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The Riddle of Growth

That poor countries are poor because they lack resources should be a testable hypothesis. By most tests, that hypothesis fails.

WASHINGTON, DC – Why are some countries rich and others poor? Why are per capita incomes in the poorest countries less than one-twentieth of those in the richest countries?

It is often taken for granted that poor countries are poor because of the terrible scarcities they confront; that they remain poor because they lack the resources needed for economic growth. Many poor countries are overpopulated and do not have as much natural resources as rich countries. Most poor countries also do not have much capital – or as much capital embodying the highest technologies – per worker as the rich countries do. Neither do they have as much education and training (or “human capital”) as high-income countries do.

With less natural resources, modern machinery, and human capital per worker, productivity in poor countries and income per capita are lower. The familiar “scarcity” or “resource” explanation of national poverty implies that, without large infusions of aid from rich nations, poor countries will never catch up.