Prosperity is a process, not a place. Having money is important to prosperity, but not enough to ensure it. There are people and countries with lots of money that are not prosperous. The key not to have wealth but to have the capacity to create it, and that capacity comes from innovation that create sustainable markets.
He starts the discussion with South Korea. When the author lived in South Korea as a young man, it was abysmally poor. It was poorer than most of the poor countries today. Now it is one of the richest, and most prosperous, countries in the world. It got that way by innovation and market creation. You have to concentrate on the non-consumers and on what they want AND are willing to pay to get. It is easy to underestimate this.
There is the example of mobile phones in Africa. Today they are ubiquitous. Not many years ago, it seemed ludicrous that poor people in Africa would have mobile phones. After all, they needed so many other things. But selling mobile phones in Africa met a need.
The author points out that the USA was abysmally poor only a few generations ago. In 1860, for example, the USA had per capita incomes less than places like Angola, and there is no place on earth today so poor in the measure of overall human development as the USA was then. We came out of it through innovation. The book profiles innovators like Henry Ford, Charles Goodyear and Isaac Merritt Singer. None of these guys invented so much as made things more generally available. Singer’s case illustrates. He figured out how to make sewing machines accessible. Investors told him that the market for these machines would be too small to make money. But they filled an important need and they created markets. Sewing machines made clothing more efficiently and cheaply, and then spawned related industries, creating jobs and further growth.
So what is the prosperity paradox?
You cannot create sustainable prosperity directly. You cannot eliminate poverty by trying to fight poverty. The authors make a distinction between pushing and pulling. Development agencies often push. They give the example of building wells in developing counties. Who does not want that? If only people had easier access to water. Problem is that the recipients cannot or will not maintain the wells. It is not that they are lazy or stupid, but rather that this piece of development is plopped down without an the human ecosystem to support it.
There is also a strong limit to generosity. For something to be sustainable, it needs to make a profit, at least be self-supporting. It is not to say that everything must be bottom up, but that prosperity cannot be granted. Thinking of it in relationship terms, it must be something that the people themselves want and can sustain. It is much better to have a job than to be granted money. Having a job, doing something that you know is useful, is what gives people dignity. W/o dignity, wealth is not much use and prosperity impossible.
Good book. I recommend it.