Friday, October 5, 2012

The differences between first world and third world nations

I am currently reading a book called "Who Stole the American Dream" by Hedrick Smith and am very impressed with how he has put it together chronicling the change of America's economy from where unions and management worked together and people made a living wage with health care benefits (maybe one reason universal health care took so long to be adopted in the United States.) and although I have been extremely skeptical of the anti-globalization movement despite having a lot of friends who are anti-globalization in their economic views, I can see a lot of points on how this new economy has hurt America and we need to change the system, the alter-globalization movement which I believe has the right answer. Fighting systems have never worked outside of all-out war. Working within systems are what caused the middle class to grow so much from the 1950s to 1970s, my family included. I have written out some ideas on what really causes economies to grow and be stable, which originally started with looking at Indonesia and wondering why it is not growing rapidly like India or China, and that train of thought led me to the following treatise:

A Healthy Economy is an economy where there is a more equitable distribution of wealth and GDP growth meets or exceeds population growth. A more equitable distribution of wealth increases the payback of new investment and improving the average quality of living. By comparing different countries, this is what appears to be the important difference.
  1. It should be easy to start a business. This allows prices to drop for consumers, and allows people to make enough to live by creating incentives to pay workers more. If people are not paid enough, the incentive to create a business of their own increases, and if there are more businesses in a market, there is more competition for the most competent workers. The invisible hand is able to work. According to the World Bank, there is a fairly strict correlation between this and economic growth. (Ease of Doing Business Index and GDP Growth)
  2. It should be easy to do business, but there should be regulations to prevent exploitation of workers. If workers are exploited their lives are worse. Also, their quality of work decreases for the employer. However, providing incentives for workers to work efficiently and making sure they are healthy increases productivity and allows both owners and workers to come out better off than a dog-eat-dog approach. Henry Ford agreed with this because he had the opinion that the people who built his cars should be able to afford their product and his company was extraordinarily profitable for him. He would now be treated as a radical, Marxist, America-hating, socialist Michael Moore emulating Commie spy in today's political sphere. (Ease of Doing Business Index and GDP growth)
  3. Public goods should be publicly owned, countries that have public oil pay the least. (Price of oil in various countries and economic growth vs. Oil production)
  4. The country should invest in its natural resources for energy. It should be self-sufficient when it comes to power and not prey to global corporations. Renewable energy is the easiest way to fulfill this. Some countries (eg. Equatorial Guinea) have seen their economies turn around completely by gaining control of their economies. 10 years ago Equatorial Guinea was one of the poorest, but after finding oil they are middle-income. They are self-sufficient in terms of energy. By not controlling their energy countries in Europe and the United States (which do not have enough oil to sustain their standard of living) have their economies controlled by foreigners. (Economic growth vs. Oil production)
  5. Taxes should give people the ability to improve their lives, especially the poor and middle class. Movement between classes should be high. Most businesses are started by these two groups. Bill Gates was middle class when he started Microsoft, Sam Walton was the son of Farmers. The government should balance the budget in most years to prevent paying a substantial portion of future revenue to debt that goes mainly to the rich investors who can afford many bonds. This ties in with the first point. (Standard of Living and Starting a Business Index in Europe and the USA vs. Central Africa)
  6. There should be a strong financial sector with regulation to prevent abuse. Most small businesses begin through a loan from a bank or credit union. Reasonable investment should not be burdened by unnecessary regulation. This is the ingredient that requires the most balancing and liberalism (will to modify).
  7. It should be easy to export goods to get goods inexpensively. This makes the global economy more efficient when done well. This is only achieved when the right to organize and ability to start a small business is universal so that there is competition for wages in countries that are usually exported to to prevent exploitation. Without that requirement it can become exploitation. See points 1, 2, and 5.
  8. Health care and education should be free and public. This allows the middle class to grow their nest egg more than otherwise as Henry Ford felt was reasonable along with other historical business owners. A healthy middle class is the bedrock to every strong economy. A healthy middle class in good times makes bad times shorter. No middle class makes economies stay in depression. Compare Scandinavia, Greece, China, India, Indonesia, and any Central African nation.

With these 8 principles of economic prosperity, there should be an index that fully encompasses all of these to show the type of economic growth built on actual growth and an increase in demand, like was the economic ideology between 1933 and 1981 in the USA when we had our longest period of economic growth. All should be weighted equally and the results will tell where sustainable and shared economic growth exists.

How do we work towards a more equal society, where work is rewarded, and people can make their lives better if they are willing? I have a two step idea that if done should work.
  1. Invest in your local economy. Grow small businesses at home and don't work for businesses like Wal-Mart that take most of your money outside of your local economy and give it to their investors alone. You won't be able to be completely self-sufficient, especially in terms of food, but by investing in your local economy and not companies like Monsanto that practice unethical business practices of preying on people you can invest in your local economy growing small businesses. This would cause the profits of large companies to shrink and they would see drops in stock prices.
  2. As a gigantic movement, truly Occupy Wall Street when the prices are low. Purchase stocks in gigantic companies and spread your shopping around large businesses and small businesses. The prices will rise if everyone does this, and we can fire the CEOs and Boards of Directors that adopt the dog-eat-dog fighting business mentality with the traditional compassionate leadership that works with unions and pays their workers living wages. As owners of those corporations we can direct them as a gigantic movement with millions of people. We need to invest in all companies, even Monsanto and Exxon Mobil which rightfully have the disdain of millions, because only then can we bring down the price of oil that is holding our economy back and end abusive business practices. Fighting from the outside is futile. Espionage however is historically highly effective according to the Art of War.
This will make it so that the middle class can grow, to grow consumer spending. Let America Be America Again.

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