Archive for category: Economy

Information and stories about economy.

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Causes of Poverty in San Marino

Causes of Poverty in San Marino

San Marino is a small, landlocked country located within Italy. It is a remnant from a time when city states dotted the European landscape. San Marino is believed to be the world’s oldest surviving republic, and tourism plays the largest role in the economy. More than three million people visit the republic each year. However, the nation still struggles with poverty. Here is a look at causes of poverty in San Marino.

One of the causes of poverty in San Marino was the recession of 2008. San Marino‘s economy is heavily reliant on tourism, and the recession incited a drop in tourism rates.

Although tourism is a large part of the economy, San Marino also acted as a tax haven for the wealthy people of Europe. This changed when the European Union and Italy pressured San Marino into going along with a crackdown on tax evasion and money laundering.

The United States Department of State reported that the strict regulations placed on the financial sector has led to a decrease in money laundering. There is not a large enough market for illegal goods, so most money laundering was done on the behalf of people outside of the country looking to avoid higher tax rates in their own countries.

A number of top executives at the Cassa di Risparmio della Repubblica di San Marino were arrested on money laundering charges. This was the nation’s top bank, so the arrests dealt a heavy blow to the nation’s economy. Thus, while it is good for the global economy, the inability to launder money is another one of the causes of poverty in San Marino.

The government of San Marino has taken actions in order to combat the economic downturn, which includes subsidized credit for businesses. San Marino has also taken steps to move its economic growth model away from a dependence on bank and tax secrecy.

Due to its low corporate taxes compared to other nations, the economy can profit from foreign investment as well. San Marino’s income tax is also about one-third the amount compared to other nations in the EU.

The Organization for Economic Cooperation (OECD) removed the small nation from its list of tax havens that have not fully complied with global tax standards in 2009. San Marino also signed tax information exchange agreements with most major nations in 2010.

Causes of poverty in San Marino are largely due to the loss of tourism and its strict regulations on the financial sector, but with its advantages for foreign investments, the small nation hopes to turn its economic woes around.

– Fernando Vazquez

Photo: Flickr

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Why is Papua New Guinea Poor?

Why is Papua New Guinea Poor?
Papua New Guinea, the name given to a group of islands situated in the southwest Pacific ocean, has experienced tremendous economic growth since its days of being an Australian colony, and has gone on to hold elections involving the indigenous population. Despite this, however, many people on the island still experience extremes of poverty. 80 percent of Papua New Guinea’s people live in rural communities with little to no modern conveniences, and 39.9 percent of the population lives below the poverty line. So, why is Papua New Guinea poor, despite economic growth? Here’s a brief look at some of the reasons behind this.

 

Why is Papua New Guinea Poor? 3 Simple Reasons

 

Income inequality
In 1996, the Gini index rated Papua New Guinea’s income inequality as 55.43 on its scale from 0-1, with 0 being perfectly equal (for comparison, the U.S. was rated around 45 on the scale in 2007). The evidence would seem to suggest that this inequality is due to the failure of economic growth to keep up with population growth, but could also have been caused by structural adjustment policies that came about along with rapid economic growth. Whatever the reason, it is clear that income equality has led to much greater poverty within Papua New Guinea. The good news is that this inequality has gone down significantly since the 1990s: In 2009, Papua New Guinea scored a 43.88 on the Gini scale.

Lack of long-term planning
Many citizens are critical of the fact that the government of Papua New Guinea has had little to no plan in place to modernize the country, which would include steps like building permanent houses, supplying water and sanitation and building infrastructure. The government, instead, acts reactively, creating short-term solutions only when it is absolutely necessary. For example, in 2002, Papua New Guinea faced an incredibly violent and chaotic election, but it was not until 2004 that police were deployed to fight this rampant violence. This lack of planning makes it difficult for real progress to be made in terms of poverty.

Corruption
Why is Papua New Guinea poor? Perhaps the biggest contributor to Papua New Guinea’s continuing poverty problem is the fact that so many government officials, in charge of funds that could help, have historically chosen to pocket the money instead. Michael Somare, prime minister of Papua New Guinea from 1975 to 2011, faced charges of political misconduct and misappropriation of funds spanning over 20 years, while in 2014, Paul Tiensten, former senior minister and later MP, was sentenced to nine years imprisonment for misappropriating over $1 million. Somare’s replacement as prime minister, Peter O’Neill, has also been accused of political misconduct involving a loan of $1.3 billion.

