Some very small and very rich countries—like San Marino, Luxembourg, Switzerland and Singapore—benefit from having sophisticated financial sectors and tax regimes that attract foreign investment, professional talent and large bank deposits. Others like Qatar and the United Arab Emirates have large reserves of hydrocarbons or other lucrative natural resources. Shimmering casinos and hordes of tourists are good for business too: Asia’s gambling haven Macao remains one of the most affluent states in the world despite almost three years of intermittent lockdowns and pandemic-related travel restrictions.
But what do we mean when we say a country is “rich”, especially in an era of growing income inequality between the super-rich and everyone else? While gross domestic product (GDP) measures the value of all goods and services produced in a nation, dividing this output by the number of 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 small number of inhabitants.
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), often expressed international dollars to allow comparisons between different countries.
In the world’s 10 poorest countries, the average per-capita purchasing power is $1,380 while in the 10 richest it is over $105,000 according to data from the International Monetary Fund (IMF). Since last October, per-capita purchasing power grew by just $30 in poor countries and by more than $5,000 in high-income countries.