Eli5: How do countries get out of bad economic situations? Like if a country has no resources, money, etc. how can they get out of that situation?



Eli5: How do countries get out of bad economic situations? Like if a country has no resources, money, etc. how can they get out of that situation?

In: Economics

can you give an example? every country has resources. the situation you’re describing doesn’t exist.

Historically, at least one of the ways out of this rut for many countries was to go to war with a neighbor, win and take the resources, plunder, wealth, and whatever else you wanted.

One way is to sell citizenship. The red are several countries in which you can pay a fixed fee (i.e. $500,000 USD), or buy land or property, and they grant you full citizenship. This may not solve all their problems but it’s one of the tools they can use.

Every country has some kind of resource. The least is their population.

There are multiple ways to better your economic situation, the most popular is taking on debt.

In Africa for example, many countries take out loans from china to improve infrastructure or buy machinery to exploit previously inaccessible resources.
You can also sell Resources more directly instead of letting them produce revenue. Like North Korea selling their population into slavery or South America, which sold their natural resources to western nations for exploitation.

If none of these ways or alternatives work, economic collapse is ineviteable. The Government will collapse, but a new one will form. Population will nearly always generate “revenue”, only mismanagement leads to economic misfortune on a country scale.

There’s no simple answer to this – there’s an entire field of economics looking at how less developed countries develop, with plenty of disagreements on the subject.

There’s no one policy that works for all countries at all times. You have to look at the specific circumstances of the country and the wider regional or world economy. And economic development is difficult.

Ultimately you need to get money from *somewhere* to develop, whether that’s loans, aid, natural resources, some part of the economy that’s competitive, money coming from people working abroad, or squeezing it out of agriculture (a traditional, but not necessarily effective method). This money then needs to be directed to the right places by the private sector or the state, which is not an easy thing to do. And usually growing industries need protection from international competition, but alongside pressure to improve efficiency – such as pressure to sell internationally.

These policies usually need to be combined with good governance, improvements to infrastructure and ‘human development’, an income distribution that’s not too unequal, and no disastrous events – natural disasters, wars, being forced to change economic policies.

Here’s an example I wrote about on here yesterday: South Korea. After the Korean war, South Korea was very poor, with a mostly agricultural economy, poorly educated population and considerable war damage. However its economy grew rapidly in the 60s and even faster in the 70s.

There are five main factors behind that:

* Large scale and consistent aid from the US (and later Japan).

* Protectionist trade policies allowing domestic industries to grow.

* Policies funnelling money into industrial development, as well as education and infrastructure. (And not losing too much to military spending or corruption.)

* Pressure on companies to export rather than relying on the domestic market.

* A world economy that was growing in the 60s and globalising in the 70s, well able to buy exports from Asian countries.