Are wealthy nations prosperous?

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Economics, among other social sciences practices, is the largest activity commonly performed by the majority of people around the world. The economic downturn has over time improved the sector and brought solutions to today’s problems. Earlier, students dropped finance, courses and concerns about their economic studies’ low quality. Instead of using approachable economic realities and allowing approaches which would address complex financial problems, the student believed that the economic education was not pragmatic and used methods which cannot be used in practice. This piece of work explores the previous work of economic superstars like Robert Heilbroner, Dickens and Sinclair who own respect for having made a significant contribution to economic thought and knowledge and help us come with an opinion on several questions that people raise. These arguments are; whether a wealthy nation is necessarily prosperous, and how the division of labor influences both the internal and external environment of a factory, the benefits of the drive for capital in wealth growth and its negative impacts, among others. This paper is based on Sinclair’s insights to prove that a wealthy nation does not literally mean a prosperous nation. The paper begins with an explanation to why a wealthy nation is not a prosperous nation. It then tackles the labor division and later points out how countries differ regarding wealth and prosperity, and Sinclair’s insights on the way forward regarding how these disparities come about. The paper further explains why a country can be wealthy with high GDP, but still not prosperous. At the same time, it elaborates why some countries are wealthy and underdeveloped; and the reasons to why some nations do not support social welfare.

A Wealthy Nation is not a Prosperous Nation

A measure of national wealth is derived from a country’s Gross Domestic Product; economists have argued that a rise in the gross domestic product show a progressing economy, while a drop shows economic trouble (Diener et al., 2010). However, this method of GDP might be misleading, and another technique has been embraced, namely Genuine Progress Indicator. Factors that lead to the growth of a nation are quite diversified and include an increase in the productive capacity, which mainly rests on the division of labor and capital accumulation.

In an economic activity, there is the desire to make a profit, and this is only achievable when there are inputs used in the production of goods and services (Birks & Sinclair, 1978). The factors of production include; the business owner, land, capital and labor. In the context of this paper, labor, money, and the entrepreneur are necessary to discuss. Labor is the common word that includes the work that the laborers and worker partake at every level of an organization, and capital encompasses the tools and machines used in the production process of good and services.

The division of labor is the physical breakdown of the production process into unit divisions, to enable laborers to focus on a precise task (Birks & Sinclair, 1978). The division of labor improves productivity levels exponentially; it creates specialization hence increasing knowledge on a particular job and makes the laborer comfortable in their duties as he/she engages in the task more often, therefore, increase in production. There is a safety of time as the worker gets acquitted to one job rather than passing from one stage to the other, which may need him/her to use more than one tool to increase speed and efficiency. When an employee is assigned to one task over prolonged time, they tend to become more innovative in technology and the methods used to carry out various duties, hence increasing productivity (Diener et al., 2010).

On the other hand, the practice of labor division has its disadvantages (Smith, 1776). It affects the internal environment of an organization. Adam Smith noted that these problems and campaigned for workforce education to motivate employees. Some of the negative impacts he highlighted included: low morale by workers, as the job becomes repetitive and dull due to the high level of specialization. The rise of mistake due to boredom and loss of motivation, which renders a low concentration degree and complete stoppage of the production processes in case of one division of the task, fails and no other worker knows the stage of production.

Robert Heilbronn looks into the inherent difficulties in the production of commodities and their sale. This leads us to questions that arise from the continuous changing institutional forms that capitalism has built and to research on how some of the economic systems work. Capitalism focused on one aspect of economics, and that is the maximization of income and profits. He says that people in the middle age did not have this profit and income motives and did the economic transaction to maintain their existence. For example, one would sell their milk in the market, to supplement the livelihood. With the emergence of monetization of labor, capital, and land, transaction became a more natural activity. At this point, everything changed, and selling and buying became the order of the day, bargain for services and goods became important, as a deal that would lead to significant income, and a weak contract would mean a loss or ruin. A sense of maximization grew strong amongst people throughout the society, and much consideration fostered to it as a new human behavior.

Creating capital is a critical condition for the growth of an economy and its progress; this can be achieved by saving a portion of what is produced instead of consuming it immediately. We can also use equipment that is labor saving and embrace modern technology. The more we accept to practice these new investment techniques, the more productivity and efficiency. However, wealth is not permanent and can be lost through theft, lavish government spending, and through mistakes and accidents. People should be allowed to build up capital by their government and aim at enjoying their productive national money (Heilbroner, 2016).

Economic history proceeds in a direction that is opposite to that we would expect of science (Heilbroner, 2016). Heilbroner (2016), statements and arguments are correct since most of the analysis of prospects for the 21st century rely strongly on classical theories of economics. While studying historical science development, one would expect to find a more or less continuous progress from previous segment insight to an ever more complex context of knowledge, where there are underlying regularities, their explanations and more theories that solve a problem. The very opposite is true of the economics of modern history. Heilbroner and Milberg (2012) argued that lack of an economic crisis in contemporary finance reflects a more significant problem in economics; they state that in the 20th century, the scope of analysis had been defined explicitly by the economics technique, which was available.

Heilbroner (2016), further explains an economics approach, which focuses on the goods determination and income distributions in markets through supply and demand; he equates this to capitalism. He adds that this approach was stagnant over a period, and was concerned with the quality outcome of a given number of conditions. Heilbroner (2016) posits that the acquisition of wealth is socially acceptable, but through the introduction of capitalism, all people accepted the acquisition of wealth, making it the legal method of wealth generation drive Diener et al. (2010). Diener et al. (2010) equates passion with wealth generation drive as a prerequisite for the development of capitalism.

