The distribution of wealth across the globe is anything but even. North America is home to just 4.9% of the world’s population — and 24.7% of its wealth. Meanwhile, the situation is nearly reversed in South Asia, where 23.7% of the global population owns just 3.3% of global wealth.
There are multiple ways to measure the wealth of a country. The most common measures are gross domestic product (GDP) and gross national income (GNI). GDP is a measure of the market value of all goods and services produced within a country. GNI includes GDP as well as the net income of the country’s residents obtained outside the country’s borders. If an entrepreneur from San Francisco owns a factory in Mexico, the factory’s profits would be included in the GNI, but not the GDP, of the United States.
GDP is a better indicator of the size of a country’s economy. As global connectivity continues to facilitate the conduct of international business, GNI becomes a more accurate measure of a country’s personal well-being.
The origins of disparity in global wealth are complex and multifaceted. Adam Smith’s The Wealth of Nations was 692 pages long and only began to outline the ways in which economic development can be explained. In an interview with 24/7 Wall St., Dr. John Komlos, visiting professor at Duke University said, “Development is a long term process. There are so many considerations. The Europeans were developing in the Middle Ages for a thousand years before the Industrial Revolution. A lot of it has to do with intangibles.”
Nevertheless, a few paths to prosperity are apparent. A majority of the 10 wealthiest countries have abundant reserves of oil, which they export as their primary economic activity, although this is certainly not a replicable business model. Qatar, the world’s wealthiest country, has the world’s ninth largest proven oil reserves. Through trade, oil accounts for a majority of Qatar’s economy.
Many wealthy countries, particularly in Western Europe, have balanced, diversified, and open economies. They maintain a slight trade surplus, heavily exporting and importing a variety of products to nearby countries. They also take advantage of any natural resources at their disposal.
Some wealthy countries make up for a lack of natural resources by developing highly specialized economies. In each specialized economy, government policy and guidance is important. Macao and Bermuda, both devoid of natural resources, have established themselves as top tourist destinations in their respective hemispheres. Bermuda has also nearly eliminated corporate taxes to attract international business activity. Singapore and Belgium have both used their proximities to larger economies to promote heavy trade.
Likewise, there are paths to poverty. Almost all of the world’s least wealthy countries are in sub-Saharan Africa, mired in political turmoil and violent conflict. Despite infertile land, their economies are largely based on agriculture. Many run trade deficits, exporting low-value agricultural and mineral products in exchange for costly necessities. Some poorer countries rely heavily on foreign aid, a dependence which can hinder long-term economic development.
However, this is far from the whole story. For every path to prosperity or poverty there is a counterexample. Iran has the world’s third-largest proven oil reserves, but is far from being one of the wealthiest countries. Meanwhile, South Korea was endowed with practically no natural resources, and developed an export-oriented industrial economy to become the relatively wealthy nation it is today.
Economic development is tied to the ability of institutions to enforce policy thoroughly, efficiently, and fairly. The wealthiest countries have some of the least amount of perceived corruption, while the least wealthy have the most.
While wealth is not perfectly dispensed throughout a nation, standard of living invariably fluctuates with GNI per capita. The wealthier countries tend to have lower unemployment rates, higher literacy rates, more Internet access, longer life expectancies, and less people living in poverty than the least wealthy.
To identify the richest and poorest countries, 24/7 Wall St. reviewed GNI data from the World Bank. We ranked the top 25 and bottom 25 countries based on GNI per capita, and supplemented our analysis with GDP, GDP growth, poverty and unemployment, life expectancy, literacy, Internet access, Gini coefficients, Corruptions Perceptions Scores, educational enrollment, agricultural employment, exports, imports, government spending from the World Bank, and additional trade data from MIT’s Observatory of Economic Complexity. In our analysis, we also included Transparency International’s Corruption Perceptions Index score, which ranks countries based on internal corruption.