The World's Poorest Country is Sitting on $24 Trillion

This is the Democratic Republic of the Congo, one of the

poorest

countries in the

world

, if not the only one, according to multiple economic measures. The

country

has a GDP per capita of only 584, which means that the average person living in the

country

produces less than two dollars. of wealth every day and live on even less than that, this figure is less than six percent of the

world

average and less than one percent of some advanced economies like the United States with this level of poverty the GDP numbers really start to lose His strenght. That is, people go back to making things for themselves instead of contributing to the overall economy.

If you don't understand why that's important right now, don't worry, we'll cover it in detail very soon, either way, the truly unfortunate thing about the DRC. The economics is that you don't need to be poor at all; It is one of the most materially rich countries in the world, with vast reserves for a variety of natural resources. If the country were able to efficiently extract these resources, it would generate $24

trillion

in income at current market prices is sufficient on its own, without any other industry involved, to bring the standard of living of the average Congolese citizen up to standards. world for two and a half decades, assuming nothing is reinvested and other industries are not allowed. grow, which of course are very foolish assumptions, by making more reasonable predictions that much of this money would be recirculated through the economy and other supporting industries would also be created, the DRC would not only be one of the most rich in Africa, but would be one of the richest countries in the world now the story of a country plagued by corruption, war and economic mismanagement is unfortunately nothing new in itself;

In fact, one of the first videos on this channel was about the Democratic Republic of the Congo and how its lack of stability. It meant that international institutions had little confidence in making the investments the country needed to take off. Stability and confidence in an economy is something we have mentioned in almost every national economy video since, but the Democratic Republic of the Congo is worth exploring again not only. due to its enormous lost potential, but also due to what makes up that wealth of natural resources, there are usual things like gemstones, metal ores and even oil, but it also houses significant quantities for the planet's reserves of koltan cobalt and essential components of Lithium in energy storage devices and electronics, the adoption of electric cars and the rise of energy storage in batteries means that demand for these materials is expected to exceed global supply this year and, unless reserves of the DRC can be put into productive operation, the growth of these industries be forced to stop so what prevents the Democratic Republic of the Congo from taking advantage of its natural wealth?

What can the global community do to get rid of these barriers? And finally, is there any reason to be hopeful about the economic future of the Democratic Republic of the Congo once? We have done all that. We can place the Democratic Republic of the Congo as one of the

poorest

nations in the world in the national league table of economics explained. This episode of Economics explained was presented by shiny.org, the best tool to teach you mathematical sciences. and computer science in a way that will stay with you long after the lesson is over. Brilliant, it has thousands of lessons and new ones are added every month, like many people.

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If you want to improve your math or computer science skills, you can get started for free at shiny.org cheap explanations or click the link in the description. The first 200 of you will get 20 off a shiny annual premium subscription. The economy of the Democratic Republic of the Congo as it exists today began in 1960, when a country gained independence from Belgium after a truly horrible period of exploitation for its farmland, precious stones and human labor. Independence was undoubtedly a positive step for the country and its people, but was managed very poorly at the time of its independence, the Democratic Republic of the Congo had a population of around 20 million inhabitants, of which only 16 were university graduates, not 16 16 In total, The Belgian officials who were in charge of the country's industries basically left overnight and left very few instructions on how to run the institutions that would keep the economy running.

Before independence, only three government positions were filled by Congolese. , the country obviously fell almost immediately. into economic chaos when civil systems collapsed and the country stopped exporting anything to maintain its international income. The economic chaos led to fighting between different political and ethnic groups within the country, which only further hampered any chance it had of improving the living standards of its citizens. This prolonged period of political turmoil became known as the Congo crisis and the fighting was indirectly supported by both the United States and the Soviet Union, who used the country as an indirect battlefield to fight their political differences using each other's lives. people in 1965.

After political stalemate, elections, and a military coup, US-backed President Mabutu emerged as the country's sole leader and, to the surprise of almost no one, turned the country into a military dictatorship, almost Immediately political tensions and divisions still existed in the country, making it really the only hope. The problem this created, beyond the immediate human suffering caused by ongoing conflicts and the daily struggles of living under a dictatorship, was that it prevented the government from being able to remain in power through the threat of military violence. the investment it needed to develop its economy there are many international companies that would have loved to set up operations in the Democratic Republic of the Congo or there as it was called between the years 1971 and 1997.

