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How Do Countries Grow Rich? It's Much Easier Than You Think
Forbes ^ | 02/15/2013 | Nathan Lewis

Posted on 02/15/2013 8:29:27 AM PST by SeekAndFind

Economists have been talking for decades about why some countries get wealthy, and some do not. It was the subject of Adam Smith’s famous book, The Inquiry Into the Nature and Causes of the Wealth of Nations. I suggest that the secret could be expressed in four words: Low Taxes, Stable Money. I call this the Magic Formula.

The reason for this is simple. The primary way that countries have become wealthy is via capitalism. Capitalism works best with stable money and low taxes.

If taxes are too high, and money is too unstable, capitalism – the incredibly complex arrangement of relationships that allow humans to cooperate together in vast networks of investment, production and trade, via the market system – becomes impaired, or collapses completely.

Recent books like Why Nations Fail, by Daron Acemoglu and James Robinson, take up this fascinating subject for our own age. In general, they tend to focus on a menagerie of what I would call secondary factors, while missing the foundational importance of the Magic Formula.

If you don’t have the Magic Formula, you might maintain a decent standard of living. Many European countries maintain a high standard of living today, despite rather high taxes. But, they didn’t become wealthy this way. If you look back into the history of Germany or Japan, or the United States, you typically find a period when the Magic Formula is in full effect. Most of the gains are made during these eras.

In U.S. history, most of the gains were made in the 1870-1914 period, the 1920s, and the 1950-1970 period. Today, we have neither Stable Money nor Low Taxes. The result? The U.S. median male full-time wage has stagnated and declined for forty years.

(Excerpt) Read more at forbes.com ...


TOPICS: Business/Economy; Constitution/Conservatism; Editorial; Government; News/Current Events
KEYWORDS: wealth

1 posted on 02/15/2013 8:29:38 AM PST by SeekAndFind
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To: SeekAndFind

How Do Countries Grow Rich?

By watching Barack Obama and American democrats, then doing the exact opposite.


2 posted on 02/15/2013 8:50:10 AM PST by Iron Munro (I miss America, don't you?)
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To: SeekAndFind

Alas, it’s not the slightest bit easy in the modern world - unfortunately, egomaniacal government meddlers think they have to “arrange” everything for everyone else.

The problem is that a nation can only prosper when the government gets out of the way with its conventions and its redistribution and its taxes and its egomaniacal “officials” and its blatant corruption.

A nation can only prosper when it sets free its creative and entrepreneurial people and lets them do their thing without messing it all up with government-sponsored and government-mandated bullsh*t.

It’s a lesson that’s been forgotten in America, which is why our Marxist president is driving the economy - and America - to its knees.


3 posted on 02/15/2013 8:50:53 AM PST by Jack Hammer
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To: SeekAndFind
What is missing from the formula is economic freedom and personal liberty. East Germany had a stable currency and relatively low taxes, but the standard of living was low compared to then West Germany. The big difference was East Germany was a police state with little economic freedom and no personal liberty. F. A Hayek in his book The Road to Serfdom makes this clear as do the writings of economist Milton Freedman.
4 posted on 02/15/2013 8:51:43 AM PST by The Great RJ
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To: SeekAndFind

Print money? - no

IMO the answer to how countries grow wealth is by creating something of value.

It just so happens that capitalism and low taxes are the best incentives to creating value.

(Saudi Arabia is a wealthy monarchy, because they “create” oil, but their system of government stinks.)


5 posted on 02/15/2013 8:59:54 AM PST by Triple (Socialism denies people the right to the fruits of their labor, and is as abhorrent as slavery)
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To: The Great RJ

...along with the respected right to have private property. Unless you can “own” something (esp. land), which is protected by the state by law, then it isn’t worth the investment - leading to people only doing what they have to for survival.

Basically, there’s no point in building personal wealth if somebody, or the state, can (and does) just come along and take it.


6 posted on 02/15/2013 9:01:42 AM PST by fuzzylogic (welfare state = sharing consequences of poor moral choices among everybody)
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To: SeekAndFind

Convince America to borrow money to shower them with.


