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Chapter 18 Policies and Prospects for Global Economic Growth
The average resident of Africa earns about 5 percent of the per capita real GDP of a U.S. resident.
Furthermore, his or her situation has not been improving. In 1970, 10 per
people lived in Africa. Today, Africa is home to about 50 percent of the poorest people.
growth? A fundamental factor is dead c
Addressing the Problem of Dead Capital
An experiment in eliminating dead capital provides some insights into the issues usually overlooked by
economists in their discussions of giving title to the real property of persons, especially poor ones, in less
developed countries. In 1984, the government of the town of Quilmes near Buenos Aires in Argentina
took away land from some large landowners and gave title to it to squatters who had built shacks and
other types of housing on the plots of land that they used. The theory was that it would be possible for
these squatters to use the property as collateral for loans to improve them. At the same time, some of the
original landowners took the municipal government to court, and as of 2006, still had not gotten a final
judgment. The question then was what differences between squatters existed in terms of improvements to
property and access to loans for the new owners, on the one hand, and the squatters who have not gotten
title to the property on which they live on the other?
The Rule of Law and Per Capita Real GDP
Failure to abide by the rule of law makes the return on capital more dependent on the whims of individuals
than on laws. Property rights become less secure, which discourages businesses from investing and using
558 Miller Economics Today, Nineteenth Edition
property for more productive purposes. The growth-reducing effects of a breakdown of the rule of law show
The World Bank and the Development of Poor Nations
The International Bank for Reconstruction and Development, known as the World Bank, was established
in 1944. To date, it has lent nearly $390 billion, mostly to poor nations. However, its accomplishments
have been questioned. For example, since 1951, India has received more than $58 billion more foreign
In 1998, Robert Rubin, then the U.S. Treasury Secretary, claimed that the billions of dollars the U.S.
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