May

23

 The latest report from Amnesty International (see the FT report below) provides more grist for my foot-shot theory of human affairs. Can anyone ever make a profit without it being 'exploitiation'?

I thought I'd try to learn more about the field of economic inequality and discovered that Amnesty International evidently subscribes to the 'dependency theory'. But there are three other major types of theory about variations in nations' wealth, plus Richard Lynn's deeply unpopular thesis, which claims it has more to do with national IQs than anything else:

1) Dependency theory: Proposes that the economically developed capitalist nations are responsible for the poverty of the underdeveloped nations because they dominate the world economy, force the rest of the world into economic dependency, and pay low prices for Third World agricultural products and natural resources. This is why we get products labeled 'fair trade' in supermarkets.

2) Climatic theories: These propose that different climates naturally lend themselves to different levels of economic activity.

3) Neoliberal theory: Proposes that the major factor responsible for national differences in economic development is the presence of free markets as opposed to command, socialist, and communist economies.

4) Various psychological theories about motivational factors, such as the Protestant work ethic, have helped northern Europe.

Perhaps several of these theories have an element of truth, but I do find Lynn's hypothesis quite compelling, especially if his IQ/GDP correlation (0.82) is correct. And I can see why it might be rejected without study.

Given the taboo surrounding Lynn's ideas, could they be used for investment purposes? Well maybe. Just go long on a high IQ country that has been held back for reasons that are being reversed. Conversely one might short the hell out of a wealthy country in which the average IQ takes a sudden nosedive.

I started wondering about how someone should set about investing in Mongolia. To my dismay, I discovered that Lynn had already investigated the IQs of Mongolian kids and found them to be 5 lower than Han Chinese living in the same community. I guess it's back to the drawing board.

So it looks like genes are not enough, IQ is probably dependent on factors other than genetic material alone. But perhaps there's still an angle here for investment in companies.

Now I've seen lots of theories about how buying into companies with a good ethic works well (without quantification), but nothing based on IQ. And there are a couple of companies I can think of whose ethics have been criticized but not the brains of their leadership; Google and Microsoft.

Could there be a bias against brains that might be profitably exploited? I suspect that most people would much prefer to invest in dull honesty rather than the too clever by half. But maybe they are wrong.

From the FT's website:

The United Nations must develop international standards that hold big business accountable for its impact on human rights, Amnesty International says in its annual report published on Wednesday.

There is evidence in many parts of the world that people are being tipped into poverty and trapped there by corrupt governments and greedy businesses, Irene Khan, Amnestys secretary general, says in her foreword to the report.

According to Ms. Khan, a growing demand for mining, urban development and tourism projects is putting pressure on land, across Africa, Asia, and Latin America, with entire communities evicted from their homes without compensation or alternative shelter.

She says that weak, impoverished, and often profoundly corrupt states have created a power vacuum into which corporations and the economic actors are moving.

In some of the most resource-rich countries with the poorest populations, big business has used its unbridled power to gain concessions from governments that deprive local people of the benefits of the resources, destroy their livelihoods, displace them from their homes and expose them to environmental degradation.

Africa has long been a victim of the greed of western governments and companies, says Ms Khan, but she singles out China and Chinese businesses for showing little regard for human rights on the continent.


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