7 posted on 02/15/2013 9:01:47 AM PST by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: SeekAndFind
Low Taxes, Stable Money.

also

1) private property rights and freedom
2) rational culture + science
3) capital accumulation, saving and investment,and capital markets
4) utilization of technological advances

8 posted on 02/15/2013 9:07:25 AM PST by mjp ((pro-{God, reality, reason, egoism, individualism, natural rights, limited government, capitalism}))
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To: SeekAndFind
How Do Countries Grow Rich?

All wealth is created by taking stuff out of the ground and making into things that people need and use everyday. Some people are smart and hard working and can do this very well. Some people are lazy and dumb and aren't very good at it. Government also can support this process or act as an impediment.

9 posted on 02/15/2013 9:18:21 AM PST by Count of Monte Fisto (Republicans are to the Democrats as the Generals are to the Harlem Globetrotters)
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To: SeekAndFind
Capitalism works best with stable money and low taxes.

Singapore is the poster child for such success. In 1966, the country was newly independent and colonial backwater only 20 years from the total devastation of World War II. The Malays hated the Chinese majority as not only capatalistic exploiters but as religious infidels. There was a significant Malay minority and the ethnic Chinese and whites who were (mostly) in charge of Singapore knew they could never hope to win a military conflict with its much larger Malaysian neighbor. The wholesale slaughter of ethnic Chinese which was happening in nearby Indonesia made that clear. In addition, Singapore's strategic location astride the world's biggest source of raw materials for heroin and other illicit drugs meant that it was not only a haven for the dirty business of the narcotics gang but that roughly 1/8th of the Singaporeans were addicted in one form or another.

If today's Democrats had been in charge here, Singapore would have fared little better than Yemen, another former British colony astride a strategic trade route.

Instead Singapore rocketed from a third world country whose very survival was in doubt to one of the wealthiest nations on earth within less than half a century.

10 posted on 02/15/2013 9:19:07 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: SeekAndFind
"Stable Money"

"http://www.intellectualtakeout.org/library/chart-graph/value-us-dollar-over-time"


11 posted on 02/15/2013 9:27:27 AM PST by BwanaNdege ("To learn who rules over you simply find out who you are not allowed to criticize"- Voltaire)
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To: SeekAndFind

Low Taxes, Stable Money - how is that applied to the states?

Since they don’t print money, but do create budgets and regulations how can one modify that to apply to a state?


12 posted on 02/15/2013 9:29:36 AM PST by 1010RD (First, Do No Harm)
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To: SeekAndFind
In U.S. history, most of the gains were made in the 1870-1914 period, the 1920s, and the 1950-1970 period. Today, we have neither Stable Money nor Low Taxes. The result? The U.S. median male full-time wage has stagnated and declined for forty years.

Lets bring back the gold standard and low tax rates... (I would see a flat tax of 14.5%

13 posted on 02/15/2013 9:43:23 AM PST by ExCTCitizen (More Republicans stayed home then the margin of victory of O's Win...)
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To: SeekAndFind

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty.

This is known as “bad luck.”

- Robert Heinlein


14 posted on 02/15/2013 9:43:58 AM PST by Lonesome in Massachussets (What word begins with "O" and ends in economic collapse?)
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To: 1010RD
Low Taxes, Stable Money - how is that applied to the states?
Since they don’t print money, but do create budgets and regulations how can one modify that to apply to a state?

Simple, really. When regulations are abused to be revenue-generation (tax-like) or to allow for certain people/companies to excel at the price of others ("pay-to-play") then they [respectively] alter the [effective] taxing rate and the stability of money -- the latter because the same amount of money changes it's purchasing-power based on if you're part of the in-crowd or not. ($1000 a licensed plumber might buy tools & supplies, but $1000 for an unlicensed plumber might not even purchase the license.)

15 posted on 02/15/2013 9:45:49 AM PST by OneWingedShark (Q: Why am I here? A: To do Justly, to love mercy, and to walk humbly with my God.)
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To: SeekAndFind

Low taxes - this harps on the one side of the equation, forgetting the other, which is low government spending.

If government spending stays high, and yet taxes are kept lower than what is necessary to pay for this spending, this requires government either creating money or borrowing it.

