Good Example Of Essay On Differences In Income Between Economies
Various perspectives are used to arrive at a definite consensus in the analysis of income disparity among people and nations. Analysts use Gross Nation Income (GNI) and the Gross Domestic Product (GDP) of nations to compare economic activities between nations. Generally, the differences in both GNI and GDP arise due to economic, political and social factors. The factors which lead to the differences in the income of the economy can be classified as either proximate causes of growth or fundamental causes of growth. The proximate causes of growth may include innovation, education and savings (Boushey n.p). Fundamental causes of growth include geography, culture and institutions (Ali 16). The low income countries are characterized with low innovation levels.
China is an upper middle income economy (World Bank, 2) that continues to experience enormous growth. This is in reference to calculations established using the World Bank Atlas methods which categorizes middle income nations to have a GNI of more than $1,045 but less than $12,746. Contrary to widespread assumption, China’s economy is not entirely capitalistic. However, the government’s effectiveness at working with township business at the grassroots level has encouraged diversity to be experienced thus spurring growth. The Government’s effectiveness has a positive rating of 55% and has even reached levels such as 65% in some cases (World Bank, 1). China’s regulatory climate is fairly moderate in its performance.
Together with an appreciation to the rule of law, the government has taken measures at encouraging investment in the nation. High profile arrests in recent times in the nation show China is focused on creating a conducive environment for businesses. However, the rule of law needs to be appreciated at a deeper level of the country is to establish strong economic growth in the future. Majority of China did not experience colonization. Therefore, the socialist policies continue to thrive today. Hong Kong was, however, under the control of the British for a while. Contrary to the rest of China, Hong Kong establishes strong private property rights and capitalistic businesses practices. As a result, Hong Kong has a strong GDP. According to the ranking, the political stability ratings of upper middle income countries in which China lies is 49% as of 2013. The government effectiveness lies at 52%, while the rule of law and control of corruption is at 49% and 50% respectively.
In contrast to China, Bolivia and Sudan are low income countries facing numerous challenges that undermine their progress to become a middle income economy. With Sudan located in Africa, Bolivia is located in the Caribbean. In reference to the governance indicators released by the World Bank, both Bolivia and Sudan have lower scores compared to China. Data collected shows both countries have unstable political environments with Sudan facing continuous decades of civil unrest. The rule of law is most of the time disregarded thus creating an environment that is toxic to the business environment. Although efforts are placed to curb corruption, Bolivia still maintains a low ranking on this front hence diminishing governance and business operations for most citizens. The diminishing aspect of the Regulatory Quality in Bolivia has given little room for the economy to establish strong growths in critical sectors such as the small and medium enterprise (SME) sector. In reference to its past, Bolivia has been subject to resource drain to its colonizer- Spain. They actively utilized the resources such as silver and did not establish strong institutions to ensure that the people of Bolivia benefited. In comparison, Spain is a high income economy with a GNI per capita of $12,746 or more as opposed to Bolivia and Sudan which both have $1045 or less GNI per capita.
Ali, M. (2015). Income Wealth and Growth in the World Economy. Web. 24 January 2015
Boushey, Heather. Understanding economic inequality and growth at the top of the income ladder. The Washington Center for Equitable Growth. 15, Oct. 2014. Web. 24 January 2015
Milanovic, Branco. Global Inequality Recalculated: The Effect of New 2005 PPP Estimates on Global Inequality. Washington. World Bank, 2009. Print.
Sherman, Erik. Income Inequality Hurts Economic Growth. Forbes. 12, Sept. 2014. Web. 24 January 2015
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