• Transfers of wealth among nations take many forms.

• Trade is the term used to describe international exchanges of commodities and services.

• A nation becomes wealthier when its exports exceed its imports because it obtains assets or foreign currency in return for its exports.

• A nation loses wealth when it imports more than it exports because it spends more foreign cash or assets than it brings in.

• The act of transferring money from one nation to another with the intention of making a profit or producing revenue is referred to as investing.

• This can take the form of portfolio investment, where investors purchase stocks, bonds, or other financial assets issued by foreign corporations, or it can take the form of foreign direct investment (FDI), where a company invests in a foreign country by purchasing or creating a subsidiary.

• Individuals and businesses in one country may invest directly in the business enterprises of another country.

• Citizens of a given country may also put their money in another country’s banks, which will in turn make loans to individuals and enterprises, so that this is indirect foreign investment.

International Investments:

• In a perfect world, wealthy nations would invest much of their capital in poorer nations, where capital is more scarce and would therefore offer a higher rate of return, however, in the highly imperfect world that we live in, that is by no means what usually happens.

• Typically, more prosperous nations tend to invest in other wealthy countries because investors look for stability, efficiency, and the expectation of returns.

• National transfers of wealth have primarily occurred between people by remittances and immigration, while national policies of imperialism and foreign aid have had little effect.

• In gross terms, international trade has to balance. But it so happens that the conventions of international accounting count imports and exports in the “balance of trade,” but not things which don’t move at all.

• A country’s total output consists of both goods and services.

• Lurking in the background of much confused thinking about international trade and international transfers of wealth is an implicit assumption of a zero-sum contest, where some can gain only if others lose.

• Exploitation may be an intellectually convenient, emotionally satisfying, and politically expedient explanation of income differences between nations or between groups within a given nation, but it does not have the additional feature of fitting the facts about where profit-seeking enterprises invest most of their money, either internationally or domestically.

International Monetary System

The system and rules governing the exchange of currency between countries as most transfers occur by currency, not goods and services.

• Capital: These include remittances, foreign aid, and transfers of human capital in the form of the skills and of emigrants.

• Remittances: Emigrants working in foreign countries often send money back to their families to support them.

Emigrants and Immigrants

• People are one of the biggest sources of wealth.

• Whole industries have been created and economies have been transformed by immigrants.

• Although it is not easy to quantify human capital, emigration of educated people on this scale represents a serious loss of national wealth.

• Imperialism: Plunder of one nation or people by another has been all too common throughout human history.

• Foreign Aid: What is called “foreign aid” are transfers of wealth from foreign governmental organizations, as well as international agencies, to the governments of poorer countries.

• The effects of international wealth transfers on nations and their economy can be both favourable and unfavourable.

• Increased economic growth, the creation of jobs, and the decrease of poverty are all positive effects.

• Economic dependence, an unequal distribution of income, and environmental degradation are all negative effects.