New world order (international banking) wants governments to borrow from them (even if they don’t lend their own capital, they collect fees for arranging the marketing of the debt).

As you can guess, it’s essential, in the international banksters eyes, for them to weasle a way to get a “central bank” for every government created that they own, or at least control it’s board of directors. This way, if they can’t find enough buyers of government debt, they can have this “central bank” have the power to create money, then buy the government debt with that.

If you want to control government - be its creditor. If you owe someone money, they have quite a bit of control over you.

Now we proceed to the next item, stable money. This is where the faux-conservative new world order “establishment”, trying to show a veneer of capitalism, cry that monetary policy is so important to the economy. We can’t have the government just print money like crazy ! It won’t have any value !

What’s left... (duhhhhh) borrowing from international banking. Voila !

It’s a process of two simultaneous steps - a) get government spending to go beyond what can be collected in taxes and b) convince government that it can’t create its own money, that it needs to borrow money from you to make up the difference.

Thanks, New World Order International Banksters !


16 posted on 02/15/2013 9:49:12 AM PST by PieterCasparzen (We have to fix things ourselves)
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To: fuzzylogic
...along with the respected right to have private property. Unless you can “own” something (esp. land), which is protected by the state by law, then it isn’t worth the investment - leading to people only doing what they have to for survival.

Basically, there’s no point in building personal wealth if somebody, or the state, can (and does) just come along and take it.


Bingo. Everyone should always keep this in mind when trying to understand economics, IMHO, it's a fundamental law of economics.

The principle of private property is taught in the Bible, God's Law Word.
17 posted on 02/15/2013 10:00:15 AM PST by PieterCasparzen (We have to fix things ourselves)
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To: Iron Munro

yep...Folks need to look at the results of Chile and Colombia...both had help from the US..in limited ways but now both are doing quite well.


18 posted on 02/15/2013 10:01:33 AM PST by rrrod (at home in Medellin Colombia)
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To: Lonesome in Massachussets

Abject poverty is not the normal condition of man. I know too many folks with 8th grade educations that retired quite well, and I’m aware of more than a few empires and nations of history where people lived relatively well. IMHO, the typical notion of ancient Rome, for example, grossly underestimates the comfortable enjoyments of it’s citizens. Fatalistic notions of “bad luck” can certainly contribute to poverty, however.


19 posted on 02/15/2013 10:16:21 AM PST by PieterCasparzen (We have to fix things ourselves)
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To: Count of Monte Fisto
All wealth is created by taking stuff out of the ground and making into things that people need and use everyday.

Exactly! Witness Singapore, and before it, Hong Kong. Oh, wait a minute . . . .

20 posted on 02/15/2013 10:27:08 AM PST by 1rudeboy
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To: 1rudeboy

Singapore and Hong Kong were economic centers built up to manage the trade of real wealth created in Asia and Europe.


21 posted on 02/15/2013 11:07:09 AM PST by Count of Monte Fisto (Republicans are to the Democrats as the Generals are to the Harlem Globetrotters)
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To: Count of Monte Fisto

So Singapore and Hong Kong are poor? Learn a new thing every day.


22 posted on 02/15/2013 11:11:19 AM PST by 1rudeboy
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To: SeekAndFind
"four words: Low Taxes, Stable Money"

I would add five more, “The Right to Own Property”. That is a big reason why the Kelo decision worries me.

23 posted on 02/15/2013 11:12:05 AM PST by 2001convSVT (Going Galt as fast as I can.)
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To: 1rudeboy

Hong Kong really came into its own in the 19th Century as the distribution hub of opium provided by the Sassoon family and the British Empire. Opium comes out of the ground and opium addicts need it everyday. Its creates some much wealth that the British Empire went to war against China three times to force it upon the Chinese people.


24 posted on 02/15/2013 11:18:31 AM PST by Count of Monte Fisto (Republicans are to the Democrats as the Generals are to the Harlem Globetrotters)
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To: 1rudeboy

Get real. They’ve been getting a slice of the wealth that they trade for hundreds of years.


