Corruption laid bare by Global Witness: A Manual for Stealing Your State's Resources for Personal Gain

Global Witness issued this must-watch video this week, which demonstrates how leaders steal from their own people with the help of lawyers and bankers. The crime itself is bad enough, but the blasé demeanour of these perpetrators is truly offensive. They must have done this a lot in order to view the proposed transactions in such a banal and relaxed way. Though one woman clutches a pillow quite closely as she calmly explains how to take care of the details. Is she nervous about her illicit behaviour, or just eager to close the deal?

This exposes a number of rotten practices, few of which I would guess are unique to Malaysia. Instead, what I think we are seeing here is a manual:

How to steal your state's resources for personal gain, in 8 easy steps.

Step 1: get control over state land allocation and resource extraction licensing by becoming a state authority.
Step 2: open a series of accounts in trust or corporate form, in places will hide your identity and assets from other state authorities, for example, in "the new Switzerland."
Step 3: have the state sell land at nominal prices to your family members and/or companies you control.
Step 4: when buyers inquire at your state offices about making land leases or purchases, direct them to your family members.
Step 5: have your family members and lawyers explain to the buyer that the purchase will require two purchase contracts plus a side arrangement for licensing rights.
Step 6: write the first purchase contract for a nominal price to legally transfer the property locally but generate minimal (or no) profit.
Step 7: write the second purchase contract to direct the remaining purchase price to be paid directly to one of the offshore accounts.
Step 8: have the buyer write the side arrangement fee directly to one of the offshore accounts.

Query: how do you make sure your buyer actually pays you the second purchase price? That is, if the first contract documents the sale, what stops the buyer exercising ownership rights if he double crosses you on the offshore bank contract? The woman in the video says no problem, this has "been done." How has it been done? Are we talking about hiring thugs to break kneecaps? I've heard of similar triangular contractual arrangements in other equally criminal schemes, and I always wonder about how that aspect works out. Honor among thieves?

Tax, Law and Development

Yariv Brauner and Miranda Stewart have posted their introductory chapter to Tax, Law and Development, a book to which I am contributing with a chapter on global tax activism.  Here is the abstract:

This book is the first collection of independent legal scholarship exploring the relationship between tax, law and the quest for human development. While acknowledging fully the challenge of tax competition in a global economy, this book rejects calls to end taxation of mobile capital even if this may be perceived to be a theoretical economic inevitability due to the difficulty of collection in an uncooperative environment. New approaches to economic development suggest we must abandon – or significantly downplay – the dominant normative approaches to tax policy, replacing these with contextualized, diverse, partial and incremental tax law reform approaches that take seriously the legal, social and political context. The innovative scholars who contribute to this book examine the role of law in national and international tax regimes across a range of topical tax issues, from the perspective of countries including China, Brazil, South Africa, India and the United States. Chapters discuss the reform of tax laws that are central to economic globalization, including tax incentives for foreign direct investment, their relationship with tax treaties and other international tax law, the problem of how to address fundamental equity concerns, and institutions of budgeting, tax law making and administration in a global era.

They conclude:

The variety of chapters presented in this book forcefully demonstrate the deep need and the wealth of opportunities for progress in this avenue of study of tax, law and development. The primarily economic and ‘one size fits all’ focus of tax policy to date has not been sufficiently matched by detailed legal, historical and contextual policy analysis that can fortify and enrich it, supporting the implementation of tax reforms within real world social and legal structures. A range of alternative approaches to development arise out of the critique presented by the authors in this book and surveyed in this Introduction. The chapters call for a direct acknowledgement of the challenges and contradictions of tax law reform for development, and emphasize patience, diversity, a trial-and-error approach, transparency, legitimacy or ‘ownership’ and constant feedback and evaluation in tax reform approaches. Although less apparently streamlined and ‘correct’, these alternative approaches to tax, law and development do not imply a loss of focus, even if they are slow, difficult to implement, and lack the appeal of promised panacea. Moreover, they often require careful coordination within and between countries that does not exist in the current international tax regime. This new approach does, however, promise some actual success. The goal of this book is unashamedly idealistic, to serve as the foundation that would jump-start further scholarship, and support real change in the global and national tax laws for economic development.

I'm looking forward to seeing the book in print.

No sugar industry sans big gov

From Tim Carney: 

Last fiscal year, Americans paid about 69.9 cents per pound of refined sugar. The world price was less than 27.8 cents. 

