The Chief Cause of the Wealth of Nations is Not Material at All, but Knowledge and Skill

Very, very well said by economist Michael Novak, quoted in Compassion International’s short booklet Poverty:

Economists affirm that the chief cause of the wealth of nations is not material at all, but knowledge, skill, know-how — in short, those acts and habits of discovery, invention, organization, and forethought that economists now describe as “human capital,” which is located in the human spirit and produced by the spiritual activities of education and training and mentoring. Human capital also includes moral habits, such as hard work, cooperativeness, social trust, alertness, honesty, and social habits, such as respect for the rule of law.

As a result, as the booklets says right before this, the true engine of sustainable and transformational development among the poor is the development of people’s internal capacities — knowledge, hope, social connection, diligence, and so forth. It is through fostering the growth of these capacities that people are enabled through their own efforts “to improve their external context.”

This is why helping the poor is about far more than giving fruit baskets at Christmas. Aid, while it has its place and is essential in emergency situations, does not go to the root cause of poverty and that’s why it will never provide the ultimate solution. An exclusively aid-based approach to fighting poverty is based in the false notion that wealth is produced by externals, rather than bringing people empowerment and helping them grow in their capacity to create, identify, and seize opportunities and fight against the oppressive situations in which they often find themselves.

  • Glenn Brooke

    Thanks for posting this, Matt. I think the history of Singapore is a good object lesson in this. Begin with a really small island and small population, without natural resources except a decent port. Education, trade, business-friendly, highly moral society — over 5 million residents and considerable wealth in 80 years.

  • Wendy McMahan

    Yes, and I would argue that there’s a root layer of internal capacities even more fundamental than knowledge and skills. You alluded to it, Matt, when you listed “hope.” Our worldview–the way we see the world and our place in it–lays the foundation for even believing that we can acquire knowledge and skills, that acquiring knowledge and skills will do us some good, and that all people in a society have a God-given potential.

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