Th Worlds Poorest Countries

“The property which every man has is his own labor; as it is the original foundation of all other property, so it is the most sacred and inviolable... To hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbor is a plain violation of this most sacred property” (Smith, 1776).

International trade is a significant element of economic growth and poverty reduction agenda. In addition, no country has successfully developed its economy by turning its back on international trade and long-term foreign direct investment. Every country that has achieved sustained economic growth has done so by opening their market to the world. However, many low-income countries are still confronted by major obstacles in expanding and diversifying their international trade. The world’s poorest countries cannot find anything to export. There is no abundant resources, such a capital or land, and in small poor nations not even labor is abundant. The main challenge for these countries is how to achieve economic growth and reduce poverty with terms of limited resources (“Trading out of poverty”, 2009).

According to the Heckscher-Ohlin model, there two different types of countries – labor-abundant and capital-abundant. Abundance is defined as a ratio; so land, capital or labor must be abundant (Krugman, 2012). The lack of capital and resources is obvious in poor countries, and if the land is insufficient to feed the population, it is also scarce. The argument about the world’s poorest countries is misinterpretation of the factor abundance conception. The matters is not the absolute abundance of the factors, but their relative abundance. The gains from trade depend on comparative rather than absolute advantage. According to the Adam Smith, labor is the most important property for human-beings, and by using labor properly many things could be achieved. Therefore, poor countries have an abundance of labor relative to capital...