Once upon a time, in the early 1960s, there were two very poor countries, in what was then called the developing world. In one—let’s call it country A—income per head was little more than $100 a year. In another—country B—income per head was slightly higher, but still under $200 a year. In both countries poverty and illiteracy were widespread. Both received substantial aid from the US. Country A had recently emerged from a civil war, and country B was still mired in one.
In country A, the economy grew rapidly throughout the 1960s and 1970s. By 1986, it had overtaken Britain as an exporter of manufactured goods to the US. Today, its companies compete successfully on world markets for cars and electronic goods with American, Japanese and European brands. Between 1975 and 1997, real incomes per head more than quadrupled. It has a large middle class and a mature film industry. It now ranks above Poland in the UN’s human development index and has joined the OECD.
In country B, 20 years of relentless economic decline was followed by a long civil war in the 1990s, in which an estimated 3m people died. In real terms, incomes today are now a third of what they were in the 1970s. Outside of mining, there is little industry, and none that is competitive in global markets. Country B has no access to international capital markets and is heavily dependent on foreign aid. It ranks 167th out of 177 countries on the human development index, well below Haiti and Bangladesh.If you are a subscriber, please log in »
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