Why is it that the richest countries basically have the smallest supplies of resources?
and the poorest have a lot more?
Answer:
This general correlation if because of the way the countries developed. IN GENERAL, countries with few resources (aka natural endowments to the economist) compensate for this void by investing in their human capital (education, job training, anything that makes each worker more productive). As important as people say natural resources are (which they are not, as evidenced by Taiwan, Japan, etc), in the long run, productivity gains are more relevant. And investment in education and the like are GREATLY positively associated with increased productivity gains.
Also, it is generally accepted as truth, that natural resources are a curse to a developing society. Though the US and Canada a exception (but, colonizing sites did not have abundant resources, as is generally accepted history, productivity increased when settlers LEARNED how to deal with the land). African countries and others in the middle east, with vast resources are those that are furthest down in the Human Development Index. This is for a few reasons. Vast amounts of resources are correlated to government corruption. Infant governments, then are corrupted and prevent society from growing economically. Consider the conflict countries in Africa and Middle Eastern Oil countries.
Secondly, people in a country with natural resources feel little incentive to move out of that field, since they have a comparative advantage in that field. Though new infant industries would make the country better off in the long-run (20+ years), a farmer working his cash and successful subsisting will not abandon his field just to try his hand at manufacturing (which would incur short term losses, wouldn't guarantee a profit, and even if it would return a profit, those profits wouldn't be as much as his current for years to come). They have no incentive to leave a field that is providing for them.
In the end, unless incentives are realigned by government that those governments are not corrupt, countries with vast natural endowments will generally stay within that industry until the resource runs out. And until they move on to industries that require more human capital (diamond mining requires less HC than textile work which requires less than steel production which requires less than computer production, etc), they will stay a low Human Development Index country.
There is no direct relationship between the richest countries and their supply of natural resources. Countries become rich by buying or renting natural resources and selling them for a profit.
A country can be rich in natural resources and be rich (Canada and US), or a country country can be rich in natural resources and be poor (take your pick of African countries).
The biggest difference is whether they have dynamic economies, which requires education, good government, and open trading of goods and services.
This insight also covers individuals, in a way. Just because my daddy is not rich has not kept me from going to college and earning a large salary!
I would refer you to a paper by Moene, Mehlum and Torvik (2006) which answers this question. Also, Jeffrey Sachs wrote about the 'natural resource curse'. Type their names into google scholar and you will find the answer. Mainly the problem is poorly defined institutions (rules) within an economy, so many poor countries' producers have little incentive to produce as their property rights and benefits are poorly defined. Corrupt governments for example. However some rich countries have many resources and some poor countries have few resources. Development Economics is a good textbook by Debraj Ray and perhaps Lucas' paper- 'Some Macroeconomics for the 21st Century' may also be of some use to you.
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Answer:
This general correlation if because of the way the countries developed. IN GENERAL, countries with few resources (aka natural endowments to the economist) compensate for this void by investing in their human capital (education, job training, anything that makes each worker more productive). As important as people say natural resources are (which they are not, as evidenced by Taiwan, Japan, etc), in the long run, productivity gains are more relevant. And investment in education and the like are GREATLY positively associated with increased productivity gains.
Also, it is generally accepted as truth, that natural resources are a curse to a developing society. Though the US and Canada a exception (but, colonizing sites did not have abundant resources, as is generally accepted history, productivity increased when settlers LEARNED how to deal with the land). African countries and others in the middle east, with vast resources are those that are furthest down in the Human Development Index. This is for a few reasons. Vast amounts of resources are correlated to government corruption. Infant governments, then are corrupted and prevent society from growing economically. Consider the conflict countries in Africa and Middle Eastern Oil countries.
Secondly, people in a country with natural resources feel little incentive to move out of that field, since they have a comparative advantage in that field. Though new infant industries would make the country better off in the long-run (20+ years), a farmer working his cash and successful subsisting will not abandon his field just to try his hand at manufacturing (which would incur short term losses, wouldn't guarantee a profit, and even if it would return a profit, those profits wouldn't be as much as his current for years to come). They have no incentive to leave a field that is providing for them.
In the end, unless incentives are realigned by government that those governments are not corrupt, countries with vast natural endowments will generally stay within that industry until the resource runs out. And until they move on to industries that require more human capital (diamond mining requires less HC than textile work which requires less than steel production which requires less than computer production, etc), they will stay a low Human Development Index country.
There is no direct relationship between the richest countries and their supply of natural resources. Countries become rich by buying or renting natural resources and selling them for a profit.
A country can be rich in natural resources and be rich (Canada and US), or a country country can be rich in natural resources and be poor (take your pick of African countries).
The biggest difference is whether they have dynamic economies, which requires education, good government, and open trading of goods and services.
This insight also covers individuals, in a way. Just because my daddy is not rich has not kept me from going to college and earning a large salary!
I would refer you to a paper by Moene, Mehlum and Torvik (2006) which answers this question. Also, Jeffrey Sachs wrote about the 'natural resource curse'. Type their names into google scholar and you will find the answer. Mainly the problem is poorly defined institutions (rules) within an economy, so many poor countries' producers have little incentive to produce as their property rights and benefits are poorly defined. Corrupt governments for example. However some rich countries have many resources and some poor countries have few resources. Development Economics is a good textbook by Debraj Ray and perhaps Lucas' paper- 'Some Macroeconomics for the 21st Century' may also be of some use to you.
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