Question

Why do people in some countries become rich while citizens in others remain poor? You might think the reasons for such a contrast is that some countries are well endowed with natural resources, such as, timber, energy, and fertile land, etc. Natural resources will answer only part of the answer. Take for example countries like Switzerland and Luxembourg, these countries have very little natural resources but decade after decade their citizens real income increase at a rapid pace. Another example, is Hong Kong, a few square miles of rocks and hills but has been a economic power house in the 20th century while Russia on the other hand with a vast land and natural resources was plagued with economic misery during the same time. Class-How would you explain this rich nation-poor nation dilemma?

Answer 1

Citizens in few countries are rich and wealthy while citizens of other countries are poor.Natural resources is one of the reason and not the main cause.Usually,countries with ample resources are expected to have high gross domestic rate and the countries with meagre resources are expected to have lower gross domestic product rate.But in real,natural resources effects GDP rate and economic growth slightly.A country can  earn high GDP and income rate by setting up many manufacturing units,producing goods,by providing employment opportunities and through exports.If a country has many companies,industries then there is need for labour.So,they hire major part of population and provide them job facilities.These people are offered with attractive wages and salaries,this makes labourers ,employees to work efficiently.When there is higher workforce available,production rate automatically increases.As there is maximum production,both  the sales and export rate tend to increase.During this stage,companies earn huge profits with high turnover.If profit level is high,workers are paid more which automatically rises income level.Hong Kong,Switzerland and Luxembourg are the countries who export goods,valuable items to other countries and import resources .These countries have impose less rules and regulations over trading sector,industries,manufacturing units ,etc.There are low trading barriers in these countries when compared to other countries.Due this low barriers,the production and sales rate is high.Even earnings of people in these countries is quite high due to low trade barriers and high currency value.When countries with high currency value exports goods or sells goods then they receive high income in return.Even real income or earnings of an individual increases due high payment of wages and high currency value.Switzerland,Luxembourg and Hong Kong are famous for vacation and holiday spot.So,these countries even earn income from tourism sector as they have many tourist spots.Therefore this is how a country becomes rich even after having scarce natural resources.

Inspite of having excessive resources,Russia failed to grow economically.This is due to low currency value,decreased prices of goods,low capital.When capital is insufficient,production rate of goods automatically decrease and industries are liquidated.When there are few industries and companies,employment opportunities tend to decrease causing low income rate.If people are not provided with employment,then the real income also decreases and people become poor and faced economic misery.Due to this,country's GDP,income rate,export rate,employment rate,etc fall and it makes the country poor.Even wars are the main reason for a country to face low economic growth.Wars effect the country and destroy the entire economy causing the country to become poor.Russia has imposed more barriers on trade when compared to Hong Kong.Even Russia's currency value is low than Hong Kong.These are the reasons why Russia is poorer than Hong Kong.Hong Kong is considered as a richest country.

Therefore,this is why some countries are rich while others are poor.A country's rules and regulations on companies and industries,production rate,sales rate,value of currency effect's its own economy and makes it either poor or rich.