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countries with vast amounts of open space, whether in twentieth
century India or nineteenth century America.
The Economic Development of Nations 219

IMPLICATIONS

All the numerous and interacting factors behind economic devel-
opment make it virtually impossible that different parts of the
world would all have equal development, and therefore equal stan-
dards of living, at any given time. Yet the puzzlement, unease and
dissatisfaction caused by seeing large economic disparities be-
tween societies have created demands for explanations”usually
without creating an equal demand for years of study of the histor-
ical, geographic, and economic factors behind these disparities.
Instead, there has been a demand for simple and emotionally sat-
isfying explanations, especially melodramatic explanations with
ideological overtones, such as "exploitation" theories. "Overpopu-
lation" is also a simple explanation that lends itself to melodrama
and to solutions favored by those inclined toward controlling
other people's lives.
Exploitation theories explain the wealth of some by the poverty
of others, whether comparing nations or classes within nations.
Sadly, however, many of the those who are said to be exploited
have had very little to exploit and many of those described as
"dispossessed" have never possessed very much in the first place.
Moreover, the actual behavior of those described as exploiters of-
ten shows them shunning those that they are said to exploit, in
favor of dealing with more prosperous people, from whom they
expect to earn more money. Thus, most American international
trade and investment goes to high-income nations like those in
Western Europe or the more prosperous regions of Asia, such as
Japan or Singapore, with only a minute fraction of that trade or
investment going to Africa or to the more poverty stricken
regions of Asia or the Middle East. Conversely, the United States
is itself the largest recipient of investments by foreigners. Simi-
larly, within the United States, capitalists are far more anxious to
22O APPLIED ECONOMICS


establish businesses in middle class or wealthy communities,
rather than businesses in blighted ghettos or on poverty-stricken
Indian reservations.
At particular times and places in history, conquerors have indeed
extracted wealth from the conquered peoples, but the real question
is: How much of today's economic differences between nations
and peoples does that explain? Spain, for example, extracted vast
amounts of gold and silver from its conquered lands and peoples in
the Western Hemisphere, at great economic and human costs to
those who were subjugated. But much of this wealth was quickly
spent, buying imported goods from other countries, rather than
developing Spain itself, which has remained one of the poorer na-
tions in Western Europe. Meanwhile, Germany”lacking colonies
of any serious economic consequence for the German economy, for
most of its history”became one of the most prosperous nations in
Europe. Switzerland and the Scandinavian countries have had no
colonies at all and yet have been among the most prosperous coun-
tries in Europe and the world.
In Asia, Japan embarked on an ambitious campaign of conquest
in the twentieth century and its behavior toward its conquered fel-
low Asians was as brutal and ruthless as that of Spain toward those
whom it had subjugated in the Western Hemisphere. Moreover,
Japan used its own lack of natural resources as a justification for its
actions. Yet, after Japan's defeat in World War II led to the loss of
all its colonies and conquered lands, the Japanese economy not
only recovered from the devastations of war, it rose to new heights.
The natural resources that it lacked could be bought in interna-
tional markets for less than the cost of conquering other countries
and maintaining armies there to keep them subjugated.
Exploitation theories are sometimes based on assumptions of ig-
norance and naivete on the part of some groups, such as Third
World peoples, as well as wily and unscrupulous outsiders who are
The Economic Development of Nations 221

able to make high profits from paying the indigenous people less
than their goods are really worth in the world market. Obviously,
everyone is ignorant of things they have not encountered before
and those living in isolated parts of the world place whatever value
they do on new products, based in part on their novelty. But the
question is: How long can such a situation last? More specifically,
can it last long enough to explain international differences in in-
come and wealth? An observer writing about West Africa, early in
the twentieth century, reported that the ability of foreign traders
to obtain much gold and ivory in that region for a little inexpen-
sive colored cloth and cheap knives had already been ended by the
growth of competition, and that consequently "the margin of
profit was diminished." This is what anyone should have expected
on the basis of elementary economic principles. Dated anecdotes
from the earlier period might continue to be repeated for many
years afterward, but the only current exploitation they demon-
strate is exploitation of the gullibility of those who are led to be-
lieve that this represents a serious explanation of international
economic differences.
No given factor can account for the large disparities in economic
development among the countries of the world. Nor is the relative
influence of any particular factor likely to remain the same over
time. Although various geographic factors have played a major
role in the economic opportunities available to various peoples,
economic development also affects the influence of geography.
The invention of railroads and trucks has made available low-cost
transport for the first time in regions lacking in navigable water-
ways and draft animals, such as much of West Africa. Production
and sales of cocoa, cotton, and tin began to flourish on a large
scale in that part of the world after railroads replaced the costly
use of human porters, who were very limited in the size of the
loads they could carry. Even mountains became less formidable
222 APPLIED ECONOMICS

barriers after techniques of tunneling and blasting through them
developed, while airplanes have flown over these mountains and
shrunk the role of distance in general. Radios and telephones made
long-distance communications possible for the first time in many
poor and isolated areas, and the Internet has put the peoples of the
whole world in instant communication with one another. In short,
economic development has reduced the role of geographic factors,
which had made economic development possible in the first place.
SOURCES