Why is that? Why, industrial policy/central planning of course: state-provided infrastructure, subsidies, import quotas, tariffs, etc. But according to the beneficiaries of all of this central planning, it's not all the planning.  It's global competition from mercenary states that don't have things like...wait for it....labor and environmental protections!

"Go down to Brazil," [anti-NAFTA sugar farmer James Dickson] says. "Check out the working conditions." Brazil's labor costs are much lower, and so are its environmental regulations. "They do stuff to their sugar we would never do."

Carney says not so fast, there's plenty of that to go around:

The federal government also made it possible for the industry to get cheap labor from the Bahamas and Jamaica. Through the British West Indies program, which was created during the Great Depression, "the United States government played a direct role in negotiating employment contracts for offshore laborers," explained Everglades historian David McCally. Uncle Sam even paid to ferry cane-cutters from the islands to Florida. 

The guest-worker program put in place exploitative pay levels and work rules. For its part, Florida helped the industry by making it difficult or even illegal for cane cutters to quit. One farmer, lobbying the USDA against allowing Puerto Rican cutters, explained his reason: "Labor transported from the Bahama Islands can be deported and sent home, if it does not work, which cannot be done in the instance of labor from domestic United States or Puerto Rico." 

All of this was the subject of a little known film called H2 Worker by Stephanie Black (who also produced Life and Debt, a must-see for anyone interested in development economics) which you should watch if you haven't yet, even though it is admittedly quite slow in parts.

Carney concludes:

Florida sugar cane is an industry literally built on big government, and growers know it will wither in a free market.

Not literally. But otherwise true enough.

Manx tax strategy

Interesting: Isle of Man announces it will keep its 0/10 corporate tax rate and pretty much the rest of its tax system as is, but wil cooperate with the US on FATCA and the EU on its codes of conduct, and might join the mutual administrative assistance in tax matters agreement, and even "consider working with other countries and multilateral organisations on the development of co-operation systems similar to FATCA." I think that last one is in regards to the UK, but it could be broader in scope.

At the same time, the Isle of Man will

"maintain competitive  personal income tax rates  as one of the features making the Island an attractive place to live and work; and

maintain a competitive business tax system in the Isle of Man to support economic development;"

among other aspirations. I think they are in a tough spot, with the US and the UK focused on chasing individual tax cheats and corporate tax avoiders (respectively, perhaps) through their banks. By way of background, the tax strategy says:

The Isle of Man‟s taxation policies have played an important part in our economic success. 

...The key principles of fiscal sovereignty, economic stability and adherence to international standards which underpinned the original taxation strategy remain just as relevant today. 

I'm not sure what anyone means by fiscal sovereignty anymore. Then again, I never really did think it was a real thing.

MRU lectures on development

From Marginal Revolution:

At MRUniversity we just released over 30 new videos on leading thinkers on development. We cover Amartya Sen (who gets three), Bela Belassa, Karl Polanyi, Adam Smith, Paul Romer, William Easterly

 I'm glad to see Polanyi on the list, and right beside Adam Smith, precisely correct (though in their full listing the two are separated by Schumpeter and Gerschenkron, fair enough.  As to Easterly I am not as enthusiastic but I will watch it anyway.  Also on the list: Krugman, Stiglitz, Ostrom, Rodrik, Acemoglu, Banerjee, Collier, more.  Yes, the list is almost wholly male--only Ostrom, Anne Kreuger and Esther Duflo are included and all three are American (ok, Duflo is also French). Nevertheless it looks like a fascinating series.

Do state tax incentives increase economic growth? No.

Taxprof points to this paper by Kenneth Meier and Soledad Artiz on whether state tax incentives actually deliver the economic growth their advocates consistently promise.  Their answer is no:

"Contrary to expectations, business taxation shows a significant positive relationship with the growth rate of GSP, implying that lowering business taxes may actually be harmful to the overall state economy. ... 

Rather than boosting the economy as expected, in reality these policies have been associated with a decrease in the growth rate of GSP and resultantly economic decline. Likely, although these policies bring in businesses, these businesses are not generating growth. This could also stem from the fact that a decrease in taxation limits the state’s ability to provide public services: a necessary component of a strong business climate. Overall, the most conservative interpretation of these results is that decreasing business taxes will not generate an increase in GSP."

Yet I don't expect massive changes in tax policy, because as the authors state, tax incentives = economic growth is a matter of faith:

The belief that tax rates affect business decisions, which in turn influence economic growth, is virtually universal among state politicians...

Although the theoretical support for a negative relationship between business taxation and economic development seems clear, few empirical studies have documented this relationship... 

