What makes a country wealthy.

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Q 1 What makes a country wealthy.

INTRODUCTION:

Envision a country where the primary goal of its economic policy is to accumulate a single commodity lets take for example, gold. Now will the accumulation of wealth be beneficial to this economy’s members?

Yes, this could only be possible if there is another country exists that devotes its power and assets to the fabrication on essentials like food, clothing, and others and that this second country is willing to trade these goods for the gold of our first country.

Commodity’s Wealth cannot be consumed directly by individuals. One cannot be provided with nutrition or protection from the elements like gold, oil, iron ore and others which are slightly valuable in direct consumption. Hence trade can be possible with such countries who realize the true measure of wealth through production of basic goods and services, so these commodities are valuable for such countries.

Figures shows the circular cycle of the economic world.

Adam Smith was the first to realize that the Wealth of a Country was neither in the accumulation of commodities nor in the resource reserves that a country may happen to possess. But rather wealth exists in the productive knowledge of its people. The ability to efficiently transform resources (factor inputs) into desired goods and services represents the true source of a country's wealth.


COUNTRY’S WEALTH

A country wealth consists of its economic factors like natural resources, human resources, capital, enterprise, technology etc. These factors help in the economic development of the country. However economic development is not possible so long as the social institutions cultural attitudes, institutional and political conditions and morel values in a nation do not encourage development and are non economic factors in economic development. In one study professor Bauer has pointed out that the main determinants of economic development are notably aptitudes, abilities, qualities, capacities and faculties, aptitudes mores, values, objectives and  motivations and institutions and political arrangements.

           Economists regard factors of production as the main economic forces that influence development.

NATURAL RESOURCES: The principal factor affecting the development of an economy is the natural resources or land. Land includes natural resources such as fertility of land, its situation and composition forest wealth, minerals, climate, water resources, sea resources etc. For economic development the existence of natural resources in abundance is essential. A country which is deficient in natural resources will not be in a position to develop rapidly. The country should properly utilize and exploit natural resources for making progress. Japan is one such country which is deficient in natural resources but it is one of the most advanced countries of the world because it has been able to discover new uses for its limited resources. Moreover by  importing certain raw materials and minerals from other countries it has been successful in over coming the deficiency of its natural resources through superior technology, new researches, and higher knowledge. Professor Lewis has pointed out that the value of a resource depends upon its usefulness which is changing all the time through change in taste, changes in techniques or new discovery. When such changes are taking place any nation can develop it self economically through the full utilization of its natural resources.

HUMAN RESOURCES: Human Resources are one of the important factors in economic development. Human resources can be utilized   best if the size of population is controlled and reduced. This requires family planning and research on population control so as to bring down the birth rate.

To increase labor productivity and mobility of labor, change the out-look of people and social behavior so that they should imbibe the importance of dignity of labor. This requires changes in religious, cultural, institutional and social factors. Such changes depend upon the spread of education. The labor force should be educated and trained. There should be human capital formation. Human capital formation is the process of increasing knowledge, the skills and the capacities of all people in the country, the level of education, knowledge, technical know-how efficiency can be increased by making investment in human capital that leads to rapid economic development.

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CAPITAL ACCUMULATION: Capital means stock of physical reproducible factors of production. The capital stock increases with the passage of time and is called capital accumulation or capital formation. Capital formation is investment in capital goods that leads to increase in capital stock, national output and income. Investment in capital goods not only raises production but also employment opportunities, it is capital formation that leads to technological progress, which in turn leads to specialization and the economies of large scale production. Capital formation helps in providing machines, tools and equipment for the rising labor force. The provision for social and ...

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