Thursday, May 14, 2020

A Life Lesson from Poor Countries

I always like to extract life lessons from seemingly unrelated ideas. This time I want to discuss an interesting article titled Why Poor Countries Are Poor. The article, which talks about the reasons some countries are poor, takes Cameroon as an example:

The average Cameroonian is eight times poorer than the average citizen of the world and almost 50 times poorer than the typical American. And Cameroon is getting poorer.

To grasp the situation better, look at the infrastructure there:
Douala, a city of 2 million people, has no real roads… Piles of rubble and vast holes mark unfinished construction or demolition work. Along the middle is a strip of potholes that 20 years ago was a road… As our car slowly bumped and lurched through the crowds, I tried to make sense of it all by asking Sam, the driver, about the country. “Sam, how long was it since the roads were last fixed?” “The roads, they have not been fixed for 19 years.”
19 years? How could that happen? Remember, Douala is a major city. Didn’t the people complain about it?

The Main Reason Poor Countries Are Poor
Economists have theories about what make a country poor:
Economists used to think wealth came from a combination of man-made resources (roads, factories, telephone systems), human resources (hard work and education), and technological resources (technical know-how, or simply high-tech machinery).

But the author argues that the picture is incomplete. There is an important part missing. The missing part explains why a poor country couldn’t build those necessary resources in the first place. Here it is:

Government banditry, widespread waste, and oppressive regulations are all elements in that missing piece of the puzzle… During the last 10 years or so, economists working on development issues have converged on the mantra that “institutions matter.”

Having bad institutions is the main reason poor countries are poor. How do you know whether or not a country has bad institutions? There’s a clear characteristic:
…self-interested and ambitious people are in positions of power, great and small, all over the world. In many places, they are restrained by the law, the press, and democratic opposition. Cameroon’s tragedy is that there is nothing to hold self-interest in check.

That’s it. There’s nothing to hold self-interest in check. As a result, everyone just looks for ways to benefit himself without ever thinking about what the consequences might be for other people or future generations. There’s no mechanism to restrain short-sighted behavior.

A Life Lesson for Individuals
I know that an individual is much less complex than a country, but I do see a parallel here. To succeed, especially in this era of globalization, you need to have good resources. Having good infrastructure, knowledge and technology is tremendously helpful. But, above all, what you need to be successful is good “institutions.” It’s good “institutions” that enable you to use your resources effectively and even build them in the first place. Without them, your self-interest will rule:
1. You will only do things that give you short-term benefits.
2. You won’t do the painful things necessary for long-term good.
3. You might cheat to get something for yourself at the expense of other people’s interest.

Good “institutions” help you prevent this short-sighted behavior.
The question is: what constitute good “institutions” at individual level? What are the things that hold self-interest in check? The answer, in my opinion, is your values and self-discipline. These are the foundation upon which you can build many other things necessary for success. They help you develop your potential and use your resources in the best possible way.

Let’s look closer at both of them:
1. Self-discipline. Self-discipline pushes you to do things that are painful in the short-term but good for you and other people in the long-term. Self-discipline makes you do the deliberate practice necessary to master a skill. Self-discipline makes you do your work even if you don’t feel like to.

2. Values. Your values fuel your self-discipline. They ensure that you have the internal motivation to do the right things rather than external motivation (like fear of punishment). They ensure that you can stay disciplined in the long run. Furthermore, they keep you from doing things that are harmful to other people or future generations.

Though they are different, the core of what makes a country successful is also what makes you successful. You need something that holds short-sighted behavior in check. You need something that makes you do painful things today for the sake of long-term good. You need to have strong values and self-discipline.
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