Unveiling the Richest Countries in the World – What Makes a Country Rich?
Thinking about changing countries? Interested in dual citizenship? Maybe you are after some tax-friendly environments to expand your business. In terms of business, future plans, goals, and living conditions, there are plenty of different possibilities out there.
For instance, a digital nomad could do with a beautiful exotic country with low living costs. This way, they can be on holiday all the time, while working for a few hours a day will ensure more than enough income to survive in that country, not to mention moving costs.
On the other hand, a business entrepreneur with that million-dollar idea may have a different plan in mind – settle down in a tax-friendly environment before the business explodes. This way, they could save a fortune in taxes.
Think about people who want to retire too – ideally, they should do it in a warm country with decent or low living costs, but a safe environment and a good healthcare system. Job and business opportunities are not too relevant at this age.
It is important to consider business opportunists too. Your local system is not the best, so you are not paid enough. You want to move to a country with higher salaries and more opportunities. At this point, you are interested in the richest countries in the world.
From all these categories of countries, assessing the richest countries in the world will probably give you more opportunities than ever. Wherever there is money, chances are the rich will drag you up as well – especially if you are business-oriented.
What makes countries rich or poor?
Now, how do you know a country is richer than another? What makes a country rich, and what makes another country poor? Money is always variable because it circulates. For example, a poor country with lots of nationals working abroad and sending money home could become rich overnight.
This is not really the case. Take a look around Europe, and with a few exceptions, most countries are very well developed. Then, take a look at African countries, which seem to find it unable to get out of poverty, yet many of them have been independent for decades already.
Is it a matter of geography? Not always. If you look around, you will notice that some countries with an excellent climate and plenty of natural resources are still poor – take a look at Afghanistan and what has been happening there for decades.
People who study economics or have a few clues about it will understand that the natural growth of a country is given by three different concepts – capital, labor, and productivity. A country can get richer by having longer working people or by getting investments.
The same rule applies to countries that produce things in a more efficient manner – for instance, technology is a pretty good solution there. There is not a clear answer regarding this question, but all these factors combined can contribute to the growth or failure of a country.
It is not even worth mentioning the political system. Just in case someone was wondering, a corrupt system where everyone is trying to grab for themselves will clearly not benefit the country in the long run – still very common in most parts of the world.
Analyzing the rule of law
Different institutions will determine what types of activities are considered more important than others in a country. Some of these activities are planned with long-term success for the respective jurisdiction. Some others are referred to as rent-seeking activities – they only benefit certain people.Now, some countries go in one direction, while others go in the other. Most commonly, it is corruption that draws people in the wrong direction. But then, the lack of education and vision will also push institutions towards the wrong types of activities.
Powerful institutions will promote growth by establishing a proper environment. They enforce certain laws, so people are not afraid to invest or work. They know there is security in there. Besides, rules are the same for everyone, meaning anyone can be on top or anyone can go down.
The legal system must make sense and be straightforward. Education is critical too, as well as social support. The same institutions must embrace innovation and new technologies, but also adapt overnight.
Considering institutions
If you are interested in the richest countries in the world, chances are you are also interested in the trends that lead to growth and failure. There are plenty of books and research studies that analyze such factors. Why did some countries turn into empires? Why did other countries struggle in poverty?Many conclusions are similar and point into similar directions. Simply put, the long-term prospect of a country and its success depends on its institutions. It is not the actual institutions, though, but their overall quality in making decisions or promoting specific things.
Of course, many other factors will also affect such things. But at the end of the day, it all comes down to institutions. Other important considerations include geography, culture, leaders' ideologies, people in the respective countries, and even luck.
It sounds simple, but then, other countries should follow the same policies and come up with the same institutions. This way, everyone would go rich. Despite seeming easy, it is actually extremely complicated – nearly impossible.
Good institutions operate for the state – the people. But then, their effects are not always in the interest of those who hold power. This is why those who hold power tend to install their own people as peons leading such institutions.
Think about communism or other authoritarian systems. There is a solid resistance to democratic elections and for some obvious reasons. Why would someone want everyone to have access to the same resources? Why would you want competition?
Take a look at Europe and how different economies went in different directions. Ukraine, Romania, and Poland were in similar positions in 1989, when communism fell. Each country had different programs of reforms.
Ukraine and Romania allowed the privatized wealth, which caused the apparition of oligarchs. Narrow elites in both Romania and Ukraine gained plenty of wealth and power, so they could easily block further reforms for decades.
