Why are some nations rich and others poor?

Martyna Rutkowska

March 11, 2023
3:24 pm

Why are some nations rich and others poor?

Such questions have long fascinated ordinary people and economists, at least since the time of Adam Smith, the eminent Scottish economist, who wrote about them in his 1776 work, “An Inquiry into the Nature and Causes of the Wealth of Nations.” On the other hand, Gunnar Myrdal – a famous Swedish economist claimed that “Poor countries are poor because they are poor.” To some extent, he has a point, but here I would like to expand on this topic a bit more.

Gunnar Myrdal, in his famous theory, claim that as a result of poverty, parents may be forced to send their children to work when they are young, with no chance of a good education, and consequently become poor adults in the future as well, a process referred to as the “vicious circle of poverty”. Surely, our origin certainly has a substantial impact on our later situation and possibilities, but this topic is much more complex and consists of many components.

Some people don’t wonder why poor countries are poor, they rather wonder why rich countries are rich. They consider poverty as a departure point. However we don’t look at this issue, it is worth reflecting a bit upon the reason for both these opinion.

First of all, it is crucial to understand that only increased productivity is the key to long-run economic growth which is needed to accumulate wealth by nations. Productivity is defined as higher output per worker. But can’t an economy also increase by putting more of the population to work? The answer is, yes, but… For short periods of time. More people put a higher percentage of population to work, however, it means that the goods and services these workers produce are divided between more workers. Hence, the output per worker – which is one way of looking at a nation’s wealth – will tend to go down.

So, having already explained that only greater productivity can improve the living conditions of society in the long run, why is it more possible in some countries than in others?

The literature distinguishes three, sometimes four main reasons for increased productivity.

These factors of production are explained below:

Physical capital: The stock of equipment and structures that are used to produce goods and services. Note that these tools and machines are themselves the output from prior human production.
Human capital: The knowledge and skills that workers acquire through education, training and experience. Note that human capital, like physical capital, is a human-made or produced factor of production.
Natural resources: Inputs provided by nature’s bounty such as land, rivers and mineral deposits. Natural resources come in two forms: renewable and non-renewable.
Technology: The technical means for the production of goods and services.

Although these factors certainly have a relevant influence on productivity, I would like to clarify exactly what these include and add new ones, because this topic is very complex and significant.

Corruption and importance of good institutions

Certainly, each of us has come across this term many times, but let’s be sure what we mean.

Corruption is dishonesty or crimes committed by a person or organization in power to obtain illicit benefits. It can take various forms, including bribery, influence peddling or embezzlement. Political corruption occurs when an office holder or other government employee acts with the official intention of personal gain.

While it is difficult to obtain accurate data on the economic costs of corruption, a 2016 report by the International Monetary Fund (IMF) estimated that bribery alone costs around $2 trillion annually. This represents a total economic loss of around 2% of world GDP.

It is no coincidence that the poorest countries in the world are also among the most corrupt. Corruption can negatively impact the economy both directly, through for example tax evasion and money laundering, as well as indirectly by distorting fair competition and fair markets, and by increasing the cost of doing business. It is strongly negatively associated with the share of private investment and, hence, it lowers the rate of economic growth. Moreover, by filling positions with friends or family instead of the most qualified and talented individuals, economic efficiency is threatened. What is more, in corrupt countries, it is not possible to collect enough taxes to finance education, health care or fight poverty. The education and health of citizens, in turn, are of key importance in the development of a given society. Only healthy, educated citizens can contribute to the growth of the economy, this is the so-called human capital, which significantly affects productivity. The richest countries in the world are famous for the best education and the longest life expectancy. Therefore, corruption destroys the basic rights of hundreds of millions of people across the world. It has devastating consequences on the services provided by public institutions and it undermines the prospect for a better life for future generations.

Additionally, corrupt political and economic systems serve only selected individuals, so wealth is redistributed to the least needy sources.

In Nigeria, according to the World Bank (2019), more than 50% of the population of this oil-rich country live in extreme poverty. An (in)famous bribery case, involving the international oil company Shell, deprived Nigerian people of over $1.1 billion as the money went to corrupt officials instead of to the national budget.

Another example is the Democratic Republic of the Congo. The country is the world’s largest producer of coltan. It is used e.g. for the production of processors and other modern electronic equipment. 1 kilogram of coltan costs around USD 400 in Europe and only USD 3 in the mining area. GDP per capita is about USD 480 and this is the third lowest value out of all 194 countries. 63% of the population live below the poverty line there, despite the fact that it is such a mineral-rich country. Corruption is the main reason for this. The proceeds go only to influential individuals, undermining the opportunities of ordinary citizens.

The explosion in Beirut is also worth mentioning – the capital of Lebanon on August 4, 2020. During the event, 204 people died and over 6.5 thousand were injured. At least 250-300 thousand people lost their homes as a result of the explosion. The blast was one of the strongest man-made non-nuclear explosions. On August 10, 2020, Prime Minister Hassan Diab resigned along with the rest of the government, admitting that the cause of the outbreak was the negligence caused by Lebanon’s powerful corruption system. This, as well as the COVID-19 pandemic, contributed to the catastrophic situation of the country to the greatest extent. 80% of the population live below the poverty line and one in three adults are unemployed. In mid-2021, the World Bank described this economic crisis as one of the three biggest economic collapses since 1850.

The Corruption Perceptions Index

The 2021 CPI (released January 2022) ranked 180 countries on a scale from 0 to 100. The lower the score, the more corrupt a country is considered to be.

GDP per capita and Corruption Perception Index in selected countries, 2018.

The graph shows the relationship between GDP per capita and Corruption Perception Index. As we see, both values are closely related. Countries with the highest corruption rates – such as Somalia and South Sudan – have lower GDP per capita. The existence of good institutions is necessary to increase the national income, which is possible only by eliminating corruption, as in developed countries. It is clearly visible in Norway which has one of the highest GDP per capita in the world and is also one of the least corrupt nations. In economics we hardly ever speak about coincidence.

When we are dealing with corruption, it is impossible to create good institutions, which are crucial for the effective operation of the economy.

N. Acocella understands the term institution as:

A set of rules that permanently regulates relations in a group of entities;
Entities involved in the implementation of these principles and the resources needed for this.

For example, they are property rights, honest government, political stability, dependable legal system, and competitive and open markets. Thus, many human choices related to the economy and management are dictated by institutions.

Why are they so important for an economy? Mainly because good institutions reduce the feeling of uncertainty in the economy, serve the rational development of entities, increase the specialization of economic activity, investments, reduce the risk of information asymmetry,create an appropriate environment for the allocation of scarce resources, integrate the individual with society, and are a link between the past and the future.

Let’s see some examples. Property rights enable owners to protect their investments. Additionally, patents promote innovation through the grant of limited monopolies, as a reward to inventors for the time, effort and ingenuity invested in creating new products and processes. Secondly, an honest government prevents citizens from having to resort to bribes. In turn, a dependable legal system allows for disputes to be resolved, contracts to be enforced, and money to be borrowed and lended.

To sum up, corruption and the lack of good institutions prevent the efficient functioning of the state, and thus drive citizens into poverty. People have to keep this in mind, because without it, other efforts are worth little.

