The World's Richest and Poorest Countries 2020

WHAT DOES IT MEAN FOR A NATION TO BE RICH? 

Would you rather be rich in a poor country or poor in a rich one? Measuring how rich a country is not that easy (spoiler: it is not just about the GDP). Measuring how rich you are depends to a large degree on how rich and poor countries are defined.

If we simply consider a nation's gross domestic product (GDP)—the sum total of all goods and services produced by a country during one year—then we would have to conclude that the richest nations are exactly the ones with the largest GDP: United States, China, Japan, Germany. But how could the economies, for example, of San Marino or Luxembourg ever match that of such powerhouses when they are no more than tiny dots on the world map?

Another problem with GDP is that it does not measure wealth distribution. That is why a more accurate representation of people’s living conditions begins with dividing a nation's GDP by the number of people that live there: per capita GDP and its growth rate tell tells us much more about the social wealth potentially available to each person and whether this wealth is either increasing or decreasing over time.

However, using per capital GDP poses a problem: the very same income can buy very little in some countries and go much further in others where basic necessities—food, clothing, shelter, or healthcare—cost far less. To gauge how a country’s citizens are wealthy it is necessary to understand how much they are able to buy. That is why, when comparing per capita GDP across countries, GDP should be adjusted for purchasing power parity, which helps us take into account inflation rates and price of goods and services in each given place.

In conclusion, then, when considering whether it is better to be rich in a poor country or poor in a rich one, the best chance of enjoying an excellent living standard is to reside in a richer nation no matter where a person falls on the income distribution scale. Averages, however, never tell the whole story. The coronavirus pandemic proved it most strikingly. Low-income workers, often migrants, living in very wealthy nations suddenly found themselves unemployed, homeless and stranded. By contrast, some poor and developing nations were spared, or cleverly prevented, the worst health and socio-economic effects of the outbreak, allowing their citizens to continue their lives in a mostly unchanged way. Whether you are rich or you are poor, these—indeed—are very strange and frightening times.

Source: International Monetary Fund, World Economic Outlook October 2019. Values are expressed in current international dollars, reflecting the corresponding exchange rates and PPP adjustments.