Even though a negative relationship between business taxation and economic development is theoretically expected, empirically this relationship is still unknown.

There are thirty pages of appendix in the article, but somehow I doubt the data will alter the politics.

The ultimate gated community is just a free zone with a new name

MR cautions not to "equate charter cities with extraterritoriality": a charter city works either "because a dominant hegemon — perhaps at a distance — supports the external system of law" or because "the external system of law serves up some new and especially tasty rents to domestic interest groups."  Either way, the charter city is not sovereign, rather some established sovereign is exerting control.  So a charter city is really just a free zone: another experiment in relaxing regulation that Honduras has already tried (along with many many countries, yes, including the U.S.), this one just has a name that taps into some emotional sentiment having to do with freedom and choice and entrepreneurialism.  If Honduras just called this another free zone project, perhaps few would take notice or wonder about it.

As this is just a new name for an old idea, it should not be surprising how quickly we see the familiar accountability/transparency issues pile up.  MR points to the Guardian, which reports:

Plans to create a neo-liberal start-up city in Honduras with its own laws, tax rules and police force suffered a setback on Friday when the economic guru who inspired the project said he has been unable to act as its guarantor and watchdog. 

...days after the deal was announced, Romer said he had not been given the powers and information necessary to fulfil his role as chairman of the transparency commission, which is meant to ensure governance of the new development zones.

Romer said he and four other international figures were appointed by presidential decree to the commission, which has wide-ranging powers to appoint and fire governors, nominate judges and hire auditors in the proposed new zones. But the five will issue a statement distancing themselves from this week's announcement and calling into question the legality of their appointment, which they say has not been published in the official gazette as required by Honduran law, ostensibly because of a challenge in the constitutional court.

Free zones have been around for a long time, they have been studied extensively, and they don't have a great track record, most especially when they lack major up front governance policy planning.  Calling the project a charter city won't avoid these difficult problems.

As an aside, I notice that the Guardian puts a price tag on the deal: a business consortium called NKG is paying $14 million for its city.  Who is NKG?  Not the Northern Kite Group or the Neumann Kaffee Group, I suspect.

 

 

The Ultimate Gated Community

Disappointing that AP saw no need to report on what it costs to buy your own private city.  It couldn't be nothing ... could it?  I would like to see the memorandum.  Does it read like a contract?  Like a treaty?

Higher Taxes Correlate with Prosperity

Taxes are one of three pillars of prosperity.   From Marginal Revolution:

In a recent book Besley and Persson 2011 argue that fiscal capacity is strongly correlated with economic performance across countries (see also here and here). They cite important historical work by Mark Dincecco who has shown that across Europe, between 1650 and 1900, higher taxes were associated with both limited government and economic growth (see here). The following graph is from Dincecco (2011) which contains similar figures for other European countries.

MR eyes this a bit warily, saying the correlation might be due to selection bias and incomplete data:

Modern states did not emerge out of nowhere.  They replaced pre-existing local systems of taxation, patronage, and rent seeking. ... There is plenty of evidence that these local systems imposed large deadweight losses [so] an increase in the measured size of central government need not have been associated with an increase in the total burden of government.  Rather the total deadweight loss of all regulations and taxes could have gone down in the 18^th and 19^th centuries, even as the tax rates  imposed by the central state went up. 

I am not sure but think this means that MR thinks that revenues could have been higher in the local system period than the data suggest?  Then MR adds a note about what caused revenues to increase:

Note: the increase in per capita revenues in England depicted in the figure is largely driven by higher rates of taxation (notably the excise) and more effective tax collection and not by Laffer curve effects (although the growth of a market economy during the 18th century did make it easier for the state to collect taxes).

So higher rates and better tax collection led to more revenues to be collected.  The Laffer thesis more or less says that low rates lead to more tax revenues since low rates produce more growth and more growth increases the base to be taxed, while higher taxes drive people out of the market and end up lowering revenues.  Leaving aside the evidence (or lack thereof) for the accuracy of this thesis in practice,  I take it that MR wants us to understand that revenues did not rise as a result of increased growth producing a bigger base and therefore more revenues at the same low rate as before, but rather England raised its tax rates and collected more taxes as a result.  Laffer doesn't seem to have played any role so I'm not sure what the point is of bringing him into this at all.  All in all I am finding MR more than usually confusing the point with this note, but I appreciate that they alerted me to the book.  Better just to read that, I think.

