Poor Places

National development is still the best way to end global poverty

Our mission is to end extreme poverty and boost shared prosperity on a livable planet. This is threatened by multiple, intertwined crises. Time is of the essence. - The World Bank Group

A warm welcome to new subscribers. Our weekly newsletter, Below the Headlines, is still on a summer break. So, before Feyi returns to bring you those interesting stories about Nigeria and Nigerians home and abroad, let me try to bore your weekend with some storytelling about one of my favourite obsessions: economic development. I am a lifelong cinephile, so I want to talk about the lives of three film stars. These stories make me sad, and I will submit that I am not recounting them for entertainment purposes, but rather to draw attention to something I believe to be fundamentally important.

Trapped in Place

I will start with Fatai Adekunle Adetayo, a screen legend in Yoruba films. He is popularly known by his screen name, Lalude, a typecast (quite common in Yoruba films) shaman character he played in many movies for years. He was in the news recently, after revealing in an interview that he and some colleagues were paid peanuts - a reported 10,000 naira per day - by a benefactor to act as campaign mascots for the current president in the run-up to the 2023 elections. While the story went viral, sparking political debate, what I found most saddening was the underlying reality: a profoundly talented actor, a veteran of his craft, is still unable to earn a sustainable living from his work. Thirty years ago, Lalude had his breakout role in the classic Yoruba mythological film, Ogbori Elemosho. I recently rewatched it, and despite the rudimentary special effects, I was struck by its ambition and storytelling. But what made the film iconic was its villain, a character who terrified nearly every child in Southwest Nigeria. Before Lord Voldemort, there was Elemosho.

Lalude's portrayal of this character was breathtakingly terrifying. His physical agility in the final confrontation with the protagonist was incredible. So why, after over three decades of work and a performance that has stood the test of time, is this brilliant actor reduced to being used as a political prop? The answer is as simple as it is tragic: Nigeria does not have a market robust enough to support its film industry or the talents within it. For all his hard work and undeniable skill, Lalude was simply trapped in place.

The second story is that of veteran Yoruba actress Jumoke George, a performer whose talent, in her prime, I would have no compunction comparing to Meryl Streep. She recently made a startling revelation about the depth of her struggles. Despite a long and visible career, she has been homeless for six years, forced to live in a church after being unable to afford rent. Compounding this, she is battling severe health issues and cannot cover the costs of her medical scans, all while her eldest daughter has been missing for years. Her story is a harrowing example of how a life's work in a precarious industry can leave one completely exposed to negative personal shocks. For all her talent, she too was trapped in place.

My favourite character in the Game of Thrones television series was Tywin Lannister, one of the richest and most feared men in Westeros. My love for this character was rooted entirely in his eminent portrayal by the British actor Charles Dance, whose gravitas filled every scene he was in. I was reminded of Lord Tywin when I recently learned of the death of actor Olusegun Akinremi, known to all as Chief Kanran. For years, Chief Kanran played the same character with grace and erudition: the rich big man, unmistakable in his lace agbadas and Mercedes Benzes, cunningly scheming to win the affection of a beautiful woman who is usually married to some poor luckless lad. So good was he in this role that it was hard to believe he was acting. Imagine my surprise, then, when I learned that throughout the years he was the rich man on our screens, he was living in a one-bedroom apartment in a decrepit Lagos neighbourhood. Just before his death from what was reportedly a treatable case of appendicitis, he was reportedly soliciting funds from friends to pay for his surgery. The years had not been kind to him; he did not earn what his talent deserved. He was trapped and died in place.

I do not tell these stories to exploit the hardships of people for whom I have great love and respect. Rather, I tell them because they illustrate a deep and troubling (for me at least) economic truth. Readers paying close attention will have noticed a controversial claim embedded in my telling of these stories: that these individuals did not earn what their talent deserved. This is not a phenomenon restricted to the film industry; it holds for nearly any kind of work or skill. But how can we possibly know what people deserve to earn? The fact is, we cannot. The underlying point is more fundamental. If we were to swap the lives of these Nigerian actors with their Hollywood peers - if we precisely swapped the location where they practised their craft - their life outcomes would almost certainly be radically different.

Place Premium

This phenomenon is what development economists call the "place premium." It refers to the additional wage a worker earns solely because of where they work, not because of differences in their individual education, skills, or experience. The wage gap between identical workers in different countries can be enormous. A landmark 2009 study by Michael Clemens, Claudio Montenegro, and Lant Pritchett quantified this gap with stunning results. They found that a typical worker from Bolivia would earn about 2.7 times more in the United States than at home. For a Nigerian worker, the premium was as high as 8.4 times. Across 42 developing countries, the wage gains from simply relocating to the U.S. averaged over $13,000 per year in real terms. The place premium is arguably one of the largest price differentials in any global market, dwarfing the impact of most conventional anti-poverty programs.

