Rich in natural resources but still in the developing stage?

Question

Why are some countries rich in natural resources, but are still poor? and other have practically none and are considred to be in the top countries? For example Singapore, is a small island with practically no natural resources, has a huge population and yet is booming. (i know they are big in the trade and thats why they are rich) and then countries like many in africa are rich in oli, gold, diamonds and even platinum (in South africa) and are sturggling.

p.s this is what i do know / think..... many of the africa governments are corrupt, their is civil war, the infrastructure is in ruins from civil war, the education is poor, but dose anyone know something more specific.

Answer 1

I am going to propose a line of logic to you, but can’t prove it. I have studied economics, history, and some sociology. From that study, I have asked myself the same question. Here is my personal answer to that question:
1) Culture and/or religion
2) Stability and/or oppressiveness of government

Countries that have a culture (many times that is coincidental with their religion) that encourage experimentation and research plus freedom of thought, along with personal rewards seem to move forward economically better than cultures and/or religions that are more rigid and legalistic. There are many examples of which I can think. Let me give one example quite close to home. Northern Europe and Protestantism was more open than Southern Europe and Catholicism. Look at Argentina, country with many natural resources, but with a background from Southern Europe compared to North America a culture largely influenced by Northern Europe. Even the Catholicism of North America, is more open than that of South America.

Now lay on top of the culture and stablity of the Government and you have a formula for success or failure. The style of the government and the openness of government ecourage or discourage development. The more open the government to input from the people the more growth in the economy will occur. North American has been characterized by open stable governments led by the people through elections. South America has had more closed, dictatorial governments. Plus South America has seen less stability in their governments. Stability is essential because it provides predictability. Predictability provides for long term decision making which ecourages for long term investments. And long term investments are essential for development.

Now compare China with Singapore and Japan. I believe the oppressiveness of the Chinese government has held back development. I don’t believe natural resources have much to do with anything. Even the central control seen in China today, makes their current growth somewhat suspect. If freedoms and openness does not develop, China will have a cap on their growth. If humans are allowed to innovate, they will, particularly if they are personally rewarded. “Adam Smith and the invisible hand” works when allowed.

Answer 2

Great Question!

First, natural resources actually have very little to do with wealth in general. The value of all of the natural resources in the world is less than 1% of the total world wealth.

Most wealth comes from people and machines. The work that people do and that machines help them do really produces most of the things that you and I enjoy.

The big question is why do the people and machines in some countries produce so much more than in others. A lot of it has to do with three factors

1) The number of machines in a country

2) The technology used to build the machines

3) The education and skill level of the workers.

For example, a nation with a lot of Combine Harvesters operated by trained farmers is always going to be more productive than a country where farmers with little training are harvesting using hand tools.

Good soil can help but cannot replace large, technologically advanced machines operated by trained workers.

The key is providing an environment where farmers and other workers can get the training they need and feel safe investing their hard earned money in big machines.

This means a good school system and a government that protects your right to own the machines you bought. These are the two biggest factors in achieving growth.

Answer 3

This is actually not an uncommon phenomenon at all. In fact according to a book i read which i will try and find to post latter these countries are doomed to fail.

Many of these countries simply live off the resources and dont spend the needed money on a good infrastructure, and education like countries with larger populations, and fewer resources have to. To make matters worse many of the governments are corrupt. Take the middle east as an example with oil. The iraqi government was put back in place nearly 2 years ago and still has not come up with a suitable uncorrupted plan to distribute its billions in oil wealth.

As it was once said "Power corrupts, absolute power corrupts absolutly."
And money is definitly a form of power.

Answer 4

Most countries have about the same growth rate in GDP per capita but by looking at the outliers since 1973
http://www.nationmaster.com/plot/eco_gdp_percap/eco_gdp_per_cap_in_197/flag
we see that Argentina, and Venezuela have done exceptional badly while Ireland, South Korea and Norway have done much better than average. Lately China and India have been growing at rapid rates. Of these only Noway has growth that was dependent on natural resources {north sea oil) and Venezuela has a lot of oil. I don't really know what causes economic growth but finding common elements both positive and negative for changes in these countries might be a place to start looking, or at least check hypotheses.

Answer 5

the reason that some countries which are abundant in natural resources are poor is this: they still lack in the other factors of production (capital, labor, and entreprenuership) you can have natural resources but not be able to develop them into something needed by consumers because you do not have the capital in order to do so. So therefore, a country has to send of its natural resources to other countries to be developed and manufactered in order to be sold to consumers. This naturally, knocks the profit way down for the country that has the resources but small portions of capital. Also, if you lack in labor, production is lowered; and you have to raise the employment price to keep the workers motivated, so you are spending more money for less production and efficiency. Also, some economists consider information intelligence as a fifth factor of production because it is need to balance out all of the factors of production in order for the market to run efficiently.

Answer 6

The level of corruption and ineptness of the government to effectively lead is the main reason. Many of these African countries you mention are in civil war and their infrastructure is a mess. For these reasons, other countries don't want to do business with them.

Additionally, they export a lot of raw materials and import the finished product. They would be wise to try to cut out the middle man and use their raw materials to make finished products. Again, this goes back to effective leadership.

With no transparency in many African governments, I see little hope for these countries to realize their potential.

Answer 7

uhmmm, u got some points. Always rememeber this "there can never be two masters on a ship, either one will rule or one serves the other." asia and europe can't be top together either europe or asia or else there would be more hate...that's why china and usa can't rule the world together or russia and usa. Look there always must be a leader perhaps it isn't africa time yet, but rememeber time isn't static, it changes so anything can happen. there was the great pharoah and also the great benin,zimbabwe...time changes.

Answer 8

I was going to answer this question until I read the first answer. Not much else to add after that! I think you've both got it.