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What Makes Nations Rich or Poor

Factors that make Nations Rich or Poor

Richer nations tend to have “good institutions”, a term used to denote sound economic policies, politically stable environment, and good leadership. Good leadership also implies that the government is more centralized and resources and opportunities for investment are well distributed. Here, investors, both local and international, are assured of reward on their investment; the opposite is true for poor nations, where their profits can be confiscated by corrupt and clan-based institutions. When the investors perceive the political environment as stable, they do not hold back on investments. They are assured of their financial security, so they contribute towards growth of the economy; towards making their country richer. Good institutions also provide guarantees for private property rights of individuals to be protected. They feel well cared of, and their property is safe. They then invest without qualms.

There must be strong government institutions that will ensure safety for the investors’ money. This contributes to the overall growth. On the other hand, bungling leadership, volatile political climate, and lack of sound centralized government structures make countries poor. Presence of natural resources also contributes towards the wealth status. Examples of countries that are poor yet they have natural resources are Congo, Nigeria, and Sierra Leone. They lack “good institutions”. They have poor leadership, are riddled in corruptions, and investors are not sure of the returns on investment. Countries that have started industrialization earlier, develop science, and stimulate technologies are predisposed to be richer. These are factors that determine some nations richer and others poor. In order for a country to be rich or economically sustainable, it has to develop “good institutions”, sound financial policies, stable political structures, and protection of private properties.

Development Strategy for Developing Nations

Developing countries are faced with economic barriers. These barriers include corruption, poor financial policies, lack of or insufficient resources, poor leadership, political instability, etc.. As an economic adviser, I would advise to these nations to ensure corruption-free investment climate. The institutions dealing with issues of investment ought to restore investors’ confidence, enacting institutions that fight or contain corruption. Investors prefer working with government institutions that ensure their profits; institutions that assure the return on their investment. Another important factor that developing nations ought to look into is political stability. A developing country needs sound political stability. Political stability is paramount to economic development. If a country is not stable, investors may hold back their investments and hamper economic growth.

Most businesses prefer working with clear and stable legal system which is followed as by common people, so by authorities. Investors favor institutions that are less corrupt and guarantee steady rules of conducting business. Another important factor developing countries can take advantage includes exploitation of natural resources. Natural resources, if well used, can prove instrumental to developing and struggling economies. It also means that the country will be less reliant on raw materials from other countries. Nations have to enact policies that regulate distribution of natural resources among its populations. For economic prosperity, a country must first be united. Internal wrangles prevent and create barriers for economic growth.

Over and above, governments must provide fair environment to investors by enacting good institutions, legislation, distribution of resources, and guarantees for investments. If all these factors are looked into by developing nations, investor confidence will be renewed, and it will spur economic growth and overall development of a country.

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