So, why is Papua New Guinea poor? In short, because of income inequality, aggravated by years of poor planning and corruption by the government. To correct this problem, new measures will need to be taken to outline and enforce government oversight and the proper use of government funds. Thankfully, awareness has risen about these issues over the past few years. During the last election, many people in Papua New Guinea protested and called for Peter O’Neill to resign after more corruption allegations were brought to light. And while O’Neill still won re-election, the fact that these protests exist shows that the citizens of Papua New Guinea are beginning to demand more from their politicians, hopefully a first step in strengthening the government and using it to enact real change.

– Audrey Palzkill

Photo: Flickr

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5 Reasons Why You Should Care About Global Health

Five Reasons to Care About Global Health
Caring about global health isn’t limited to providing mosquito nets and vaccines. It is an expansive endeavor that attempts to deal with illnesses resulting from natural disasters, war and poverty. With this in mind, here are five reasons to care about global health.

 

  • Food Borne Illness: The development of international agricultural trade combined with the misuse of antimicrobials has increased the risk of foodbourne illness outbreaks from microbial contamination, chemicals, toxins and undiscovered diseases.

 

  • Global Economy: Disease outbreaks strain economies monetarily, but also weaken individual workers’ ability to support their families or contribute to society. The biggest hit to many countries affected by disease outbreak is a loss of tourism and consumer confidence. The cost to treat many diseases on such a large scale is astronomical compared to the preventative costs.

 

  • Drug Resistance: With new diseases appearing at a rate of one or more per year, known viruses and diseases are becoming increasingly drug resistant, elevating the likelihood of outbreaks. Diseases that were once considered treatable, like tuberculosis, are now becoming drug resistant.

 

  • Outbreaks: Transmittable diseases are making their way across oceans via airplane passengers and mosquitoes. Examples include the SARS epidemic in 2003, the outbreak of the H1N1 influenza in 2009 and, most recently, the spread of the Ebola virus in 2014.

 

  • Bioterrorism: Both accidental and deliberate outbreaks, whether malicious or simply negligent, pose severe threats globally. Examples include toxic chemical accidents, radionuclear accidents, environmental disasters and intentional release of toxic agents like anthrax and other bioterrorist actions.

There are many more reasons to care about global health in such an interconnected society as is present today. Organizations like the Centers for Disease Control, USAID and the World Health Organization are working to achieve global health security. Investing in global initiatives that increase the probability of early detection and control of communicable diseases can ensure a healthy global economy.

– Rebekah Korn
Photo: Flickr

Job Security in Oman

Job Security in OmanOman is the oldest independent state in the Arab world, which has existed since the mid-17th century after the expulsion of the Portuguese. It is an absolute monarchy, ruled over by the Al Said dynasty for centuries. It is a nation that is rich in natural resources (especially oil) but, unfortunately, almost one-fourth of the people of Oman are unemployed.

Oman relies heavily on its oil production for economic growth and high oil prices until the recent past were what boosted its economy. However, the problem with an oil-based economy is that it is unsustainable because of the inevitable decline in oil production and fall in its prices. Oman, like other oil-rich countries in the Middle East and Africa, has been experiencing the negative effects of this decline in prices and oil production.

It is feared that due to “the global economic slowdown, the recession in Europe and the economic slowdown in China and elsewhere, oil prices are not going to increase.” Consequently, there has been an increase in job insecurities and frustration among the people of Oman. In 2012, the unemployment rate was 25 percent. It is expected to increase if the government does not create employment opportunities in the public and private sectors.

In 2011, the people of Oman, with changes underway in the region due to the Arab Spring, protested against the government, demanding economic and political reforms. The government responded with a police crackdown on protestors as well as taking measures to placate people by creating public sector jobs and raising wages.

Analysts believe that the result of raising wages in the public sector is not encouraging, for two reasons: One is that it has brought pressure on the budget, which is already strained by the decline in oil prices and production. The second is that the increase in wages in the public sector has also proved to be a hindrance to private sector growth. In order for economic diversification to take place, which the country needs, Oman needs to create more jobs in the private sector.

The positive news, according to the 2016 Word Bank Economic Outlook report on Oman, is that the country’s overall real GDP growth is expected to slightly recover “as a gradual recovery of oil prices improves confidence and encourages private sector investment.” Further, trade and investment opportunities with Iran are also expected to increase as sanctions are lifted. There is hope that these and other measures will bring help to the people of Oman in terms of job security.

