ECONOMICS Q)Why R some countries poor when they should be super rich?

**for-the-right-reason** · 01-17-2007 05:46 PM

Heya.

I was just watching Dom Joly (sp?) on Sky 3 and it was a programme on him going to Russia to check out the country and drinking problems. Basically, Russia comes across as being a tragically poor country. I have known for a long time that poverty in Russia was quite widespread but having watched the programme...it made me feel slightly depressed. I don't understand why making a country rich should be such a problem. Surely, why doesn't Putin hire some super clever economists and say 'make Russia rich'. I mean, Russia has tremendous potential with its raw minerals and whatsnot. So why then is it stuck in the ghetto...it's not a third world country (yet)....thus, I assume it has most of the technological know how to help develop itself...

So my question is this:

Why are some countries like Russia so f-ed up? Is it political problems? If the politicians would stop being mugs and got something done...wudn't Russia get richer? It just seems so dumb to me that such a country of historical richness should be so poverty striken in the year 2006...whereby worldwide economic growth is happening...

Another question...in Nigeria it exports billions and billions of barrels of oil a year...so why is it so poor?

I think I know the answer to these questions but judging by other threads...there seems to be really clever ppl here. And 2 heads are better than 1. Please help!

Much Love

**SSM** · 01-17-2007 06:44 PM

A few quick answers:

Corruption (freedom fighters/government spending everything on themselves)
Communism
Stupidity

**akula** · 01-17-2007 08:02 PM

Originally Posted by SSM

Stupidity

that's not a objective assessment

**SSM** · 01-17-2007 08:06 PM

Originally Posted by akula

that's not a objective assessment

but it does sum up a lot of things

**akula** · 01-17-2007 08:24 PM

no it doesn't

it's a judgment you're making on the actions of men (who happen to be a lot smarter than us), as well as the stochastic nature of developmental economics

the only thing this judgment sums is that ignorance is the cousin of arrogance

**akula** · 01-17-2007 08:29 PM

for-the-right-reason, great questions

there are answers to your questions

why do you wanna know these things? is it just personal interest or school?

how complicated do you want this analysis?

it's a complicated question

you're basically asking for a crash course in russian economic history and the theory of developmental economics

Originally Posted by for-the-right-reason

Heya.

I was just watching Dom Joly (sp?) on Sky 3 and it was a programme on him going to Russia to check out the country and drinking problems. Basically, Russia comes across as being a tragically poor country. I have known for a long time that poverty in Russia was quite widespread but having watched the programme...it made me feel slightly depressed. I don't understand why making a country rich should be such a problem. Surely, why doesn't Putin hire some super clever economists and say 'make Russia rich'. I mean, Russia has tremendous potential with its raw minerals and whatsnot. So why then is it stuck in the ghetto...it's not a third world country (yet)....thus, I assume it has most of the technological know how to help develop itself...

So my question is this:

Why are some countries like Russia so f-ed up? Is it political problems? If the politicians would stop being mugs and got something done...wudn't Russia get richer? It just seems so dumb to me that such a country of historical richness should be so poverty striken in the year 2006...whereby worldwide economic growth is happening...

Another question...in Nigeria it exports billions and billions of barrels of oil a year...so why is it so poor?

I think I know the answer to these questions but judging by other threads...there seems to be really clever ppl here. And 2 heads are better than 1. Please help!

Much Love

**SSM** · 01-17-2007 09:25 PM

akula - I wont begin to tell you how much smarter I am than politicians of third world countries. Believe whatever you want tho. It's your world too.

**for-the-right-reason** · 01-18-2007 05:31 AM

heya everyone. Wasn't expecting this much interest! It's good.

Yes Akula...I appreciate that I am 'asking for a crash course in russian economic history and the theory of developmental economics'. If you could be kind enough to share your wisdom and knowledge then that would be great. Even if only it were 30 lines long it'd be great. It's just that I figured that corruption and differing politics come into play. But (and a lot of people may disagree with me here) how hard can it be to make a country rich? Of course, very hard. But not impossible. The British in the 19th Century were determined to become rich and the greatest nation on earth...the Brits accomplished that in a sense that they ruled 1/4 of the world. Now if Britain can do it...why can't Russia (with its much greater size, population, raw minerals etc) do it? To me, if I was Putin, i'd get every economist worthy of recognisation inside the Kremlin and talk about how to make 'Russia rich'. Such an action hasn't taken place...which tells me that the Russian politicians can't really be bothered...?! Because Russia can make herself super rich (one of the richest countries in the world in my humble opinion) and she has the ability to do so. Why would Russian politicians not want Russia to be rich?! Are sentiments associated with the Soviet Regime still so ingrained? Do they fear what the man with alot of money can do? Because economically, the richer the population...the more likely the politicians are to stay in power. In addition, the richer the population, the more likely that everyone in Russia will become richer thus, the politicians could enjoy pay rises.

