The Four Kinds of Countries

James Wolfensohn, former president of the World Bank, writes in the International Herald Tribune that there are four kinds of countries in the world today:

The first tier are the rich countries, including the United States and Europe, which for the last 50 years have maintained 80 percent share of global income while accounting for only 20 percent of the world's population. They will continue to enjoy improvements in living standards, but their dominance is being contested by emerging economies.

These emerging economies, comprising a second tier of about 30 poor and middle income nations, have learned how to leverage the global economy. With sustained growth at 7 percent or more per year, countries like India and China will soon become global leaders.

A third tier - a much larger number of economies, perhaps 50 in all - have experienced growth spurts, but also periods of decline or stagnation, especially once they hit middle income country status.

Spanning from Latin America to the Middle East, these economies have been forgotten by the G-8 leaders. They are neither poor enough to warrant special aid, nor sufficiently large and fast-growing to be major players in global growth. Yet more than a fifth of the people in the world live in these countries.

A fourth tier, a billion people, live in the poorest countries, which continue to stagnate or decline. These countries, mostly in sub-Saharan Africa, gain little from globalization but are among the most vulnerable to its adverse effects, such as climate change and higher natural resource prices. The human tragedy engulfing this group is a huge concern and political challenge to the rest of us.

If you think about it, these four groups are just different kinds of economies. The first group depends mostly on services; the second group, manufacturing; the third, natural resources; and the fourth, (mostly primitive) agriculture. Of course, there is some overlap; rich countries manufacture things too, destitute countries export some oil and diamonds, etc.

Wolfensohn is mostly worried about the fourth group, which has high death rates, famine, disease, and often constant low-level violence. But, weird as this may be to say, I'm not particularly worried about these countries. Of course we can't ignore the humanitarian crisis they represent, but their prognosis doesn't seem so bad.

Why? Well, sub-Saharan African countries (excluding some prosperous ones on the southern tip) are living in the way humans have traditionally lived for thousands of years. Farmers work the land while their wives raise children. Surplus boys occasionally form gangs to pillage the neighbors. The population surges until nature viciously cuts it back. If you looked at Europe in the 1300s, this is probably exactly what you'd see (Europe was the Sub-Saharan Africa of the Middle Ages, a destitute syphilis-ridden gangland so nasty and worthless that passing superpowers didn't even want to conquer it).

And again, that kind of life pretty much sucks (though not nearly as much as that of hunter-gatherers!). But my point is that we know how to get countries out of this type of situation. Strong governments, universal public education, public health campaigns, birth control, and international trade. That's pretty much the standard mix that boosts countries to Wolfensohn's "second tier." That's no mean feat - development economists are working around the clock on helping countries put those institutions in place, with only moderate success. But if Europe could make the jump five hundred years ago, so can Sub-Saharan Africa today. I'm optimistic.

What really worries me is that "third tier." Countries that make much of their living from exporting oil and minerals are prone to chronic corruption, uncontrollable boom-and-bust cycles, and a dangerous reliance on the state (since resource income goes to whoever has the land, and then typically gets redistributed to the general populace). This is the "oil curse."

One big problem is that, once you start selling resources, your exchange rate typically goes up and it becomes hard to sell anything else (this is the so-called "Dutch disease"). In international trade, countries tend to specialize; the world needs oil and minerals, so countries like Saudi Arabia or Venezuela have basically no choice but to specialize in what they've got sitting in the ground. And this probably isn't going to change in the near future; the world will always need natural resources, and some countries will always have lots more of them than others.

What will happen to these countries? The best hope is that their populations grow large enough so that their resource income just isn't enough anymore. But, obviously, even that scenario will involve upheaval and conflict, and could even throw some countries back into the hellish world of the "fourth tier." A few countries, such as Australia, have managed to rely to a certain extent on resources without their institutions disintegrating, so there is some hope. But overall, this remains one of the world's most intractable development problems.


Bonus Reading Guide
1. The British University and College Union discusses whether to boycott Israeli academic institutions over Israel's infringement of Palestinian academic freedom. Of course, they never discussed the possibility of boycotting China due to its infringement of Tibetan or Hong Kong (not to mention Chinese) academic freedom. That might have something to do with the fact that China is 193 times larger than Israel...

2. Egypt's top Islamic cleric says that countries in which it's considered brutal for a man to beat his wife should not obey the traditional Muslim law that allows wife-beating. But, he says, "Women in some cultures are not averse to beatings. They consider it as an expression of masculinity, and as a kind of control, which she herself desires." So basically he supports beating only if it's in the context of S&M. Many Americans would probably agree...

3. Oh jeez. Bush is now trying to scale back scientific projects that measure global warming. See, we're an empire now, and when we act, we create our own reality. (hat tip: Yglesias)

4. Speaking of Yglesias, I agree that the idea of a "guest worker program" is absolute crap. How about a "citizen worker" program instead, where we let people who want to be Americans do so.