DEVELOPMENT ECONOMY

FACTORS THAT MAKE A COUNTRY TO BECOME POOR

FACTORS THAT PROMOTE / HELPS A COUNTRY TO BECOME RICH

Savings

• Huge ability and predilection for savings.
• Families try to save as much as possible because of a cultural preferences, a trend towards less consumption in the present in order to spend more in the future. These huge amount of savings leads to higher production and wealth levels. For example Japan citizens was keen in saving and they are still doing that.

Training

Demilitarize and democratize

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• Demilitarize - remove all military forces from an area

• Democratize - introduce a democratic system or democratic principles to.

• For example, 50s, 60s, 70s were miraculous years, (Japan’s Golden Age).

• A time led by the “Liberal Democratic Party” a political party that ruled the country for almost 40 uninterrupted years.

• In the early 1960’s, Prime Minister Hayato Ikeda announced a plan to double the size of Japan’s economy in just 10 years.

• To reach the goal, the country needed to maintain an annual average growth of 7.2% for that entire time.

• 10 years later, Japan had far exceeded it’s goal. The country had multiplied the size of it’s economy by 2.8 because it had an average annual growth more than 9.3%.

Location of a country

Location of a country will open a good market for that country. Especially to import and export or becoming a hub for that activity.

  • For example, Singapore having a strategic location. It sits in the middle of an important trade route connecting Asia to Europe.

Being competitive among other countries

Having state-owned companies, privatized telecommunications will attract more and more investors. It gives those investors a good image about that particular country. For example, Singapore took this opportunity. Singapore having state-owned companies, privatized telecommunications even though it's a small country.

Factors of production

• Rich countries have a lot of physical capital and a lot of human capital. Hence, that capital is organized using the best technological knowledge.
• Physical capital - More and better tools like shovels, tractors, cell phones, roads and buildings makes worker more productive.
• Human capital – Produced by an investment in education and training by experience.
• Organization – Brings physical capital, human capital, entrepreneurs, technological knowledge for better production.

Incentives

Institutions

• Some countries have good incentives (WHY?)
• Because they have good institutions that create incentives that spur prosperity.
For example, Property rights, Honest government, Dependable legal system, Political stability, Competitive and open markets

Proper training is required for a country's citizen for development
• For example, Japanese’s huge capacity of willingness to work longer hours.
• Karoshi’s death from working too much, which is a public health problem in Japan.

Some countries have good institution (WHY?)
Factors such as Ideas, History, Geography, Culture, Luck helps a country to have good institutions.

Wars

Bad governance

Corruption

Colonialism

Corruption is a form of dishonesty or a criminal offense which is undertaken by a person or an organization which is entrusted with a position of authority, in order to acquire illicit benefits or abuse power for one's personal gain. Corrupted politician or a citizen will only give importance to themselves only. They will not care about the country's growth or image.

A state of armed conflict between different countries or different groups within a country. Nowadays there are no wars among most of the countries. Yet there are some because of some political reasons. It may have some effects on the country's growth. For example, in the current situation war between Russia and Ukraine affected those country's import and export activity. But those countries can handle it because of the country's economical status.

Bad governance will face many difficulties in managing a country. Will not use the country's wealth in a good way. All those politicians will become position hunters. Focus on becoming prime minister, chief minister, and etc. But they will not use country's natural resources in productive way. For example Congo, have Coltan.
• Coltan is a rock that contains a lot of tantalum and it’s very cheap to refine. Biggest coltan reserves on the planet is Congo. (Saudi Arabia of Coltan)
But the country's politician just focus on their personal needs.

Colonialism is a practice or policy of control by one people or power over other people or areas, often by establishing colonies and generally with the aim of economic dominance. It resembles irresponsible citizens too. For example in Congo, they have such good natural resource which is Coltan. Government did not bother about it. Therefore, those irresponsible citizens or guerrillas make use of it for their personal income in an illegal way.