Why Some Countries are Rich and Others Poor: A Study of Colonial Legacies

Ever wondered why some countries are wealthy while others struggle with poverty? Three professors from the US, including two born in the UK, have just won the Nobel Prize in Economics for figuring out part of the answer. They found that the political and economic systems set up by colonisers hundreds of years ago can still affect a country’s wealth today. Countries where the colonisers set up institutions that benefited everyone, like fair laws and inclusive governments, ended up being richer in the long run. But if the colonisers just wanted to grab resources and exploit the local population, the countries often stayed poor. Surprisingly, some places that were once rich are now poor, and vice versa. The researchers think this is because the colonisers’ ideas about who should benefit stuck around long after they left. But here’s the good news: countries can change their fate by setting up fair democracies and strong laws. The prize money is a whopping 11 million Swedish kronor, which is about £810,000. This award is technically called the Sveriges Riksbank prize in economic sciences in memory of Alfred Nobel. The committee chair, Jakob Svensson, thinks understanding the impact of institutions is key to bridging the huge income gaps between countries. Two of the winners, Daron Acemoğlu and Simon Johnson, teach at MIT in the US. Along with the third winner, James A. Robinson from the University of Chicago, they have written best-selling books explaining their findings. So, the next time you think about a country’s wealth, remember: the history of its institutions might be playing a big role.