In late nineteenth-century, the drive for capital and wealth acquisition grew widely and marked a significant development of industries and productivity of goods primarily in the United States. Possibly, this could have been because of massive capital investments increasing production of products. In the late 19th century, because of such economics approaches, mechanization had begun, and machines replaced craftspeople in different industry, hence unemployment of the skilled craftsmen. Production of goods increased availing more products in the market, which were cheaper. Machines also altered the way laborers worked

One of the most significant achievements of mechanization and production in factories was the attractive growth in the organization of labor. Industrialization, however, did not wholly outdo the craftspeople, craft guilds remained for an extended period, but labor unions were established to check the welfare of workers. These unions did not have notable success in the 19th century. It is good to note that, the capital drive is a crucial contributor to economic growth (Birks & Sinclair, 1978).

In the twentieth century, industrialization was embraced fully and it grew far beyond manufacturing (Birks & Sinclair, 1978). It dominated almost every segment of life in developed countries across the entire world. Industrialization is a term used to describe the transformation of an economy that depends on agricultural to manufacturing and trade-based economy. However, the conversion from agriculture to production is merely a sign, but not the actual symbol of industrialization. As discussed before, the process of labor division, capitalism, standardization, and consolidation, is the best indicator of the industrialization processes rather than moving from agriculture to manufacturing. The economic transition from agricultural activities to trade and construction is merely a result of applying industrial plans to the economic development process. Through the application of inputs like fertilizers, use of machinery, specialization, and the free market, agriculture in America became very efficient, ranking top throughout the world, having wholly minimized the cost of production and maximized production of commodities and industrialization objective is reached.

Discussion

It is a fact that countries differ regarding wealth, Sinclair starts by questioning why such disparities come about and give insights on the way forward. According to Diener et al. (2010), there is a vast difference in prosperity across nations in the contemporary world. For example, the income per capita in sub-Saharan Africa on average is 1/20 of USA income per Capita. Diener et al. (2010), point out the institutions that determine the wealth and prosperity of a nation. These systems also determine the economic performance and are the critical determinants of understanding the cross-country difference in success. Institutions are not exogenous; however, they are potential sources of exogenous disparity in history. Birks & Sinclair, (1978) argue that these systems are not customarily chosen to benefit the society but only help those in power and their interests and consequently negatively affecting the general economy. Understanding how institutions work requires one to understand the dynamics of political power. Institutional reforms are also possible, however; most of these improvements focus on the symptoms rather than a broad cause. Various reasons drag a country behind and constrict its prosperity; these factors include human capital difference (especially in the emerging countries that do not invest more in human social welfare). Secondly, the technological gap is another factor that hinders the prosperity of a nation. For example, most of the developing countries have been reluctant in investing in technology, which ultimately has led these countries not to optimize their productivity levels, especially in the manufacturing sector.

In other words, a country can be wealthy but not prosperous. A country can be wealthy regarding economic growth, but once this economic growth is not sustainable, then a nation cannot prosper. Most states that do not invest in human capital are likely not to be prosperous, even if they are wealthy. On the other hand, spending in human capital can make a country both wealthy and affluent, also if its prior state was underdeveloped. For instance, countries like China and India have immersed a lot of wealth and record a high GDP per capita. In some cases, China has recorded higher Gross Domestic Product per Capita compared to the USA, yet on the other hand, the USA is still considered a prosperous nation as compared to China. The reason behind such a comparison is because; the USA has invested more in their institutions, social welfare, and human development to ensure a sustainable economy as compared to China. As much as China records a higher figure in economic growth, other elements of prosperity such as the population per doctor, teacher population to student ratio, social welfare, and population health are still low (Diener et al., 2010). The same situation has been similar in India, Russia, Brazil, Singapore, Indonesia, and Malaysia. These countries have recorded high values regarding economic development; however, due to insufficient investment in the local population, they cannot be counted among prosperous nations like Germany, United Kingdom, France and the United States of America.

References

Birks, J. S., & Sinclair, C. A. (1978). Nature and Process of Labour Importing: The Arabian Company. Doi; 991795103402676. International Labour Organization.

Diener, E., Ng, W., Harter, J., & Arora, R. (2010). Wealth and happiness across the world: Gulf States of Kuwait, Bahrain, Qatar and the United Arab Emirates.

Diener, E., Tay, L., & Oishi, S. (2013). Rising income and the subjective well-being of nations. Journal of personality and social psychology, 104(2), 267.

Durkheim, E. (2014). The division of labor in society. Simon and Schuster. Journal of Labor, 23 (11) 45-58. Cite

Hanushek, E. A., & Woessmann, L. (2015). The knowledge capital of nations: Education and the economics of growth. MIT Press.

Heilbroner, R. L. (2016). Capitalism. The new Palgrave dictionary of economics, 10 (2) 1-12.

Heilbroner, R. L., & Milberg, W. (2012). The making of economic society. Pearson Education material prosperity predicts life evaluation, whereas psychosocial prosperity predicts positive feeling. Journal of personality and social psychology, 99(1), 52.

Smith, A. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Routelodge

Smith, M. H. (2013). The natural advantage of nations: business opportunities, innovation, and governance in the 21st century. Earthscan.

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