Why is AUSTRALIA so RICH? - Why is it call the LUCKY COUNTRY?

in 1872 australia was the richest country in the world in terms of gdp per capita that is richer than switzerland the united states or even its colonizer the united kingdom although years later it lost the first place at present it is still one of the richest countries in the world so the questions are what is the source of australia's wealth how did it avoid the natural resource curse and why do some say the australian economy is going to stop growing in the coming years in 1964 a book entitled the lucky country was published one of the most famous ideas in the book is that australia's wealth was not generated by hard work talent or excellent leaders but rather that it is a lucky country where everyone benefits from it this is obviously a controversial and questionable idea but it has a point australia is blessed with an abundance of natural resources in proportion to its population to get an idea the size of its territory is similar to that of the continental united states but its population is only 25 million and that of the united states is over 300 million for example australia is 2.4 times larger than india but has less than 2 percent of its population in other words it is a huge territory for only 25 million people and it is precisely from there from its territory that australia's wealth comes from at first it was wool then gold and later other agricultural products and minerals in 1788 australia was established as a penal settlement for british convicts it turns out that at the time the prisons in the united kingdom were overcrowded and the british crown saw australia as a suitable territory to send tens of thousands of inmates it is said that for 80 years they sent just over 160 thousand convicts between men and women and since the first inmates began to arrive in the colony of new south wales capitalist activities quickly developed and the labor of the convicts was used for the construction of roads bridges hospitals and other infrastructures the labor sent from the united kingdom was also used by the free settlers to develop other economic activities such as wool production in the early 1830s wool prices rose sharply the economies of other colonies such as victoria tasmania and queensland were structured around the export of this product mainly to meet the demand of british industry however the wool boom came to an end when the british textile industry went into crisis in the early 1840s this represented a severe blow to the economy in the colonies but they soon recovered with the gold rush for a few years in the early 1850s thousands of people arrived in southeastern australia the ships that brought them would sit empty at the piers because even the crews were heading inland the reason was the gold fields there were stories about nuggets picked from the ground that were worth a fortune about pounds of gold extracted after a few days work these stories were also fueled by stories of wealth gained during the california gold rush months earlier which also aroused great interest in the uk but the journey to california was long and dangerous whether overland from coast to coast or across the isthmus of panama through jungle filled with diseases the gold rush was a defining era for australia's future a period characterized by rapid population growth encouraged mainly by free british immigrants and high capital flows from the uk years after this gold boom was when australia had the highest income per person in the world it must be said that not all diggers found wealth in the gold fields yet many decided to stay and integrate into the communities these immigrants tended to be relatively young educated hard-working energetic and who had become accustomed to the long and exhausting work days in search of gold the gold rush was not only limited to new south wales and victoria where the largest discoveries were made and where they are precisely in the two most important cities sydney and melbourne as the easy to obtain gold ran out in these colonies seekers began to explore further north in queensland and western australia by the end of the gold rush the eastern colonies had been transformed railroads roads libraries theaters and stock exchanges were built in other words the gold rush transformed the conflict colonies into cities with thousands of free immigrants making the country the richest in the world for at least a few years and finally the third boom after wool and gold was the post-world war ii boom when japan industrialized at unprecedented rates along with other asian economies such as south korea singapore and taiwan which opened up expert opportunities for australia's extensive mineral reserves the country remained heavily dependent on the export of raw materials because it never had a strong manufacturing industry but despite this and despite suffering economic crises when the boom ended with a particular commodity as happened with wool or gold and as will happen in the future with other exploited resources australia is an interesting case because it doesn't seem to have been affected by the natural resource curse like many other resource-dependent countries rather that abundance of natural resources seems to have been a blessing because australia has always been a relatively wealthy country with a very high human development index and with cities that have the best quality of life in the world according to various indices so the next question is how does australia avoid the natural resource curse natural resource abundance doesn't always translate into economic growth this is an idea widely accepted around the world and supported by the experience in some latin american and african countries if you do not have enough capital to exploit them they are useless or even worse if conflicts are generated because certain groups want to take them over on the contrary australia had a very different path it was founded with the political institutions language legal system culture and some social norms of the most successful and industrialized economy in the world at that time the united kingdom for example institutions guaranteeing land ownership rights were fundamental to the high production of wool on the other hand these institutions were important in allowing convicts to integrate into a labor market and hundreds of thousands of immigrants to work in a relatively organized way during the gold rush consider that it is likely that if 160 000 convicts had arrived in countries with other types of institutions and social norms they wouldn't have been entitled to regain their freedom in any case but in australia in 1782 the first convicts arrived and within the first few decades most had been released a percentage were even given jobs of high responsibility this doesn't mean that they were not treated badly at some point nor does it mean that the british established good institutions in all their colonies but at least in australia they did facilitate the administration of natural resources and productive factors before the pandemic australia had gone 28 years without an economic recession the longest period in recent history but for some critics the greatest vulnerability is that this economic growth was based on the exploitation of minerals such as coal copper diamonds natural gas and oil to get an idea exports of metals and minerals accounted for 32 percent in 2019 of total exports well above the seven percent of canada which is also a country with abundant natural resources or the six percent of the united kingdom or the three percent of the united states and as can be seen in this graph it was from 2002 onwards that exports of metals and minerals began to grow even more due to the booming chinese economy and its growing demand for its minerals the problem is that since 2012 the chinese economy is slowing down and also since 2020 there have been geopolitical tensions between china and australia which would further aggravate the outlook for the australian economy however as australia is one of the freest and least interventionist economies in the world it would be expected that the moment minerals run out relations with china worsen or global demand for these products simply decreases the capital and labor previously employed in the mining sector would be transferred to other sectors of the economy in other words the market would be in charge of restoring the productive factors in the medium term the point is that the australian economy has sufficient freedom and flexibility to recover in the event of a crisis caused by the decline of exploited natural resources in conclusion australia is indeed a lucky country it had a relatively successful colonial past its territory has abundant natural resources and a small population and its geographical location has kept it away from conflicts but at the same time it has been fortunate to be positioned close to asia the area of greatest economic growth in recent decades there is one question that remains to be addressed and that is why australia did not have a strong manufacturing industry or large globally recognized companies but that could be the topic for another video for now thanks for watching and see you in the next one you

Channel: Economics Nation

Views: 135,627

Keywords: economics nation, economics nation Australia, Australian economy, why Australia is so rich?, life in Australia, economics of Australia

Id: sQUOIEW8HG4

Length: 9min 25sec (565 seconds)

Published: Sun Jul 31 2022