In Economics, what is specialization & opportunity cost, and why do we try to keep poor countries poor?

These concepts are often made murky by the most well intentioned textbooks. Let’s see if a practical example would suffice:

If I am a lawyer and earn $500 per hour in a courtroom, and can type 60 words per minute, do I hire someone that types 30 words per minute at $50/hour?

Assume that it will take him two hours to do the typing, but it will only take me one hour.

Hell yes I hire him!

By hiring him to do my typing, I lose $50 per hour for 2 hours but make $500 per hour in the courtroom for a total profit of $900.

If I type myself, I miss out on $500 per hour for one hour and hop into the courtroom for the other hour for a total profit of $0.00.

So even if I am better at both lawyering and typing than the person I hire, I should still hire him.

Now pretend instead of me and a typist, we are talking about two entire countries.

Poor countries specialize in cheap labor (“typing”), wealthy countries specialize in design and engineering (“Lawyering”), and both are better off than before the deal was struck to (hopefully, temporarily) create that arrangement.

The First World does things (like offer IMF loans that have strings) in order to keep them poor because it is in the interests of all of the First World to do so. If we created another Japan, we’d have competition. If we keep them around as another metaphorical China, then the wealthy people in the developing country can exploit our middle class for profit and our wealthy people can exploit the poor desperate people in the developing country for profit (via minimizing costs). As long as you aren’t a poor person in a developing country, you win.

Why is it that no one seems to care about poor people in developing countries, and instead the well-intentioned but misinformed First World philanthropists do silly things like give them free corn that destroys the local farmers’ and forces them to grow poppy or marijuana in a desperate attempt to stay afloat by entering the drug trade? When I find the answer to that one, I’ll happily be accepting my Nobel Peace Prize shortly thereafter and credit any suggestions you may have to offer in the comment section.

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In Economics, what is specialization & opportunity cost, and why do we try to keep poor countries poor?

2 thoughts on “In Economics, what is specialization & opportunity cost, and why do we try to keep poor countries poor?

  1. Anonymous says:

    You already answered your last question in the next to the last paragraph. Although, it sounds like our middle class doesn’t come out too well in the deal either.

  2. I think our middle class benefits a bit.

    They get cheap stuff to consume, and they get to be in a service-based economy instead of a labor-based (ie, producing goods) one. We get stuff, but we don’t have to perform the arduous labor to produce “stuff.” All we have to do is count it and maintain it – being a clerk, accountant, or tech support person is generally less crappy than being a factory worker that makes whatever the thing is.

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