The second set of Western civilization

Have you also heard the familiar - now almost universally accepted saying that the "small and backward countries" almost automatically have to grow faster than the "big and developed" ones? Let's think about it… Somehow I just don't believe it.

Do you know what I think of the repetitive and widely accepted saying that "poor countries grow naturally faster"?

In my opinion, it all came about when, once in rich Western countries, politicians and "experts" needed to justify a long period of slow growth (relative to lagging countries) and instead of actually doing something (facilitating business, cutting taxes and stopping enlargement of the state), so they had the "experts" extract the data from the statistics and compare them with the data of their own countries (completely out of context, of course).

Subsequently, they said that the backward countries needed less investment to grow faster than developed countries. That it is natural. That goes without saying, $ 100 billion investment in the US and the same in Bangladesh certainly has a different impact on GDP in each country, but this whole statement is only half the truth.

Let us now say the other half of the truth: the more pronounced the impact would be large investment on the product of the country, the more difficult it is to give investment looking for the country. Why?

First: Huge hundred billion investment they don't just grow like mushrooms. There are few of them. Their frequency is inversely proportional to their size: the higher the planned investment, the fewer there are in the world.

Secondly, another common argument of those who defend the above statement is that labor is cheap in underdeveloped countries. Therefore, "naturally" they attract larger ones investment.

This is again only half the truth: cheap labor means expensive capital. Machines have to be imported from afar, employees have to learn things that are natural elsewhere (for example, due to the lack of education), infrastructure needs to be built. There is often a lack of a skilled workforce, managers who can only be provided from developed countries. For them, it is necessary to provide facilities, but also to provide a salary corresponding to the amount of wages for which they work in their country of origin.

Third: security. Why, for example, Pakistan has not gained much in the last few years investment? The answer is simple: they are at war for humny. Afghanistan, with its instability, is harming the countries around it, despite the fact that, especially recently, one does not know the day and time when the extremist Taliban movement will take power in Pakistan.

Fourthly: All countries compete. "Duel" o investment not only developed countries, but each other about investment even economically weak states compete.

The mentality of the second set

There would certainly be many arguments "against" underdeveloped countries, but those mentioned above are enough for now. But now let's look at the developed ones.

It does not have one for the GDP growth of developed countries investment too much influence. It is true. However, all ailments that cause more difficulties in obtaining in underdeveloped countries investment are de facto resolved in developed countries.

Developed countries thus have a greater potential to obtain more investment.

So why does the "West" lag behind poor countries in growth? We cannot make excuses that "they" have lower GDP and therefore grow faster. We must realize that each of our bad decisions can mean loss investment with us and getting investment at their place".

We can only look for mistakes in ourselves.

Let's compare it a bit to tennis: we have the first set behind us. We went through an industrial revolution, we had two world wars and one cold war. "We won."

But who won? Above all, freedom over totalitarianism won, the market over central management. And today? Relative calm, when we should enjoy the acquired freedoms and relative wealth.

But this peace is treacherous - it comes so-called mentality of the second set: Western civilization is relaxed and satisfied after winning the first set. And he starts making "opponent" mistakes.

Our "western wealth" and high salaries have provided us with cheap capital. However, many government interventions in prices (where wages are prices) have caused this balance to slowly cease to apply. And in the West, both labor and capital are becoming expensive. Invest in western economies it is thus de facto impossible.

In fact, the only key to the successful development of Western "developed" countries lies in the parliamentary benches. We need to start taking advantage of our comparative advantages (as opposed to underdeveloped countries, which indeed often use them), before it is too late - and we will become that backward world ourselves.

However, the question arises when it will be "late". If we haven't missed our "second set" already…

0 comments

  1. Non-governmental education and others create investment opportunities for the private sector, ie the opportunity to earn. It is therefore possible that government cuts would have a positive effect on the development of living standards (and purchasing power), because it also means that others will have money from their taxes in their pockets and others can earn effectively even where there is an inefficient state mole.

  2. The question here is whether all the poorer countries are developing faster than the rich ones. Hardly, the faster growth affects only parts of developing countries. Even if taxes in developed huts are zero, expensive labor is more costly for companies than in cheap countries. Low taxes only mean spending cuts that will hit the pretty middle class - teachers, police officers, doctors, officials… These cuts bring about a reduction in purchasing power and sales problems for companies.

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