Wars and political instability

It is widely known that wars and conflicts adversely affect global economic trends, including rising inflation, extreme poverty, increasing food insecurity, deglobalization and deepening environmental degradation. Moreover, conflicts can lead to fewer people of working age and therefore fewer workers. In addition, people are not sure of the future, so they do not invest, they postpone expenses for more reliable times. Surely, trade suffers as well.

Deaths from terrorism and conflicts per 100,000 people 2009-2019.

The graph shows the death rate from terrorism and conflicts per 100,000 people both in World Bank Low Income and World Bank High Income countries.

World Bank Low Income are defined as those with a GNI per capita of $1,085 or less, whereas World Bank High Income involves economies with a GNI per capita of $13,205 or more.The first group consist of 28 countries such as Burkina Faso, Burundi and Central African Republic. The second rank involves 81 economies, for example Qatar, Poland and Japan.

As we see, World Bank Low Income countries have a significantly higher death rate than World Bank High Income countries.

Lack of peace not only impedes nation development but also they drive it in bigger poverty and tougher situations. Terrorism and conflicts devastate capital goods and infrastructure, never mind human capital. Furthermore, as I said before they prevent investments that are so critical to economic development.

Political instability has similar consequences. The standard definition of this term is the propensity of a government collapse either because of conflicts or rampant competition between various political parties. Also, the occurrence of a government change increases the likelihood of subsequent changes. Political instability tends to be persistent.

The Index of Political Stability 2021, source: Political stability by country, around the world | TheGlobalEconomy.com

The index of Political Stability measures perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically-motivated violence and terrorism. -2.5 means weak political stability, whereas 2.5 is strong.

Not by chance, the poorest countries also have the least stable situation. Let’s look at Somalia. The value of GDP per capita according to purchasing power parity is USD 478, which is one of the lowest in the world. The chaos in the country was mainly the reason for the emergence of Somali piracy.

The situation was difficult starting from the war with Ethiopia in 1977, followed by a prolonged drought in the 1980s. The resulting economic crisis contributed to the aggravation of political conflicts – deepening separatist tendencies in the north of the country and fighting. Since the overthrow of the Siad-Barre government in 1991, civil war between the clans has raged in Somalia. The UN military’s attempt to introduce democracy since 1991 did not bring the expected result, as a result of which the UN decided to withdraw from Somalia in 1995.

As a result of the civil war, Somalia de facto disintegrated. Several independent small states sprang up, and the rest of the country was plunged into clan warfare. Units such as Somaliland, Puntland, Galmudug or Jubaland.

Taking everything into account, both wars and political instability deter enterprises’ innovativeness, lessen government spending on technology, worsen quality of education and cause poverty, as a result, impede economic development.

History

History has a significant impact on economic prosperity. The main reason why some countries are poor today is simple because they were occupied for a long time and the richest countries used them to build their empire. Let’s look at India and wonder why it has taken them so long to catch up. For more than two centuries, it is estimated that Britain drained a total of nearly 45 trillion USD from India by taxes and trade. This is money that could not be used for the development of the state, among others. by building the infrastructure that is so necessary for the proper functioning of the economy and social well-being.

In 2022, India was the fourth fastest growing economy in the world out of 194 countries with an average growth of 8.2%. However, as we can see in the chart, this dynamic growth was possible only after freeing ourselves from the British occupation, which lasted in the years 1858-1947.

Graph showing India’s GDP between 1750 and 2018, source:GDP per capita, 1750 to 2018 (ourworldindata.org)

The reasons for the lower level of development of some regions can also be sought in conflicts from the past, such as the Second World War. This resulted in a delay in the development of cities in Central and Eastern Europe. The socialist path of development was also of great importance here.

Let’s take Balkans countries which were under communist influence. The money was spent on the development of heavy industry, thus causing shortages in the supply of consumer goods. What is more, collective property meant that incentives to work hard were low. In such a system, hard work and results do not result in higher earnings. This has contributed to the fact that these countries are much less developed than Western Europe.

Unfortunately, it is not the case that with the end of the occupation countries stopped exerting influence over their former colonies. They have made them dependent on each other and now they play with them, but it is mostly “help with a fish, not a fishing rod”, which increases this dependence even more. As a consequence, the economies of developing countries rely heavily on imports. The situation is the worst in the face of global collapses, economic crises that cause a sharp increase in prices on world markets. When we are dealing with food prices, which in African countries account for up to 50% of all expenses, the number of malnourished people and starvation deaths may increase dramatically. That is why it is so important for these countries to be self-sufficient, at least when it comes to necessities such as food.

Education

Education is a basic element of human capital. Although I am a supporter of little state interference in the economy, I believe that equal education should be financed by the government. It is well known that education is the only mechanism available to you that allows you to shape your life.

Thanks to education, human capital, which is of fundamental importance in the development of the state, increases in importance. It affects not only the knowledge of citizens, but also competences, skills, creativity, innovation and openness. The state’s investment in education pays off, because people with higher education earn higher wages and, as a result, consumer demand increases, also for luxury goods.

“Education is the most powerful weapon which you can use to change the world.” — Nelson Mandela

Unfortunately, in developing countries only a few people are allowed to go to university. It depends on what family you come from and whether you have enough money. Free education will break the poverty cycle and give people the power to get out of poverty.

It is widely known that education is a crucial human right, as a result, everyone should have access to it. However, In 2016, some 750 million adults in the world still lacked basic reading and writing skills. Two-thirds of them were women.

GDP per capita (USD) and literacy rate in selected countries, 2020.

Above we see GDP per capita (USD) and literacy rate in selected countries. Correlation between those two values is about 0.785. In social science it means a strong relationship. As one value increases, the other also goes up. This indicates that an increase in literacy rate can also significantly compound GDP per capita.

For example, across a range of OECD countries, a 1% increase in literacy skills—as measured by the Survey of Adult Skills—is associated with a 3% increase in GDP per capita

Another point to consider is the term “poverty trap” . It describes a state when people are not able to get a good education due to the fact of their background. There is no possibility to study in their town or it is costly and moving out is not possible, too. As a result, children often continue the same occupation as their parents that is bad-paid and is not fulfilling.

I strongly believe that success in life should depend to a greater extent on whether a person is hardworking and talented than on his origin. This is why free education is such a crucial thing in each country. We understand this term as education without economic cost, tuition, fees, or other products. You could also define it as one controlled or completely funded by the state, free of charge, or free to all students. There is a clear correlation between the quality of a country’s educational system and its general economic status and overall well-being. In general, developed nations tend to offer their citizens a higher quality of education than developing nations do. Education is clearly a vital contributor to any country’s overall health.

It seems terrifying that in the Democratic Republic of the Congo in 1960, when the country regained its independence from Belgium, only 16 people had higher education. not 16%, only 16 people nationwide! How was this economy supposed to develop quickly, taking into account such limited possibilities of human capital.

Education not only affects the increased earning potential of citizens and economic development, but also reduces social inequalities, and thus negative moods in society. Free access to education gives everyone the opportunity to develop, and as a result, the success in life depends more on hard work and ability than on the social status of parents. Another advantage of universal access to education is less crime in society. Society is more aware and poverty is low, so people don’t have to resort to such activities.

