The paper explains the role played by productivity differentials between different parts of the world, and how they are sustained dynamically. This is a positive feedback process. The surplus profit arising form these productivity differentials is re-invested in the higher productivity countries, permitting them to maintain and extend this gain, resulting in a secular rise in differences between national output capacities, over a very long period of time. This paper was originally printed as‘The Poverty of Nations’, LINKS, July-October 1996 pp35-58. ISSN 1321-795X. A subsequent version was presented as ‘Die Armut von Nationen’ to a 1999 seminar at the Freie University of Berlin and distributed to delegates attending the 1999 conference of INKRIT in Potsdam, Berlin.