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or sinister reasons for those differences. There are also many other factors at work besides geography which influence the poverty or prosperity of nations. Because of other factors, some geographically very fortunate nations are nevertheless poverty-stricken and some much less geographically favored nations have prospered. We need to consider these other factors as well but, again, with no general presumption that peoples and nations around the world would have had the same economic outcomes except for some given factor.

HISTORY

When we refer to Third World nations, that may give the impression that there is a given set of countries very different from other countries. But that would be a fallacy. A list of either prosperous or poverty-stricken countries a hundred years ago would not contain all the same countries as today. As recendy as the middle of the twentieth century, Singapore would have been among the poorest places on earth but today it is among the richest. Midnineteenth century Japan was a poor and backward nation and, as recently as the first half of the twentieth century, products made in Japan were usually regarded as poor quality imitations of similar products made in Europe or the United States. Yet today Japan's cars, cameras, and other products have set the standard for quality around the world, and the Japanese people are among the most prosperous. At the beginning of the twentieth century, Argentina was one of the ten most prosperous nations on earth— ahead of Germany or France— but it has long since lost that position. In the long view of history, all nations were Third World nations at some point or other in their evolution.

In short, what are identified as Third World nations today are simply countries whose economic levels lag behind those of most other countries. Some have always been poor and some have become poor, either absolutely or relative to rising living standards around the world. Some, such as China and India, have for some centuries been very poor but have, within the past generation or so, had unusually rapid economic growth rates that have lifted

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many millions of their people above these countries' official poverty lines. Within an even shorter span of time, the composition of the group of poorest nations has changed. As economist William Easterly has pointed out, "eleven out of the twenty-eight poorest countries in 1985 were not in the poorest fifth back in 1950."9

As noted in Chapter 5, comparing the relative incomes of statistical categories over time produces very different results from comparing the relative incomes of the same human beings over time. Likewise, comparing statistical categories of nations over time produces very different results from those of comparing the same nations over time. The World Bank, among others, has produced statistics showing that the ratio between the incomes of the 20 highest income countries and the 20 lowest income countries has grown over the period from 1960 to 2000, rising from about 23-to-one to about 36-to-one. Some have used such data to claim, among other things, that globalization increases the economic inequality between prosperous and poverty-stricken nations. But the directly opposite conclusion would be reached when comparing the same set of nations in 2000 as in 1960. The income ratio between the initially richest 20 nations and the initially poorest 20 declined from 23-to-one to less than ten-to- one.1 0 Freer and rising amounts of international trade— globalization— was in fact one of the reasons why some nations rose out of the bottom 20.

Since all countries around the world began poor, what requires an explanation is not why there is poverty but how some countries rose out of poverty to become prosperous. No one knows who invented the wheel or what individual first began to plant crops instead of relying on gathering the spontaneous produce of nature. What is known is that such things appeared in some societies long before they appeared in others— and that they spread from one society to another, though not to all. The earliest known agriculture appeared in the Middle East and spread into those European societies located nearest the Middle East. Thus Mediterranean Europe, especially in the Eastern Mediterranean, was much more advanced in many ways than northern Europe. The ancient Greeks built magnificent structures such as the Parthenon but there was not a single building in the

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British Isles centuries later, when the Romans invaded. As Winston Churchill said, "We owe London to Rome."1 1

As late as the tenth century, A.D., a Muslim scholar could say that Europeans grow more pale the farther north they are, and also that the "farther they are to the north the more stupid, gross, and brutish they are."1 2 However much such talk would be automatically dismissed as racism today, the fact is that he was there and we were not. Moreover, the enormous retrogression throughout Western Europe after the collapse of the Roman Empire, lasted many centuries, before the countries of Western Europe emerged as the new leaders of European civilization, displacing the countries of Mediterranean Europe. In Asia as well, the ancient civilization that developed around China's Yellow River spread not only across China but into other parts of Southeast Asia and to some extent Japan, and the products of China spread across the Eurasian landmass into Europe.

Places cut off from advances in the various leading civilizations of the world, whether for geographic or other reasons, tended to lag behind and to remain at levels of poverty that the more dynamic economies were leaving behind. Seventeenth century Japan adopted a national policy of deliberate isolation from the outside world that lasted until American warships entered Japanese waters in the middle of the nineteenth century and forced the Japanese to open their ports to the world. This painful episode provided a revelation to the Japanese of their own backwardness and weakness, creating an agenda of national economic development that dominated the country for generations to come.

Here was one of the rare examples of a country which saw in itself the sources of its own poverty— and therefore a need to change themselves in order to advance. Having never been conquered at that time, they could not blame colonialism and, having been isolated from international commerce and investment, they could not blame "exploitation" by foreigners. Operating on a vision radically different from that of many Third World nations today, Japan had one of history's most rapid and dramatic rises from poverty and backwardness.

In terms of leadership in science, technology, economic and political organization, and the arts, China was the leading nation in the world longer

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than any other nation in any other period of history. As late as the Middle Ages, China had the highest standard of living in the world. Yet, in more recent centuries, China has usually been a Third World nation, where recurrent famines took millions of lives, and only since the last quarter of the twentieth century has an accelerated growth rate begun to lift China out of that condition. Similarly, for centuries beginning in the Middle Ages, the Islamic world was well ahead of Europe in science, the arts, and militarily. But here too the relative positions of these two civilizations have reversed across a broad spectrum of social endeavors. In short, no nation or civilization has been permanently in the forefront of human advancement. But what has also never happened has been an economic equality across the spectrum of nations that many today regard as a norm, whose absence requires special and perhaps sinister explanations.

E C O N O M I C S

While contrasts between the economic levels of rich and poor nations are striking to the eye, these contrasts are truly staggering when seen in statistics. Real income per capita in Switzerland is more than three times that of Malaysia and 40 times that of Afghanistan, while the real income per capita of the United States is 50 times that of Afghanistan.1 3 There are more than half as many automobiles owned in Germany, Switzerland, and Canada as there are adults and children in each of these countries, while in Ethiopia only one person out of a thousand owns a car.1 4 The list of wide disparities goes on and on. However, some of these statistics need to be taken with a grain of salt.

In many Third World countries, much— if not most— of the economic activity takes place "off the books," because red tape and micro-managing laws and regulations make it too costly to do business legally. In India, for example, it has been estimated that only 10 percent of the country's working population work in the formal or legally recognized sector.1 5 Even aside from that, per capita income data are often not comparable because populations differ greatly in age between Third World countries and more