Question

Why are some countries today much poorer than other countries? Are today’s poor countries destined to always be poorer than today’s rich countries? If so, explain why. If not, explain how today’s poor countries can catch up to or even pass today’s rich countries.

Short answer

Some countries are much poorer than other countries because the modern economic growth in poorer countries reached later.

No, poor countries are not always destined to remain poorer.

Today’s poor countries can reach the prosperity level of rich countries by applying the already developed cutting-edge technologies and institutional reforms.

Step-by-step solution

Step 1. Reason behind inequality of wealth between countries

Modern economic growth started from the European countries and expanded to other countries. Countries that experienced modern economic growth earlier became rich. Countries, where the modern economic growth reached later, are still poor. Poor countries are using useless advanced production technologies in comparison to rich countries. Thus, they have less experience of economic growth and are poor.

Step 2. Reason why poor countries cannot remain poor forever

Poor countries have the chance to copy and apply the most advanced institutions and technological methods of advanced nations. There is no need for them to start from the beginning and invest many resources in advanced methods. In this way, their rate of growth will be higher than the rich countries. Because of a higher economic growth rate, they will reach the level of rich nations and will not always remain poor.

Countries like China and South Korea were poorer nations in the past but have attained the level of advanced nations.

Step 3. Poor countries catch up with rich countries

The poor countries will adopt the most advanced technologies and institutional policies directly by copying them from rich countries to catch up with the economic prosperity of these countries. For example, suppose a poor country from Africa decides to invest in the telecom sector from zero instead of developing the technology on its own. In that case, it will directly adopt the most advanced technology of the telecom sector available to rich countries (high-speed internet).

The development of high-speed internet in the country directly by copying the technology available to rich countries saves time and resources of the county. In this way, the African country requires less time to reach the prosperity level of rich countries in the telecom sector. The developing nations apply the same concept for all kinds of different sectors.

That’s why the economic growth rate of poor countries is higher than that of rich countries. Because of higher growth rates, they will reach the level of advanced nations by copying the methods and technologies built by them to reach that level.