What are they doing to
our world? Nations fail because of concentration of power. It is difficult to quantify
this concept. So, let’s look at the results - how fast an economy is growing
and its pace of wealth creation (productivity growth). A subpar pace and
poverty is an indication the political system has become too pervasive. Too
concentrated. Too obsessive. Too regulated.
I have always been
negative about the outlook for China.
Why? Because it is a dictatorship - like the USSR,
Cuba, Venezuela, and
many other struggling countries.
If we are disappointed
about the growth of our economy it may very well be the outcome of excessive
concentration of power in the hands of a few economic players - whatever the
reasons may be - rightly or wrongly. The markets and the sluggish economy are
saying it is happening. People’s discontent confirms it.
The same has been taking
place in Europe. I have been writing about it
for many years. The EU idea is not working because of concentration of power in
the hands of a few unelected and untaxed bureaucrats who have been building
sumptuous offices in Brussels and Frankfurt while the populace is struggling in poverty.
The EU idea is wrong. You
cannot put together countries with very different cultures, languages,
productivity differentials. The country with the highest productivity (Germany) is
going to gobble up the others reducing them to poverty because investments flow
toward the country with more wealth-generation capabilities.
The same is happening in
the US.
But in a much smaller scale than in Europe. Productivity
differentials among our states create invisible local dollars. For instance, Ohio’s main employers
are government and healthcare. When I go to Greenwich, CT
everything is more expensive because the Ohio Dollar is much weaker than the
Connecticut Dollar. Ohio is producing less
wealth than Connecticut.
The OH$ is worth less than the CT$.
The point is the markets
always win. Concentration of power reduces productivity growth (wealth
generation). And productivity differentials create imbalances as in Europe, thus producing poverty and financial volatility.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
Author, Profiting in Bull and Bear Markets
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