It just doesn't make any sense to me. If a homeless man can become a millionaire then why can't Russia become rich?

I don't expect anyone to write a novel on my questions but anyones answers/judgements would be appreciated! Also Akula i'm answering these questions because I'm very interested in economics and trying to figure out why the world is the way it is. The world is rich enough to support everyone on the planet yet billions still suffer in the pit of poverty. This paradox just confuses me and I want to completely understand why the world is the way it is...so that (hopefully) I can help others with the knowlegde I hope to gain.

Much Love

And thanks alot for the interest!!!

**skidlin** · 01-21-2007 09:07 AM

In my view there are a couple of reasons that may contribute to the poverty of Russia in the past.

1. Russia's major seaport is only accessible 6 months of a year

2. communism blocks the drive for competition

**Newton** · 01-22-2007 12:36 AM

The more a government messes with an economy, the more the people suffer, IMO. It's why communism has been such a huge failure.

There's many countries with no real reason to be poor but simply are.

Look at Japan on the other hand... barely any natural resources but a culture that encourages large scale enterprise and BOOM there you have it, a rich country.

**chopper** · 01-22-2007 12:12 PM

Originally Posted by skidlin

In my view there are a couple of reasons that may contribute to the poverty of Russia in the past.

1. Russia's major seaport is only accessible 6 months of a year

2. communism blocks the drive for competition

It doesnt block drive for competition, there is not competition! All companys are owned by the state.
If the government decides there is not enough jeans, it will produce jeans for everyone. Not like in a free marker economy where there are businesses producing jeans for everyone all the time.]
It is very efficiant communism, in term the Production Possibility Frontier anyway. Not very practical, but a nice idea on paper.
But a very valid statement.

As to the main question at hand, the answer is what all russian economists want to know! In truth, people can suggest things like, Russia is still recovering from the Communist era, or the Russian mafia owns over 70% of private companys(allegedly) and so that is why there is such a diverse income distribution.
In reality there is no one reason why Russia has not reached its full potential in terms GDP (gross domestic product, which does not include import/export in reference to the quoted statement above.), but rather a combination of many factors.

Originally Posted by Newton

The more a government messes with an economy, the more the people suffer, IMO. It's why communism has been such a huge failure.

There's many countries with no real reason to be poor but simply are.

Look at Japan on the other hand... barely any natural resources but a culture that encourages large scale enterprise and BOOM there you have it, a rich country.

No real reason to be poor, but simply are??? Are you serious!? Please...that is the most rediculous thing i have heard in my life.
The more the government messes with the economy?
No, not at all. Look at the UK, and mixed market economy, where the government does intervene.
Everyone knows communism doesnt work, its a nice idea, but not practical with human nature. Nobody likes being poor, and people like having nice things

However as you say Japan is a very rich country, and also a mixed market economy and that has to be the case due to the lack of natural resources. It isnt a rich country becuase it encourages large scale enterprise..China supports large scale enterprise and although having many traites of an MEDC its still is an LEDC country. Although admitidly it is communist and is not a very good example. Russia could be another good example though.
For all you know Libya could be supporting large scale enterprise, but the reason it is one of the poorest countries in the world is becuase its is in the middle of the Sahara and has very little going for it, in terms of not only natural resources but factors of production. (Land, labour, Capital).

**Newton** · 01-22-2007 07:44 PM

Originally Posted by chopper

No real reason to be poor, but simply are??? Are you serious!? Please...that is the most rediculous thing i have heard in my life.

Really? That's quite an achievement.

I should have said 'simply are, due to various factors'.

The more the government messes with the economy?
No, not at all. Look at the UK, and mixed market economy, where the government does intervene.
Everyone knows communism doesnt work, its a nice idea, but not practical with human nature. Nobody likes being poor, and people like having nice things

You're not making any sense champ. My argument was against Communism in the first place. Communism is an example of a government messing with the economy. Britain has taken a much more hands off approach and has received the dividends.

However as you say Japan is a very rich country, and also a mixed market economy and that has to be the case due to the lack of natural resources. It isnt a rich country becuase it encourages large scale enterprise..China supports large scale enterprise and although having many traites of an MEDC its still is an LEDC country. Although admitidly it is communist and is not a very good example. Russia could be another good example though.
For all you know Libya could be supporting large scale enterprise, but the reason it is one of the poorest countries in the world is becuase its is in the middle of the Sahara and has very little going for it, in terms of not only natural resources but factors of production. (Land, labour, Capital).

I wouldn't say China encourages large scale enterprise... given that its Communist. ... ...