Policy autonomy and the WTO

Alvaro Santos has published "Carving Out Policy Autonomy for Developing Countries in the World Trade Organization: The Experience of Brazil and Mexico," discussed last week at Opinio Juris where Santos says:

I argue against the commonly held assumption that WTO legal obligations overly restrict countries' regulatory autonomy.  Despite the presence of restrictions, I claim that there is still flexibility in the system for countries to carve out regulatory space for themselves. That countries can expand their policy autonomy means that governments of developing countries have more agency and responsibility than development scholars typically admit. At the same time, however, the asymmetry of power and resources between countries does affect their experience in the system and thus influences the outcomes to a greater extent than liberal trade scholars usually acknowledge.

...countries are creating policy space ... as repeat players (RPs), to make use of textual open-endedness in legal obligations, to seek out favorable rule interpretation, and to actively participate in the WTO system through strategic lawyering and litigation. To pursue this strategy, countries invest in "developmental legal capacity," through which governments recognize the need to make gains in policy autonomy in order to pursue economic policy goals that may be in tension with the WTO's free trade objectives.

Santos analyzes the trajectories of Brazil and Mexico in the WTO to show two different experiences of repeat players and explore how and why their strategies differ.  More discussion at the Opinio Juris link.

UNCTAD update

UNCTAD gets fresh mandate, "after a huge battle between developing and developed countries": the G77 hung together and resisted attempts to silence it or narrow its mandate.  the Guardian's Poverty Matters Blog has this: Unctad is astute and progressive – so why don't developed countries like it?  For several of the reasons Vijay Prashad explained, such as:

"Some explanations for the apparently surprising attitude of developed countries can be found from the informal statements made by certain negotiators. One such representative of an important developed country told his counterpart from a major emerging market economy that they "did not want Unctad to engage in intellectual competition with the IMF"!"

The author follows that with "Intriguing, isn't it? Such people are usually all for competition in everything (certainly in labour markets) – except, apparently, ideas."

Controlling policy debate on trade & development

UNCTAD has issued a letter decrying attempts by the OECD to silence it as a voice in the international economic development debate:

"Since its establishment almost 50 years ago at the instigation of developing countries, UNCTAD has always been a thorn in the flesh of economic orthodoxy.  Its analyses of global macro-economic issues from a development perspective have regularly provided an alternative view to that offered by the World Bank and the IMF controlled by the west.

Now efforts are afoot to silence that voice.  It might be understandable if this analysis was being eliminated because it duplicated the work and views of other international organizations, but the opposite is the case - a few countries want to suppress any dissent with the prevailing orthodoxy. 

...At time when pluralism is finally being meaningfully discussed in the election of the  President of the World Bank, it is ironic that OECD countries are endeavouring to stifle  freedom of speech within another multilateral organization."

The letter is signed by a long list of people, including Dani Rodrik.  The Tax Justice Network posted the letter along with this disturbing addendum:

John Burley, who worked for UNCTAD for many years in senior positions, and who coordinated the letter, gave a presentation in Geneva in which he provided some background information (supplemented with a couple of comments in an email):

"An attempt is going to be made there, on the basis of what we hear ... at the moment, to change UNCTAD's mandate by denying the organisation the right to continue – and I emphasise: to continue – to analyse and report on global macroeconomic issues, including the role of global finance in development.
. . . This is not a matter of money: it is an attempt to dilute the mandate of UNCTAD to work on macro-economic and global finance issues."

... Why is the UNCTAD message so unwelcome? The fact that UNCTAD has no formal responsibility for the global management of the international economy and none of its own funds to dispense means that its analysis is free of vested interests. ... 

... And it is precisely in its analysis of interdependence that UNCTAD brings added value to an understanding of how the functioning of the global economy impacts on the majority of the world's population who live in developing countries. Given the current pressure on the organisation and its secretariat, that contribution could now be gone for good (our emphasis).
. .
The developed countries in Geneva have seized the occasion to stifle UNCTAD's capacity to think outside the box. This is neither a cost-saving measure nor an attempt to "eliminate duplication" as some would claim."

This is not about tax policy per se though quite clearly tax policy is a major part of trade-based development initiatives.  So it is worth connecting this to the OECD's control of rhetoric over international tax.  The OECD likes to call itself a "market leader in tax policy," a self-assessment I often refer to as an understatement because there is not much competition in this market, if any, and the OECD seems to work rather diligently to ensure that remains the case.  India's response to the OECD's position on transfer pricing is a current example, as TJN notes in their post; they also point us to this guest post by David Spencer that outlines the ongoing tension between the OECD and UN tax committees.

