A Reversal of Fortune

There are tremendous differences in incomes and standards of living between the rich and the poor countries of the world today. For example, average per capita income in sub-Saharan Africa is less than 1/20th of per capita income in the United States and this is after adjusting for differences in purchasing power, which helps African incomes. For those of us lucky enough to be living in North America or Western Europe, it is difficult even to imagine how people can survive at such income levels. Explanations for why the economic fortunes of countries have diverged so much abound. Poor countries, such as those in sub-Saharan Africa, Central America or South Asia, often lack functioning markets, their populations are poorly educated, and their machinery and technology are outdated or nonexistent. These are, however, only proximate causes of poverty, in turn begging the question of why these places don't have better markets, better human capital, more investments, better machinery, and better technology. There must be some fundamental causes of poverty, leading to these outcomes, and via these channels, to dire poverty. The two main popular candidates for the fundamental causes of cross-countr