Economic Growth: Why is Panama Succeeding and Nicaragua is Failing?

“The malady of many underdeveloped economies can be diagnosed as a stable equilibrium level of per capita income at or close to subsistence requirements. Only a small percentage, if any, of the economy’s income is directed towards net investment. If the capital stock is accumulating, population is rising at a rate equally fast i.e. thus the amount of capital equipment per worker is not increasing. If economic growth is defined as rising per capita income, these economies are not growing. They are caught in a low-level equilibrium trap.”

The economy in a country can be affected by another country, due to the fluctuation in that country’s economy. Although there are downfalls to economic development, new developments are necessary to keep the economy stable and to provide positive impacts to the society. New developments such as providing aid to developing countries and increasing foreign trade will help that country by building a closer relationship allowing them to gain more resources to their own country. Countries all around the world face a certain amount of poverty where some countries experience a higher number of poverty rate compared to the “richer” ones. In The End of Poverty: Economic Possibilities for Our Time, written by Jeffrey Sachs, he informs readers by providing

Nicaragua is a beautiful country, however, that beauty is shadowed by its economic misfortune which have hindered its development resulting in Nicaragua being the poorest Spanish-speaking country in the Americas. This predicament, like many that impact economics, is a complex matter resulting from natural disasters, guerilla insurgency, governmental missteps, and a debilitating trade embargo executed by the United States. Even before the aforementioned circumstances took place, from 1972 through 1990 the Nicaraguan government was not executing an economic formula that would yield success. In 1932, following the end of US intervention in Nicaragua the US-backed Somoza dynasty rose to authority empowering the Nicaraguan elite to control nearly all aspects of living. This deprived the Nicaraguan people and its economy long before the unfortunate events of later decades compounded the problem. Its economy too dependent on the international market didn’t stabilize enough to impact Nicaragua’s hardest working citizens due to monopolization of the country’s agricultural market by the aristocratic elite.

Economy: To be one of the fastest growing economies in the past decade in Latin America with an average of 8.4% GDP (gross domestic product) in 2004 and 2013, Panama is beyond stabled! In the year of 2010 and 2011, the Panamanians phenomenally accelerated its growth rates to double-digits. Their economy is extraordinarily high due to imports and exports through the Panama Canal and other industries. Bananas, corn, coffee, and sugar are the principals of cash crop, aside from that the agriculture sector became less important throughout the years. The 2007 project, expansion of the Panama Canal, has become the major source of Panama’s economic activities. Panama is a dollarized economy and has a stable political environment.

In Technology, Inequality, and Underdevelopment: The case of Latin America Rodrigo Arocena and Peter Senker lay out the realities of why there is economic inequality and thus a lack of technological advancement in Latin America. Arocena and Senker argue that economic inequality is the main driving factor behind underdevelopment and a lack of technological change in Latin America. One of the major factors for the lack of technological change in Latin America is the lack of research and development (R&D). While globally R&D decreased between the mid 1980’s

In recent years, sub-Saharan African countries have experienced macro economic growth. The growth rate per annum averaged 5.2% over the past decade between 2000 and 2011 (Kulundu, 2013). The growth rate has outpaced Middle East, Latin America and Eastern Europe after being the slowest growing region for many years. In Tanzania, the growth rate averaged 6.8% from 2005 to 2011. It was ranked 1st in East Africa and 8th in sub Saharan Africa. In 2014 the GDP was expected to grow by 7.2% and continue growing at annual averaged rate of 7.7% in medium term (MOF, 2014). Ifzal et al (2007) observed that, economic growth does not guarantee all people to benefit equally, because growth itself is not sufficient for poverty reduction. If poor or marginalized people are left behind, it will result in increase of income inequality (Ifzal et al 2007). Vijayakumar et al (2012) showed the importance of economic growth by identifying its effect in the economy. It’s observed that, if GDP growth decreases by 1%, it might trap 20 million more people into poverty. Therefore, it is evident that unstable growth will definitely have severe adverse impact on vulnerable groups of people in the society. Furthermore high and increasing levels of inequality may reduce the effect on poverty reduction resulting from a given rate of growth. Thus inequality has implications for social cohesion and political stability required for growth sustainability. This has been studied in several research works that have

Since 2008, the economy of the United Arab Emirates has been steadily increasing. In 2012, the economy of the United Arab Emirates grew 4.4%. Panama also is experiencing a period of significant economic growth. Over the past year, the economy of Panama grew 10%, putting Panama as one of the fastest growing economies in the Latin American as well as in the world. I believe the reason for such significant economic growth in both countries is mainly due to import/export of goods through the waterways located by each country. United Arab Emirates had imports totaling 273.5 billion dollars and exports totaling 314 billion in 2012. Panama’s imported goods totaled 26.61 billion dollars and exported goods totaled 18.87 billion dollars in 2012.

