Ars Regendi Simulation Forum

Full Version: The real, fundamental, cause of low growth in developed economies
You're currently viewing a stripped down version of our content. View the full version with proper formatting.
The true, fundamental, cause of low growth in developed countries is the typical access to an abundance of resources to all on the social scale. In other words, the true cause is a lack of impoverished peoples. Poverty is the greatest incentive to getting out of poverty; without it, people have little incentive to take large risk in developing their human capital, such as taking on a new career or starting up a small business (the ultimate risk). What we define as "impoverished" in this country is extraordinarily different than that in different countries. In India, for example, "not being in poverty" could be as simple as having access to fresh water. In Great Britain, it is as simple as having access to things like phones, computers, and the Internet, and even higher education, things and services which would be considered immense luxuries and wealth in other countries. The drive for human capital which was present 100 years ago, likewise, no longer exists to the same extent in developed countries. Fundamentally, achieving something like 5% growth is now near impossible; society, the individuals, themselves, do not desire said development, the desire of politicians. In the end, we are countries of individuals, not "economic theory" or dolls for the lauded snobby intellectual class which rules over us. The capacity of developing is directly correlative to the amount of poverty in a country. As the reserve pool of impoverished or "have-nots" dries up, so does economic development, at least in any sense that we could comprehend.
Poverty is also very depressing since it convinces people that life is miserable.

People want to improve themselves because they have ambitions, goals, and dreams. It's not that they're trying to escape misery, but that they're trying to become happy.

Developing countries are advancing because they're piggybacking off the achievements of developed countries right now. We saw this in Japan before that prioritized innovation before invention, we see it in China now with reverse engineering, and we see it in India that takes advantage of its familiarity with the British Empire and connections with American technology firms.
I respectfully disagree. Back 100 years ago, economic growth year on year was at about 3%, despite there being a greater incentive to get out of poverty. This 2-1% economic growth experienced in the west comes from a multitude of factors.

During the 50's-70's, Keynesian economics was adopted in the west and largely successful. Mind you, I'm not saying Keynesian economics works in all aspects, but the way it was used in the post war industrial boom proved extremely effective. Across the west, nations experienced an average of 5% growth a year. At the time, the balance of a very entrepreneurial society combined with an adequate safety net and policy that encouraged the worker to benefit the most from industrial progress led to the largest growth of the western middle class in poverty. It also saw poverty rates drop to 6% in the United States. More specifically, high taxes on the rich and tight regulation on buybacks allowed money that the rich would rather sit on to be put to good work by efficient government spending on infrastructure and social welfare programs.

The oil crisis of 73 and the recession of 76 proved detrimental to western economies. The lack of energy security slowed industrial society to a halt. Consequently, these crisis's drained a lot of what little wealth was kept by the top. Desperate to never again see their incomes disappear, they began to lobby for people who would reduce their tax burden and allow them to get away with economic practices that only served their interests (Reagan and Thatcher for ex.).

The new policy passed by the Reagan administration resulted in a slower economy. Gone were the days of 3% pay-raises every year, and the days of constant productivity boom. Given that 1 dollar to the rich only puts back 39 cents into the economy, the rich in effect sat on their money a lot more. In addition, a lot of the policy in this era paradoxically legalized financial crime. Now, rich investors in Africa found it easy to conduct tax evasion and shift money into foreign bank secrecy accounts, which robbed Africa of 900 billion dollars of revenue out of its total of 1.2 trillion. In a way, its rather policy passed in the eighties robbed many developing nations of their ability to industrialize quickly, while simultaneously destroying the economic and industrial superpowers of the world at the time: the United States and the United Kingdom.

Because of the situation created by such policy, we are now seeing a dangerous divide of wealth inequality in the United States. The rise of the super-rich has given them more influence in government, increasing corruption across the world. In addition, the rise of trillion dollar multinational corporations crush small business competitors through tax loopholes and lobbying much of which they fund. Overall, this has caused the business environment in the west to deteriorate, caused many governments to slowly transition from democracy to plutocracy, and is leaving many stimulus programs useless, racking up national debts worldwide, a dangerous precedent for the future.

Therefore, in order to solve the issue of slow growth in the west, we must simultaneously tackle corruption, improve the business environment, reinvigorate antitrust, and remove any incentives that hamper wage and productivity growth.

Al1sonPayne

Thanks for information
Reference URL's