CHAPTER i: POLITICS VERSUS ECONOMICS
Data on spending and taxing in New York City are from an article on pages
27 to 35 of the Winter 2003 issue of City Journal, titled "Bloomberg to
City: Drop Dead," by Steven Malanga. The effects of subsidized rice in In-
dia are discussed on page 313 of India Unbound by Gurcharand Das. The
effect of subsidized train fares in India is from page 8 of a special section on
India in The Economist of June 2, 2001 under the title, "The Rich Get
Richer." The statement about the Indian government's tardiness in re-
sponding to a cyclone is quoted from page 535 of Indian economist Barun
S. Mitra's article, "Dealing with Natural Disaster: Role of the Market," in
the December 2000 issue of Journal des Economistes et des Etudes Humaines.
The information on the effects of California's price controls on electricity
supply is from page 10 of "California's Electricity Crisis," by Jerry Taylor
and Peter Van Doren, Policy Analysis paper number 406 of the Cato Insti-
tute. Gunnar Myrdal's thumbnail sketch of central planning is from page
131 of his book, Asian Drama, abridged edition published in 1972 by Vin-
tage Press. The use of food and electricity in an Israeli kibbutz, before and
after prices were charged for them, is discussed on pages 332 and 333 of
Heaven on Earth: the Rise and Fall of Socialism by Joshua Muracchik, pub-
lished in 2002 by Encounter Books. The excessive use of resources by the
Soviet Union is from pages 128 to 137 of a book by two Soviet economists:
The Turning Point: Revitalizing the Soviet Economy by Nikolai Shmelev and
Vladimir Popov, published in 1989 by Doubleday. The statement about a
Soviet queue for men's undershirts is from page 169 of An Old Wife's Tale by
Midge Decter. Data on the Gross National Income per capita in China and
in India are from two publications of the World Bank”World Tables 1992
and World Development Indicators, both published by Johns Hopkins Uni-
223
224 Sources


versity Press. The data from 1970 to 1991 are from the former (Table 2) and
for 2000 are from the latter (Table 1.1). India's relaxation of government
controls over its economy was reported in the distinguished British maga-
zine, The Economist, June 2, 2001, page 13. The bird droppings found on
bread in the Soviet Union and its subsequent re-baking into new bread was
reported on pages 163 and 164 of The Age of Delirium: The Decline and Fall of
the Soviet Union by David Satter, published by Yale University Press in 1996.
The quotation from Congressman Kucinich is from page A29 of the March
14, 2003 issue of the San Francisco Chronicle in an op-ed essay titled "Water
is a Matter of Public Debate" by Dennis Kucinich. The quotations from the
Soviet Economists are from page 61 of The Turning Point: Revitalizing the
Soviet Economy by Nikolai Shmelev and Vladimir Popov.


CHAPTER 2: FREE AND UNFREE LABOR
Information on debt peonage in India is from an article titled "The Social
Psychology of Modern Slavery," in the April 9,2000 issue of Scientific Amer-
ican, April 9, 2002. The experiences of Paul Williams are from Paul R.
Williams, Architect: A Legacy of Style by Karen E. Hudson, published in 1993
by Rizzoli International Publications. The experiences of F. W. Woolworth
are from Remembering Woolworth by Karen Plunkett-Powell, especially on
pages 19, 20, 30 and 49. Information on the early work habits of the richest
Americans is from page 14 of A Portrait of the Affluent in America Today
(New York: U. S. Trust, 1998). Information on the 400 richest Americans is
from pages 80 and 81 of the September 30,2002 issue of Forbes magazine, in
an article by William P. Barrett titled "The March of the 400." Rags-to-
riches stories from India can be found in India Unbound by Gurcharand
Das, on pages 187-195, 207-210, 246-248. The quotation from Professor
Peter Bauer about social mobility in Britain is from page 127 of his book,
From Subsistence to Exchange, published in 2000 by the Princeton University
Press. Data on labor productivity in India and the United States are from
page 65 of the September 8, 2001 issue of The Economist, under the title
"Unproductive." The relative productivity of British companies run by
British and American managements was reported on page 52 of the Octo-
Sources 225