Even if these companies were only there to take advantage of the wealth of natural resources in the region. Effective governance of these operations can still produce a lot of wealth for all participants. Advanced economies such as Norway, Canada, the United Kingdom, the United States, and Australia generate a lot of wealth from natural resource extraction. is produced by private companies, the difference is that these countries will negotiate resource agreements with these companies in exchange for some level of compensation that benefits the people who are ultimately the decision makers in that country through their right to vote free and open elections in dictatorships, compensation only needs to benefit the dictators, but even in situations like this, the international companies involved need a certain level of stability before they can establish their operations.

Bribing government officials to obtain mining rights in African countries is nothing new, but companies still need to make other significant investments before they can access resources profitably. Investing billions of dollars in purchasing equipment processing facilities and shipping ports to move materials out of the country can pay for itself very quickly as long as that infrastructure does not become caught up in a nationalization campaign or ongoing conflicts, given that these events are common in the Democratic Republic of the Congo, the country has constantly struggled throughout its history to attract foreign investment, even from companies that only want to exploit its natural resources, this means that it has not been able to build any type of industry, which It means that even mining is done mostly by hand with very rudimentary tools, which means that each individual worker produces very little value, so even if the economy were perfectly fair, they wouldn't be paid much when we compare the minds of people. the Democratic Republic of the Congo, for mines extracting similar materials in advanced economies, much less equipment is used, which must be offset by more low-cost labor;

This is where the International Monetary Fund and the World Bank normally come in, these organizations operate to provide loans. to underdeveloped or distressed economies so that they can make the initial investments they need to build some type of productive industry. In theory, the IMF could lend money to the DRC so they can build some roads and buy some equipment to start harvesting efficiently. the vast resource while

sitting

on top of those incomes, they could pay off those loans and make further investments in more tools to extract even more resources and generate even more income. Everyone would win if everything went perfectly with some version of this plan in Note that the IMF and World Bank have lent billions of dollars to the Democratic Republic of the Congo over the past five decades, but much of that money has ended being mismanaged or misappropriated by corrupt government officials.

Both institutions have had to cancel most of these loans and eventually even the IMF, which was created specifically to help countries like this, said enough was enough, they also sent economic advisors to try to help build a coherent plan to the country, but they have struggled to overcome a widespread challenge for many years. The leaders who have ruled the country since its independence do not want their people to have a good economic situation because the richest are more difficult to control and with the country's factional rivalries holding on to power is difficult enough without the general population demanding too much.

Questions about how your government is run is a never-ending feedback loop and a problem that is nearly impossible to solve without undue intervention in the politics of a sovereign country, which is a solution that hasn't had a great track record in the past, too. It's important to remember that what might seem like a geopolitical and economic problem to us has some very real human consequences. The level of poverty in countries like the Democratic Republic of the Congo can be difficult for economists in advanced countries to understand. Economists are educated professionals who are typically relatively wealthy within their countries.

Saying that countries that are very rich by global standards say that the Democratic Republic of the Congo has a GDP per capita of 584 or that the average citizen lives on less than two dollars a day is technically accurate, but it doesn't give anyone a real understanding of the financial conditions or realities of the people living in these countries GDP is a measure of the total market output of an economy, so in theory it should be the total value of all final goods generated in that economy in one year; However, there are some things an economy will produce things that are not included in the total GDP figures, economists will exclude non-final goods from the GDP value because otherwise we will end up counting things many times which will give us an exaggerated idea of ​​what the economy really is.

What a non-final good is worth is something like an engine that will end up going into a new car if the automaker buys an engine for five thousand dollars to put in a car that it will sell for $25,000 just those twenty-five thousand dollars. Another thing that is not included in the GDP figures will be counted towards the GDP: illegal goods and services. Now, technically, these assets should be included because they are valuing products. The only reason they are not included is because there are obviously people involved in illegal activities. They are not going to report their profits to the government organization responsible for collecting economic data.

Finally, the category that is left out of the GDP figures is important for underdeveloped economies like the Democratic Republic of the Congo. A so-called domestic industry is dedicated to domestic production. Home production is something like a woodworking enthusiast making a dining set for his family, it technically adds value, but it wouldn't be counted in theGDP figures because it was not supplied to the market, if that worked and that dining set was sold then it would be included. In GDP figures, if you've ever wondered how an entire nation can survive on just two dollars a day, this will explain it.

