Why is the cost of living so low in undeveloped countries?
First, your question cannot be answered because your assertions are wrong. The cost of living is lower in dollar terms in developing nations but not for the people who actually live in those countries. Exchange rates for currencies are decided by the markets. Currencies in developing nations are not as valuable because not as many people (if any at all) want to keep their wealth in the form of those currencies. They’re usually unstable or unreliable. The safest currencies in the world currently are the US dollar and the Euro. Let’s take Colombia as an example. Colombia’s peso is about 1/1500 the value of the US dollar. It rises and falls in value, but overall, that’s about the fraction of worth. This means that there is a huge supply of Colombian pesos and not enough people who are demanding them. Because they’re so bountiful, the people who do use them can acquire large numbers of them. This is where supply and demand comes into effect. If there is a large supply of Colombian pesos an
Simple! With no industrial base(still largely agricultural with the exception of the large urban areas), little to no economic expansion, no mass markets to provide a consumer base, relatively low level technological systems, but huge labor reserves means that they can gain a better living by working for the multinationals. That is why they are multinationals: they are able to take advantage of cheap labor throughout the world. China has over a billion people! What a labor reserve! But just wait…wages will be going up in China as it continues to advance.
Most underdeveloped nations are actually in hotter climates. If we argue this from a geological point of view it seems quite logical. Most of this countries used barter (goods obtained through nature) as opposed to monetary trade (goods made or acquired by man) until quite recently (couple of decades ago at most) as they relied heavily on nature other than human ingenuity. The colder countries HAD to develop a monetary system to trade on a level as their commodities were mainly man-made which was not a necessity for countries with huge natural resources. As it so happened the colder climates needed crafts and craftsmen for survival while in warmer climates nature provided the means for survival. When travel became possible, money and paid skill were a very foreign notion to most indigenous people and I feel it still remains an alien concept. The imbalances occurred when the world of barter and money collided and money took the upper hand perhaps because it was sold by professional busi
