Book SummaryThe Master Guides: The Global Wealth Gap, by Shortform

1-Page Summary1-Page Book Summary of The Master Guides: The Global Wealth Gap

Why are some nations poor while others are rich? Is it the result of factors and circumstances determined long ago, or of contemporary political and economic decisions? Most importantly, is a global wealth gap inevitable, or is there a way to close it?

In our master guide to the global wealth gap, we’ll look at a number of perspectives on these questions from 11 economists, political theorists, and scholars:

• Prisoners of Geography by Tim Marshall
• The Bottom Billion by Paul Collier
• Guns, Germs, and Steel by Jared Diamond
• _[Why Nations...

The Master Guides: The Global Wealth Gap Summary Cause #1: Geographical Differences

The geography theory of international inequality argues that differences in the physical locations of countries determine—or at least strongly influence—their economic success. Proponents of this theory point to two main geographical factors: natural resources and topography.

1) Natural Resources

The first key factor of geography theory is access to natural resources—everything from farmable land to oil to fresh water. These resources can determine whether a nation becomes rich or poor.

How Resources Make Nations Rich

Journalist Tim Marshall’s Prisoners of Geography argues that in some cases, simply having more natural resources makes a nation richer. Resource-abundant nations can generate more wealth through extraction and then use that wealth to develop faster than their neighbors. For a modern example, [Saudi Arabia and other Persian Gulf states became some of the richest nations in the world in just a few decades due to their abundant oil...

The Master Guides: The Global Wealth Gap Summary Cause #2: Cultural Differences

Some authors argue that differences between cultures are responsible for international inequality. Culture, they explain, determines the values a nation promotes in its people. When these values are aligned with good economic practices, a nation is more likely to be rich. When they resist good economic practices, a nation is more likely to be poor.

Proponents of cultural theories of inequality argue the following three cultural values contribute to whether a nation is rich or poor: work ethic, openness to new ideas, and public trust.

1) Work Ethic

Max Weber (The Protestant Ethic and the Spirit of Capitalism) argues the religion Protestantism is conducive to economic success because it encourages hard work, frugality, and smart investment. He notes that at the time his book was written in the early 20th century, majority Protestant nations like the United Kingdom, Germany, the Netherlands, and the United States...

The Master Guides: The Global Wealth Gap Summary Cause #3: Political Differences

Some authors argue that political decisions are a more direct cause of the global wealth gap than geography or culture. They suggest certain types of governments, laws, and political norms are conducive to success while others lead to poverty. In particular, they focus on three main elements of government:

1) Market Regulation

Some authors argue that the use or misuse of market regulations—the way a government manages and controls its economy—can lead a nation to success or poverty. In Why Nations Fail, economist Daron Acemoglu and political scientist James A. Robinson argue government regulation of the economy is crucial for success. Specifically, they say regulations must create an economic environment that is fair, competitive, and easy to enter into. Under these circumstances, people are able to put their ideas on the market and the best ideas will be able to succeed. This economy of good ideas encourages technological development, which increases efficiency to create more wealth.

Acemoglu and Robinson explain that to create this...

The Master Guides: The Global Wealth Gap Summary Cause #4: Exploitation

Instead of studying the differences between nations, some authors focus on how nations interact to explain the global wealth gap. Specifically, they view exploitation—nations taking advantage of others for their own benefit—as the main cause of international inequality. Put simply, they argue that rich nations often become rich by taking wealth away from poorer nations.

They focus on two main methods of exploitation:

1) War and Colonialism

Acemoglu and Robinson (Why Nations Fail) explain that the most direct way nations exploit one another is through violent force. This can be as simple as one nation declaring war on another to try and secure economic benefits, or as complex as one nation establishing a network of colonies across the globe to extract wealth from elsewhere. Either way, one nation uses violence to benefit at the expense of another, creating or widening inequality.

Easterly (_[The White Man’s...

The Master Guides: The Global Wealth Gap Summary Solutions to the Global Wealth Gap

Now that we’ve gone over the common theories on why international inequality exists, we’ll explore some of the potential solutions to it—how nations and peoples can work to close the wealth gap. Some of these solutions apply only to specific causes of international inequality and have been noted as such, while others can be applied more broadly. In particular, we’ll look at the following proposed solutions:

1. Do nothing: International inequality isn’t a problem and therefore doesn’t need to be solved.
2. Encourage development: Rich nations can solve inequality by using foreign policy to encourage economic development in poor nations.
3. Mass redistribution of wealth: Nations and peoples around the world can solve inequality by redistributing wealth from the rich to the poor.

Solution #1: Do Nothing

Some argue international inequality is inevitable and acceptable. Sowell (Basic Economics) argues that because cultural, geographical, and political differences all contribute to international inequality, it’s too complex an issue to solve. He...

Shortform Exercise: Analyze Your Nation’s Wealth

Consider where your nation lies on the global wealth gap and what factors may have influenced its placement.

On a global scale, would you consider your nation to be rich, poor, or somewhere in the middle? Why?