Most of the countries at the top of a new list of the wealthiest in the world are not among the biggest or the mightiest. Many, in fact, are among the smallest: Consider Luxembourg, which tops the list published by Global Finance.
Singapore, Ireland, Qatar, Macao and Switzerland follow the world’s only grand duchy.
The indicators of a nation’s wealth can vary from one ranking to another — thus the differences among them — but often include a country’s Gross Domestic Product, or GDP (goods and services produced by a country during one year), the GDP per capita (the average amount of money that each person in a country earns in a year) or the gross national income, or GNI.
Examining the per capita GDP of each country around the globe is a frequent parameter because it permits the ranking of countries based on wealth and then compares them to one another.
Are there fair indicators?
“Remember, however, that GDP per capita does not necessarily correspond to the average wage a person living in a given country earns,” explains the World Population Review. “For example, the United States’ GDP per capita in 2019 was $65,279.50, but its average annual wage was $51,916.27 and its median wage was $34,248.45.”
In their analysis of the world’s richest countries ranked by GDP, the organization notes that “even the wealthiest countries have some citizens living in poverty, and even the poorest countries are home to a number of extremely rich residents — but it is a fair indicator of a country’s overall financial health.”
As explained by Global Finance, when a ranking is based mainly on GDP, the richest countries are among the largest.
Here, for example, are the 10 richest countries in the world based on the International Monetary Fund’s data:
- United States ($18.6 trillion)
- China ($11.2 trillion)
- Japan ($4.9 trillion)
- Germany ($3.4 trillion)
- United Kingdom ($2.6 trillion)
- France ($2.5 trillion)
- India ($2.2 trillion)
- Italy ($1.8 trillion)
- Brazil ($1.8 trillion)
- Canada ($1.5 trillion)
Tax havens and other peculiarities
How can the economies of such small countries like Luxembourg match those of powerhouses like the ones in the list above?
There is the fact that “GDP values can sometimes be warped by international business practices,” the World Population review explains. “For example, some countries (such as Ireland and Switzerland) are regarded as “tax havens” thanks to government tax rules that favor foreign businesses.
“For these countries, a significant amount of what registers as GDP may actually be money that international companies are funneling through that country, as opposed to income that is actually staying there.”
The United States is considered a tax haven by many financial watchdog groups.
Luxembourg, which is also often tagged as a tax haven, has another particularity: It has a high proportion of cross-border workers — nearly 212,000 in the second trimester of 2021. “While they contribute to the country’s wealth, they are not included when the GDP is divided by inhabitants, leading to an artificially high number,” writes local broadcaster RTL.
In attempts to compensate for these tax havens’ effect on national GDPs, many economists track each country’s Gross National Income, GNI.
Also, there are well-being indices intended to measure different aspects of life and used to complement the most traditional indicators.
Sophisticated finances, taxes, natural resources
Among the main factors that lead to wealth in a number of the small countries including Luxembourg, Switzerland and Singapore, are sophisticated financial sectors and tax regimes structured to attract foreign investment and professional talent.
Others in the top 10 of the list such as Qatar, Brunei and the United Arab Emirates have large reserves of hydrocarbons and other lucrative natural resources. Macao, Asia’s gambling heaven, with its casino businesses attracts hordes of wealthy tourists.
The “pandemic effect”
In any case, for 2022 all indices had to be adjusted due to the effects of the global Covid-19 pandemic that forced many businesses to close or reduce their activities and exponentially expanded the possibilities of remote working, among other changes.
The Grand Duchy of Luxembourg weathered the pandemic much better than its European neighbours.
In 2014 “the country topped the $100,000 mark in per capita GDP,” Global Finance notes. “Luxembourg uses a large share of its wealth to deliver better housing, healthcare and education to its people, who by far enjoy the highest standard of living in the Eurozone.”
Luxembourg is a small, landlocked country located in western Europe and bordered by Belgium, France, and Germany. With a population of 642,371, Luxembourg is the only Grand Duchy in the world.
Its GDP per capita of $140,694 makes it the world’s richest. The unemployment rate is just over 5%, and the average life expectancy is 82 years. Healthcare, education and public transportation are free for all citizens.
The government of Luxembourg is stable and efficient, and the country enjoys political and economic stability and a high standard of living.
Luxembourg hosts major multinationals including Skype and Amazon.
Along with Luxembourg, 10 European countries appear among the 20 wealthiest. Here is the list:
- Luxembourg, GDP: $140,694
- Singapore: $131,580
- Ireland: $124,596
- Qatar: $112,789
- Macao, SAR (Special Administrative Region): $85,611
- Switzerland: $84,658
- United Arab Emirates: $78,255
- Norway: $77,808
- United States: $76,027
- Brunei Darussalam: $74,953
- Hong Kong, SAR: $70,448
- San Marino: $70,139
- Denmark: $69,273
- Taiwan: $68,730
- Netherlands: $68,572
- Austria: $64,571
- Iceland: $64,621
- Andorra: $63,600
- Germany: $63,271
- Sweden: $62,926
Whether these list weather the current global turmoil unaffected remains to be seen. The most recent World Economic Outlook Update from July 2022 by the International Monetary Fund offers a “Gloomy and More Uncertain” view of the world’s economic situation:
“A tentative recovery in 2021 has been followed by increasingly gloomy developments in 2022 as risks began to materialize.
Global output contracted in the second quarter of the year, owing to downturns in China and Russia, while US consumer spending undershot expectations. Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwide––especially in the United States and major European economies––triggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine.”