When it comes to economic development, what makes for a successful country? N.C. State University economist Mike Walden responds.
“Well, at first glance you might say that a country that has abundant natural resources might be a successful country. But you’ve got several counter examples here. You have some unsuccessful nations — one would be Zaire right now — that have abundant natural resources, but they’ve not done well economically. But then you have some countries like Japan that have very few natural resources that over the last five decades, they’ve actually done very well economically.
“So I think we have to look at some other factors. One that economists have pointed to is the rule of law. Investors need to know that their resources and their investments are going to be protected — that if they invest money and make a rate of return, that it’s going to be protected. They need to know the rules of the game, if you will. So where there’s a strong rule of law and contracts, and relationships, and economic ties are protected by the law, by the courts, by the police, that is associated with economic development.
“Clearly, an educated and skilled workforce — in fact, that’s probably the major resource today, rather than natural resources — that’s related to economic development.
“An atmosphere of economic opportunity where people are motivated to take risks, take chances — social mobility — it allows people to move in and out of occupations at will — that’s clearly related to economic development.
“And lastly, political stability. That doesn’t mean one party or one person in power constantly, but a political system that allows for a transition of power, a safe and peaceful transition of power so that you know the political system’s going to be honored: That also has been found to be strongly related to economic development.”Category: Economic Perspective