Three Factors that Explain why Some Countries are Poor


Have you ever wondered why some countries struggle while other prosper and keep improving? There are 195 countries in the world today, and only 25 of those are considered to be rich. How did the number of poor countries become that much higher than the number of rich ones and what is contributing to their poor status? In the end, it comes down to three very important factors – geography, culture, and institutions.

Geography

The world’s poorest countries are mostly located in tropical regions that come with dry weather, bad soil, scarce vegetation, diseases and various other problems for people living there. Geography also includes transport and poor countries, which are usually landlocked, are simply not well-connected with the rest of the world. When it comes to natural resources, poor countries seem to have heaps of them; however, they usually end up in the hands of the rich countries due to how expensive the extraction process of those resources is.

Culture

Just how the outside world comes into play, what is happening in people’s minds, their beliefs and religious systems could also be part of the reason why the country is poor and why that status won’t change easily. Generally, those countries whose people are not strict believers, tend to be wealthier and more powerful. This is more easily observed when we look at the fact that in 19 of the richest countries more than 70% of people say that religion doesn’t play a big role in their lives. On the other hand, the poorest countries are also the most religious ones. This is probably because religious people tend to focus on spiritual rather than material, and have a belief that things on Earth are that way for a reason.

Institutions

Poor countries usually have bad, unstable institutions which is one of the reasons why they stagnate. The fact that poverty and corruption are often interrelated can prove the fact that the poorest countries in the world are also said to be the most corrupt ones. Some of the poorest countries in the world have $10 to $20 billion worth of lost revenue that goes to offshore accounts.  This forms a big issue in that country since, with bad institutions, they are not able to collect enough taxes. Without that sufficient tax base, they cannot invest in police, health, education or transport. Another side-effect of having corrupt institutions is that poor countries often don’t have access to intelligence and real talent of their people because hiring is done through connections and ties.