Where does wealth come from?

Yesterday I watched a show about a London bus driver going to Manila to drive a jeepney.  The bus driver lived with the jeepney driver for 10 days.  Because it was made by the BBC it of course was not anywhere near the show I would have made; I would have started by eliminating the narrator.  We didn't really see much of the country in the video; I wonder what filled the hour, upon reflection.  Why are people that travel to poor countries always surprised that the people in poor countries are poor?

Anyway, here is the video, and it is interesting:

So as I was watching it I was thinking about the poor.  Everyone in the video seems to seems to wonder why there are rich people and poor people.  That's not what I wonder.

I wonder how there are rich people in the first place.  Hundreds of years ago the rich were the people who could get other people to do all of their work for them, think fuedalism.

About 200 years ago the wealth of some countries grew dramatically.  Why did the wealth in those countries grow in the first place? Why only in some countries? 

It would be hard to watch the video, see the jeepney driver, and think of how he could become wealthy.  And he's probably better off than most people in the history of the world.  He's probably got a better standard of living than some European kings of several hundreds of years ago; he potentially has access to medical care that didn't exist 100 years ago, he only needs to work 12 hours a day 6 days a week, etc.

How did anyone rise from that level?  Why are there countries that are almost entirely composed of relatively wealthy people?

I think that the answer to why some people have become wealthy lies in the article by Dr. Tim Nerenz I linked to yesterday.  Specifically the quote in my last post:

"And yet all of the trappings of modern living that we have come to depend on have just come into being in the past 200 years.  Ask yourself why.  Why did this not take place in any of the other two-century stretches in the history of our species?  They were smart, they worked hard, they understood mathematics, and the iron and oil and coal was right there in the ground the whole time.  What changed?    

America - that’s what changed. 

For the first time in the history of the world, the person who “built it” got to keep it.  Liberty – that is all that it took to free the unlimited human capacity for enterprise and advance the living standards of the human race beyond comprehension."


I've read elsewhere that the things needed to create wealth are: liberty and private property rights.


The next question might be: how can we help raise the living standards of people in poor countries, and how can we make a buck off of it?


If we start a collection and send money to poor people, like celebrities are prone to ask us to do, they will not be wealthier.  What would happen when we stopped sending money?  Would they suddenly learn to make it themselves? 


We shouldn't gather food and send it over either.  The people that make and prepare food there currently would go out of business.  If you're poor do you pay your local food preparers or go get the free food some westerners sent over?  And what would the people eat once we stopped sending food and the local food providers have lost the ability to provide food.  At best sending food would be a short term solution.  And one that would encourage bad habits like begging, what would prevent the strongest and meanest people from robbing the weaker people of there free food once they are out of sight of the food donors? (On a side note: anytime you see someone promoting local food and products, know that really poor countries already follow those "buy local" ideals.)


I'll bet you wouldn't guess something that does improve the lives of people in poor countries: sweatshops.  No, they're not fun. No, they don't pay well.  But, if people choose to work there that suggests that it is a better option than their alternatives.  New businesses, like restaurants and doctor's offices, couldn't afford to locate were there is hardly any wealth at all.  But once the citizens start to acquire some money other businesses will be able to start.

Many on the left like to make videos of the poor pay, etc., in sweatshops.  I've been to a few in China, and while I wouldn't like it, they do seem to be better options for the people than any of their alternatives.  What is often suggested by the left is to raise the wages, etc., to higher levels.  If that was done there would be no advantage in having the work done in poor countries, the jobs would leave, and the poor people would be worse off than they are now.


Of course, another way to start people on a path to prosperity is to implement minimum wage laws.  If only the city of Manila had a US$10 /hr minimum wage that jeepney driver's wealth would shoot right up.  Read my all time favorite column.