This link has been bookmarked by 9 people . It was first bookmarked on 07 Oct 2007, by Vivian Paganuzzi.
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29 Aug 08
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"Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."
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80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity."
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the rule of law explains 57 percent of countries' intangible capital. Education accounts for 36 percent
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"If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid."
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"Where is the Wealth of Nations?"
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21 Oct 07
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But what is intangible wealth, and how on earth is it measured? And what does it mean for the world's people—poor and rich? That's where the story gets even more interesting.
Two years ago the World Bank's environmental economics department set out to assess the relative contributions of various kinds of capital to economic development. Its study, "Where is the Wealth of Nations?: Measuring Capital for the 21st Century," began by defining natural capital as the sum of nonrenewable resources (including oil, natural gas, coal and mineral resources), cropland, pasture land, forested areas and protected areas. Produced, or built, capital is what many of us think of when we think of capital: the sum of machinery, equipment, and structures (including infrastructure) and urban land.
But once the value of all these are added up, the economists found something big was still missing: the vast majority of world's wealth! If one simply adds up the current value of a country's natural resources and produced, or built, capital, there's no way that can account for that country's level of income.
The rest is the result of "intangible" factors—such as the trust among people in a society, an efficient judicial system, clear property rights and effective government. All this intangible capital also boosts the productivity of labor and results in higher total wealth. In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."
Once one takes into account all of the world's natural resources and produced capital, 80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity." -
the rule of law explains 57 percent of countries' intangible capital. Education accounts for 36 percent.
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The World Bank study bolsters the deep insights of the late development economist Peter Bauer. In his brilliant 1972 book Dissent on Development, Bauer wrote: "If all conditions for development other than capital are present, capital will soon be generated locally or will be available . . . from abroad. . . . If, however, the conditions for development are not present, then aid . . . will be necessarily unproductive and therefore ineffective. Thus, if the mainsprings of development are present, material progress will occur even without foreign aid. If they are absent, it will not occur even with aid."
The World Bank's pathbreaking "Where is the Wealth of Nations?" convincingly demonstrates that the "mainsprings of development" are the rule of law and a good school system.
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12 Oct 07
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In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."
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"Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity."
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the rule of law explains 57 percent of countries' intangible capital. Education accounts for 36 percent
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The rule-of-law index was devised using several hundred individual variables measuring perceptions of governance
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Switzerland scores 99.5 out of 100 on the rule-of-law index and the U.S. hits 91.8. By contrast, Nigeria's score is a pitiful 5.8
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In fact, some countries are so badly run, that they actually have negative intangible capital. Through rampant corruption and failing school systems, Nigeria and the Democratic Republic of the Congo are destroying their intangible capital and ensuring that their people will be poorer in the future.
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When a Mexican, or for that matter, a South Asian or African, walks across our border, they gain immediate access to intangible capital worth $418,000 per person. Who wouldn't walk across the border in such circumstances?
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he "mainsprings of development" are the rule of law and a good school system
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How can the people of the developing world rid themselves of the kleptocrats who loot their countries and keep them poor?
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11 Oct 07
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08 Oct 07
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The answer is not the obvious one: This country has more machinery or tools or natural resources. Instead, according to some remarkable but largely ignored research—by the World Bank, of all places—it is because the average American has access to over $418,000 in intangible wealth, while the stay-at-home Mexican's intangible wealth is just $34,000.
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07 Oct 07
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A Mexican migrant to the U.S. is five times more productive than one who stays home. Why is that?
The answer is not the obvious one: This country has more machinery or tools or natural resources. Instead, according to some remarkable but largely ignored research—by the World Bank, of all places—it is because the average American has access to over $418,000 in intangible wealth, while the stay-at-home Mexican's intangible wealth is just $34,000. -
The rest is the result of "intangible" factors—such as the trust among people in a society, an efficient judicial system, clear property rights and effective government. All this intangible capital also boosts the productivity of labor and results in higher total wealth. In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."
- 3 more annotations...
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The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity."
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In fact, some countries are so badly run, that they actually have negative intangible capital. Through rampant corruption and failing school systems, Nigeria and the Democratic Republic of the Congo are destroying their intangible capital and ensuring that their people will be poorer in the future.
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The World Bank's pathbreaking "Where is the Wealth of Nations?" convincingly demonstrates that the "mainsprings of development" are the rule of law and a good school system. The big question that its researchers don't answer is: How can the people of the developing world rid themselves of the kleptocrats who loot their countries and keep them poor?
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