The 5 Ps of Poverty
Why Poor Countries are Poor: Place
Place means size and location – geography – things you can’t control.
Bigger is generally better when you consider human and natural resource capital. You want large numbers of productive people who have a lot to work with. The US is the world’s largest economy and the world’s third largest country. Think of other economic powerhouses like Canada and Germany – these are large countries. The economies of the world who are among its fastest growing are also big – the BRICs (Brazil, Russia, India, China).
Bigger isn’t always better . Certainly there are challenges associated with large expanses of land, especially if they are ungovernable because of ethnic tensions or difficult topography (such as Sudan).
Small can be okay. Consider Switzerland or Japan – but you need to have a lot of other things going for you.
Think the iron law of real estate…location, location, location. For countries, this means where you happen to lie the planet, and how you came to get your present boundaries. Most poor countries are located in the Southern Hemisphere (why they are called the Global South); most had their boundaries drawn by someone else during the age of empires and colonies.
Many poor countries are located in harsh climates, in areas without adequate rainfall, or with great volatility in rainfall patterns leading to drought and/or floods. Climate is destiny when you are talking arability of land (suitability for growing things). You can’t grow crops in the sand or in poor quality soils. Irrigation is expensive. People are more likely to come in conflict with each other when there is not enough arable land to go around. This is a big reason for the conflict in Darfur – different groups fighting over a diminishing supply of land suitable for grazing and farming.
Climate also determines the kinds of pestilence and diseases that flourish in a given area, affecting the health of livestock and humans alike. For example, there are parts of Africa where cows simply cannot live because of disease-bearing pests. Think of how much livelihood can be squeezed out of a cow, not to mention the labor-saving functions that “beasts of burden” have always provided in societies throughout time. Malaria-bearing mosquitos are also a huge problem in climates where many poor countries are located. Add to this rare, tropical parasites and germs (diseases) that flourish in these climates.
Access to the Ocean
One of the most significant disadvantages that can be visited upon a country is to be landlocked, or without reliable access to a port. Some oceans are better than others; and it really helps if you have access to more than one (such as the United States).
Oceans help keep enemies out – navies are expensive (not many countries have full-capacity navies); and sea-borne invasions are rarer than land invasions (and more difficult to pull off).
Even with the voluminous virtual and air traffic of today, a full 80% of goods still move my sea. Getting things in and out is a whole lot easier if you have a port within your borders. Or even one near your borders – there are some countries that are double and even triple-landlocked. If you are landlocked, you MUST have good relations with your neighbors on the coast (and those in-between) in order to participate in the vital maritime lifeblood of the global economy. From Rwanda to Russia – whole histories of countries have been written around a lack of (and efforts to attain) access to the sea.
Having access to the ocean does not, itself, ensure that a country will be able to take advantage of its port potential. You also need money to develop your ports, and to build roads and/or railroads linking suppliers and consumers to exports and imports. Liberia, located on the Coast of West Africa, has long coastlines that are vastly underutilized because this infrastructure does not exist. You also have to be able to control your ports and your coastline, or other non-state actors will, such as pirates in Somalia who make a living interfering with shipping along one of the world’s busiest shipping routes, just off Somalia’s coast in the Gulf of Aden.
Access to an ocean gives you, if nothing else, access to a food supply in fish. And, if you can move this fish quickly and efficiently to markets in other places, all the better. It also gives your country the potential to tap into tourism dollars. People pay to go to the coast. Hotels, resorts, dining, and all the recreation and service jobs that come with them can be a pillar of the economy of a well-located country.
What the land looks like inside a country’s borders also matters. Are there deserts and mountains that interfere with transportation of goods within the country and isolate communities from each other?
Are there navigable rivers to move goods and generate power? The United State’s enviable location in a temperate climate with fabulous ocean access is only enhanced by its plentiful supply of domestic rivers. Do you share these rivers with other countries? The fact that the US does not share these rivers, a critical water supply for Americans, with hostile neighbors (assuming, as we are, throughout, that Canada and Mexico are allies of the US). Think of Pakistan and India who share the Indus water system or the numerous countries that share the Nile systems in Africa. Gives you more to fight about. Especially in a world where water is becoming more and more precious. (See the Water edition of The World Savvy Monitor…)
Natural Resources *
Besides water, a country’s location determines what other natural resources like within its borders as well. What is in the ground like oil, natural gas, iron ore, copper, coltan, diamonds, and other minerals…and what grows in the ground like timber and agricultural products. These are resources a country can use for its own consumption or as raw materials for domestic production of another good, such as steel. Just as importantly, they are resources that can be exported and sold as commodities on global markets.
