Why some countries prosper, whilst others continue to remain poor and in chaos

WHY do some nations flourish while others remain impoverished? That question remains as relevant as ever—especially after Sri Lanka’s painful economic struggles in 2022, and more recently, the crises in Bangladesh and Nepal. Poor nations often grapple with extractive institutions, political instability, bloated governments, and deep historical legacies. For decades, scholars and policymakers have debated the roots of prosperity. Early theories placed geography at the centre of national success, arguing that climate, natural endowments, and location shaped destiny.

- By Dinesh Weerakkody

Later, attention shifted to politics, with examples like Singapore led by Lee Kwan and Switzerland (Switzerland’s prosperity is not attributed to a single person) proving that talent, leadership and good governance can overcome geographic and resource limitations. In their 2012 book Why Nations Fail, Daron Acemoglu and James A. Robinson argued that the quality of a country’s economic and political institutions is the primary determinant of its wealth.

Beyond geography and race

History reveals that the truth is far more complex. Good geography can sometimes offset poor politics, while visionary leadership can overcome geographic constraints. It was once fashionable to argue that rich countries were in the northern hemisphere and poor ones in the south. Yet Australia and New Zealand—both southern hemisphere nations—are among the world’s most prosperous, while their neighbour Papua New Guinea remains among the least developed. Clearly, geography alone does not determine destiny. Similarly, racial or cultural explanations for poverty are deeply flawed. The success of immigrants from poorer countries in the United States, Canada, UK and Europe demonstrates that people are not the problem—systems and leaders are.

Japan and later South Korea, despite limited natural resources, became Asia’s richest economies through education, innovation, work ethic, and disciplined governance. Conversely, many resource-rich developing nations have experienced short-lived prosperity, followed by decline once natural wealth was depleted. The decisive factors are leadership, governance, and institutions that foster long-term innovation and productivity.

The foundations of prosperity