land ownership.
Mercy Corps includes the public sector as one of the three key actors in its “vision for change.” Strengthening local institutions is critical to Mercy Corps’ mission of helping build community-driven and market-led economies to end poverty.
And it's this kind of development of strong national institutions and social norms that give everyone a chance to improve their own lives that Davidson argues is key to breaking the cycle of poverty.