aid from the poor to the rich

Today's top story is still the Pakistan earthquake. Todays story is about aid arriving from the west. So it is worth remembering that poor countries always send more wealth to rich countries than ever comes back in aid. It is a simple fact of economics, as pointed out in a earlier blog:

When a country is failing, it has less money to pay its people. Let us imagine that country A pays its people an average of five dollars an hour, and country B pays fifty cents per hour. For citizen B to earn a day of country A's production, he needs needs 50 dollars, so he needs to work for 100 hours. For citizen A to earn a day of country B's production, she only needs 5 dollars, so she needs to work one hour. So the pay difference of 10 to 1 produces a trade difference of 100 to one.
For poor countries to survive, they must trade with the rich countries. But the 100 to 1 disparity means that whenever they trade, the rich countries act like giant vacuum cleaners, sucking out anything of value from the poor country.

The few hundred thousand dollars pledged in earthquake relief should be seen in context: it is just crumbs compared with the vast wealth we suck out of Pakistan and every other less developed country. This wil be a fact of life for as long nations have different levels of economic success. The long term solution, as noted yesterday, is land rent.