Why do some countries are rich and others are poor?

Why do some countries are rich and others are poor?




Here the most significant points which take parts in country growth

  1. Institutions: The biggest factor that determine the success of any country is the strong government . The government must enforce existing laws with strictness or create new laws so that everyone follows it. Many people who work in various institutions are corrupt and therefore, these bodies cannot collect enough fund through taxes to eradicate poverty and improve the lives of nationalists. Moreover, government cannot support and spend big chunk of money on most significant section of the society which is police, education, health and transport. These are the main 4 pillar for the country’s victory and if executives are failed to support these pillar then it is impossible for a nation to prosper.


  1. According to Adam Smith, the country’s economic growth is based on some factors (natural resources, labor resources and capital resources). Labor resources X Capital resources = Total Factor Productivity (TFP) is the most crucial factor to determine the country’s progress. Rich nations use machinery and labour to get large amount of output whereas poor countries do not have capital resource due to which they lag behind and their per capita income is very low. To read more about it click the following link: https://research.stlouisfed.org/publications/page1-econ/2017/09/01/why-are-some-countries-rich-and-others-poor/


  1. Short life expectancy: In poor countries, adults and children are adversely affected with death and disease. Whereas in rich countries, citizens take a different approach and maintain their health.
  2. Woman Education and low Fertility Rate: Poor nations are male dominated and their consciousness is polluted with stereotype that women are born to raise kids and take care of house. However, in richer countries women walk shoulder to shoulder with men  and help the country to grow due to which wealthier nations have low fertility rate.


What can we do to make a country rich?

  1. Increase trade with developed nations so that developing nations can buy their machinery to increase TFP (Total Factor Productivity).
  2. Government must assist business people in poor nations to create the employment opportunities and increase productivity.
  3. Various countries can learn lessons by comparing the North Korea and South Korea.


Example of South Korea: This country turned rich by taking top-bottom approach. After the second world war, dictatorship government approached the family of big companies like Samsung and LG. The higher authorities assisted these companies to grow more by reducing their taxes and finally these corporations created so called “Chaebol”. Chaebol is luxury conglomerate of houses, parks and splendor life for their employees. This is how these manufacturing industries played a role to remove poverty. Government also helped the citizens to save and invest their money. This is how in few decades this country turned rich. Moreover, leaders of this country put more emphasis on Maths and Science as they need skilled trade workers to run Chaebol.


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