I have heard from an interview with N. Chomsky that the British favored India to work their fields instead of creating the machines that are used in the fields, this is a form of economic supressesion I assume, but India was a British colony so it's a different story. Is it possible for a country to grow economically with just farming? Or really wealth comes from having highly demanded ground resources like oil.


1 Answer 1


How to make a country rich with no ground resources?

Country can develop and achieve high income country status (I assume that's what you mean by being rich), without much if any natural resources. There are numerous historical examples, such as Hong Kong, Singapore, South Korea, Switzerland etc.

Economic development and economic growth comes from having good 'inclusive' institutions such as property rights or free labor markets as opposed to bad 'extractive' institution such as slavery (see Acemoglu 2008, Acemoglu & Robinson 2000a, 2000b, 2001, 2006, 2008; Olson 1984, Bates 1981, 1983, 1989 and sources cited therein) and from technological growth, saving, capital accumulation (see Acemoglu Introduction to Modern Economic Growth or Romer Advanced Macroeconomics).

None of the factors above require country to have abundance of natural resources. In fact, in economics we talk about natural resource curse. That is abundance of natural resources often, although not always, makes countries poor and less developed (see for example; Venables, 2016). For example, Russia, Ukraine, Iraq, Iran, Kazakhstan etc are all resource rich countries but save for elites average citizens in those countries are very poor by our (western) standards.

Hence to make country rich without natural resources someone needs to first persuade the country's rulers to adopt inclusive institutions such as private property rights, free labor markets, provision of independent justice, provision of public goods etc, and also to invest into technology and capital.

Is it possible for a country to grow economically with just farming?

This question is not clear. It is certainly possible for country to focus on producing agricultural products and to develop and grow. However, even countries that typically specialize in agricultural products do not devote whole economy to that sector. The sort of agriculturally centered feudal economy of middle ages where virtually everyone was employed in agricultural production is likely inconsistent with significant economic development or growth.

  • $\begingroup$ Is it possible for an 'inclusive' institution to become 'extractive' unexpectedly? India may have thought it had a free labour market (where the only available jobs were field work) and strong property rights (where the British owners owned all the property). $\endgroup$
    – user253751
    Apr 27 at 9:26
  • $\begingroup$ when you say free labor market, do you mean less regulated labor? so like child labor? $\endgroup$
    – ArmenB
    Apr 27 at 17:14
  • $\begingroup$ @ArmenB it’s not what I mean I did not coined the term myself. When Acemoglu and Robinson talk about free labor market they mean unrestricted access to labor market without much price regulation; that is no caste system; no forced labor like slavery or serfdom. I don’t know if they also mean allowing child labor (if defined for children below 13) i don’t remember them mentioning child labor when they talk about free labor market but I think they do not because another inclusive institution they mention is basic education for children. However, it also depends on what you mean by child labor $\endgroup$
    – 1muflon1
    Apr 27 at 17:25
  • $\begingroup$ Since in the literature there are various definitions of child labor. For example, a common definition classifies child labor as anyone engaging in economic activity under age of 17 (ie that would include lemonade stands or the sort of apprenticeships common in EU in Netherlands Germany Denmark or Sweden where adolescents in vocational education contribute to some economic production). However there are different definitions and classifications some consider only labor by individuals under 15, 14 or 13 and some even make distinction on what sort of work it is $\endgroup$
    – 1muflon1
    Apr 27 at 17:34
  • $\begingroup$ @1muflon1 I think Union regulate salary, and that's a good thing on the personnel level and make happy employees. I kinda disagree with the free labor market strategy that sounds like a capitalist propaganda,who is advocating that? Acemoglu and Robinson what? $\endgroup$
    – ArmenB
    Apr 27 at 17:40

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