Share of the population with no formal education, 2020.

The graph shows the relationship between GDP per capita and the percentage of the population without access to formal education. The larger the circle size, the greater the number. We see a strong relationship between the two values. Societies without good education can’t generate significant national income. Underdeveloped countries such as Niger, the number of people without access to formal education is as high as 64%, while in highly developed countries such as Canada it is only 0.2% – the circle depicting this country is almost invisible. Such disparities in education, which is a basic human right, are outrageous.

It is worth mentioning that in the period 1960-2010 education inequality went down every year, for all age groups and in all world regions. However, recent estimates of education inequality across age groups suggest that further reductions in schooling inequality are still to be expected within developing countries.

Unfortunately, authorities in developing countries are not necessarily interested in higher quality and access to education, because education also brings with it higher public awareness, and educated citizens ask more questions about the government. This could make it more difficult for the authorities to corrupt and take a significant part of the state’s income into their own pockets.

Age structure of population

Not only the knowledge and skills of citizens are important in the economic development of a country, but also its age structure. It can be modified by natural increase, mortality rate or migration. Undoubtedly, the structure with a significant percentage of people of working age is the most desirable when it comes to economic growth.

The global median age has increased from just over 20 years in 1970 to just over 30 years in 2022. The global population breakdown by age shows that around a quarter are younger than 14 years, around 10% are older than 65, while half of the world population is in the working age bracket between 25 and 65.

It is common in demography to split the population into three broad age groups:

children and young adolescents (under 15 years old) – in rich countries about 30%, and in poor countries about 60%.
the working-age population (15-64 years)
the elderly population (65 years and older) – in rich countries 10-15%, and in poor countries about 5%

Demographers express the share of the dependent age-groups using a metric called the ‘age dependency ratio’. This measures the ratio between ‘dependents’ (the sum of young and old) to the working-age population (aged 15 to 64 years old).It’s given as the number of dependents per 100 people of working-age. A value of 100% means that the number of dependents was exactly the same as the number of people in the working-age bracket. A higher number means there are more ‘dependents’ relative to the working-age population; a lower number means fewer.

Graph showing age dependency ratio by country, 2021.

A significant demographic dependency ratio is problematic for the state due to the limited number of workers. It is then difficult to collect taxes that are necessary to finance health care, state defense, technical infrastructure, education and other public goods. Both too many people in working age and post-working age are harmful to the economy. A large percentage of children require increased state spending on education and health care, and older people on health care, medicines and pension payments. Although both groups contribute to the increase in demand for particular goods, the older population structure has a more desirable impact on the economy. Adults and the elderly are more susceptible to advertising. It is well known that this is such a key thing when it comes to growing demand. In addition, retirees have more free time, and as a result, they can spend money on tourist and recreational services that surely are not cheap.

Age pyramids can be divided into progressive, regressive and stasis.

Graph showing different pyramid types of age pyramids with an example of the country in which it occurs, source:Population Pyramids of the World from 1950 to 2100 – PopulationPyramid.net

As we can see, the age structure varies significantly from country to country. In highly developed countries, the regressive model is most common, while in developing countries – progressive model. Both of these structures are undesirable because, as I said before, they result in a small number of people of working age.The most favorable age structure is found in some newly industrialized countries, e.g. Brazil, Turkey, India, China, Thailand, Malaysia, Vietnam and the Philippines or in the so-called “Asian Tigers”.

However, let’s focus here on countries with a high percentage of people in pre-working age, because other factors (mentioned in this article) leading to a low level of economic growth also intensify there, and consequently these countries are among the poorest in the world. The population under 15 constitutes even 40-50% of the population there. This is a large natural increase, which is a barrier to economic development, the number of people is growing faster than GDP and food production. This consequently leads to deterioration of living conditions, poverty and hunger. In addition, more children per woman leads to poorer health and higher mortality.

Religion/culture

Some researchers argue that explanations for economic growth should be broadened to include cultural determinants. Culture may influence economic outcomes by affecting such personal traits as honesty, thrift, willingness to work hard, and openness to strangers. Let’s look at this issue.

The authors, Robert Barro and Rachel McCleary, used six international surveys conducted between 1981 and 1999 to measure religiosity – church attendance and religious beliefs – in 59 countries. They find that their measures of religiosity are positively related to education, negatively related to urbanization, and positively related to the presence of children. In general, religiosity tends to decrease with economic development. The authors then move on to assessing the impact of differences in religiosity on economic growth. They find some indication that the fear of hell is stronger for economic growth than the prospect of heaven. Their statistical analysis allows them to argue that these estimates reflect the causal effect of religion on economic growth, and not vice versa.

The relationship between GDP per capita and the importance of religion, 2018.

In the graph, we see GDP per capita of individual countries and religiosity. Religiosity was measured using a survey which asked the question “How important is religion in your life?”. In poor countries the huge majority say that religion is very important in their life: in countries like Uganda, Pakistan, and Indonesia it is the answer of more than 90%. In Ethiopia, it is the answer of 98% of the population.

The negative correlation between economic growth and the importance of religion may be explained by the fact that believers focus mainly on spiritual life and life after death, thus not striving to accumulate material goods.The exception is the USA, which is very diverse in terms of religion and there is a large percentage of Protestants who are rather materialistic.

According to economists, the world has increased the dollar value of gross domestic product by 26% in the last decade . It is worth noticing that ten countries with a non-denominational (agnostic/atheist) majority recorded the fastest growth – by as much as 54 percent. in the last decade.

Let’s discuss the impact of each economy separately. How exactly do specific religions affect growth and society?

Christianity

From the perspective of Christianity, man should multiply what the earth gives him. The basis is intellectual and physical effort, as well as hard, productive work. It is also emphasized that economic, i.e. material, life must have a social context. For economics, this means that the focus is on interpersonal relationships – such as the need to help the poor, the sick, rather than the transactions themselves. An important element of this religion is also the legality and morality of the market economy. The globalization that Christians want is one based on honesty. The sale and purchase of products on illicit markets is therefore out of the question, and the protection of property rights becomes particularly important. Thus, in Christianity, there is always a person in the first place, and only then material goods, which does not always lead to the maximization of economic profits.

Protestantism

Protestantism along with Catholicism and Orthodox Christianity also belong to Christianity, but we will discuss it separately. In his famous thesis from 1904, Max Weber noted that in Prussia at the turn of the 19th century and in the 20th century counties with a majority of Catholics were poorer than those with a majority of Protestants, and Weber believed that this was due to the Protestant “work ethic”. Similar conclusions were reached by Benito Arrunad of Pompeu Fabra University in “Protestants and Catholics: Similar Work Ethic, Different Social Ethic”. In its part, he included an international survey examining, among others, differences between the values held by citizens of different countries. The religious part of the questionnaire contains 72 detailed questions concerning i.a. trust in other people and institutions, participation in religious practices, participation in social organizations, opinions on the tasks of the government. According to the author, this makes it possible to identify people who actually profess a given religion and follow its indications in everyday life. The analysis shows that Catholics are significantly less likely to volunteer. What’s more, among Catholics, along with the increase in faith, the willingness to work “for the common good” increases by more than half as much as among Protestants. Interestingly, the Protestants of this group have more confidence in all kinds of organizations and institutions. They also follow established rules and often spend their own time to see if others follow these rules as well. In addition, the survey also found that sticking to Protestant principles increases your chances of being an entrepreneur. The authors of the study “Protestants and Catholics: Similar Work Ethic, Different Social Ethic ” confirm Max Weber’s thesis that the Protestant ethic can influence the behavior of people in the “economic sphere”. It is assumed that it is not Protestant values alone that drive wealth, but the resulting drive to teach everyone to read and write, and to education in general.

