Studentnomics

Inequalities have existed in the world for a very long time. Looking back, there has always been a disparity in economic development, with certain countries having strong economies and high standards of living while others are overcome by corruption, poverty, and underdevelopment.

Economic development is defined as “the reduction and elimination of poverty, inequality, and unemployment within a growing economy.” It possesses three key characteristics: life-sustaining goods and services, higher incomes, and the freedom to make economic and social choices. Indeed, some countries have much more access to these factors than others. But why?

It is impossible to answer this question with one reason. Each country is different and, therefore, has a plethora of multi-faceted, complex factors affecting its economic development.

One of the most significant factors affecting the economic make-up of countries is their colonial history. The colonialism of these nations meant that their resources were exploited, and the countries became severely underdeveloped due to a lack of investment in infrastructure and public services such as healthcare and education. Policies implemented by the colonisers also included constitutions such as the divide and rule policy, which involved splitting countries and, consequently, led to violence and aggression between the people. This accumulated in post-colonial nations in Asia, Africa, and Latin America, leaving them with weak, foundational institutions and lacking infrastructure essential to support economic growth. Post-colonialism was typically also met with violence and conflict, with corrupted individuals fighting for power and wealth. On the other hand, the colonisers such as the United States, the United Kingdom and parts of Europe had strong institutions and substantial resources, to prosper their economies.

Another predominant reason for the poor economic development of some countries is the lack of political stability and effective governance. Nations with solid political systems and transparent institutions, which are placed to meet the country’s macroeconomic objectives of supporting economic growth and reducing unemployment, are more economically prosperous. In contrast, countries with corrupted government officials and political instability experience economic decline, as the officials focus on personal greed and pursuit of wealth instead of flourishing the country’s wealth. Corruption means that resources are diverted for self-interest and self-gain and the public remain impoverished and poverty-stricken, lacking infrastructure and public services. Moreover, these countries tend to lack political freedom and rights, inhibiting any economic development due to the country’s weak political and financial institutions. This is visible in countries in Sub-saharan Africa, where political corruption and a lack of a strong political system resulted in inabilities for long-term development.

In addition, the physical geography and natural resources of a country plays a key role in shaping the economy of a country. Many economically successful countries tend to have abundant natural resources, such as oil or nutrient-rich, fertile soil, as these ignite economic growth and wealth. Also, these countries are typically located near trade routes, with easy access to the sea or advantageous climates and soils for a booming agriculture industry. On the other hand, some countries are thought to lack economic development due to their “cursed” physical geography, consisting of inadequate natural resources to support the country’s economic growth and perhaps being landlocked and having harsh climates. This leads to increased transportation costs for imports and exports, limited access to the global markets, and environmental vulnerabilities due to extreme weather and the progressing issue of climate change.

However, many famous economists, such as Daron Acemoglu, have claimed that whilst the physical geography and the extent of natural resources impact a country’s economic growth, this is not major and is, therefore, not the main reason some countries are poor. For example, despite having vast oil reserves, some nations like Nigeria struggle with poverty and instability due to corruption and conflict over this resource control. Moreover, countries like Botswana have achieved significant economic success and progress in sub-Saharan Africa. However, nations like South Sudan remained trapped in poverty and low prosperity despite their similar geographies.

In conclusion, it is difficult to pinpoint precisely one or two reasons why some countries thrive economically whilst others lack development. It is complex, with different extents to which they impact the growth of a country. The combination of history, institutional framework, political stability, education, governance, and resource access plays a critical role in a nation’s economic situation. In order to tackle global inequality and foster economic development in all countries, we must understand these reasons and implement policies. However, once again, we must note that every country is different, and therefore, each country’s path to economic success will be distinct.