Why Are Some Nations Rich While Others Are Poor?

Adam Smith (1723-1790), explained why some countries were rich while others were poor in his 1776 seminal book The Wealth of Nations. Since Smith, and despite efforts by economists and government to explain differences between wealthy and poor nations, the wealth gap continues to widen. Several factors may determine to some degree the wealth of a nation. These include, but are not limited to decentralization, corruption, democracy, education, trade, and institutions.

Tariffs and Candlestick Makers

The fight between those who prefer free markets and those who prefer protectionism and domestic production is a war that has been waged since the time of mercantilism in the 1600's. Adam Smith, Frédéric Bastiat, and many other classical economists of their time fought hard against the idea that markets needed to be controlled extensively by government regulations. They, along with many others, believed that government intervention in the economy produced inefficiency and dead-weight loss.

Trade Liberalization vs. Protectionism: Pros & Cons

Globalization has always instigated debate and disagreement. It’s blamed for the decay of state sovereignty, the rise of transnational organized crime and economic degradation. It’s constantly used as a scapegoat by politicians and world leaders who want to justify cases of economic and social race to the bottom phenomena in their respective nations, and it’s generally used as an easy excuse to defend failures and downsides. Regardless of these accusations, however, it’s important to note that the benefits of globalization and liberalization vastly overshadow their discontents, especially in the context of trade and economic growth.