Generally, diversity of natural resources is best. The more variation you have, the less vulnerable you are. To unforeseen events such as weather patterns that destroy a particular crop. Or to global supply and demand variations that create price volatility for a product.
It’s also best to have some natural resources at hand that you can process and sell yourself. Some countries do not possess the technology or investment required to turn raw materials into lucrative products. An example is refining oil into gasoline. Iran, a major petroleum producer, must export its oil to be refined elsewhere and re-import it as gasoline for domestic use. When you have to do this, you leave a lucrative portion of the value chain of the good outside the country. Same with cocoa production when the chocolatiers are located outside your borders. Or diamonds when the polishing and crafting is done elsewhere. Growing or mining that raw material only gets you so far – the real money is made when raw materials are turned into goods that the word desires.
*A Note of Caution on Natural Resources – It’s more complicated than you think.*
When a country’s place in the global economy is solely as a source of raw materials, exploitation can result. Waters are overfished, forests are overlogged, fragile environments are harmed. Sometimes irreparably, relegating future generations to no place in the global economy.
Economies that are built on resource extraction can experience what is known as the “resource curse” where a rising tide does not lift all boats. Resource wealth acts as what economists call “external rents,” creating significant wealth for the country, while eliminating the need for ruling elites to tax, and thus be responsive to, the people. Corruption often flourishes under these circumstances; and the wealth that is generated remains concentrated at the top, with little accountability. High commodity prices can artificially inflate the value of a country’s currency, thereby discouraging export diversification – and economies fail to grow. A prime example here is Nigeria. Despite being one of the world’s top oil producers, it is among the world’s poorest nations, with the residents of its oil rich delta among the world’s most desperate people. Saudi Arabia is another good example where petrodollars remain concentrated in the hands of a small wealthy elite while the majority suffer, and the overall economy remains undeveloped.
Finally, the presence of natural resources in the absence of much else creates high risk of conflict. Not only civil as when groups compete for scarce goodies, but invasion by outsiders as well.
Quality of the Neighborhood
Your neighbors’ problems can quickly become your problems. Generally, poor countries have a tough time enforcing customs and border controls. This can mean refugee flows from other country’s wars, environmental disasters, or other crises. It can mean the flow of arms, drugs, trafficked persons, and other hazards easily crossing porous borders. Or the proliferation of non-state actors (ethnic and other interest groups) who wield a lot of influence across borders, complicating the governance of any individual country. Think the Taliban in Afghanistan and Pakistan, the Kurds in Iraq and Turkey, and the LRA in Uganda and Sudan.
Poor countries are often clustered in forgotten parts of the globe, repelling capital and attention from the developed world. In addition to being too poor to bring each other much mutual benefit through regional trade and markets.
If you have good neighbors, it’s a different story. Then you’ve got trading partners, opportunities for accessing talent and ideas, more resources to bring to bear on common issues that you may not be able to solve by yourself.
Number of neighbors can trend either way. If they are friendly and stable, more can be better (think the EU). If they are unfriendly or in crisis themselves, more neighbors means more of what you don’t need. Allies are obviously better than enemies. You are most in danger of invasion by your immediate neighbors, especially if your borders are contested. Having a sworn enemy on your border is wildly distracting and dangerous. Think Israel. Stability – economic, social, and political – is key. Frequent coups, famines, uprisings, and discontent in one country can destabilize whole regions.
How You Got Your Borders in the First Place
Many poor countries are former colonies, others were created from existing countries. This means their borders were drawn according to the interests of a distant power, not necessarily the interests of the local population. The calculations that led to the carving up of large regions often made little sense on the ground. Many enduring civil and international tensions in the world today can be traced back to poorly-drawn maps as ethnic groups were divided or combined artificially; and resources were divided unevenly.
Interestingly, there are some experts who believe many countries never should have been countries in the first place. They contend that some nations are just too small, too disadvantaged geographically, and too ethnically combustible to function as states. It would have been better, for example, for the smaller states of Africa, to have been combined or attached to larger ones. Fewer nations would mean fewer landlocked states (see above), and would inherently contain more diversified resources. Such configurations would theoretically minimize conflict that has ensued where ethnic groups have been split from each other, or combined in too small of a country (think Rwanda).