How to Increase the GDP per Capita

Economic policy affects the way a nation develops.

From World War II until the opening of the 21st century, some nations' economies have sky-rocketed while others have stagnated. Japan, South Korea, India and China have become powerhouses of manufacturing and technology, while nations including Zimbabwe, Ghana and Nicaragua have barely budged. While economists debate the reasons for these differences, growth doesn't happen by chance. Countries that successfully raise their gross domestic product, or GDP, per capita often rely on a small group of experts to put a coherent set of policy reforms in place, according to World Bank private sector development specialists Alberto Criscuolo and Vincent Palmade.

Instructions

1. Enforce the law and make sure courts are independent of the government. Rule of law provides an indicator of economic development. Investors like to put their money in countries where the governments protect private property and resolve legal disputes fairly. It makes it easier to do business if management does not have to worry that a local government will take over the company, capriciously tax earnings or arrest the company's employees. Countries put themselves at an economic disadvantage if they project hostility to foreign investment.

2. Allow other countries to invest in yours. Many American companies maintain brand presence all over the world. But the U.S. also tops the list of nations that others invest in, according to "The World Factbook" of the Central Intelligence Agency. A comparison of leaders in allowing foreign investment shows that these countries enjoy strong economies.

3. Educate the population. The Organization for Economic Cooperation and Development publishes rankings comparing economic and educational performance. Most of the top economies, including Japan, Germany and Korea, also score highest in education, especially for science and math.

4. Get rid of corruption. Transparency International, an anti-corruption watchdog group, produces an index of how corrupt countries are, based on perceptions revealed in extensive polling. Costs associated with corruption, such as bribes and legal fees, increase the cost of doing business. The index counts many of the world's poorest countries, including Angola and North Korea, among the most corrupt.

5. Let people vote, and conduct fair elections. During the 20th century, nearly all of the most developed nations economically had democratic political systems. China in the late 20th and early 21st centuries may seem an exception to this, but if we look at overall quality of life, all of the most prosperous countries are democratic, according to Joel Kotkin, who writes the "New Geographer" column at "Forbes" magazine's website.

References

• "Public Policy for the Private Sector": Reform Teams; Alberto Criscuolo and Vincent Palmade; Feb. 2008
• The World Justice Project: Rule of Law Index 2010
• Central Intelligence Agency: World Factbook: Country Comparison: Stock of Direct Foreign Investment
• OECD: Comparing Countries' and Economies' Performance
• Transparency International: Corruption Perceptions Index 2010 Results
• "Forbes": Prosperity Index Shows That Democracy Still Works Best; Joel Kotkin; Oct. 26, 2010