her 12, 2002 issue of The Economist in an article titled, "Blame the Bosses."
The quotation about not being able to make a man worth more by making
it illegal for anyone to offer him less is from page 237 of The Wisdom of
Henry Hazlitt, published in 1993 by the Foundation for Economic Educa-
tion, 1993. Job security laws in Germany and their consequences were re-
ported in the July 14, 2001 issue of The Economist on page 47, under the
title "No Great Harm, No Good Either." Job guarantees to engineers in In-
dia are mentioned on page 46 of "Impossible India's Improbable Chance,"
by David Gardner in The World in 2001, published by the British magazine,
The Economist. The information on Poland's job security agreements is from
The Economist of March 23, 2002, pages 58 and 59. The case of the Indian
fertilizer plant which continued to employ workers, even though they were
producing no fertilizer, is from pages 160 of India Unbound'by Gurcharand
Das. The low percentage of the country's industrial output produced by
government-owned enterprises is from page 161 of the same book. The
comparisons of British and American burglary rates is from page 165 of
Guns and Violence by Joyce Lee Malcolm. The data on burglaries in occu-
pied and unoccupied homes in the United States, Britain, Canada, and the
Netherlands is from page 140 of Point Blank: Guns and Violence in America
by Gary Kleck and the dramatic decline in burglaries in Kennesaw, Geor-
gia, after each household was required to have a firearm is reported on page
136. Data on the sharp rise in murder rates after the legal reforms of the
1960s is from page 409 of Crime and Human Nature by James Q. Wilson
and Richard J. Herrnstein. Data on the increased risk of becoming a victim
of a violent crime is from page 4 of Criminal Violence, Criminal Justice by
Charles H. Silberman. Data and graphs showing crime rates and incarcera-
tion rates in Britain, Australia, New Zealand, and the United States are
from an article titled "Does Prison Work?" in the Summer 2002-2003 issue
of the Australian publication Policy, published by the Centre for Indepen-
dent Studies in St. Leonards, New South Wales. The history of firearms
laws and murder rates in London and New York are from pages 141-144,
223 and 225 of Guns and Violence by Joyce Lee Malcolm.
The episode involving taking a shopper in custody to be forced to serve
as a juror is from a front-page story in the August 20, 2002 issue of the
226 Sources


Wall Street Journal, under the title, "When the Jury Box Runs Low,
Deputies Hit the Wal-Mart." The use of Irish immigrants, instead of
slaves, for hazardous work is mentioned in the Modern Library edition of
The Cotton Kingdom by Frederick Law Olmstead on pages 70 and 215; on
pages 186”187 of Life and Labor in the Old South by U. B. Phillips; on page
394 of The Americans (1969 edition) by J. C. Furnas; on page 101 of the
second volume of The Americans by Daniel Boorstin; pages 301-302 of
American Negro Slavery, by U. B. Phillips; and page 520 of the second vol-
ume of History of Agriculture in the Southern United States by Lewis C. Gray.
The various roles played by slaves in countries around the world and a cap-
sule history of slavery around the world can be found in Chapter 7 of my
book Race and Culture. The use of slaves as human sacrifices was discussed
on page 26 of Human Bondage in Southeast Asia by Bruno Lasker, published
in 1950 by the University of North Carolina Press; on page 191 of Slavery
and Social Death: A Comparative Study by Orlando Patterson, published in
1982 by the Harvard University Press; and on page 325 of Indians of North
America, second edition, by Harold E. Driver published by the University
of Chicago Press in 1975. The better treatment accorded slaves in occupa-
tions requiring individual initiative, such as divers in the Carolina swamps
or in tobacco processing, was described on pages 114-116, 119-120 of
Olmsted's Cotton Kingdom on page 188 of Slavery in the Americas (1961) by
Herbert S. Klein and on page 127 of A Journey in the Seabord Slave States
(1969) by Frederick Law Olmsted. The case of the slave who was a river
boat captain over a crew that included both black and white sailors is from
the December 1962 issue of the Mississippi Valley Historical Review, pages
472-484, under the title, "Simon Gray, Riverman: A Slave Who Was Al-
most Free." Frederick Douglass' comment on urban slaves was quoted from
page 110 of Slavery in the Cities by Richard C. Wade. Information on the
economics of the Soviet gulags is from Chapter 2 of Labor Camp Socialism:
The Gulag in the Soviet Totalitarian System by Galina M. Ivanova, a scholar
in the Russian Academy of Sciences in Moscow, in an English translation
published in London by M.E. Sharpe. The superfluous railroads built at
the cost of gulag prisoners' lives were mentioned on pages 123 to 124 of Be-
hind the Facade of Stalin's Command Economy, edited by Paul R. Gregory and
Sources 227

published in 2001 by the Hoover Institution Press. Books on white inden-
tured servants in colonial America include White Servitude in Colonial
America: An Economic Analysis by David Galenson and Colonists in Bondage
by Abbott Emerson Smith. The estimate that more than half of the white
population outside of New England arrived in colonial America as inden-
tured servants is from pages 3-4 of the latter. The history of coerced Chi-
nese indentured labor shipped from the port of Macao in the nineteenth
century is discussed on pages 74, 98, 124, and 128 of Chinese Bondage in
Peru by Watt Stewart and pages 18-19, 27-29, 80, and 117 of A Study of
the Chinese in Cuba by Duvon Clough Corbitt. The unscrupulous methods
used to gather indentured labor in Britain to be shipped to its Western

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