Economic Development

            Economic development can be affected by many different forces. These forces include economic systems, political systems, and culture. All of these have an impact on how developed a country is, or will be. Economic theory predicts that a market economic system will create greater economic development than a command or mixed economy because with a market economy because the resources are owned by the private individual and they will use them most efficiently to make profits. Economic theory predicts that a democratic political system will create greater economic development than a totalitarian or partly free political system because with a democratic system the people have more incentives to innovate because they will get the rewards from it in the end. Finally, economic theory predicts that cultures with a high degree of individualism will have greater economic development because there are more incentives to innovate if the rewards of your innovation go to you rather than sharing them with a group.

 

Market	GDP per capita		Mixed	GDP per capita		Command	GDP per capita
Hong Kong	$34,200		Macedonia	$7,100		Korea, North	$1,700
Singapore	$27,800		Malaysia	$9,700		Burma	$1,700
Luxembourg	$58,900		Thailand	$8,100		Libya	$6,700
Estonia	$14,300		Saudi Arabia	$12,000		Zimbabwe	$1,900
Ireland	$31,900		Senegal	$1,700		Turkmenistan	$5,700
New Zealand	$23,200		Croatia	$11,200		Laos	$1,900
United Kingdom	$29,600		Uganda	$1,500		Cuba	$3,000
Denmark	$32,200		Lebanon	$5,000		Iran	$7,700
Iceland	$31,900		Moldova	$1,900		Uzbekistan	$1,800
Australia	$30,700		Swaziland	$5,100		Venezuela	$5,800
Average:	$31,470		Average:	$6,330		Average:	$3,790

 

 

 

 

 

 

 

 

 

This chart clearly shows that a market economy will yield a higher GDP per capita than a mixed or command economy. The average GDP per capita is almost six times the average of a mixed economy and almost twelve times the average of a command economy. Also, even the lowest GDP per capita on the market list is higher than any countries on the mixed or command economy list. This huge difference is due to the incentives to innovate in a market economy. In a market economy, if you work hard and come up with better ways of doing things, then you get the rewards unlike in a mixed or command economy. In command economies, the government tells producers exactly what and how much to produce. There is no incentive to innovate when the rewards go to the government, not the individual. Also, in command and mixed economies, the government has strict regulations on firing employees, so an employee could just go to work and not do anything without fear of losing his or her job. Therefore, productivity is low and there is no economic development. Finally, command economies do not protect intellectual property rights, so there is no incentive to innovate because the government can come and take whatever they want and there is nothing you can do about it. The economic theory that market economies will yield greater economic development is supported by the evidence of GDP per capita.

 

Democracy	GDP per capita		Partly Free	GDP per capita		Totalitarian	GDP per capita
Austria	$31,300		Albania	$4,900		Burma	$1,700
Bahamas	$17,700		Bolivia	$2,600		Cuba	$3,000
Chile	$10,700		East Timor	$400		Libya	$6,700
Costa Rica	$9,600		Ecuador	$3,700		North Korea	$1,700
Germany	$28,700		Madagascar	$800		Saudi Arabia	$12,000
Italy	$27,700		Niger	$900		Sudan	$1,900
Poland	$12,000		Paraguay	$4,800		Syria	$3,400
Netherlands	$29,500		Solomon Islands	$1,700		Turkmenistan	$5,700
Malta	$18,200		Sri Lanka	$4,000
Portugal	$17,900		Turkey	$7,400
Average:	$20,330		Average:	$3,120		Average:	$4,512.50

 

 

           

 

 

 

 

 

 

 

    When comparing different political systems with regards to GDP per capita, countries with democratic forms of government are the highest. The average GDP per capita is much higher in democratic governments than in partly free or totalitarian forms of government. This is because economic development comes from increases in productivity that comes from innovations. There is more incentives to innovate in a democratic form of government because if someone works hard then they get the rewards for there hard work. In a totalitarian or collectivist government, the needs of society as a whole are most important, not individuals. If someone is doing well, then the government will restrict what they are doing and get the benefits for it. There is one country in the totalitarian list that does have a higher GDP per capita than one country on the democratic list, but just by a small margin. This might be just due to chance, or the country may have a totalitarian government but have a low population with a lot of wealth in that nation. Overall, the evidence supports the economic theory that a democratic form of government will create greater economic development than a partly free or totalitarian government.

 

High Individualism	GDP per capita		Low Individualism	GDP per capita
Australia	$30,700		Guatamala	$4,200
Canada	$31,500		Ecuador	$3,700
Netherlands	$29,500		Colombia	$6,600
United Kingdom	$29,600		Costa Rica	$9,600
United States	$40,100		Venezuala	$5,800
Belgium	$30,600		Indonesia	$3,500
Denmark	$32,200		Pakistan	$2,200
France	$28,700		Panama	$6,900
Italy	$27,700		Peru	$5,600
New Zealand	$23,200		Taiwan	$25,300
Average:	$30,380		Average:	$7,340