Romania is moving a bit forward, but Ukraine is extremely slow at sorting this problem out. It could be a bit too late to fix things overnight. Poland, on the other hand, is miles away and can be considered among Europe’s most stable economies.
Imagine a system where good institutions are actually established from scratch. Real problems occur when it comes to maintaining them. The institution might be good in theory, but it becomes completely useless if the people managing it are worthless.
The culture and social norms are extremely important here. This is the main reason wherefore copying other countries will not work. If the local circumstances are ignored, such institutions will fail in the long run. This is why institutions in formed colonies failed once the authorities behind them left.
Take the most recent example – 20 years of western domination in Afghanistan went down the drain.
What makes countries succeed or fail?There are a bunch of countries considered high-income economies out there. While they are all over the world and they feature all kinds of different cultures and ideologies, there are a few things they tend to have in common.
First of all, they are democracies. A democracy defines the distribution of power in terms of politics. A democratic environment encourages the population to act and take part. People are free to express themselves. It gives them a bit of extra control over their lives.
Such societies are inclusive and ensure everyone has access to the same types of resources.
Second, they have low inequality levels – some of these countries may have moderate levels, but things will still work. This aspect is responsible for the distribution of wealth, which is also related to personal income.
Bottom line, when everything is widely distributed, economic developments will be shared by everyone.
Now, what are the richest countries in the world? While things and small details change on a yearly basis and some countries go up and down in ratings, the top players are the same and things are less likely to change too soon.
Luxembourg
Luxembourg has been a top runner for decades. The country has high-income levels, but it also has a super low unemployment rate. The inflation rate is not to be overlooked either – around 1%. The wealth is also stable, so things are less likely to change too soon.
The high GDP of this country is given by the fact that almost everyone works. Lots of workers are not even local, but they reside in nearby countries. The landlocked country is tiny, so people can come and work from nearby cities with no issues at all.
The infrastructure is flawless, and investments are always welcome. Luxembourg had also adapted when things changed in the 1970s. Today, its money comes from all sorts of companies – both small and large businesses – in numerous industries.
Singapore
Singapore has always been a hub for freelancers, offshore entrepreneurs, and professionals. The popularity of this country might be difficult to understand for some, mostly because there are no natural resources to build a consistent economy.
With all these, hardworking locals have turned this little country into an economic powerhouse. The place is a central hub for all sorts of financial companies. Then, there are jobs in services, engineering, and logistics, not to mention exports like electronics and biotechnology.
The infrastructure leaves no room for mistakes, and the tourism sector is getting better and better. The country attracts plenty of tourists on a yearly basis, mostly with a civilized attitude. The tax-friendly environment also stimulates investments.
Qatar
Half a century ago, Qatar had nothing – a low fishing industry and no schools. The oil explosion has turned everything upside down. Qatar is one of the richest countries in the world now, and it has become a significant market player.
Qatar's oil resources were discovered in 1939. The rich deposits of natural gas were discovered about three decades later. Plenty of money went into modernizing the country – luxury, cleanliness, and incredible architecture and infrastructure.
The Royal Family has also accumulated plenty of revenue. Starting with the 1970s, Qatar has also started modernizing the healthcare system, education, social programs, and so on. Offshore investments have also contributed to its growth.
Ireland
You would not really expect Ireland to be among the richest countries in the world, but you will be surprised. The country has changed the way it does business by reducing corporate taxes ages ago. These days, it is one of the most attractive markets for super large corporations.
Lots of businesses relocate to Ireland and grow locally, meaning they contribute even more to the GDP. Wages are high when compared to other countries in the European Union. Furthermore, the local economy is stable, and there is lot of income from manufacturing, agriculture, and tourism.
Main exports cover metals, technology, and textiles. Since it is part of the European Union, it has a wide-open market at its disposal, yet it also has numerous agreements with countries out of the union – such as the nearby UK, for example.
Switzerland
You naturally think about white chocolate, army knives, and banks when it comes to Switzerland. While there are quite a few inventions that could make Switzerland worth some attention, the truth is its financial system, banking, and insurance services are the main factors behind its wealth.
The country also boosts a powerful tourism system, not to mention exporting precious metals, pharmaceuticals, and gems. Believe it or not, this country has the highest density of millionaires out there – no surprise at all.
The Swiss economy has also been affected by the coronavirus pandemic – pretty much like any other country out there. However, the internal production went down by just over 2% – about four or five times less than in neighboring countries.
UAE
Just like other countries in the area, the United Arab Emirates gained revenue with the discovery and growing popularity of oil. Prior to using oil, locals used to dive for pearls – a significant source of income, especially for small fishing communities on the shores.