The Republic of Panama is not only a resplendent country mystically enchanted with unique culture and stunning landscape, but it additionally a country with a sound economic substructure. With the recent increase in efforts to amend the Panamanian way of life, there seems to be a very promising future for all Panamanians as well as others who have ties to this fascinating country. Panama has always been economically sound, generally verbalizing, but with all of these recent amendments, it seems as if Panama is only moving forward from here. The country has been a trading point for quite some time now, mostly because of the Panama Canal, but with recent investments and integrations, Panama has the potential to grow into an immense trading

The Author Dr. William Easterly, a former Economist with the World Bank and a current professor of Economics at The New York University, in this book talks about The Economists’ Quest to find the means by which a poor country in the tropics would be able to become rich like the countries in Europe and North America.

Inequality problem is not discussed in detail by Perkins, but it is mentioned as one of reason of political instability in Thailand, due to the social gap between people from rural and urban area, which hinder its economic growth. It is consistent with Piketty (2014), that when the share of capitalists increasing in income, over the growth rate of income per capita, the inequality will rise, due to unequal ownership, which then lead to social inequality and political conflicts (pp. 182-183). Stiglitzs (2012) points out that fairness for the individual is crucial and it will motivate protests all over the world when the economic and political system bring the unfairness (p. 10). According to Mankiw (2013), inequality in income should not be the only object of public policy, but the inequality in opportunity should become the primary focus since it might cause inefficiency as well (p.26). Perkins shows Indonesia and Malaysia as sample of countries which suffered from inefficient social welfare allocation that make national development policy ineffective. The inclusiveness, as the crucial part of sustaining growth, is also related to the equality of opportunities when growth is created. No people should be left out and facing extreme inequality of income and education, since it will cause resistance and diverting process of growth through the conflict and political instability (Spence 2011, p. 88). The role of government to lower the income inequality and

As technological globalization advances and technological change progresses more quickly than ever in the past, one of the central dimensions to gain an understanding of how Latin American countries are posed to answer to these new challenges concerns changes in their science and innovation policy.

The most trite yet crucial question in the field of economic growth and development is: Why are some countries much poorer than others? Traditional neoclassical growth models, following Solow (1956), Cass (1965) and Koopmans (1965), explain differences in income per capita in terms of different paths of factor accumulation. In these models, cross-country differences in factor accumulation are due either to differences in saving rates (Solow), preferences (Cass-Koopmans), or other exogenous parameters, such as total factor productivity growth. In these models there are institutions, for example agents have well defined property rights and exchange goods and services in markets, but differences in income and growth are not explained by variation in institutions. The first wave of the more recent incarnations of growth theory, following Romer (1986) and Lucas (1988) differed in the

Chile’s sustained growth over the past few decades has reduced poverty and substantially improved living conditions. The country stands out for having the highest Human Development Index in Latin America, as well as having made progress towards shrinking the income gap with OECD countries. This achievement is largely related to capital deepening as well as robust growth in labor force participation, while total factor productivity (TFP) growth has been meager, stalling after 2000 (OECD, 2017). In terms of labor productivity, Chile has only reached 40% of US levels, and 55% of OECD levels (McKinsey, 2015).

The selected social problem in this paper is poverty in the United States. The social problem poverty was realized on the global scale when the second world war ended. Before the year 1940, poverty was not an issue in most parts of the world. World bank was the first to report about the issue in 1948, (Polyp, 1992). In its report, it described that the single statistics’ set revealed both the potential and need for development. As per the UN Bureau of statistics, the United States had a per head average income of over $1400 in 1947, (Polyp, 1992). The report depicted other 14 countries to be having a per head average income ranging between 400 and 900 US dollars. However, over 50% of the world's population had less than $100 per person as average income. Moreover, it would sometimes be far less than that figure, (Polyp, 1992). The discrepancy's magnitude not only demonstrated the urgent necessity to improve the standards of living in the developing countries but also possibilities that are enormous to enforce this. As a result, it was found necessary to recognize a policy response, (Polyp, 1992).

1- Poverty: Increases in national income can lead to reduction of poverty in society. There is less resistance to the sacrifice of higher taxes paid by high-wage earners which may be needed to relieve poverty. The potential for fast economic growth means that great scale poverty reduction is now achievable within a human life. Developing countries like Botswana, Chile, China and Thailand have been able to double per capita incomes within 10 years. But this is quite recent observable fact. During the 19th century, the fastest growing economy, Britain, needed about 60 years to double per capita income. In contrast, developing countries nowadays have the option of implement most excellent practice technologies and institutional arrangements from around the world so as to improve productivity growth and thus incomes more speedily. There is increasing proofs that the potential for growth, and thus the potential for poverty reduction, can best be understand in well performance private market economies that are open to operate and invest. A higher output allows people to have extra goods and services. It will furthermore generate higher incomes and so without increasing tax rates, government tax revenue will go up. Some of this increased revenue can be spent on