|From the tables presented in Chapter 17, (See attached file) what did you find most striking or unusual in the given income levels and growth rates of the different countries? Are rich countries getting richer while the poor are getting poorer? Has the United States become more or less economically free and how might this impact the future growth of the US? How does political decision-making impact the economy?|
Support your response with at least two scholarly and/or credible resources in addition to the text.
One of the striking things in chapter 17 of the course text was the large gap between various economies in income levels. It comes down to whether policies and institutions are consistent with economic freedom. If yes, such countries are likely to perform well in economic growth and record low poverty rates. The text also mentions China and India as countries that were considered less developed a few decades ago. These previously less-developed countries have narrowed the economic freedom gap relative to high-income levels, achieving a greater reduction in extreme and moderate poverty rates.
Although the rich countries are not experiencing pronounced growth, they are getting richer by maintaining the economic structures that have accorded them a comparative advantage. According to Schott and Leamer (2005), as 60% of the world population living in poorer countries have seen their earnings increase over the last few decades, so have the 20% living in rich countries. There are significant differences between the rich and poor countries, that continue to confer crucial benefits to the former over the low-income and middle-income countries. For instance, several differences come down to dissimilarities in inputs and differences in the productivity of labor and capital resources (Wolla, 2017). Higher productivity experienced in rich countries will continue to propel their economies to greater levels. However, as international trade increases, the gap between rich and poor countries will lessen with time.
The United States has less economic freedom today than before due to the sharp decrease in its fiscal health score. In 2017, the U.S ranked 17th out of 180 countries with an economic freedom score of 75.1 out of 100 (Wheeler, 2017). This loss in economic freedom has surprisingly resulted in just an insignificant impact on the U.S. economy, and I think it may remain resilient for several years. The decline in economic freedom may not impact the future growth of the US, especially because economic freedom is not related to economic growth (Rapsikevicius et al., 2021). Political decision-making can impact the economy positively or negatively. For instance, the private sector may struggle to contribute to economic growth if the government’s support decreases over time. If the country is politically stable, its economy is deemed healthier. For example, countries with a high risk of terrorism or internal conflicts are mostly unstable. It makes opening and operating businesses expensive and risky, hindering economic growth.
Rapsikevicius, J., Bruneckiene, J., Lukauskas, M., & Mikalonis, S. (2021). The Impact of Economic Freedom on Economic and Environmental Performance: Evidence from European Countries. Sustainability, 13(4), 2380. https://doi.org/10.3390/su13042380
Schott, P. K., & Leamer, E. E. (2005, April 1). The Rich (and Poor) Keep Getting Richer. Harvard Business Review. https://hbr.org/2005/04/the-rich-and-poor-keep-getting-richer
Wheeler, L. (2017, February 15). US falls in economic freedom index. The Hill. https://thehill.com/policy/international/319556-us-falls-in-economic-freedom-index/
Wolla, S. A. (2017). Why Are Some Countries Rich and Others Poor?. Page One Economics®.
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