Why are some nations rich while others are poor?

How have some nations made it from poverty to prosperity –
while others have failed?
Why are many small nations outperforming many bigger
ones, in the international race to the top?
Why, indeed, is the majority of mankind entrapped in
exreme poverty, although we have the the knowledge,
technology and resources to end poverty in the lifetime of a

  1. Finding reliable answers to these questions is a matter of life and death for the majority of mankind.

    Although major thinkers and scholars have searched for answers to those questions for more than 200 years, since Adam Smith published The Wealth of Nations in 1776, the answers so far are still tentative and controversial.

    Does the wealth of nations depend primarily on external factors, beyond human control? Natural resources, climate, geographic location, proximity to markets or sheer size, through the economy of scale? If it were so, why then is Japan rich but Russia poor? Why is Denmark rich but Brazil relatively poor?

    Or does prosperity or poverty depend primarily on human qualities, such as they are moulded through time by history, customs or by religious beliefs or rules, that gradually shape basic attitudes towards work, education and the willingness to solve conflict through democratic procedures and the rule of law?

  2. Economists speak of models: There is a laissez-faire model; there is a Nordic model; there is a European welfare model; and there is an Asian model. The journalistic jargon seeks metaphors from the animal kingdom: Accordingly they talk about Celtic tigers and – more recently – about Baltic tigers. The role of the state – and the interplay between the state and market forces – and free trade versus protectionism – is usually at the heart of the controvesy.
    But whatever our ideological predilections may be, the 20th century made one thing clear – beyond dispute: Without freedom, there can be no progress. Freedom is therefore a sine-qua-non , if human society is to prosper materially and mentally.

    But if freedom is merely a priviledge of the few, rather than the human right of the many, it is unsustainable. Only freedom, exercized by responsibility, overseen and guarded by a genuinely democratic state under the rule of law, can lead to a sustainable human developement on our planet.

    At the beginning of the 20th century Icelanders were among the poorest of the poor; at the turn of the century we were among the Top-Ten, measured by GDP per capita. We did not have access to oil or gas or any precious metals. But we did have rich fishing grounds and free access to European markets. But what enabled us to master new technologies was a long tradition of high level literacy, fostered by democratic traditions and the rule of law, which was the hallmark of the ancient Icelandic Republic, established already in the 10th century.

    The key to our material success is therefore freedom, exerciced by the restraint of a healthy democracy and our egalitarian traditions.

  3. What took us almost a century to achieve is now being accomplished in Latvia – and the other Baltic countries – in the course of a few decades. What you have achieved
    in the past decade and a half is remarkable by any standards.
    What you can accomplish in the next decade and a half, can
    be a lesson to the rest of the rest of the world.
    It is the peaceful Baltic road to freedom and prosperity.

    What is being signed here today – an Icelandic – Latvian
    cooperation agreement in the financial sector – signifies on
    our part a vote of confidence in Latvia´s future.

Riga, January 18, 2006
Jón Baldvin Hannibalsson/BS