Russia is an even WORSE example because more than 95% of its Agriculture, for example, is still government owned. Nearly all state assets were sold off to high ranking communists and other powerful people as the Soviet Union fell. These guys then crush competition under their heel with the help of the mafia. No, that's not encouraging free scale enterprise.

For all I know Libya isn't encouraging enterprise because it is a tightly controlled economy that has subjected its citizens to enormous sanctions due to its refusal to cooperate with other countries and its occasional sponsorship of terrorist activities.

It barely has any tourism because it makes it basically impossible to enter the country - for the people that do, they have to pay hundreds of pounds to get their passport translated into Arabic by a Libya approved translator. For their entire trip in Libya they have to be in the presence of a government-appointed minder. Oh, and you need to be on a tour with one of only a couple approved tour groups.

Did you know Libya has the world's best preserved Roman ruins? Even better than Italy! Yet its tourist industry is basically at standstill.

Examples of government messing with free enterprise:

- Over regulation (such as Communism, Socialism)
- Under regulation (allowing the mafias to step in)
- Corruption
- War/civil war
- Tariffs and subsidies.

you'd be hard pressed to find a poor country that hasn't been affected by one of these examples.

**for-the-right-reason** · 01-23-2007 05:24 AM

Right, great comments guys...

so...it seems like these following factors have contributed to Russia's economic status:
1) Communism
2) The lack of free enterprise
3) Mafia scum

All of this means that it is almost impossible for competition to occur in certain sectors. In addition, it means that there is so much unfair wealth distribution...

So...surely anyone with 2 brain cells would
a) sort out the Mafia slowly but surely (check out how the US did it)
b) become capitalist
c) ask America for help...and in return send troops to Iraq
d) Call a truce with Checynia (sp)
e) become a more transparent country
f) set out policies aimed at increasing economic growth

I figure that if Japan can become rich with America's help (Japan became rich due to American aid during the Cold War) then Russia can become rich too....I am not trying to big up America but they are the richest country in the world so their influence is bound to have a massive impact.

**Newton** · 01-23-2007 07:12 AM

Originally Posted by for-the-right-reason

So...surely anyone with 2 brain cells would
a) sort out the Mafia slowly but surely (check out how the US did it)
b) become capitalist
c) ask America for help...and in return send troops to Iraq
d) Call a truce with Checynia (sp)
e) become a more transparent country
f) set out policies aimed at increasing economic growth

I figure that if Japan can become rich with America's help (Japan became rich due to American aid during the Cold War) then Russia can become rich too....I am not trying to big up America but they are the richest country in the world so their influence is bound to have a massive impact.

See there's some nice ideas there but when the people in power have a vested interest it gets in the way

a) Mafia are powerful and people run scared of them. (although JFK had enormous success in combating the mafia.)
b) A lot of people think being capitalist has made them worse off, which has created a bit of inertia. There's a bit of cynicism about capitalism because in Russia it seems to mean 'sell the Communists and their buddies all the goodies for very cheap prices.'
c) They didn't want Iraq to start because they either had oil or weapons contracts with them. I forget which. Also, Russia is a very proud nation, don't like being helped.
d) Wouldn't that be nice

e) Vested interests...

Russia is sitting on enormous economic potential and is stuttering along.. They really messed up the move to capitalism which has hurt badly.

**Sam Barona** · 01-23-2007 09:11 AM

Just my two cents...

Any intelligent person cannot dismiss the impact that western distabalisation programmes have on developing countries, or even on ex-world powers and new democracies (this in its loosest form) like Russia.

Of course, internal lack of infrastructure (legal, political, etc) is a key driving factor, but please refer to people like Chomski for a more enlightened take on these topics, rather than the unadulterated propaganda that we use to make our assessments with.

Another factor is of course trade deals that the west controls; so for example, Nigeria exports oil, but the American and European led OPEC cartel demanded that Nigeria allow companies like Shell and BP inside to exploit it in order to secure their collaboration.

Result? Nigeria exports billions, but only receives a fraction of this, since the oil companies are owned by foreign firms. These type of price fixing and trade restricting controls are prevalent in most industries that pertain to raw materials (mostly from developing countries); from diamonds to gold, to coffee and flowers.

There are many of these cartels in existence, OPEC and De Beers being just two of them. But these are legal cartels with the power to act internationally in the best interests of the G8.

Credit to G8 nations is due, they have managed to secure their position in the world and have an international infrastrucuture that allows them to maintain this position around the world; with perhaps the exception of China, who thwarted the western funded and Taiwanese led would-be-revolution in Tianamen square.

If you want the truth, you will have to look beyond the stories in the news, which are just biased reprts of the truth.

Sam