– Aslam Kakar

Photo: Flickr

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How to Help People in Denmark

How to Help People in Denmark

In the 2016 U.S. presidential election, Denmark and other Scandinavian countries gained attention for their extraordinarily equitable economies. Candidate Bernie Sanders often pointed to the Danish education and healthcare systems as models to be followed by the U.S.

Rather than asking how to help people in Denmark, Sanders and other social democrats focused on how the rest of the world could benefit from understanding the ways in which the Danish government already helps its own people.

In addition to free education and healthcare, the Danish government provides all citizens with a minimum income guarantee of about $100 per day. As a result, Denmark has achieved the fourth lowest inequality rate in the world.

Such a world-class safety net is supported by one of the world’s highest tax rates. All sales in Denmark include a 25 percent tax and the highest income earners give upwards of 60 percent of their income to the state.

The high tax rate has motivated some economists like Rasmus Landerso and James Heckman to frame the Danish economy as equitable only insofar as it compresses the range between high and low incomes, not because it has a high index of social mobility.

Indeed, their recent study found that intergenerational social mobility in Denmark mirrors that in the U.S. A child from a lower-class background, for example, whose parents did not finish college in Denmark is just as unlikely to attend college and become middle-class as his or her American counterpart, despite the fact that Danish higher education is free.

The difference, then, between the two countries is that the Danish government compensates for low social mobility by providing significant welfare benefits to the poor.

In the end, while there may still remain a question about how to help people in Denmark ascend out of their generational social classes, it is clear that the Danish people already receive sufficient amounts of help from their own government.

– Nathaniel Sher

Photo: Flickr

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The Egyptian Economy: A Positive Outlook

The Egyptian Economy

Since the Arab Spring rocked the Middle East in 2011, the countries fortunate enough to avoid devastating civil war were nonetheless impacted by the political turmoil in the region. Egypt was no exception.

However, even with several issues persisting in the Egyptian political and security spheres, the country looks to move forward with privatizing more sectors of its economy and has an overall positive economic outlook. The Egyptian economy, which has suffered from decades of bloated public sector employment, looks to revitalize its push for privatization in various sectors.

“That is the brake on reform,” said an anonymous government official in 2010, before the Arab Spring movement. His comments were about the overreliance on public sector employment. “They have grown up with the state doing everything: ‘You educate me, give me a degree, you give me a job when I die you bury me — and I do nothing.'” While public sector employment is not altogether negative, private sector companies need to flourish if there any hopes for growth.

In 2017, the privatization of the Egyptian economy is being rebooted by the government after encountering setbacks in years prior. The political fallout of the Arab Spring and subsequent policies undertaken by the Morsi and Sisi administrations had left a bad taste in the mouths of Egyptians regarding privatization.

However, after a tragic train collision this year on a government-owned rail line, it was understood that something needed to be done. Officials began drafting new laws that would allow private companies to improve existing lines, as well as permit them to operate their stations. This will inevitably lead to the creation of jobs for Egyptians, a population that still suffers from almost 12 percent unemployment. Fortunately, this is the lowest it has been since the 2011 uprisings.

The Egyptian economy is slowly becoming a destination for foreign investment as well, even beating out South Africa for the top spot on the continent. In tandem with government reforms and an improving business climate, Egypt is attracting large sums of foreign money, most notably from Beijing.

“Currently [the European Union] is the biggest but I think China investors will grow rapidly… We’re in discussion with major players in terms of textiles and automotive. Those are two main projects we are in discussions with,” stated Trade Minister Tarek Kabil. This is in line with China’s growing presence on the continent.

Tourism is one of Egypt’s largest industries, and it has taken a severe hit since 2011. Fortunately, the country is seeing a slight uptick in tourism due to cheaper hotel deals as a result of certain currency policies. While the security situation continues to be a major factor in deterring potential tourists, this short-term low-cost trend will assist the tourism sector, which is a major pillar of the Egyptian economy.

The Egyptian economy undoubtedly suffered enormous setbacks in the aftermath of the Arab Spring. However, its position as the most populous Arab country paired with a strong economic outlook will allow Egyptians to look to the future with optimism.

– Daniel Cavins

Photo: Flickr

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Inequality: Causes of Poverty in Liechtenstein

Immigrant In-Equality: Causes of Poverty in Liechtenstein

The Principality of Liechtenstein is a country located in Europe that is landlocked between Switzerland and Austria. It is a relatively wealthy country, containing one of the highest measures of GDP per capita in the world, a low inflation rate and the benefits of a monetary and economic union with Switzerland. It therefore has one of the highest standards of living across the globe, although it comes with the trade-off of an extremely high cost of living.