Economic development is influenced by many factors, but the ones mentioned above have certainly contributed to the fact that in countries with a large percentage of Protestant population – such as Norway, Sweden, Denmark, Iceland or Germany, the standard of living is very high.

Buddhism

Buddhism is a religion that is not conducive to economic development due to the minimal use of natural resources and the incentive for small consumption of goods. The Buddha tells us how to be happy and shows the path to follow to save ourselves and end dukkha – our suffering. It is certainly not conducive to attachment to material things, which Buddhists want to get rid of, hence most of them do not lead lavish lives. Nevertheless, Buddhists have the ability to adapt quickly to changing external factors. This results in the rapid economic development of regions that have opened up to foreign investment.

Hinduism

Hinduism, just like Buddhism, negatively affects economic development. The main reason is social divisions (caste system) which eliminate the principle of competition.

They limit the desire to acquire material goods and make social advancement almost impossible. On the other hand, in the circle of this culture there is a large birth rate, and the population is constantly improving their qualifications. Entrepreneurs are open to implementing technological progress. Thanks to this, India has a chance to become the most dynamically developing country in the modern world. The future will show which aspect will have a greater impact on the economic development of society.

Islam

When it comes to Ilam, every Muslim is obliged to expand his knowledge throughout his life, which increases the intellectual level of the followers of this religion. However, in Muslim countries, religious conflicts and so-called Jihad, as well as internal disputes that weaken these regions economically. Moreover, the right of inheritance is also a factor that blocks economic development. In the past, it has resulted in land fragmentation, and limited ability for one person to accumulate capital to enable investment, which is a significant factor in economic growth. In addition, the limited consumption in these countries of certain products, such as meat or alcohol, eliminates significant income because they are not cheap goods. What’s more, Islam is characterized by a small percentage of professionally active women compared to other religions. They often stay at home and take care of the children, thus their intellectual capital is wasted and does not bring income to the economy.

It is also worth mentioning that both in Islam and Catholicism, the prohibition of charging interest for hundreds of years has become established, limiting the possibility of raising capital and blocking the development of banking. In the past, lending at interest was considered a sin worse than murder because, as it was explained, the killing happened once, whereas the interest on the debt accrued all the time.

Shintoism

I believe that this religion is also worth mentioning, although compared to the other religions mentioned, it is relatively small in number. It plays a significant role especially in Japan – the third largest economy in the world. As we know, this country was rapidly reborn from the huge devastation of the Second World War. The ethics of this religion could have contributed to this to a significant extent. It’s about, among others, identification with the family and strong identification with the company for which one works, and finally with the state to which one is obliged to obey and work hard. What’s more, Shintoism doesn’t say much about life after death, which is why followers focus on earthly life and material things.

As we can see, religion can significantly affect the level of economic development not only through the number of believers, but also through the type of religion. What people believe affects their behavior, attitudes and perception of the world. All this causes certain social and economic effects.

However, I don’t want to say that being religious is something negative. The pursuit of material goods, the lack of thinking about autotelic values is certainly not a positive phenomenon either, but a golden mean should be found in all of them. Albeit sometimes people devote most of their time to religious ceremonies and don’t have enough time to work on the development of their own society and the improvement of living conditions. In addition, some religions also significantly influence culture and social hierarchy. As a result, women often are dependent on men, staying at home, wasting their intellectual potential. It is worth noticing that women became more professionally active, especially after World War II, when many men died and their hands were needed to work. Undoubtedly, women significantly influenced the development of the economy in this and later period.

Here we can again connote the term “poverty trap” again, just in a different sense. It affects human capabilities not only through the opportunities offered by parents’ wealth, but also through the patterns we have drawn from them. If every woman in the family married young, had children, and took care of the house, a young girl would often not even consider taking up a career. If our parents were deeply religious and devoted a lot of time to various ceremonies, perhaps we would consider it appropriate and do the same in the future. If everyone in the family were blue-collar workers, the child did not have the opportunity to learn how intellectual knowledge and entrepreneurship are mutually important. As we see, cultural and religious patterns drawn from the home play a large role. When a person does not believe enough in their abilities and is not motivated enough, what our parents instill in us can have a huge impact on our future.

Geography/climate change

Let’s begin with climate. It is widely known that poor countries are overwhelmingly located in the tropical regions. Life there is much tougher. The problems start with agriculture. Tropical plants involve less carbohydrates and soil less fertile. What is more, photosynthesis is also inhibited. As we all know, domesticated animals such as horses and oxen play a substantial role in poor countries which represent a huge part of the workforce. They are devastated by an appalling scourge – tsetse fly. When it bites a sick animal and sucks its blood containing parasites, the parasites develop and multiply inside it. According to National Geographic magazine, nagana kills three million cattle each year.

Unfortunately, not only plants and animals suffer from tropical climate. Humans are more prone to become ill with a terrifying array of disease, too. Examples of tropical diseases include malaria, cholera, Chagas disease, yellow fever, and dengue. But there are many more, that’s just a small part of them. All low income countries are affected at least by 5 tropical diseases at the same time. It is said that the magic temperature which helps make a rich country rich is 16 degrees.

Now let’s pay attention to the relationship between geography and transport. It is well known that water transport is cheaper than other types. In addition, this type of transport gives great opportunities in terms of the type of goods that can be loaded on the ship. In the case of sea transport, it is possible to transport almost any type of goods. Transport significantly affects trade opportunities, which is a driving force for the economy. Countries without access to the sea or without navigable rivers are among the least developed. Let’s look at South America. Badly connected Bolivia and Paraguay are the poorest nations in this region. The same problem is with Uzbekistan’s location. It is one of two countries doubly landlocked in the world. Although there is a great deal of natural gas resources there, which is so relevant in the current economy, the country struggles with low social development. Furthermore, the deprivest area – Africa, has only one navigable river – Nile and fifteen landlocked nations. Surely, it is not a coincidence that their average incomes per capita is the smallest in the world.

The impact of climate change on economic and social development can’t be overlooked. Although Africa contributes to this phenomenon the least, it is the most prone to be affected by climate change because of its location.

Graph showing carbon dioxide (CO₂)emissions in million tons and per capita (CO₂)emissions in tons, 2021.