There are high barriers to entry in the international tax policymaking market--you've got to have the right infrastructure and resources so you can hold conferences in attractive locations and get important people to show up and network together, and you need to be able to display some indication of your ability to influence national legislatures to adopt norms you develop.  The institutions that can do that, like the OECD, can only keep doing that so long as people don't start to think they fail to represent consensus, sufficiently to erode the influence of their ideas in political discourse.  As we know, high barriers to entry are good for the established monopoly, and the case seems no less true for the production of ideas, judging by the many efforts to eliminate competition.

Want to move to IKEAland?

Maybe not quite as exciting as Sealand, but with infinitely better street names, one can only imagine.  Marginal Revolution links to this globe & mail article about IKEA's designs on designing urban living:

The people who run the Swedish home-furnishings behemoth are launching a bold push into the business of designing, building and operating entire urban neighbourhoods. Where once they placed a couch in a living room, the Swedes now want to place you and 6,000 neighbours into a neglected corner of your city, design an entire urban world around you, and Ikea-ize your lives. Their bold, high-concept notion of an urban 'hood could be an important solution to the housing-supply shortages that plague many large cities – but it could take some getting used to.

...It is a far more appealing design than most of the centrally-planned urban neighbourhoods that have blighted British cities for the last 60 years, and it promises the sort of pleasant population density – on a piece of wasteland that had once been considered uninhabitable – that could help Britain’s dire housing shortages.

The Ikea people promise that this will not be an Ikea...so, maybe no creative street names after all.  If not, the appeal seems considerably diminished.  It could be a premium to have an address on Fågleboda Drive,  or to take Förhöja Böülevård to the Förträfflig Öffice.

The homes will all be rentals, since this is an income-producing project for Ikea: “We don’t like to sell income-generating assets.”  But Ikea would like to stress that this will prevent speculation-driven boom and bust cycles, thus preserving affordability.  Check out the controls Ikea will exert:

“We’d have a very good understanding of rubbish collection, of cleanliness, of landscape management,” Mr. Cobden says. “We would have a fairly firm line on undesirable activity, whatever that may be. But we also feel we can say, okay, because we’ve kept control of the management of the commercial facilities, we have a fairly strong hand in what is said in terms of the activities that are held on site.”

Now it starts to sound like a gated community in Florida...not anything near as exciting as Sealand.  Instead of expanding into consumer credit, Ikea's just expanding into rental properties.

That's a Fryken shame.

Tax Activism

Activists around the world are taking on tax dodging as a threat to economic development in poor countries and to society in general in all countries.  I write about the movement and its prospects for involving NGOs and other non-business civil society groups into the rarefied world of international tax policymaking in my latest paper, Tax Activists and the Global Movement for Development Through Transparency.  In the paper I explore how the rise of concern about tax avoidance, especially by multinational companies, came about, and how the elite tax policy community is reacting to it (not particularly well).  Tax avoidance has been a staple of entity-level planning ever since we have had an income tax, and tax havens have existed for decades with tacit acceptance by governments.  It is only in the last decade or so that you could say a "movement" to bring multinational taxation to the public discourse as a matter of social justice began.  What happened to get the ball rolling and what turned it into a sustained force capable of disrupting the status quo?  The paper traces the movement and how it is faring as a means of contesting the established policymaking order.  If you're interested in the extractive industries transparency movement, country-by-country reporting, how tax connects to economic development, or how the OECD manages international tax discourse, you'll find the paper of interest.  It is forthcoming as a chapter in a book on tax law and development, edited by Miranda Stewart and Yariv Brauner.

Dying for Growth

Jim Yong Kim edited a book called "Dying for Growth" that has some people worried about what he would do if given the helm at the World Bank.   The FT quotes William Easterly as a worrier, and Tim Geithner as a soother.  Easterly:

"Dr Kim would be the first World Bank president ever who seems to be anti-growth," said William Easterly, professor of economics at New York University. "Even the severest of World Bank critics like me think that economic growth is what we want."

Geithner:

"[Dr. Kim] has an incredible feel for what matters most in development and recognizes that for economies to grow they have to invest in expanding opportunities for their people, in healthcare and in education. Those are lessons that the most successful emerging and developing countries have learned and been forced to learn, and in that sense he has the ideal feel. His experience comes from what he has done in the field, not just from his academic research."

