Final answer:
A low-income country may still feel poor after periods of rapid growth due to a substantial income gap with high-income countries. This perceived poverty persists despite reduced disparity because wealth perception is relative and growth rate may slow as easy gains are already captured. Inflation and low income levels above the poverty line can exacerbate this feeling of poverty.
Step-by-step explanation:
After periods of rapid growth, a low-income country may still feel poor compared to a high-income country for a number of reasons. One key factor is that despite experiencing economic growth, the income gap may still be substantial. Let’s use an example: imagine a low-income country that has been growing rapidly at 10% per annum and a high-income country growing at 2% per annum. Initially, the high-income country was, say, 10 times richer than the low-income nation. After 30 years, the disparity has reduced, and the high-income country is only 2.4 times richer. However, the citizens of the low-income country may still feel poor because the perception of wealth is relative.
In addition, as the low-income country develops, its growth rate may slow due to diminishing returns to investment and reduced opportunities for catch-up growth. This is because easy gains from adopting existing technology and best practices have already been made, and further growth requires innovation and more complex improvements. The country may also face challenges like high inflation, which can erode purchasing power and exacerbate the feeling of poverty. Moreover, despite a fairer distribution of income, poverty can persist if the income level at which people are considered to be above the poverty line is still very low.