We talked last time about why some countries are wealthy and some countries wallow in misery and poverty. On page 20 of the new Better Off book I use a couple of real-life examples.
A Tale of Two Countries
In the early 1980s, I embarked on one of my first international economic assignments in Zimbabwe, Africa. I was there at the invitation of prime minister Robert Mugabe—who later became president—and members of his cabinet. It didn’t take long to realize that Zimbabwe wasn’t the place for me. Civil war had not only claimed thousands of lives, but the government had also imposed a policy of forced redistribution of assets and property. However, I was there long enough to become well acquainted with the political and economic situation.
Formerly known as Rhodesia, the “bread basket of Africa,” Zimbabwe has a population of more than thirteen million people and boasts some of the richest farmland on the face of the earth. The country also has one of the finest railroad systems in all of Africa, as well as the world’s largest platinum reserves. In the past century, the Marange diamond fields were one of the greatest discoveries, but Zimbabwe is most famous for the great Zambezi River that flows over the majestic Victoria Falls.
Zimbabwe has everything imaginable to qualify it as one of the wealthiest countries in the world. But today it wallows in poverty. According to the Mundi index of gross domestic product (GDP), as of January 1, 2014, the per-capita earnings of the people of Zimbabwe amounted to just $600 per year. That’s $1.64 per day! Out of 228 countries, Zimbabwe ranks 227!1 Why?
Next, let’s consider a little spot on the globe called Hong Kong. More than seven million people inhabit this 400-plus-square-mile parcel of land bordering the South China Sea. Most residents emigrated to Hong Kong from Guangdong Province in China to escape conflict. In 1997, Great Britain returned Hong Kong to the People’s Republic of China, and it has remained under Chinese rule ever since.
Hong Kong possesses very little arable land and almost no natural resources, except for a shoreline sufficient for a port. As of 2013, the Hong Kong dollar was the thirteenth most traded currency in the world.2 The tiny administrative region has become one of the most important financial centers in the world, following New York and London,3 and is considered the epicenter for management, finance, Internet technology (IT), business consultation, and professional services.
Hong Kong has a well-developed transportation system and is lauded for the exquisite quality of life its residents enjoy. In fact, life expectancy in Hong Kong is one of the highest in the world—eighty years for men and eighty-five for women.4
Year after year, the Heritage Foundation’s Index of Economic Freedom has listed Hong Kong as the freest market economy in the world.5 The Mundi index of per-capita income ranks Hong Kong sixteenth in the world, with individual earnings at nearly $53,000 per year.6 That’s $145 per day, or approximately 90 percent more than the folks in Zimbabwe earn in a year.
Hong Kong doesn’t possess even a fraction of the natural and human resources available to Zimbabwe, and yet it’s one of the wealthiest regions on earth. Why?
The hunt for clues continues!
© Dr. James W. Jackson
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