In the graph, we see carbon dioxide (CO₂) emissions in millions of tonnes and carbon dioxide (CO₂) emissions per capita in tonnes. The narrower bar shows carbon dioxide (CO₂) emissions per capita. It can be seen that emissions per capita vary significantly from country to country. Less developed countries have a much lower level of it due to the worse standard of living. Thus, they contribute less to pollution and climate change. However, annual total carbon dioxide (CO₂) emissions are often presented, putting developing countries as the culprits, while highly developed countries are mainly to blame for climate change and pollution. Developing countries are often highly populated, so the entire country can emit a significant amount of CO₂, even though individual individuals live at very low levels. For example, in India there are about 1.4 billion people, while in Germany, for example, about 83 million. How can the annual emissions of these two countries be compared?

Transport, large consumption of meat, the pursuit of luxury and positional goods – these phenomena can be observed in highly developed countries, not developing ones, where the diet is based on plant products and barely suffices to meet the basic needs of life.

Poorer countries will feel about 75-80% of the effects of climate change. It results, among others, in intensified weather phenomena such as natural disasters.

Chart showing death rate from natural disasters per 100,000 population 2012-2019.

In the chart, we see the death rate from natural disasters per 100,000 population in Africa and Europe 2012-2019. Floods, droughts and landslides are the most common in Africa. In Europe these are floods and storms. What is more, it is estimated that 45 times more people would have to die in an African catastrophe to attract the same media attention as a European one. This fact seems outrageous, each death is just as important and noteworthy.

Source: Graph showing temperature change in Africa between 1901 and 2021, with red color being warmer and blue being colder than average (the average temperature in 1971–2000 is set as the boundary between blue and red colors) – link

Africa suffers from not only higher temperatures but also from intensified natural disasters such as droughts, floods or hurricanes. For example, in the Horn of Africa region, the drought that accumulated in October 2022 affected at least 36 million people, including 24.1 million in Ethiopia, 7.8 million in Somalia and 4.2 million in Kenya. Moreover, severe floods were recently recorded in South Sudan, Nigeria, Republic of Congo, DRC and Burundi.Some countries in Northern Africa experienced extreme heat, especially Tunisia, Algeria, Morocco and Libya. This was accompanied by wildfires and dust storms. As if the misfortune wasn’t enough, in Sudan in 2020, 830 000 people have suffered due to the flood. Rainstorms are a normal weather phenomenon between June and October, however, this time it has intensified significantly. Without shadow of a doubt, climate change has played a substantial role here.

The greatest hazards in the African Region.

All these phenomena have horrific consequences for an already impoverished region. Problems related to food and water shortages continue to increase.

As we see, geography plays a crucial role when it comes to a country’s development. Unfortunately it can significantly prevent a nation’s prosperity. Together with other overlapping factors, it can drive a country into poverty.

Technology

In economics, it is widely accepted that technology is a key driver of economic growth for countries, regions and cities. We define it as the technical means for the production of goods and services. It allows us to use the same amount of physical or human capital but produce substantially more. Already many years ago, economists like Robert Solow and Joseph Schumpeter recognized investing in the development of new technologies as a driving force for economic growth. What is more, an improvement in technology results in a requirement for less costly inputs. In the face of a growing population and the limited possibilities of our planet, increasing productivity becomes especially important.

Fortunately, the international community is beginning to think ahead.

All 193 UN member states adopted on September 25, 2015 in New York

sustainable development goals. The Agenda defines 17 sustainable development goals and 169 related tasks. The goals cover a wide range of challenges such as poverty, hunger, health, education, gender equality, climate change, sustainable development, peace and social justice.

However, many people are unaware of the seriousness of the situation.If, according to estimates, the world’s population will increase to 9.6 billion by 2050, then we will need natural resources in quantities corresponding to three times the resources of our planet to maintain our current lifestyle.

The introduction and implementation of the above-mentioned goals is a very difficult task and will only be possible if the way of acting and perceiving the world, both by the authorities and citizens, changes.

Graph showing research and development expenditure (% of GDP)

Research and development (R&D) is an important driver of economic growth as it spurs innovation, invention, and progress. It also can lead to breakthroughs that can drive both profits and wellbeing for consumers. R&D involves the total expenditure (current and capital) on R&D carried out by all resident companies, research institutes, university and government laboratories, etc., in a country. Regardless of whether the country is rich in natural resources or not, it should invest in R&D, because the resources will run out one day anyway. Government has to look to the future. Some countries, such as the Scandinavian countries and Germany have taken up such a strategy. It is not by chance that these countries are among the most developed economies in the world.

Unfortunately, investments are not always possible. Two concepts should be distinguished here: the accumulation fund and the consumption fund. The first defines the future financial possibilities and includes i.a. capital expenditures. The second is about the ability to meet current needs. It is assumed that approximately 20% of the state’s GDP should be spent on accumulations, i.e. investments. However, this is not possible in poor countries where all income is spent on consumption. Here you can again refer to the poverty trap and Gunnar Myrdal’s words that “poor countries are poor because they are poor”.

Importance of technology:

Discovery of natural resources – The insatiable demand of humanity for natural resources leads to their rapid use. As a result, we are forced to look for new sources located in increasingly difficult places for humans – under the ocean floor or in the mountains. In their extraction, it is necessary to use new, modern technology.
Renewable energy – This is becoming an increasingly important problem today due to the growing demand, concern for the environment and high prices of traditional energy sources. It is technology that is the key element in the development of renewable energy. The renewables-based electrification of European industry, buildings, and transport will allow the continent to reduce its energy-related carbon dioxide emissions by 90 percent by 2050, according to some predictions. However, it is an incredibly tough task that can be managed only by the use of new technology. That is why it is so important to devote both money and time to the development of innovation. The problem is myopia, which means that the government often finds it hard to detect long-run advantages of higher spending on research and development.

Green technology (environmental technology) plays a particularly important role here. By this term we mean any technology designed to reduce the negative impact of human activity on the environment. We divide this for two categories – green tech and clean tech. First is a broad category that encompasses solutions that improve the performance and efficiency of production and thereby reduce negative environmental impact of any kind. Whereas, climate tech relates only to problems specifically associated with human-induced climate change.

It is worth mentioning tech trends that are becoming more and more substantial in green tech.

It is Unsung heroes that conducts selections of green technology startups that will deal with, among others, the above-mentioned issues. Unsung Heroes

Agricultural revolution – As we know, the supply of land is limited and in the last 200 years the population has been growing at an alarming rate and with it food needs.

We need to mention the theory of Thomas Malthus here. It talks about the economic situation of the country, in which an increase in productivity and an increase in income results in an increase in population, but does not lead to an increase in living standards. This is due to the fact that, according to Malthus, population growth is exponential and food production is linear. This means that with greater agricultural productivity, the number of people also increases, but food does not arrive as fast as the population, so it leads to famine and lower birth rate. Then the situation repeats itself. Technology helped break the “Malthusian Trap” state that existed in all countries of the world until the industrial revolution. This mechanism first ceased to function in Great Britain around 1800, and then in other Western European countries. Currently, the Malthusian model describes the economic and social situation in a small number of countries with a low level of economic development, such as Ethiopia and Bangladesh. Getting out of the Malthusian trap was possible only thanks to a greater level of technology. This is why its development is so important to lift poor countries out of the cycle of poverty.

