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Wealth, Developing Countries & Technology
Clark S. Lindsey

I am often surprised to find highly educated people with absolutely no idea of what determines the wealth of a country. Just as one does not have to be a geologist to know that the world is not flat, one does not need to be an economist to know basic economic facts.

The wealth of a country, the wealth that determines the standard of living of its citizens, is equivalent to its productivity. Productivity is defined essentially as the amount of goods and services produced in an average hour of labor.

This is not a political or ideological opinion but just a basic definition in rudimentary economic arithmetic.

The most wealthy countries are about 150 times richer than the poorest. This is not because they inherited 150 times more rich people or are 150 times better at exploiting other countries.

They are richer because they produce 150 times more goods and services for the equivalent amount of labor input.

Raising productivity doesn't depend just on implementing higher technology but on many factors such as creating a government that assists rather than hinders improvements in efficiency, building a solid infrastructure of roads, bridges, railroads, etc. It's especially important to raise the educational level of the work force.

Technology, though, is the single greatest factor. The standard example is that of the farmer who, previously working with only his hands and a pointed stick to jab holes for seeds, produces an enormous enormous jump in output after receiving a simple plow.

Giving him a computer, though, probably would not be very useful for him. (At least not at first. See Precision Farming.) Importing inappropriately advanced technology will provide little benefit when the infrastructure of the society cannot yet take advantage of it. (It has taken developed countries several decades, in fact, to learn how to translate computer advances into genuine productivity increases.)

The Technology for Developing Countries section provides links to various practical technologies and approaches that will help to accelerate the productivity of individuals and small communities and to bootstrap developing economies.

Note: One of the trends that stroked American fears during the Cold War in the 1950s was the Soviet Union's apparently strong economic progress. The USSR's production of heavy industrial goods such as steel began to approach levels in the US. "We will bury you", Nikita Khrushchev famously said. However, as it turns out, their higher production didn't do the Soviets any good.

That's because they were simply adding more and more workers to produce more and more steel.The number of workers per ton of steel stayed about the same. In the West and in Japan, however, as technology improved, fewer and fewer hours of labor produced each ton of steel. This higher productivity led to lower priced steel, which in turn produced lower priced cars, applicances and thousands of other goods. These kinds of productivity improvements throughout the economy led to a rising standard of living in the West. The post-war period saw the creation of a middle-class in size and wealth never known before in history.

Meanwhile, in the USSR living standards stagnanted and eventually led to the collapse of the Soviet Union. Economists often point out that the goods that came out of a typical Soviet factory were worth less than the raw materials that went in.


Original: May 7, 2002
Modified: July.15.04

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