Lecture_Why%2bthe%2bWest%2bis%2bRicher%2bthan%2bthe%2brest%2bof%2bthe%2bworld_2

Lecture_Why%2bthe%2bWest%2bis%2bRicher%2bthan%2bthe%2brest%2bof%2bthe%2bworld_2

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Why the West is Richer than the rest of the world, the Myth of Low Savings in Poor Countries, Cannot explain the West’s breath-taking economic progress via one factor alone. There were several contributing factors. But the single most important one was “ property rights ” and the existence of an institutional framework that documented, archived, legitimized and enforced these property rights. 1) Historical, Geographical factors : Knowledge is cumulative (since the days of ancient Greece up to & beyond the Industrial Revolution) and technological progress 2) Cultural & religious factors: Values, pluralism, modernity, religion. Look up: http://www.sociology.ccsu.edu/adair/excerpts_from_the_protestant_eth.htm 3) Governance: 4. Capital Accumulation –(The Mystery of Capital). Capital is the force that raises the productivity of labor & creates the wealth of nations. It is the foundation of progress. Poor countries can’t seem to produce sufficient capital for themselves, no matter how eagerly they may engage in activities that characterize a capitalist economy. In the last decade, any attempt to build capitalism without capital has shared the same political, social & economic problems: i.e., o glaring inequalitiy, o underground economies, o pervasive organized crime, o political instability, o capital flight, o corruption, o lack of rule of law (flagrant disregard for the law) The Myth of Low Savings in Poor Countries In the poorest country, even the poor save. Value of savings among poor is roughly 40x all the foreign aid received throughout the world since 1945. Egypt: wealth accumulated by poor is 55X the sum of all direct foreign investment. (the term wealth includes money, physical resources & assets such as livestock, arable land, buildings, gold & silver coins, jewelry)
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Haiti: total assets of the poor are more than 150X the foreign investments received since independence in 1804. The problem is…….the poor hold these resources in defective forms, so they can’t use them as “collateral” for credit, loans, etc: For instance: Houses built on land they do not own or whose ownership rights are not adequately recorded or protected; Land they live and work on, but tenure/tenant rights are not clearly defined, recorded or protected. Unincorporated businesses with undefined liability Industries are located in the outer fringes of society, or where financiers, venture
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This note was uploaded on 11/10/2011 for the course ECON 4310 taught by Professor Staff during the Fall '08 term at Kennesaw.

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Lecture_Why%2bthe%2bWest%2bis%2bRicher%2bthan%2bthe%2brest%2bof%2bthe%2bworld_2

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