I recently read a newsletter article by Simon Black that was very timely for this Moving Out of the Country series. In it, he describes the main reasons why some countries are poor and some are prosperous. He’s been to over 120 countries, so he uses this data set for comparisons.
He describes three factors:
The first set is cultural. Wealthy nations have a culture that values hard work. Knowledge. Productivity. Innovation. Risk-taking. Saving. Self-reliance.
I’m not trying to say that people in poor countries don’t work hard. Far from it.
The point is that if working hard and saving money are strong CULTURAL values (which tends to be the case in Asia), a country is going to do better.
I’m not as well traveled as Simon, but I’ve seen exactly what he’s talking about, not only in different countries, but in different cities and neighborhoods throughout the US. Some local cultures are about hard work and saving your money, others are about doing whatever you want and yelling at the government to help pay your bills. The latter are always poorer. Always.
Second, wealthy nations have much better institutions. The rule of law is strong. Private property rights are strong. Corruption is limited. Regulation is sensible. Taxation is reasonable and efficient.
It’s simple; no one wants to do business in a corrupt dictatorship.
This is what separates most countries in Africa and South America from countries like Singapore. Singapore is hugely successful despite having zero natural resources, an extremely racially diverse population, and being heavily in debt, because it has strong rule of law. (I’ll be talking more about Singapore in the next installment in this series.)
Lastly (and most importantly), wealthy nations have an “inclusive” economy.
This means that people aren’t medieval serfs toiling away for the establishment. If someone develops skills, works hard, and takes risks, they’ve got a good chance of moving up the socioeconomic food chain.
As Simon states in his newsletter, this is the trait the US and West in general is losing. He’s right.
When looking for your country A, B, or C, you should pay attention to the above three traits. It’s also interesting to notice that the entire Western world is losing all three of these traits, and more so every year.
By the way, do the three traits above tend to indicate the ideology of left-wingers, or right-wingers and libertarians?
Interesting, isn’t it? Maybe socialism, redistribution of income, and the welfare state aren’t very good ideas. Hmmmmm…
In the next post, I’ll get to what I promised last time: a list of countries for your possible country C and D, where to save / invest your money, and where to base your legal business entity. Stay tuned.