Why are some people rich and why some are poor and what can poor nations do to become wealthy?

Answer 1

Rich people are rich because they have effectual control of significant amounts of the factors of production and employ those in lucrative ways, or because they are effectually privileged to extract payments from others. For example, some have talents that are valuable in the labour market, others have valuable skills (human capital), some own (directly or through companies) land, mines, fisheries (land) or valuable building, plant, and equipment (capital), and others have valuable reputations that make advertisers and movie-makers want them to appear in movies, advertisements, and sporting competitions (social capital). For further example, others are able to pay themselves huge salaries and bonuses out of the funds of companies that belong to other people, or use government authority to exact bribes and embezzle public funds and other assets.

Poor people are poor because they lack valuable labour, land, capital, human capital, or social capital, or because they have disabilities that overwhelm their advantages, or because they squander their advantages, or because they are denied the opportunity to put their advantages to lucrative use (often because of lack of public infrastructure, because of defective legal and economic institutions, or because they are oppressed), or because they are exploited by monopsonists in the markets for their factors of production, or because they are oppressed, or because they are robbed, or because war destroys their assets and the markets for their assets.

For poor countries to become wealthy the most important thing is not to have a war fought in their territory. Second most-important is not to have a corrupt government that steals public funds and public assets and extorts bribes. Other important things are to have efficient and effective enforcement of contracts with clear rules as to who owns what, adequate transport infrastructure, a large proportion of the people able to read and write, and an minimum of barriers to economic activity (such as regulations, fees, internal tariffs, restrictive licences, and burden of compliance with bureaucratic rules). Free foreign trade and free foreign investment help, too.