A table showing the number of years needed for a population increase of 1 billion.

By the table above I want to convey an urgent need to enhance the level of technology, particularly in developing countries, because of the rapidly surging population.

Technology helped introduce fertilizers to plants and farmland, tractors, the invention of high-yield seeds, threshers, and pesticides. The revolution resulted in the cultivation of good crops and became a profitable profession, and helped to significantly eliminate food and grain shortages. However, more than 800 million people in the world still suffer from hunger, so further technological progress is desirable.

Efficient operations – Technology is especially important at the enterprise level. It can optimize the operation of the company and plays an important role in generating efficient processes. It can help reduce or eliminate duplication, errors and delays in your workflow, as well as speed up the automation of specific tasks. Smooth transition from one activity to another supports effective management of production, distribution and marketing processes. With the right technology, entrepreneurs can save time and money and increase the productivity and competitiveness of their companies on both the domestic and international markets.
Globalization – Technology in business has enabled them to achieve greater reach in the global market. It was possible thanks to these marvels of technology. Anyone can now do business anywhere in the world. In particular, the spread of information technology has made production networks cheaper and easier. This greatly helps to exploit its comparative advantage by expanding trade internationally.

Abundance of resources

Paradoxically, sometimes the source of poverty is wealth. In the last decade, Africa had 1/3 of the world’s raw materials. These resources exploited in Africa in many cases not only do not bring benefits, but also generate a number of economic, political and social problems. The discovery of raw material deposits may mean new problems for the country, not necessarily leading to the solution of old ones. This phenomenon is so common that the literature on the subject includes the concept of the “raw material curse”, which affected African countries that tried to base their development on the mining industry.

The already mentioned Democratic Republic of the Congo can serve as an example. History has been extremely cruel to a country whose land hides enormous wealth – from gold and diamonds to copper, cobalt and oil. Especially recently, the importance of the already mentioned cobalt on the international market has increased. It is most widely used in the production of electronics – mobile phones, iPhones, mp3 players, laptops or computer game consoles. Considering the fact that two-thirds of humanity uses mobile phones, the demand for it will be even greater. Only in Japan every four days a new model of a mobile phone is launched on the market. Does the country and its people benefit from it? No way, on the contrary. In Congo, coltan is mined illegally. Most of the mines remain in the hands of guerrillas armed to the teeth. People who get too close die. In addition, corporations arm local warlords, because it is more profitable for them to trade with the rebels than with the government. Thus, the state is plundered of its wealth, while suffering only damages, contributing to the worsening of the situation and the impoverishment of the citizens.

Prices of selected natural resources per ton in 2022 (USD).

The chart shows the average prices per ton of selected raw materials that the Democratic Republic of the Congo has in abundance. In addition to the resources mentioned above, the country also has significant gold and diamond reserves, which fetch even higher prices. If the DRC could realize its potential, it could be a significant economy on the international stage.

The situation is the same with crude oil, which is the most sought-after commodity in Africa. The continent is ravaged of its resources with impunity. The world uses 13 billion oil every day (a barrel as high as the Eiffel Tower and half a kilometer in diameter), and the demand for this raw material will increase. Africa supplies almost 20% of the world’s oil trade. It ranks third in this respect, after the Middle East and North America.

Diamonds also play a special role today. The best example of this type is the “diamond war” in Sierra Leone, during which heavy fighting between government troops and rebels took place over diamond mines

Unfortunately, the facts are overwhelming. 20% of diamonds mined in African countries end up in Western markets illegally. Not less than 4% of diamonds traded in the world are mined in countries where the proceeds from their sale are or were used to finance internal conflicts, i.e. Sierra Leone or Angola.

Another reason wealthiness can be the cause of poverty is that a country that has a lot of natural resources is less prone to invest in research and development, because it believes that the raw materials are enough for the efficient functioning of the economy. On the other hand, countries that are poor in them are forced to look for other methods to stimulate development. Investments in R&D certainly generate large inputs initially, but then they bring significant benefits. Forward-looking economies gain the most. Let’s look at Japan. Although the country lacks many raw materials needed for industry and energy, such as oil, coal, iron ore, copper, aluminum and wood, it is the third-largest in the world by nominal GDP. The dynamic reconstruction of the state after World War II in the last 70 years was possible mainly thanks to investments that enabled the mastering of advanced technologies and increase in productivity, which, as mentioned earlier, is crucial for economic development. In 2020, Japan spent about 3.4 percent of its GDP on R&D, which is one of the highest rates in the world. Of course, other factors also contributed to this are a well-educated workforce, a high domestic savings rate , an activist government and subsidies. On the other hand, African countries that are very rich in all kinds of raw materials, such as fossil fuels or precious metals, but do not put emphasis on investments, are generally underdeveloped. Of course, there are other factors as well, but there is a certain relationship here. For example, African countries such as Nigeria and Namibia have some of the largest uranium reserves in the world. It is an element of extraordinary value – 1 gram of uranium has as much energy as burning 3000 kg of coal. If only these countries were able to use their potential, they could certainly belong to highly developed countries.

Let us look at the situation of Spain in the modern period. The country went bankrupt several times. Paradoxically, the creation of such a state was its source. After the discovery of America by Columbus in 1492, the Spaniards, in the newly discovered lands, began expansive activity. They exploited local residents by forcing them to work as slaves. The cheap labor cost of the huge influx of gold and silver into Spain. The amount of money in the market quickly led to an increase in prices. Thus, the Spanish economy is no longer competitive with other European countries. Spain became completely dependent on supplies of raw materials from America, at the expense of domestic production. That, in turn, bolstered the strength of the then indigent England while weakening the Spaniards. In addition, the Spanish kings spent easily obtained money to conduct war expenses. These phenomena caused the bankruptcy of Spain several times in the 16th and 17th centuries.

Similarly, an initial wealth now may contribute to a worse situation in the future. An increase in money in circulation drives up prices, and wages often do not grow at the same rate. Moreover, with more cash, the government can finance undesirable phenomena such as war and conflicts, which will only cause more damage in the future, consistently worsening the state’s situation. On the other hand, consumers can only spend money on foreign products, causing more cash outflow than inflow.

Poor medical infrastructure

The African countries are among those with the poorest health care. Less than half It is worth mentioning that only about 2% of the drugs used in Africa are visible on the continent. As mentioned above, countries are heavily dependent on imports of essential, often even life-saving, supplies.

Only a minority of Africa’s citizens – some 615 million people – have access to it. Moreover, this health care almost doesn’t exist outside of major cities. Approximately 1.6 million Africans died of malaria, tuberculosis and HIV related illnesses in 2015. Needless to say, this number could be reduced with affordable medicines, vaccines and other health services. The main resources of this situation are inadequate human resources , inadequate budgetary allocation to health and poor leadership and management.

Graph showing average life expectancy by country, 2021.

Above, we can see average life expectancy by country. Graph shows countries with the highest and the lowest values. For example, in Japan life expectancy amounts to about 85 years, whereas in the Central African Republic only 54.4 years. The gap is about 30 years. Despite the significant inequalities in life expectancy across the world, we can see a positive trend that life expectancy has increased drastically over the last couple of centuries, with substantial long-run improvements in all countries around the world. Moreover, scientists assume that the gap between values in developed and developing countries will be lower in the next few years.

