Transcript | 5. lecture: Wealth of Nations - University for modern Slovakia

Thinkers, philosophers, scholars, and later among them particularly the economists always thought about what it is conditional on the wealth, why are some countries rich and others poor, but especially what and how to do to make the country grew rich and prosperous. There is probably no coincidence that the classic work of the founder of modern economics, Adam Smith is named "An Inquiry into the Nature and Causes of the Wealth of Nations” which is also known under the abbreviated name "Wealth of Nations. "Adam Smith wrote it in 1776.

So what lies under the wealth of nations, what brings it and what impedes? Theories have been, and indeed still are different. First, there was a theory that it is the size of the state (empire), then mineral resources, soil fertility, amounts of gold and silver, favourable geographical location and so on. Even today, the theories differ in their looks on the importance of one or another factor. The further away, however, it is more evidential that although the above-named factors may play a role, but are far from conclusive.

Just look at the list of the richest countries to make it clear. After all, consider this. Currently the economically most powerful countries and therefore the richest nations are Luxembourg, Qatar, Norway, Singapore, USA, Ireland, Hong Kong, Switzerland, the Netherlands, Austria, Sweden, Kuwait...

From this calculation it is obvious that the mineral resources, particularly rich oil reserves, can be, especially in small countries, the source of their wealth (Qatar, Kuwait), but this is not a requirement at all. On the other hand, also the size of the country is clearly not a prerequisite for wealth. Rather it appears that small nations such as Liechtenstein, Bermuda, Macau, Jersey, Andorra etc. prevail among the richest.

In the economy it is very important to examine not only the current status but also the previous development and future development trends. Examine therefore the economic and related phenomena dynamically rather than statically. It is also important when researching the wealth of nations, especially when one considers that the current (and pretty much the future) wealth depends probably the most on the richness of the past.

In other words, there is great inertia here. Countries belonging to the richest 50 or even 100 years ago mostly are still among the rich, even though the order is usually changing.

This inertia is determined by many factors. Wealthy countries cumulate capital of all kinds during decades.

This is not just about money by far, but also material goods, infrastructure of all kinds (technical, transport, social). Mutually conditioned growth of education, science, research, know - how, business skills and habits, entrepreneurial culture are associated with wealth. The functioning of public institutions is improved and in the conditions of globalisation new opportunities are offered all the time.  

The force of inertia is good news for those countries that are already rich historically, but bad news for the others. It applies that to get among the rich from the poor countries requires extraordinary effort and if any country succeeds, it is rather the exception than the rule. Apart from the oil exporters (Qatar, Brunei, Kuwait) in recent decades only a few countries succeeded - the Asian tigers (Hong Kong, Taiwan, Singapore, South Korea), and Ireland.

Yet greater is the exception, however, if the country belonging to the rich fells outside from them. This is the case of Argentina and Czechoslovakia. This is the best illustrated by the fact that among the countries that were the richest twenty nearly one hundred years ago (between 1925 and 1930) eighteen of them are still among the richest. Only two countries dropped away, Argentina and Czechoslovakia. Why these two countries fell out and why the Asian tigers and Ireland progressed among the richest nations, we will talk about in the next lecture.

Note: Correct answers to the test questions are intentionally not included in the text of the lecture. The reason is to motivate students in their additional self-study and partially (as revealed from the students’ responses and requirements) to make the test questions more challenging.