Countries grow at different rates because they accumulate capital at Essay

Countries grow at different rates because they accumulate capital at different rates. Is this true Explain your answer - Essay Example Accumulation of wealth can be viewed in two ways. The first is where one party amasses wealth at the expense of another. The second is where there is an increase in the amount of wealth for both parties. It happens due to a mechanism in place that generates wealth for both parties. These two mechanisms cannot work in isolation. In the economic wars, available countries are using both tactics to gain economic advantages over others. A look at the two graphs above reveals a significant difference in the rate of GDP growth between a developed country and a developing country. There are three theories that expound how the difference in the rate of accumulating wealth determines the variation in the rate of growth between the various countries. The theory argues that the economic growth of a country is dependent on the output of its individual citizens. In country where the capital per individual is large, the rate of economic growth is higher. Therefore, in countries where the level of technology is high, lesser employees are required per unit of output. This cuts down the labour cost and increases the capital goods which have higher returns on the inputs. This confirms that the higher the capital goods per individual, the more the more the returns per input and hence a higher growth rate is achieved (Setterfield 2010, p.49). Karl Marx in his theory argues that, the rate of accumulation of wealth is determined by how much profit is returned back into the production process in order to produce more profit. He measures the rate of wealth accumulation by how much the capital is grown. The amount invested back into the production process determines how fast the wealth of the nation grows. He further explains that, the process of accumulating wealth involves legal trading between two parties for the purpose of making profit or just acquiring property from someone at their expense. This two process breeds both fair and unfair competition among nations for the