A second metric that is often used to compare healthcare around the world is hospital beds per 1,000 people. It reflects to what extent medical care is actually available to ordinary citizens.

Graph showing number of hospital beds per 1,000 people.

The World Health Organization recommends at least 2 beds per 1,000 people, but 4 beds per 1,000 people in developed countries. Many developed countries have more than 4 beds per 1,000 people. Germany has one of the highest rates – 8, while Mali only 0.1. It follows that citizens in a developed country can have as much as 80 times more access to medical care than in a developing country!

Healthcare plays also a critical role when it comes to shaping the already mentioned in the context of education – human capital. This term includes not only knowledge and experience, but also the health of citizens, and thus their physical strength. This is crucial in building the national income, because people in poor health will not be able to work effectively for the development of the economy.

This is where telemedicine can help.

But what is it exactly? DIstance treatment is based on the use of telemedicine devices that allow you to perform the test yourself and automatically upload it to the online platform. Then doctors with access to the tests can interpret them in real time and inform the patient about their results. Thanks to this, patients who are a long distance from the nearest medical professional or hospital can be diagnosed and treated, receiving help from virtually any doctor in the world with access to the Internet.

Its development can bring huge benefits, especially in countries with a low rate of urbanization. For example, in Burundi, only 13% of the population live in cities. This means that reaching any medical help that is only in larger cities becomes almost impossible by people living in the village. In addition, another advantage of medical care is its significantly lower costs. Without a shadow of a doubt, it is of primary importance in Africa. However, in implementation of telemedicine the development of the Internet network and the universality of mobile applications are crucial.

When it comes to African countries, telemedicine is developing particularly well in Kenya. It is a stable country and Kenyans are very open to new technologies. Over 90 percent of them have a smartphone. Moreover, in Ghana, in the Amansie Oeste district, a program developed in cooperation with telecommunications companies, universities and NGOs was introduced. It covered 30 rural regions. About 35,000 people were connected to a call center where doctors work. In this way, the regions gained 24/7 digital access to nurses, doctors and specialists ready to help patients.

Five years after launch, referrals to clinics in the pilot area have been reduced by 31% and more than half of consultations have been resolved over the phone. Each avoidance of a referral resulted in an average saving of $25 for patients, and a high success rate reduced waiting times at clinics.

Unfortunately, not every country has such good conditions for the development of telemedicine, so much work still needs to be done in this direction, however we can see a silver lining.

What’s more, drone tests are currently underway on the African continent to help deliver blood and medicines to remote clinics and health centers. One of the most extensive drone projects has just started in Rwanda and is led by the Rwandan government and US company Zipline. However, drones are also used in Madagascar, where the American company Vayu delivers biological samples taken by rural doctors to laboratories. The advantage of Africa is the fact that air traffic over this continent is small. There aren’t too many urban areas either. The use of drones is therefore easier there than elsewhere. However, this does not mean that operations of this type are without problems. Many governments fear such technologies

– considers the use of drones to be a violation of their sovereignty. Another problem is the cost.

It is clear from the above evidence that people who die from diseases and have low life expectancy can’t generate economic value, develop themselves as a society and fulfill their dreams. On the basis of the above-mentioned information, it is no longer surprising that the economies of African countries are less productive compared to, for example, Western European countries. How are those citizens supposed to work intensively and effectively if they have to deal with deadly diseases or lack of access to health care on a daily basis? Not to mention other factors such as famine, climate, wars. Everyone will agree that health is the most important thing any person has, and if we lose it, everything else is worth nothing. That is why it is a critical issue to guarantee an affordable and accessible medical health care for all citizens. I strongly believe that this should be a priority for every government.

Backwash effects

I would like to refer to the statement of the Swedish economist Gunnar Myrdal mentioned at the beginning that “Poor countries are poor because they are poor.”

The scholar meant the term “backwash effects”.

The graph showing “backwash effect”.

Gunnar Myrdal observed that backwash effects often outweighed the spread effects that were supposed to transmit economic development from rich to poor countries, or from rich areas within a country to poorer areas. In a broad sense, backwash effects are the negative impacts of the growth of the core region on the peripheral regions, which tend to be poorer. These growth centers work as a suction pump, it provides a better return to the investor hence it sucks. An example would be the brain drain from many of the poorer villages to the large cities, which are seen to be profitable and offer better quality of life. The migrants tend to be young and of working age, thus leaving the area worse off due to lack of labor. Core regions can produce goods more efficiently due to the large skilled workforce they attract, economies of scale and the higher demand for the goods within a country. This leads to markets in the periphery being penetrated and dominated, as competition is very unlikely due to the difference in economies of scale. We can talk about the same situation in relation to entire countries. Gifted, educated individuals of developing countries, instead of supporting the development of their national economy, emigrate to developed countries, which offer them greater opportunities for both earning and self-education.

The same goes for foreign investors. They are attracted by proven, well-known markets of the economies of North America or Western Europe, e.g. Africa. Psychology also plays a big role here. In economics, we use the term “sheep effect” to describe the phenomenon of demand. It consists in the fact that we buy the same as other consumers, without taking into account our own preferences and the economic calculation. Investors do the same. They act like their predecessors, they do not see the potential in less developed countries, often without even thinking about it. They just prefer to do what everyone else does, “if everyone else is doing it, it must be a good decision.” Moreover, Africa is often reduced to one entity. So if in one part of Africa there are conditions unfavorable for investment, e.g. through wars, unstable political situation, etc., then it is thought that similar things are happening on the entire continent. Meanwhile, Africa occupies 30.37 million km²,is inhabited by more than a billion people in 54 countries, and there are more than 1,000 languages. With that information I want to show that the whole continent cannot be brought to one entity.

Ideas:

Here there are some useful ideas that can help combat the above-mentioned problems limiting economic development. I strongly believe that they should be implemented if possible.

Corruption:

End impunity – effective law enforcement is essential to combat impunity or freedom from punishment. This is underpinned by a solid legal framework, law enforcement and an independent and effective judicial system.
Reforms focussing on improving financial management – this action involves mainly the disclosure of budget information prevents waste and misappropriation of resources. For example, Transparency International Sri Lanka promotes transparent budgeting by training local communities to comment on the proposed budgets of their local.
Transparency and access to information – countries with a low level of corruption are famous for their openness, freedom of the press, transparency and access to information. Certainly, such actions increase the responsiveness of the authorities, and at the same time have a positive impact on the level of social participation in the country.
Citizen Empowerment – Citizens’ growing demand for anti-corruption and empowering them to hold the government accountable helps build mutual trust between citizens and government. In some cases, it also contributes to uncovering corruption, reducing leakage of funds and improving the quantity and quality of public services.
Closing international loopholes – Without access to the international financial system, corrupt public officials throughout the world would not be able to hide the proceeds of looted state assets. Major financial centers urgently need to put in place ways to stop their banks and cooperating offshore financial centers from absorbing illicit flows of money.

