The problem with our world

 

 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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