This is the final post in a weekly series discussing themes from Gregory Clark’s book A Farewell to Alms. In chapter 18, Clark concludes that: “in the years since the Industrial Revolution, there has been a progressive and continuing disengagement of economic models from any ability to predict differences of income and wealth across time and across countries and regions.” In other words, economics models predict poverty quite well, but they struggle to explain how to escape from poverty.
Clark says that: “local social interactions that determine the attitudes of people towards work, and co-operation in work, are magnified by the economic system to generate unprecedented extremes of wealth and poverty.” He then goes on to say that the West does not have any viable economic development model to offer the countries which remain poor. Aid does not work. Trade is not working. Complicated economic surgery has just made things worse.
I disagree with Clark’s final pessimistic assessment. In my view it is conceptually quite simple how a country can become wealthy. All that is required is that the citizens be motivated to become as productive as possible, and that the systematic things which prevent economic growth – such as corruption, war and insecurity, disease, lack of education, lack of infrastructure, lack of reliable institutions, and anti-productive cultural values – be eliminated. These things are easy to understand, but extremely difficult to achieve.