Much of the country’s wealth can be attributed to its status as a tax haven, though it has taken steps in recent years to regulate and rid itself of this image and to reposition itself as a legitimate financial center. Despite the country’s economic successes, there is still poverty to be found here.

The causes of poverty in Liechtenstein become evident when analyzing the immigration policies put in place by the country’s government. In 2013, many media outlets in Europe began to report that the growing immigrant population was composed of many low-income families. This is mainly due to the increased share of the population that are immigrants, with the incomes earned by these immigrants being lower than those of the native population. This has caused the overall income growth of Liechtenstein to be subjected to downward pressure in recent years.

The unemployment rate of immigrants in Liechtenstein is approximately twice as large as it is for national citizens that have lived in Liechtenstein for their entire lives. In terms of how this applies in practice, one in two unemployed persons living in Liechtenstein is an immigrant. Despite these concerns, compared to other European countries, Liechtenstein remains in a prosperous position and the unemployment rate in general is at a very low level. As of 2012, the average unemployment rate faced by the country was 2.4 percent, with the unemployment for national citizens being 1.7 percent, compared to immigrants, who had an unemployment rate of 3.5 percent.

This is the result of a restrictive immigration policy based on bilateral agreements and clear economic considerations, combined with the insatiable job demand of Liechtenstein’s economy. One of the essential guidelines for immigrants is that there is a requirement for the person immigrating to have the ability to support one’s own cost of living when applying for residence. This means that the onset of poverty usually occurs sometime after having immigrated, with the main reasons for poverty ultimately being unemployment, illnesses, death of an employed family member and excessive indebtedness.

A relevant quote by economist John Kenneth Galbraith rings true with poverty in Liechtenstein, in which he writes, “people are poverty-stricken when their income, even if adequate for survival, falls markedly behind that of the community.” This is one of the main causes of poverty in Liechtenstein and it illustrates an area that can be improved upon, leading to a greater equality of wealth between national citizens and immigrants and less poverty overall.

– Drew Fox

Photo: Flickr

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Why is Nauru Poor?

Why is Nauru PoorIn recent years, news about the small island of Nauru pertains to the violation of human rights for asylum seekers. However, what is not being discussed is why these people are seeking asylum in the first place or why Nauru maintains the third highest proportion of refugees per capita in the world. The explanation partially lies on the deterioration of the country’s wealth over the last few decades. So, why is Nauru poor?

In fact, the country was not always poor. In 1980 Nauru became the wealthiest nation globally, per capita. The country’s natural resource endowments were recognized for this feat. Large deposits of phosphate were discovered in the late 19th century across the island, and once Nauru gained independence in 1968, intensive mining boosted the country’s income.

After this, Nauru seemed to experience what is called the “resource curse.” While the country’s specialization in phosphate mining originally provided wealth, Nauru experienced a drastic economic collapse when phosphate ran out in the early 1980s.

The country was then left with was a series of long-term problems. Today, 50 percent of households in Nauru live on an average of only $9000 a year. As phosphate mining had such a destructive toll on the environment, 80 percent of the island has been labeled wasteland and threatens the remaining resources. Because the phosphate specialization drove away other business previously developed in the country, it now obtains limited revenue, and the unemployment rate in 2011 rested at 23 percent.

To spark growth in Nauru’s economy, the government agreed to open the Australian Regional Processing Center for asylum seekers in 2012. Australia’s offshoring tactics pay Nauru $312 million annually to run detention centers on the island.

While this has improved the incomes of families in Nauru, the country has faced much backlash due to the living conditions of the refugees sent to the country. Consequently, a new deal is being formulated to move these vulnerable groups to other areas including Cambodia and the United States. This will leave Nauru, again, without the revenues necessary to keep its people from poverty.

Reverand James Aingimea, a minister of the Nauru Congregational Church confessed to the New York Times, “I wish we’d never discovered that phosphate…When I was a boy, it was so beautiful… Now I see what has happened here, and I want to cry.” This pain can be felt across the island where the residents bear witness to the question, “why is Nauru poor?” The exploitation of Nauru without environmental protection or diversification in the economy has led the nation to a state of dependency.

– Tess Hinteregger

Photo: Google

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Why Is Suriname Poor?

Why Is Suriname Poor? Poor Planning and Unhealthy Dependence.
Suriname, one of the smallest countries in South America, is also one of the poorest. Nearly one out of every two people in Suriname are impoverished. Tucked between Brazil and Guyana and endowed with oil reserves, one may wonder: why is Suriname poor?