Yves Smith is scathing:

"It isn't hard to see how self serving these attacks are. Notice who is making them: economists! When I was at the Atlantic Summit the week before last, Larry Summers made a remarkably transparent "why you need economists" pitch: all the problems the US was facing (big military commitments, need for more healthcare spending, perceived need to reduce the deficit as a percent of GDP) could all be solved with one magic bullet: growth!" 

 Yves mentions that Joe Stiglitz, Amartya Sen, and Jean-Paul Fitoussi are working on a "better measure of economic performance than GDP," with sponsorship from France.  Is that the Commission on the Measurement of Economic Performance and Social Progress?    Then there's the gross national happiness project (which tries to measure "psychological wellbeing, health, time use, education, culture, good governance, ecology, community vitality and living standards").  It's a tough sell because GDP is so nice and numerical and gives us confidence that we know what we're supposed to be trying to achieve.

Using taxes to correct trade imbalances

John Whalley, who has done a lot of work on tax, trade, and development, has a new paper with Chunding Li entitled Indirect Tax Initiatives and Global Rebalancing, in which the authors suggest that value added taxes can be used strategically to correct the global trade, current account, savings, debt and deficit imbalances that led to the 2008 financial crisis.  Exchange rate policies have been the main tool for rebalancing, but Whally and Li suggest that with cooperation, the US, Germany, and China could use VATs to achieve it.  From the abstract:

We suggest that if China and Germany (as major surplus countries) switch their present VAT systems from a destination principle to an origin principle, and the US (as the major deficit country) adopts a VAT on a destination principle, jointly these actions can significantly reduce the three countries’ joint imbalances and so contribute to global rebalancing.  ... VAT structures are not only good for global rebalancing but also the changes we consider are beneficial for welfare and revenue collection. 

And from the paper:

both China and Germany (and the EU more broadly) operate destination based value added taxes under which imports are taxed but exports leave the country tax free. Both have large trade surpluses of about 5% of GDP. Switching to an origin basis which taxes exports and allows imports tax free entry will, given these significant imbalances, raise taxes and effectively also tax imbalances potentially lowering their size. The long claimed neutrality of origin/destination basis switches for the VAT ... only holds for balanced trade, and not for today’s world. In the US there is no VAT, but revenue pressures given the debt and deficit situation could in the next few years potentially result in its adoption. Were this to happen, given the large US trade deficit a VAT in the US introduced on a destination basis could similarly serve to reduce the US imbalance. We also suggest that an internationally coordinated indirect tax change involving China and Germany switching to an origin based VAT, and the US introducing a destination based VAT could potentially lead to a significant change in global external sector rebalancing. 

There are plenty of formulas, charts, and jargon-filled paragraphs in the paper, but it also includes a straightforward explanation of how VAT works.   I'm not a proponent of VAT in general, but am interested in how these taxes might impact trade.  I think the political appetite for new taxes in the U.S. is too low to produce a federal VAT even if it could promise to reverse the trade imbalance, but the authors argue that "any individual country’s VAT changes will significantly reduce world total and individual country’s imbalances, improve individual country’s welfare and increase revenues."

Global Food Disparity in Pictures

Daily Kos links to a fascinating series of photos in which families pose by what they eat in a typical week, from a book by Peter Mentzel called "Hungry Planet: What the World Eats."  A few of the more startling contrasted:

In Egypt...

In Chad...

in China...

In America...

More at the link, all fascinating.  The surroundings and family compositions are equally as interesting as the food choices.  The pictures immediately reminded me of a series of photos I saw in an airport once that showed families from all over the world posing with their entire household possessions, displayed out in their front yards.  I thought that must be the same author/photographer, and indeed, here it is, entitled Material World: A Global Family Portrait.

Why do nations fail?

From Planet Money's Adam Davidson,

Over the centuries, proposed answers have varied greatly. Smith declared that the difference between wealth and poverty resulted from the relative freedom of the markets; Thomas Malthus said poverty comes from overpopulation; and John Maynard Keynes claimed it was a byproduct of a lack of technocrats. (Of course, everyone knows that politicians love listening to wonky bureaucrats!) Jeffrey Sachs, one of the world’s most famous economists, asserts that poor soil, lack of navigable rivers and tropical diseases are, in part, to blame. Others point to culture, geography, climate, colonization and military might. The list goes on.   

He doesn't mention what continues to be one of my favorite books on the subject, Guns Germs & Steel.  But the column is on the more recent work (linked to last week), which I have ordered but haven't read yet, by Darren Acemoglu and James Robinson.   Davidson says this book argues

"that the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy...when a nation's institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help."

This seems in tune with the Spirit Level.