What do people think when they think about the richest countries in the world? And what comes to mind when they think about the smallest nations in the world? Some would be surprised to find out that the wealthiest nations are also among the tiniest.....
Some very small and very rich countries—like Luxembourg, Singapore, Switzerland and Ireland—benefit from having sophisticated financial sectors and tax regimes that help attract foreign investments and professional talent. Others like Qatar, Brunei and Kuwait have large reserves of hydrocarbons or other lucrative natural resources.
Shimmering casinos and hordes of tourists are good for business too: Macao, Asia's gambling haven, is the second-most affluent state in the world. Bigger countries with a relatively small population like Norway and the United Arab Emirates, two other oil and gas-rich powerhouses, round up the list of the top 10 richest nations according to the International Monetary Fund (IMF).
But what do we mean when we say a country is “rich,” especially in an era of growing income inequality between the rich and everyone else? While gross domestic product (GDP) measures the value of all goods and services produced in a nation, dividing a country's GDP by the number of the full-time residents is a better way of determining how rich or poor one country's population is relative to another's. The reason why “rich” often equals “small” then becomes clear: these countries’ economies are disproportionately large compared to their comparatively small populations.
However, only when taking into account inflation rates and the cost of local goods and services can we get a more accurate picture of a nation’s average standard of living: the resulting figure is what is called purchasing power parity (PPP), which is often expressed international dollars in order to allow comparisons between different countries.
Should we automatically assume that in nations where this figure is particularly high the overall population is visibly better off than in most other places in the word? Not quite. We are dealing with averages and in any given country, structural inequality can tip the balance in favor of the already privileged.
The Covid-19 pandemic lifted the veil on these disparities in ways few could have ever predicted. While there is no doubt that the wealthiest nations had the resources to help save more lives and jobs, the economic downturn hit low-paid workers harder than those with high-paying occupations. A new kind of inequality also emerged: some people have been able to work from home, some others lost their livelihood and found themselves without a safety net—large holes in the most celebrated welfare systems in the world were exposed.
In the meantime, the V-shaped recovery many are still hoping for—a brief sharp economic decline followed by an equally rapid rebound—appears less likely by the day. The IMF, in its World Economic Outlook's June update, anticipates growth in advanced economies at -8.0%, followed by a "sluggish" turnaround in 2021, hardly enough to undo the damage that has been done.
To be sure, when a crisis of such unprecedented magnitude takes place, you'd rather be where welfare and social services can offer a degree of assistance and hospitals have reliable electricity access. In the 10 world's poorest countries, the average per-capita purchasing power is less $1,200, in the 10 richest is over $90,000. However, there is one more reason to be wary of accepting such economic prosperity at face value. The IMF has warned repeatedly that certain numbers should be taken with a grain of salt. For example, Macao, Luxembourg, Singapore, Switzerland and Ireland are all tax havens, which means wealth originally generated in other countries ends up inflating their GDP because of sophisticated accounting and legal practices.
More broadly, it is estimated that over 15% of global jurisdictions are tax havens and that about 40% of global foreign direct investment flows are so-called “phantom” transactions, financial investments passing through empty corporate shells with no real influence on a country’s economy and people’s financial well being. Add to that the unequal distribution of resources, and it becomes easy to understand why even in very rich countries live very poor people.
10. Switzerland
9. Kuwait
8. United Arab Emirates
7. Norway
6. Ireland
5. Brunei Darussalam
4. Singapore
3. Luxembourg
2. Macao
1. Qatar
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