Why does prosperity stop suddenly at country borders? Thus, as you leave the border of South Korea and enter North Korea, you suddenly face deep poverty and a sense of hopelessness. (see: https://www.sabhlokcity.com/2010/06/black-and-white-proof-against-socialism/ for a visual depiction of this dramatic difference in economic performance).
Why do borders make such a huge difference? What changes when borders change?
Mancur Olson, in his "Distinguished Lecture on Economics in Government: Big Bills Left on the Sidewalk: Why Some Nations are Rich, and Others Poor", The Journal of Economic Perspectives, Vol. 10, No. 2 (Spring, 1996), pp. 3-24, explained that the key difference lies in the differences in institutions and incentives. (his article here – pdf)
At the root of these differences is the level of freedom, as I've shown at some length in BFN.
Trillions of dollars of wealth is left lying around today, without picking it up. India has lost hundreds of thousands of crores of rupees by following policies of unfreedom, policies of socialism, policies that have blocked and choked incentives for wealth creation.
We can easily pick up that money by ushering freedom and good governance into India. Join the Freedom Team if you are interested (and capable).
Let's pay heed to Mancur Olson's lecture, extracted below:
Picking Up the Big Bills
“The best thing a society can do to increase its prosperity is to wise up. This means, in turn, that it is very important indeed that economists, inside government and out, get things right. When we are wrong, we do a lot of harm. When we are right – and have the clarity needed to prevail against the special interests and the quacks – we make an extraordinary contribution to the amelioration of poverty and the progress of humanity. The sums lost because the poor countries obtain only a fraction of – and because even the richest countries do not reach-their economic potentials are measured in the trillions of dollars.
“The familiar assumption that the quality of a nation's economic institutions and policies is given by the smallness, or the largeness, of its public sector – or by the size of its transfers to low-income people – does not fit the facts very well. But the hypothesis that economic performance is determined mostly by the structure of incentives – and that it is mainly national borders that mark the boundaries of different structures of incentives – has far more evidence in its favor.
“There is also direct evidence of the linkage between better economic policies and institutions and better economic performance.”