Later on, the country has moved on to tourism. Take Dubai, for example. This place has grown from nothing over a few decades. It has some of the most luxurious hotels and resorts in the whole world and investments are far from being over.
Not all emirates worked together when oil was discovered. In fact, Dubai was left behind, while Abu Dhabi thrived. Its ruler saw some potential and borrowed tens of billions of dollars to turn a stretch of sand into one of the most exclusive places in the world.
Norway
Norway is known as one of the happiest countries in the world. The education system is extremely advanced, not to mention the social security, healthcare system and the human development index. This country does look after its citizens – no doubt.
Most of the economy is driven by gas and oil resources, but there are more considerations – the fishing industry is also worth some attention, not to mention minerals, freshwater, or hydropower, among others. Productivity comes from more directions.
The free education is clearly a plus, as people understand the importance of productivity at an early age. Technologies are also advanced, as well as the infrastructure and telecommunications. The unemployment rate is super low – just like the poverty rate.
USA
USA could be a bit different from other countries, yet it keeps climbing among the richest countries in the world. Somehow, it works for this country, which is seriously split. On one hand, you have queues at food banks, no jobs, and astronomical medical bills in a faulty system.
On the other hand, you have people with high wages who managed to work from home during the pandemic and even saw their investments grow in value throughout this time frame. It is no surprise why a bunch of people hold more wealth than hundreds of millions of Americans at the bottom.
Bottom line, things in the USA are not great. A certain population of the country keeps grabbing and securing wealth. It does help the country rank among the richest countries in the world, but at the end of the day, there are huge amounts of people struggling too.
Denmark
Denmark is not necessarily one of the richest countries in the world. Its national economy is easily outweighed by other countries. However, 2020 was a great year for Denmark, which ranked among the top richest countries out there. When it comes to Europe only, it is definitely one of the front runners.
The population is not too impressive – less than six million people. However, the economy is mixed, and this is probably the secret. It is supported by very high living standards. The country does depend on foreign imports and exports though.
The local economy is extremely competitive and boosts industries like transportation, food processing, constructions, medical fields and wind turbines, among others. In terms of exports, Denmark exports meat, fish, pharmaceuticals and even energy.
Netherlands
The Netherlands boosts one of Europe's most competitive economies, not to mention its position among the highest-earning countries in the world. It has an open economy that brings in prosperity. The country depends a lot on foreign trade though.
Other than that, the unemployment rate is extremely low – the same goes for inflation. No matter what industry you think about, it is stable. Plus, there are lots of international transportation routes crossing through Netherlands as they get into Europe.
Some of the most appreciated industries in the country include food processing, electrical machinery and even oil refining. The country has top-notch trading partnerships with countries like Germany, the UK, France, or the USA. To make everything even better, it also has one of the highest rates of happiness.
Poorest countries in the world
Now that you know the richest countries in the world, what about the poorest ones? To some, these countries mean nothing. To others, they could represent great opportunities due to the low living costs – pretty good for a digital nomad.
Burundi is probably the poorest country out there. It was torn apart by an ethnic conflict between the Hutu and Tutsi, not to mention a civil war. The country seemed to get back on track, but nothing has really changed due to corruption, security, and poor infrastructure.
South Sudan is not too far behind, yet people here live with more than a dollar a day. The country could be extremely rich due to its natural resources. Corruption and ethnic conflicts seem to keep it at this low level though, and things are less likely to change too soon.
Somalia has always been a pole of poverty. About thirty years of internal conflicts, droughts and floods contribute to its current situation. Food insecurity is extremely high and people die on a daily basis due to starvation. There is no such thing as a healthcare system in Somalia.
The Central African Republic is extremely rich in diamonds, uranium, gold and oil, but its inhabitants are incredibly poor. The country has been the poorest in the world for many years. Things might change a bit, but it will take decades. Starvation is still the most common issue there.
The Democratic Republic of Congo is the place where most people live with less than a couple of dollars a day. Dictatorships, instability and violence have prevented improvements – no infrastructure, no healthcare system and no political stability.
Conclusion
Bottom line, when it comes to considering the richest countries in the world, most people talk about money. Forget about resources because they mean nothing if there are no technologies to exploit them or no will from the authorities. Sure, based on people’s needs, a rich country may not necessarily be the best one.While some prosper in rich environments where everyone is pulling everyone else up, some others will do better in poor countries with low living costs. At the end of the day, it is only a matter of personal needs and preferences.
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