Nations don't get rich by plundering other nations
National wealth comes from ingenuity, hard work, good institutions, sound policy, political stability, and openness to foreign ideas and investment.
One idea that I often encounter in the world of economic discussion, and which annoys me greatly, is that nations get rich by looting other nations. Here are just a couple of examples I saw today on the platform formerly known as Twitter:
This idea is a pillar of “third world” socialism and “decolonial” thinking, but it also exists on the political Right. This is, in a sense, a very natural thing to believe — imperialism is a very real feature of world history, and natural resources sometimes do get looted. So this isn’t a straw man; it’s a common misconception that needs debunking. And it’s important to debunk it, because only when we understand how nations actually do get rich can we Americans make sure we take the necessary steps to make sure our nation stays rich. (There actually are some more sophisticated academic ideas along similar lines, and I’ll talk about those in a bit.)
So anyway, on to the debunk. The first thing to notice is that in the past, no country was rich. There’s lots of uncertainty involved in historical GDP data — plenty we don’t actually know about populations, prices, and what people consumed in those eras. But even allowing for quite a bit of uncertainty, it’s definitely true that the average citizen of a developed country, or a middle-income country, is far more materially wealthy than their ancestors were 200 years ago:
If you account for increasing population and look at total GDP, the increase is even more dramatic.
What this means is that whatever today’s rich countries did to get rich, they weren’t doing it in 1820. Imperialism is very old — the Romans, the Persians, the Mongols, and many other empires all pillaged and plundered plenty of wealth. But despite all of that plunder, no country in the world was getting particularly rich, by modern standards, until the latter half of the 20th century.
Think about all the imperial plunder that was happening in 1820. The U.S. had 1.7 million slaves and was in the process of taking land from Native Americans. Latin American countries had slavery, as well as other slavery-like labor systems for their indigenous peoples. European empires were already exploiting overseas colonies. But despite all this plunder and extraction of resources and labor, Americans and Europeans were extremely poor by modern standards.
With no antibiotics, vaccines, or water treatment, even rich people suffered constantly from all sorts of horrible diseases. They didn’t have cars or trains or airplanes to take them around. Their food was meager and far less varied than ours today. Their living space was much smaller, with little privacy or personal space. Their clothes were shabby and fell apart quickly. They had no TVs or computers or refrigerators or washing machines or dishwashers or toasters or microwaves. At night their houses were dark, and without air conditioning they had trouble escaping the summer heat. They had to carry water from place to place, and even rich people pooped in outhouses or chamberpots. Everyone had bedbugs. Most water supplies were carried from place to place by hand.
They were plundering as hard as they could, but it wasn’t making them rich.
Nor were colonized and exploited nations and peoples rich before the European empires arrived. Yes, Africa, Latin America, and parts of Asia were harshly exploited by European empires for their natural resources. But although Africa, Latin America, and Asia were closer to Europe in terms of living standards back then, they were all very, very poor by modern standards.
This should be the first very strong clue that modern rich nations’ wealth didn’t come primarily from plunder, but from something else — something that nations started doing over the last century and a half. In fact, we know what that something is — it’s industrial production, coupled with modern science.
We are far richer than our ancestors because we know how to make a lot more stuff than we did then — cars and trains and planes and antibiotics and vaccines and reinforced concrete and electricity and running water and TVs and computers and all the rest. And we know how to make stuff more efficiently. In 1810, 0.4 percent of Americans’ income was spent on nails. Yes, you heard that right — the little metal pointy things took $1 out of every $250 we earned. Nowadays it’s negligible. In 2006, the price of lighting in the UK was about 1/4500 the price of lighting in 1786.
So the fabulous wealth of the modern day can’t be due to plunder alone. The world does not contain a fixed lump of wealth that gets divided up among the people of Earth. Human ingenuity and hard work increases the amount of wealth in the world.
Anyway, there are two more sophisticated cases you can make for the “imperial plunder” theory of national wealth. The first is that continuing plunder is responsible for income differences between countries. The second is that plunder was necessary to initiate the process that eventually led to industrial production and modern science. The first of these arguments is wrong; the second can’t easily be disproven, but there’s major reason for doubt.