Economic development varies from one country to another depending on the nature of economic and non-economic factors. These factors determine the quantity of goods and services that a country generates in a given period, as well as the trend of the real gross domestic product (GDP). Capital, technology, population, and natural resources are significant economic factors that influence economic development (Malmaeus, 2016).
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Increases in the capital, technology, and population boost economic development because they augment production efficiency and confer a comparative advantage to countries. The presence of natural resources and proper utilization hastens economic development since they generate foreign exchange earnings (Malmaeus, 2016). Moreover, non-economic factors such as political stability, favorable legislation, civilized culture, and improved health enhance the economic development in countries. Therefore, this research paper seeks to examine the influence of population and natural resources on the economic growth of Canada and Algeria for the past 57 years.
Selection of the Country
The research paper selected Algeria as a country that heavily relies on natural resources in its economic development. Algeria fits the selection criteria because it is a major exporter of natural gas, crude oil, helium, uranium, lead, iron ore, and phosphates. Globally, Algeria ranks fourth and ninth in the production of helium and natural gas respectively, while in Africa it ranks third as the producer of natural gas (Taib, 2014).
In essence, these natural resources have boosted economic development in Algeria for decades since their discovery and exploitation. According to the Organization for Petroleum Exporting Countries (2018), the oil and gas industry is the primary driver of economic development because it forms 85% of exports and 20% of the GDP. Overreliance on oil and gas implies that Algeria’s economy is sensitive to variation in the global prices of fossil fuels.
Algeria has massive potential of fossil fuels because its proven crude oil and natural gas reserves are 12,200 million barrels and 4,504 billion cubic meters respectively (Organization for Petroleum Exporting Countries, 2018). Thus, these statistics demonstrate that Algeria is one of the leading exporters of natural resources, particularly oil and gas in Africa. Additionally, Algeria is an appropriate country for comparison purposes because it has almost the same population as Canada.
The data used in the research paper was selected from the website of the World Bank because it contains annual data since 1960. The World Bank is a commercial database that allows searching of several economic variables of various countries and provides valid and reliable data. In the website, the real GDP, total population, and the real GDP per capita were searched individually, and the data in the form of excel files and containing global data were retrieved from the database (World Bank, 2018). Subsequently, the data for the real GDP, total population, the real GDP per capita, and their respective years for Canada and Algeria were selected from the global data retrieved from the website of the World Bank. The data for real GDP, total population, and real GDP per capita were copied and pasted in an excel file, saved, and used in the analysis.
Real GDP Chart
Total Population Chart
Real GDP Per Capita Chart
Discussion of Economic Growth
The examination of the Canadian economy (Figure 1) displays that it has grown exponentially from about $41billion of real GDP in 1960 to about $1.65 trillion in 2017. These figures reveal that Canadian economy has grown forty times in the last 57 years. However, trend analysis shows that the Canadian economy has experienced both extensive and intensive economic growth. From 1960 to 1986, Canada experience extensive economic growth because the real GDP increased from about $41 billion to $377 billion without major fluctuations.
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Between 1986 and 1991, there was intensive economic growth as the real GDP increased from $377 billion to $610 billion. In 1991 and 1993, there was a decline in economic growth as the real GDP decreased from $610 billion to $577 billion, which gradually increased to $757 billion in 2002. From 2002 to 2008, the Canadian economy experienced a fast economic growth since the real GDP doubled from $757 billion to $1.548 trillion.
During the global economic recession of 2008/2009, the real GDP of Canada dropped to $1.371 trillion. After the global recession, there was an accelerated economic growth as the real GDP increased from $1.371 in 2009 to $1.788 trillion in 2011 followed by low growth from 2011 to 2014 where the economic growth peaked with a real GDP of $1.842 trillion. In 2015 and 2016, there as a sharp decline in the economic growth because the real GDP decreased from $1.842 trillion to $1.535 trillion. Thus, the current economic growth of Canada exhibit fluctuations of the real GDP between $1.5 trillion and $1.8 trillion. The trend of real GDP per capita demonstrates a similar pattern of economic growth over time (Figure 3). The population has increased gradually from 17 million in 1960 to 36 million in 2017 (Figure 2).
The analysis of the Algerian economy (Figure 1) shows that it has increased gradually over the past 57 years since 1960. The real GDP of Algeria has increased by more than 60 times from $2.7 billion to $170 billion in 2017. During the first decade, the economy of Algerian exhibited a low growth rate because the real GDP increased from $2.7 billion to $5.07 billion in 1971. Between 1971 and 1987, there was an extensive economic growth since the real GDP increased from $5.07 billion to $66.7 billion. Negative economic growth occurred from 1987 to 1995 because the real GDP declined from $66.7 billion to $41.8 billion.
