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as the average $19,800 per-capita GDP of the other nine countries. Larger countries are wealthier.
Why is America much wealthier than the nine smaller countries? Because companies in Amer-
ica are more focused than companies in the other countries. And the more focused a company is, the more e cient it becomes, creating wealth for the company’s owners and its employees. Visit a small country like Honduras (population 8.6 million, per-capita gross domestic product $4,900). You’ll nd the typical Honduran company into a wide range of businesses: Perhaps a hotel, a restaurant
or two, gas stations, a trucking business and a con- struction rm. All relatively ine cient and not very pro table.
As time goes on, smaller countries fall farther behind larger countries. Suppose you started a so ware company in Honduras? How could you compete with Microso ? Or suppose you started a computer company in Honduras. How could you compete with Lenovo? Or a smartphone company. But how could you compete with Apple?
It’s no secret what creates wealth. In his book e Wealth of Nations, published in 1776, Adam Smith had the answer: e division of labor leads to specialization, expertise, dexterity, and machinery, thereby producing greater wealth. But, as Smith pointed out, there is a limit to specialization: as it
is the power of exchanging that gives occasion to the division of labor, so the extent of this division must always be limited by the extent of the market. In other words, the larger the market, the more spe- cialization and the greater the wealth. e smaller the market, the less specialization and the smaller the wealth.
Compare a big city with a small town. You won’t nd many rich people in a small town unless they moved there from a big city. You will nd many rich people in a big city because wealth is cre- ated by specialization. And specialization can only happen when the market is large enough.
Why are some small countries rich?
e per-capita gross domestic product of Qatar, a country with a population of just 2.2 million, is $132,000. e per-capita GDP of Luxembourg, a
fig. 1: the countries wealthier than the U.s. are all small-population countries with exports
MarketiNg for social chaNge
country
exports as % of gDP
Norway
38%
Switzerland
64%
Kuwait
68%
Qatar
69%
Brunei
71%
United Arab Emirates
98%
Singapore
201%
Luxembourg
203%
country of just 540,000 people, is $99,000. ere are eight countries wealthier than America and all of them are small-population countries. In addition
to Qatar and Luxembourg, they include Singapore, Brunei, Kuwait, Norway, the United Arab Emirates and Switzerland. Total population of these six coun- tries: 34.5 million. Less than the population of the state of California.
What makes a small country wealthy? Exports. Petroleum in the case of Qatar. Financial services in the case of Luxembourg. Here are the values of each country’s exports as a percentage of the country’s gross domestic product.
Assuming a country has a free-market econ- omy, there are only two ways for a country to become wealthy. Either you are a large country like America or you are a small country with a large export economy. ere’s no way a small country can become economically successful by citizens sell-
ing things to each other. A small country can only become economically successful by selling things
to people in other countries. And not commodities either, unless the commodities are in huge demand like oil.
Why are some large countries poor?
China is the largest-population country in
the world with 1.4 billion people. India is second with 1.3 billion people. Together the two countries account for 36% of the world’s 7.4 billion popula- tion. Yet both countries are relatively poor. China’s
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