Wars and instability:

Powerful, determined and bold leadership is required to set aside differences entrenched in political positions. Leaders should use their positions to deliver better outcomes for people in need and to commit to sustained engagement.
National governments need to be more adept at identifying early signs of human rights violations and deteriorating situations. A bad situation should be nipped in the bud before it becomes significant and will be harder to solve later. Tolerating one bad action gives tacit permission for another such action.
Governments and the international community must invest in developing the capacity to deal with more than one crisis at a time. This can be done through financial investments in promoting peaceful and inclusive societies, strengthening legitimate institutions and reactivating markets and economies.
The government should have considerable conceptual skills, especially when it comes to looking ahead and anticipating future events within the limits that can be predicted.
Solid involvement of people and civil society in political processes and governance is crucial. This forces the authorities to act efficiently and effectively. That is why education is so important because it not only increases the knowledge of citizens, but also their awareness of the situation in the country.

History:

History cannot be changed, but the former colonies’ dependence on the metropolis must be ended immediately. This can be done by:

Limit foreign aid “with a fish, not a fishing rod.” If any aid is already taking place, let it be aid through investments, development of technology or education in a given country, not a finished product. Citizens of developing countries then become accustomed to this assistance and are less willing to seek change and lose motivation to work after receiving aid. Having an aid dependence rate of around 15%-20% or higher will have negative effects on the country.
The first priority is to become independent of food imports. Food security should be the most important thing in the development of the state, it will reduce the sensitivity to food prices on international markets and prevent famines.
The government should consider what are the most important actions for citizens. Each country has different needs, a different initial situation, e.g. when it comes to the level of health care or education. The authorities are obliged to independently determine what is most important at a given moment. This cannot be precisely predicted from the international arena.
Due to the fact that each country has different opportunities for development, i.e. raw materials, location, human capital. The government should identify the strengths of the state and focus on a given area of economic development and specialize in it. Previously imposed patterns by metropolises do not have to be the right path of development.

A good example is Ghana, where aid dependency has fallen from 47% to 27%, and Mozambique, where aid dependency has fallen from 74% to 58%.

Education

In the case of education, aid from the international side has an extremely positive impact. This certainly increases their professional opportunities, thanks to which they are able to produce more national income. Developed countries should invest in schooling and technology. Moreover, computer equipment can be donated. This will certainly increase their professional opportunities, thanks to which they will be able to produce more national income. First of all, developed countries can financially help these struggling countries to improve their literacy rates.
Governments should make education compulsory for all children. They should encourage parents to send their children to school.
Governments of developed and developing countries must work together. Collaboration is vital in solving education issues in developing countries. This can give insight to developed countries on the real situation and can provide some approaches for the improvement of developing countries.

Age structure of population

As it was justified earlier, the most advantageous structure is when the society has a significant proportion of people of working age. To achieve this, it is may be useful:

In the case of an aging society – introduce social benefits encouraging starting a family, reducing taxes, focusing on political stability, creating good conditions and opportunities for the arrival of immigrants of working age by the state, and improving the state of medical care. It could extend the life expectancy of citizens and improve their health, which would also lead to an increase in the retirement age.
In the case of a very young society – dissemination of contraceptives and sex education. It would also be helpful to improve the pension system because in developing countries people have a large number of offspring to provide for themselves in old age, because it is unlikely to be well developed.

Religion/Culture

People’s beliefs or beliefs should not be imposed, but their awareness should be increased so that they can decide for themselves what is good for them. However, the government or the international community should intervene when a given culture or religion causes racism, limits the role of certain individuals in society, or causes violations of human rights. Citizens should also be provided with access to information so that they can reassure themselves that their views and actions are definitely right.

Geography/climate change

Investments in the development of new cultivation methods, more efficient plants that will be more resistant to unfavorable climate.
Development of infrastructure that will help deliver any goods in a geographically disadvantaged location or through innovations such as the previously mentioned drones.
The fight against climate change can take place through the introduction of a carbon tax and emissions trading. Highly developed countries should invest in reducing the effects of global warming and repairing the pollution in developing countries that they produce.
There should be full access to reliable information on climate change. Highly developed countries often try to show the best and pay attention to the high emission of greenhouse gasses in highly populated countries, e.g. India, thus diverting attention from themselves. However, per capita, CO2 emissions are many times higher there. Moreover, it is necessary to act against all disinformation and greenwashing, which makes it impossible to specify the problem and take concrete countermeasures against it.

Solutions to other problems contributing to the low development of a given country mentioned in this article include ideas already mentioned here, e.g. investments and an honest government that has chosen the right development strategy.

At the end of my article, I would like to point out that, as Paul Krugman – the creator of the theory of New Economic Geography – said, everything depends on everything else. It is the so-called first law of geography. By this I mean that all the factors mentioned above that affect the prosperity of a given country are closely interdependent, they interact with each other, one contributes to the other. Thus, there is no clear answer to the question posed. This is the result of an infinite number of complex factors.

Takeaways:

Corruption and political instability effectively prevent social development. The potential of society is wasted by dishonest officials, frequent changes of government and wars. The most corrupt and politically unstable countries also have the lowest GDP per capita.
The long occupation had a severe impact on the level of economic development of the former colonies. They were then used and prevented from developing in the right direction. Today, countries are often heavily economically dependent on former metropolises.
There is a strong correlation between the level of education of the society and economic growth. Countries with the highest levels of literacy and higher education are among those with the highest GDP per capita. Educated citizens can pursue more productive jobs, such as transitioning from working in textiles to IT. Education broadens horizons, encourages asking questions and allows one to escape from the “poverty trap”. That is why it should be free, available to everyone on an equal level.
Religion significantly affects the level of economic development not only by the number of believers, but also by the type of religion professed. Numerous studies show that countries with a greater number of followers have lower GDP per capita than those with a smaller percentage of faithful. Protestantism, through diligence and respect for institutions, is the most conducive to economic development, while Hinduism and Buddhism are the least.
The climate also has a significant impact on the prosperity of a country. A humid, warm climate increases the incidence of deadly diseases for humans and animals. What’s more, the soil is less fertile, and thus agriculture is less efficient. Tropical regions are also more vulnerable to climate change and cause frequent natural disasters. This leads to losses in people and physical capital.
The inland location, away from navigable rivers, significantly hinders trade, which is very vital in the processes of economic development.
Technologies are crucial to long-term progress of society. Thanks to them, it is possible to significantly increase productivity, without changing the human capital, physical capital and natural resources. Countries that think long term have the highest GDP per capita in the world.
The abundance of natural resources may limit the propensity to invest or lead to increased spending on undesirable things, such as war. As a consequence, it can plunge society into poverty. Natural resources can only have a positive impact when the state has good institutions and thinks long term.
Only healthy and strong citizens can produce significant value for the economy of their country. Therefore, countries with insufficient health care, low life expectancy, and high rates of various diseases have the lowest level of GDP per capita. In developing countries, life expectancy may be as much as 30 years shorter than in developed countries.
“Backwash effect” and “sheep effect” can pull advancement away from developing countries and towards developed ones. In this way, disparities only increase. This mainly results in a brain drain and a low degree of investment in peripheral regions. The situation is often unreasonable and the psychological factor plays an important role here.

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