Concepts Of Rich Countries And Poor Countries. Flawed, Misleading, And Laughable

Commentary April 4, 2019

Countries are often classified in terms of two popular concepts, namely rich countries and poor countries. There is even a midway concept called middle income countries, but that is not important here.

We think the current classification in terms of the two concepts is flawed, probably deliberately in some quarters; misleading; and above all laughable! The classification may also have considerable negative impacts on the countries classified as poor. We will elaborate as thus.

Classification of countries in terms of the concepts of rich countries and poor countries seems to be based on the amount and variety of capital assets countries can generate, and often determined by levels of indigenous industrialization. The classification, however, does not take into account natural assets countries have.

On the one hand, capital assets are manufactured capital goods that can be used to generate more wealth directly. They include manufacturing plants, e.g. vehicle assembly plants; agricultural machinery like tractors, combine harvesters, irrigation systems, food processing machinery, etc; mining equipment and machinery; road and rail construction machinery; vehicles; trains; aircraft; ships; refrigeration equipment like refrigerators and freezers; etc. They also include properties like houses, hotels, schools, hospitals, etc. Furthermore, they include roads; bridges; oil and gas pipe lines; railway lines; airports; ports; electricity power stations and power lines; water treatment plants and clean water supply networks; etc. In addition, capital assets may include foreign exchange reserves in US dollars and other major currencies like the EU's euro and British pound.

On the other hand, natural assets are renewable and non-renewable resources that occur naturally and often used to conceptualize the natural environment. Natural assets could therefore be seen as the constituent variables of the natural environment. Natural assets include land for different uses; forests; water resources like rivers, lakes, oceans, etc; tourist attraction resources like mountains, valleys, craters, wildlife, beaches, waterfronts, etc; mineral resource reserves like those for gold, diamonds, uranium, plutonium, cobalt, iron ore, zinc, aluminium, copper, coal, tanzanite, crude oil, natural gas, etc; energy natural assets like sunlight, wind, etc.

It is important to note at this juncture that current classification of countries in terms of the concepts of rich countries and poor countries may have, as indicated earlier, considerable negative impacts on those countries classified as poor, especially if the countries believe what is said about them is true!

For example, the current classification may make citizens from the so called poor countries feel inferior to those from the so called rich countries, in global gatherings, debates, and even negotiation of business deals. It may also lead to diminished confidence of citizens from the so called poor countries in international events like sports, entertainment, etc., where they may have to interact with people from the so called rich countries. Furthermore, the classification may lead to a vulnerable "culture of begging" by which those in the so called poor countries may tend to falsely believe that in order for them to prosper, help from the so called rich countries is a prerequisite!

As it can be seen from the foregoing, capital assets can easily be attained, at least in the long run, if natural assets exist, coupled with good technological base. That is simply because, if appropriate technology is available, to generate most of the former, considerable amount of the latter will be required. Natural assets used in production of capital assets are called inputs to the production process.

Strictly speaking, natural assets and technological know how could be said to be the main requirements for generation of capital assets. Without these two inputs, generation of capital assets may be almost impossible. For instance countries with good technological base but without their own sources of iron ore will have to import iron ore to generate steel for construction of bridges, buildings, railway lines, etc. Otherwise, they will have to import steel or recycled any available used steel waste. Also, manufacturers of electric vehicles will have to have, among others, cobalt to produce necessary electric batteries.

Looked at in this way, one could safely say with exception of probably USA, Russia, Brazil, Canada, Australia, and probably China that have massive natural assets, many of the so called rich countries may not be as rich as claimed, particularly in comparison with some of the so called poor countries. How could, for instance, geographically tiny countries like Denmark, Switzerland, Holland, Singapore, Qatar, Kuwait, etc, with their rather limited natural assets be richer than let say the geographically huge Democratic Republic of Congo (DRC) with its gigantic mass of unexploited fertile land, mineral resources, water resources, and other natural assets?

Accordingly, the so called poor countries that have abundant natural assets may not be poor at all in reality. They may in fact be economic giants if only the classification of economic status of countries is properly approached, and the classic concepts of rich countries and poor countries redefined to include natural assets. In this way, such so called poor countries with ample natural assets like DRC have huge economic potential hence an almost guaranteed opportunity for attaining huge wealth of capital assets, if they understand and agree with what we are propounding in this commentary, and make appropriate policy decisions.

Within this context, what the so called poor countries ought to do is to ensure they extract and process their natural resources locally and tactically, and utilize processed products to generate capital assets for their domestic needs and export. Only surplus processed natural resources should be exported. Generation of capital assets is no longer technologically difficult, because many of the so called poor countries have been generating local professionals for decades now.

Also, technology is easily transferable nowadays, through international recruitment and employment of qualified people from other nations including the so called rich countries! That is exactly what all the oil rich countries in the Middle East and elsewhere have been doing. Using hard foreign currency earned from extracted oil to generate cutting-edge infrastructure and buildings in their cities through the use of expatriates. Similar approach could be used by the so called poor countries to generate other more strategic capital assets like manufacturing plants for vehicles, trains, and aircraft; ship building yards; agricultural machinery manufacturing plants; manufacturing plants for electric vehicle batteries; etc. In this way, in the long run local professionals working with their foreign counterparts, would be capable of doing the job on their own! That is probably what happened in India.

Finally but not least, one thing that should completely be avoided by the so called poor nations with abundant natural assets, is exporting raw and locally needed processed natural resources. That will only consolidate production of capital assets in the so called rich countries, that are often sent back to the exporters as imports at non-negotiable prices. Above all, such export of raw and needed processed natural resources by the so called poor countries may seriously jeopardize all their efforts geared towards indigenous industrialization. That is because if their reserves of the resources get depleted before they industrialize, they may never ever industrialize!

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