Obviously, life for these people is still incredibly hard and I don't want to undermine the intensity of poverty in these The countries may be e, but those two dollars are worth much more than in the most developed economies, in a country where everyone is very poor. Companies don't have the opportunity to charge a lot for their products, so the overall cost of living is much lower. Economists will use something called purchasing power parity to adjust for this because it's not fair to compare two dollars in a country like the Democratic Republic of the Congo, where a decent meal can cost less than 50 cents, with two dollars in a country like Australia or Switzerland. , where you would be lucky. to have lunch for less than fifty dollars, adjusted for purchasing power parity, the Democratic Republic of the Congo has a GDP per capita of 1,179, which means that the average person actually lives on the equivalent of four dollars a day, an improvement , but not big enough in its current form.

What people survive in countries like the Democratic Republic of the Congo is that they are very self-sufficient at the household or community level, growing their own food, collecting their own water and, in many cases, even building their own homes. These are all examples of domestic production and are not counted in the national GDP figures, this means that people who go out to work to earn a couple of dollars a day only end up spending that money on some things that their homes cannot produce on their own. themselves, such as tools, materials and fuel, while this allows households in desperately poor countries like the Democratic Republic of the Congo to take care of themselves, it also perpetuates the cycle of poverty because it makes it difficult to specialize the foundations of the modern economy.

The economics are that individuals, organizations, and sometimes even entire countries should focus on what they are good at because if everyone specializes in something and then swaps the things they make, we will be left with something more general. Adam Smith, the grandfather of economics, used the example of a sewing pin, if an individual set out to create a single sewing pin, it would take him a long time to extract the iron ore, smelt it into steel, forge that steel into a thin wire, cut that thin and wider shape and then sharpen it to a point. After all, they will only have a sewing pin, which is not much use to them, without fabric to sew, it is much easier and more efficient for some people to concentrate on mining, others on metallurgy, and others on running shops to Sell ​​the sewing pins - all of these people can make a small profit from the value they have added to the process and use that profit to buy more sewing needles than they would have been able to produce on their own or anything else they want to buy in the industries domestic constraints that maintain that the majority of citizens of the Democratic Republic of the Congo also prevent them from specializing to generate economic wealth.

It's easy for economists to say they just go out and specialize, but when most people only earn the equivalent of four dollars a day, it's simply impossible to survive. By specializing in a traditional role, even if there were better jobs available, it is a tall order for the people of a country ravaged by war and marred by an endless history of violence and mismanagement to give up their self-sufficiency in the hope that this maybe it will be better. different and that economic growth can be sustained long enough for them to support themselves and their families by engaging in activities that help their entire economy.

Now is the time to put the Democratic Republic of the Congo in the economic classification explained. National leaderboard starting with the size of the Democratic Republic of the Congo. has a GDP of 55.3 billion dollars now, as we have explored in this video which does not give us a complete picture of how much has been created in this economy because much of the production is not counted in the official figures, but a large Still, domestic industries are not a great indicator of a healthy economy, which is why the Democratic Republic of the Congo gets a 2 out of 10 because the small GDP is spread across one of the largest populations in the world.

The Democratic Republic of the Congo is home to almost 100 million people, meaning the country has a GDP per capita of 584, making it the poorest country on the planet: it scores a zero out of 10. Stability and trust are the unfortunate reason why the country cannot capitalize on the material wealth advantages it has at its disposal in the The country could easily be one of the most powerful economies in the world, but building functioning industries is difficult and building them with continuous conflict, Corruption scandals, power struggles and general mismanagement is like trying to build a sand castle in the middle of a hurricane, no matter how hard.

If you have it, you won't be able to build anything. The Democratic Republic of the Congo scores one out of 10. Growth is the only thing the Democratic Republic of the Congo has going for it to potentially stay out of the bottom of the rankings. The economy has doubled. in size over the last decade and while it was not growing from a high baseline to begin with and much of the economic growth has been driven by overall population growth, it is still trending in the right direction and the country scores a 7 out of 10. Finally, industry there really isn't much to say here, it doesn't really exist, the average worker in the DRC has systematically been put in a situation where they have to be self-sufficient and contribute to the overall economy as an afterthought late with exports.

It mainly relies on incredibly basic mining that uses hand tools to extract easily exploitable resources. The country scores one out of 10. In total, that gives the Democratic Republic of the Congo an average score of 2.2 out of 10, putting it last in economics. leaderboard thanks for watching friend, bye