Wealth Is a Decision

For decades, Latin America has been told a simple story: rich countries are rich because they plundered everyone else, and we remain poor because we were plundered. You hear it in classrooms, in political speeches, and in everyday conversation. The trouble is that this story does not hold up against what has actually happened in the world. This article proposes a different explanation, one that is more useful and better supported by the evidence: wealth is not what a country has, but what its society is capable of doing, and developing that capacity is, to a large extent, a decision.

To see why, imagine two societies with exactly the same resources: the same territory, the same climate, the same minerals. In the first, people receive a good education, trust the rules, know how to work as a team, and can turn ideas into products. In the second, none of that happens. A few decades later, the first will be far more prosperous than the second, and the difference will not lie in what they own, but in what they know how to do together. This idea has solid academic backing. Amartya Sen, who won the Nobel Prize in Economics in 1998, argued that development means expanding what people are able to do and to be, not merely accumulating goods. Ricardo Hausmann and his team at Harvard created the Atlas of Economic Complexity, which measures how varied and sophisticated the products each country knows how to make are, and they have found that this sophistication helps predict an economy's future growth. Put simply, a country is rich when it knows how to make complex things.

If that is true, then natural resources cannot guarantee anything, and the facts bear this out. Venezuela holds the largest proven oil reserves on the planet, yet its economy shrank by roughly three quarters between 2013 and 2021, while more than seven million Venezuelans left the country. Nigeria, a major oil producer, and the Democratic Republic of the Congo, with enormous deposits of cobalt and copper, are among the poorest countries in the world. Economists call this phenomenon the resource curse: when a country lives off selling what it pulls out of the ground, the incentives to educate, innovate, and build strong institutions weaken, and easy money replaces the hard work of building capabilities.

The reverse is also true. Singapore has no oil or minerals, and not even enough water, and South Korea has very few natural resources, yet both rank today among the richest countries in the world. Botswana discovered diamonds shortly after its independence in 1966 and, unlike the Congo, managed them with transparent institutions, which allowed it to grow at a remarkable pace for several decades. The resources were valuable in both cases; the difference lay in what each society decided to do with them.

The countries that managed to transform themselves share one trait: at some point, they made a deliberate bet on building capabilities. When Singapore became independent in 1965, it was a poor island with no resources. It invested in education, adopted English as a common language to connect with the world, built one of the most efficient ports on the planet, attracted foreign companies, and fought corruption relentlessly. Today its income per person exceeds 80,000 dollars. South Korea emerged from the war of 1950 to 1953 devastated, with incomes comparable to those of several African nations, but it invested heavily in education, pushed exports, and gradually climbed the ladder of sophistication, from textiles to ships, from ships to cars, and from cars to semiconductors. Ireland, which until the 1980s was one of the poorest countries in Western Europe, with mass emigration and high unemployment, offered free secondary education starting in 1967, opened its economy to foreign investment, and joined the European Community in 1973, until it became known in the 1990s as the Celtic Tiger. And closer to home, Costa Rica abolished its army in 1948 and redirected part of those resources to education and health; decades later it attracted an Intel plant, and today it exports medical devices and high-tech services, something unthinkable for an economy based only on coffee and bananas.

These cases did not follow a single political model. Singapore and Korea grew under authoritarian governments for much of their takeoff, while Ireland and Costa Rica did so as democracies. What they had in common was something else: a decision, sustained over decades, to build capabilities, with mistakes and corrections along the way, but without waiting for conditions to be perfect.

Does this mean history does not matter? Not at all. Colonialism left behind institutions designed to extract wealth, and Daron Acemoglu and James Robinson, in their book Why Nations Fail, have shown how those institutions can perpetuate inequality for generations. But it is one thing for history to influence a country's path and quite another for it to be destiny. Latin American countries have been independent for about two hundred years, while Singapore was a British colony until 1963 and Korea was under Japanese rule until 1945, which is much more recent. If a colonial past alone explained present-day poverty, both would still be poor, and if wealth depended on owning resources, Venezuela and the Congo would be superpowers.

The cost of clinging to the plunder story is enormous, because it convinces entire societies that their situation was decided by others and that all they can do is wait for reparations or a stroke of luck. Each generation inherits resignation along with poverty, and as long as people believe the problem lies outside, no one asks what could be built from within.

Still, it is worth avoiding a common misunderstanding. Saying that development is a decision does not mean that every poor person is responsible for their own poverty. The decision we are talking about belongs to society as a whole, not to the individual. No matter how hard a person works, they cannot single-handedly change their country's education system, institutions, or economic rules; they can only adapt to the context they were born into, and that context weighs enormously. Research by the economist Michael Clemens, among others, shows that a worker from a poor country who migrates to a rich one can multiply their income several times over doing the same job. The person is the same; what changed is the environment in which they work. That is why, between two people with the same talent and the same effort, the one who lives in an environment that makes progress possible will go much further. Society, by contrast, can transform that environment by building schools that truly teach, reliable institutions, and rules that reward creating value rather than capturing privileges. Responsibility, then, does not rest with those who fail to prosper within a system that will not allow it, but with a society that has not yet decided to change that system.

For a decision like this to be made, the first step is to realize that it exists. A leader can drive it, but that is not enough: the way society thinks must change, so that it stops seeing itself as the victim of destiny and begins to see itself as the builder of its own future. Latin America has talent, resources, history, and no shortage of examples, both its own and others', showing that change is possible. What has been missing is not capacity, but the conviction that it depends on us, and waiting for a future generation to make the decision is to repeat the mistake, because every year of waiting confirms the belief that nothing can be done. The question is no longer whether Latin America can develop, because the world has shown that any society can. The question is whether we will make that decision now.