The most important answer to this question lies in Suriname’s exports. Economically, Suriname is heavily dependant on exporting commodities, namely oil and gold, for revenue. As market prices fluctuate, so too does Suriname’s economy.

Mining for said commodities is the main source of employment in the nation. Stagnant markets cause production to slow and unemployment to jump. From 2014 to 2015, Suriname’s unemployment rate climbed from 6.9 to 8.9 percent.

The country’s GDP decreased two percent in 2015 and 10 percent in 2016—more than eight full quarters of economic contraction. A country is considered to be in a recession after just two.

Oil Dependence
After the crude oil price spikes during the global recession, crude supply increased as North America, and Russia exploited domestic supplies.

The sharp increase in supply, coupled with the plateauing of China’s demand for crude, depressed the global price. This led to a decrease in Suriname’s exports and public revenues. Couple that with the announcement that Alcoa, a major U.S. aluminum company, was ending its operations in Suriname after 100 years of activity—Suriname’s economy entered free fall.

In 2016, Suriname’s GDP plummeted to 2008 levels. In the same period, the U.S. added $4 trillion to its GDP, an average increase of 1.4 percent.

Currency Issues
In response to the recession, Suriname experimented with a number of monetary and fiscal policies. The Suriname dollar was devalued by 20 percent amid the drop in oil prices, was unpegged from the U.S. dollar and, by the end of 2016, had lost more than 46 percent of its total value.

Suriname also implemented austerity policies in last two years to reign in spending and raise revenue. As a result, the Suriname dollar inflated over 50 percent in 2016.

In regards to the question “why is Suriname poor?”, there are a few big takeaways:

  • The drop in global oil prices dealt a major blow to Suriname’s export-driven economy.
  • Suriname’s economy is in a two-year-long contraction. The unemployment and poverty rates have both increased.
  • The Suriname dollar has lost a great deal of value and purchasing power, hurting the country’s less-fortunate.

The short and mid-term economic forecasts for Suriname are bleak, according to economists. Economic contractions are expected to continue throughout 2017. However, the discovery of another offshore oil deposit has given the nation hope. With foreign investment and revenues from another oil project, Suriname might stabilize its economy, which will allow it to restructure to rely less on exports.

– Thomas James Anania

Photo: Flickr

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What Causes Poverty in San Marino?

What Causes Poverty in San Marino?

San Marino, said to be the world’s oldest republic, is a small country landlocked by Italy. At only 23.6 square miles, it is the fifth smallest country in the world, only larger than Vatican City, Monaco, Nauru and Tuvalu. It is also one of the richest countries in the world, with an estimated 2021 gross domestic product (GDP) per capita of $54,982.45. Despite its wealthy status, the 2008 recession, from which the country is still recovering, has significantly increased poverty in San Marino.

The 2008 Recession

San Marino‘s main economic activities are tourism, banking and the manufacture and export of different goods such as clothing, ceramics, fabric, wine and spirits. As Italy surrounds it, most of San Marino’s economic sectors are highly supported by this nation; in fact, 90% of San Marino’s export market is supported by Italy. Italy also suffered from the 2008 recession, so its demand for imports from San Marino has lessened, which has, in turn, weakened San Marino’s economy.

After the recession, San Marino’s strong economy took a downward turn. Unemployment – which had been at its lowest in 2007 at 3% – jumped to 4.5% by 2009 and reached its peak of 7.9% in 2017. However, after significant efforts and initiatives, San Marino’s unemployment rate declined to approximately 5% in 2022. While poverty is not a major issue in San Marino compared to many other countries, the recession certainly caused a notable increase.

Unemployment

Although San Marino’s poverty rate is low enough that it is not necessarily significant enough to be recorded, such a rapid increase in unemployment likely led to hardship for a significant portion of San Marino’s population. Increases in unemployment cause greater stress for the individual and strain the government, as it puts more pressure on the government to support those who are unemployed. Additionally, it weakens the economy further, as those who are unemployed lose purchasing power.

Final Remark

Although the recession increased poverty, the government of San Marino has been working to curb its effects by eliminating its status as a tax haven. Notably, the country’s nonfinancial sector recovery, which started in 2014, has placed its economy in a strong position to face shocks.

Furthermore, as other countries have bounced back from the recession, demand for goods from San Marino has increased as well. Hopefully, as more countries start recovering, this will also help San Marino’s economy recover so that progress can be made regarding its poverty rate.

– Mary Kate Luft

Photo: Flickr
Updated: May 29, 2024