A slow growth rate of real GDP from 41.8 billion to 56.8 billion in 2002 followed the period of decline. From 2002 to 2008, the Algerian experienced an intensive economic growth because the real GDP tripled from $56.8 billion to $171 billion.
The global economic recession of 2008/2009 caused the real GDP to decrease from $171 billion to $137. Another intensive economic growth occurred between 2010 and 2014 because the real GDP increased from $137 billion to $213 billion. In 2014 and 2016, the real GDP decreased intensively from $213 billion to $159 billion, but it improved to $170 billion 1n 2017. Therefore, the analysis of the current economic development shows that it fluctuates between $170 billion and $210 billion. Figure 2 shows that the growth rate of the Algeria population is higher than that of Canada because it grew from 11 million in 1960, surpassed Canadian population in 1998 at 30 million, and currently it stands at 41 million.
Comparison of the economic development of Canada and Algeria shows significant differences. Comparative analysis indicates that the real GDP of Canada had increased 40 times since 1960 when it was $41 billion to $1.65 trillion in 2017. In contrast, the real GDP of Algeria has increased 63 times from $2.7 billion in 1960 to $170 billion in 2017. Thus, the growth rate shows that the economic development of Algeria has expanded many times than that of Canada. Comparison of the real GDP growth rates shows that the economy of Canada grew 10 times faster than that of Algeria.
From the trend line, it is apparent that on average, real GDP of Canada increases by $30 billion while that of Algeria increases by $3 billion. In 1960, the gap between the real GDP of Algeria and Canada was $38 billion, but now it has increased significantly to $1.48 trillion within 57 years. Thus, the growth rate and the gap of the real GDP indicate that Canada and Algeria have different economic development trend despite having almost the same population.
The analysis of trends of the real GDP shows that Canada and Algeria exhibited similar patterns. Since Canada and Algeria compete in the global markets, they are subject to the same forces in the market, which influence their real GDP over time. According to Gadea, Gomez-Loscos, and Montanes (2016), the volatility of oil prices affects business cycles and the real GDP of most countries that rely on fossil fuels in earning foreign exchange.
Comparatively, trends of real GDP for Canada and Algeria exhibit the same pattern because crude oil prices account for their variations significantly. Periods of high real GDP coincide with the regions of inflations in oil prices, which occurred in the 1970s and 1980s, 2002-2008, and 2010-2014. Apparent periods of economic recessions are also evident in the trends of the real GDP of both Canada and Algeria are 1990-1991, 2000-2001, and 2008-2009.
Findings obtained from comparative analysis of Canada and Algeria provides evidence that supports the hypothesis of ‘resource curse’ by Jeffrey Sachs and Andrew Warner. Although Algeria has many natural resources, such as crude oil, natural gas, uranium, lead, and helium, it has experienced a slow rate of economic growth in the past 57 years. Sachs and Warner (2001) observe that countries endowed with natural resources tend to grow at a slower rate than poor ones. Although Canada and Japan have the same population, which represents labor and market for products, their economic growth rates in the aspect of real GDP and real GDP per Capita exhibit are different. Specifically, the economic growth rate of Algeria is 10 times slower than that of Algeria.
Canada and Algeria are countries with almost the same population but experience different economic growth rates. While the real GDP of Canada increased from $41 billion in 1960 to $1.65 trillion in 2017 that of Algeria increased from $2.7 billion to $170 billion in 2017. In 1960, the Canadian economy was 15 times more than the Algerian economy. Currently, the Canadian economy is 10 times more than the Algerian economy.
Despite the notable growth, the natural resources have not boosted the growth rate of the Algerian economy to keep abreast with the Canadian economy. Trend lines show that the rate of economic of Canada is 10 times that of Algeria due to the ‘curse of natural resources.
Gadea, M. D., Gomez-Loscos, A., & Montanes, A. (2016). Oil price and economic growth: A long story. Econometrics, 4(41), 1-38. Web.
Malmaeus, J. M. (2016). Economic values and resource use. Sustainability, 8(490), 1-20. Web.
Organization for Petroleum Exporting Countries. (2018). Algeria facts and figures. Web.
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Sachs, J. D., & Warner, A. M. (2001). The curse of natural resources. European Economic Review, 45, 827-838.
Taib, M. (2014). The mineral industry of Algeria. United States Geological Survey. Web.
World Bank. (2018). Data. Web.