This economic truth extends beyond just wages and into the most fundamental of human outcomes: life itself. A recent paper by economists David M. Cutler, Marian H. Wan, and Adriana Lleras-Muney titled "Place-Based Drivers of Mortality" explores a similar concept within the United States. They asked a profound question: to what extent does where you live shape your health and mortality, independent of who you are? By tracking the mortality rates of U.S. citizens who moved from one commuting zone to another, they were able to isolate the causal impact of "place" itself. Their findings are both striking and humbling. They discovered that moving to a "healthier" place—one with lower overall mortality—causally reduces a person's risk of death. While individual characteristics still matter most, the study confirmed that the environment and infrastructure of a location have a real and measurable impact on longevity.

The place premium exists within countries. But the biggest difference is between countries. This is because rich countries are fundamentally more productive environments. They have relatively stable formal and informal institutional environments that foster predictable expectations. They have vastly more physical and financial capital, better infrastructure, and superior technology, all of which make workers more productive. Furthermore, their large, dynamic markets and the clustering of firms and skilled labour create powerful agglomeration effects that are absent in poorer economies.

The place premium is a symptom of a deeper issue: poor places are incubators of poverty traps. A poverty trap is a self-reinforcing mechanism that causes poverty to persist across generations. It is a structural condition of entrapment, where the combination of weak institutions, a lack of capital, low savings, low productivity, and low incomes creates a vicious cycle that is nearly impossible to escape. This is less about the fate of any single individual and more a phenomenon of economic geography. These traps operate on the principle of thresholds. Below a certain level of wealth, health, or nutrition, an individual or household cannot save, invest, or work productively enough to improve their situation. No amount of incremental effort can get them over the hump.

So here is why I am talking about this. Over the last two decades, the intellectual paradigm in development economics has shifted. The focus has moved away from the complex, long-term challenge of making poor places more prosperous, and toward the more manageable goal of helping poor people where they live. This shift is understandable; it is far simpler to offer direct assistance to a poor family than it is to reform a nation's economy. It is also easier to measure, and an entire cottage industry of academics and development agencies has been built around the mantra of "doing what you can measure."

Economist Lant Pritchett has fiercely criticised this trend, arguing that it ignores the economics of the place premium. He contrasts what he calls "the best you can do" with "the least you can do." The "best you can do" is represented by a widely praised, multi-component anti-poverty program studied via randomised controlled trials across six countries. This intensive program - involving asset transfers, training, health education, and more - produced an annual consumption gain of about $344 per household. Pritchett then compares this to the "least you can do": simply allowing one low-skilled worker to migrate temporarily to the United States. The average annual income gain for that single worker is over $13,000, thirty-eight times greater than the gain from the best-in-class poverty program. The lifetime gain from just one year of migration is four times greater than the entire projected benefit of the in-country program, and it comes at nearly zero cost to the citizens of the host country.

However, Pritchett is making an argument in the context of migration - letting people move and work. But the reality is that most people are not going to leave the places they were born. Additionally, migration has become a politically divisive and toxic issue in many rich countries. So much so that the economist and popular blogger Tyler Cowen now considers pro-immigration views in developed countries to be anti-democratic. And quite frankly, the citizens of developing countries are not lesser humans who should have to endure the condescension and indignity of being reluctantly tolerated as ambitious economic itinerants in wealthy nations. So here is my twist on Pritchett's take: the hardest thing we can do to end poverty remains the best thing we can do. National development. Nothing is more liberating, empowering, and ultimately rewarding than for a poor country to become a prosperous one.

Pritchett’s own work reinforces this conclusion. He argues that true national development is a four-part transformation: creating a more productive economy, a more responsive state, a more capable administration, and a stronger sense of equal citizenship. His research shows that these three factors - GDP per capita, state capability, and democracy - explain nearly all the cross-country variation in human well-being, as measured by the comprehensive Social Progress Index. For poor countries, economic growth and state capacity are not optional extras; they are the essential drivers of better health, nutrition, safety, and opportunity. The focus on targeted, measurable aid projects, while well-intentioned, often mistakes mitigating the symptoms of underdevelopment for promoting development itself. In Pritchett's framing, it is the equivalent of rich countries looking in a mirror at their own prosperity and wrongly believing they see a window into how development ought to happen elsewhere.

The path of national development is slow, fraught with political challenges, and difficult to measure with the clean precision of a randomised trial. But it is the only path that can further rapidly reduce global poverty. Helping people in poor places is good, but poor places becoming rich is what has really changed the world. This is a task that cannot be outsourced to donor countries or so-called development agencies. National development is a local project that must be owned by local elites. It is time to hold the feet of political leaders in poor places to the fire.