25 posted on 02/15/2013 11:20:38 AM PST by Count of Monte Fisto (Republicans are to the Democrats as the Generals are to the Harlem Globetrotters)
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To: Count of Monte Fisto
"Came into its own?" LOL--Is that one way of saying wealth was created? And also ignoring what happened afterward?
26 posted on 02/15/2013 11:21:32 AM PST by 1rudeboy
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To: 2001convSVT

Three more works better: Rule of Law. That incorporates property rights but includes respect for and enforcement of contracts and liabilities.


27 posted on 02/15/2013 11:22:58 AM PST by Cincinatus (Omnia relinquit servare Rempublicam)
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To: PieterCasparzen

I think you missed Heinlein’s point. He is *not* saying you need an expensive education to be productive. Edison dropped out of school in the second grade, yet he invented the phonograph, moving pictures and the electric light bulb. Even in purely academic pursuits, Einstein had problems graduating from college (due to his personality, not his intellect) and failed to get an academic appointment after graduation. He was working as a patent examiner, second class, in 1905 when he wrote four of the most influential papers ever by any scientist.


28 posted on 02/15/2013 11:42:01 AM PST by Lonesome in Massachussets (What word begins with "O" and ends in economic collapse?)
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To: SeekAndFind
No. 1 factor not mentioned: a people with a good work ethic and the capacity for innovation. That is the overruling basis for a wealthy nation. All else are boundary conditions.
29 posted on 02/15/2013 11:44:19 AM PST by Moltke ("I am Dr. Sonderborg," he said, "and I don't want any nonsense.")
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To: Count of Monte Fisto

Singapore and Hong Kong are blessed with remarkably productive populations.


30 posted on 02/15/2013 11:46:02 AM PST by Lonesome in Massachussets (What word begins with "O" and ends in economic collapse?)
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To: SeekAndFind

Giverments have NOTHING except what they steal from the people..
The level of theft is the problem...

This is true of ALL givernments, all of them.. no matter system..
What givernments and its officials HAVE is totally STOLEN..
Why it is easy to become rich as a politician..

ONLY one system ever devised by man to LIMIT the theft..
Thats the USA.. Constitutional system... not stop it but limit it..

You do know, the entire reason for a US Constitution was to LIMIT federal givernment.. NOT ENHANCE IT..


31 posted on 02/15/2013 11:50:01 AM PST by hosepipe (This propaganda has been edited to include some fully orbed hyperbole..)
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To: Lonesome in Massachussets
Singapore and Hong Kong are blessed with remarkably productive populations.

No doubt about it. They also don't have a government undermining them at every turn or shipping their jobs to a foreign country.

32 posted on 02/15/2013 12:07:31 PM PST by Count of Monte Fisto (Republicans are to the Democrats as the Generals are to the Harlem Globetrotters)
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To: SeekAndFind
Economists have been talking for decades about why some countries get wealthy, and some do not. ... I suggest that the secret could be expressed in four words: Low Taxes, Stable Money. I call this the Magic Formula.

According to Wikipedia: "The tax level in Norway is among the highest in the world". Yet their per capita GDP is higher than that of the US.

33 posted on 02/15/2013 12:07:51 PM PST by wideminded
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To: Count of Monte Fisto

We are blessed with the government we elected. We have no one to blame but ourselves.

If more Americans shared my voting preferences, America would be far, far more prosperous. American voting preferences, unfortunately, are becoming indistinguishable from Venezuela’s.


34 posted on 02/15/2013 12:17:02 PM PST by Lonesome in Massachussets (What word begins with "O" and ends in economic collapse?)
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To: Count of Monte Fisto
They also don't have a government undermining them at every turn or shipping their jobs to a foreign country.

Here are the scores for both Singapore and the United States in Heritage's Index of Economic Freedom:

Singapore,
United States.

Where does it look like the United States needs to improve?
35 posted on 02/15/2013 3:16:17 PM PST by 1rudeboy
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To: OneWingedShark

I think that the sound money of states is corruption and regulation. Keep both low and you’ve got a winner.


36 posted on 02/15/2013 3:48:11 PM PST by 1010RD (First, Do No Harm)
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To: SeekAndFind
"I suggest that the secret could be expressed in four words: Low Taxes, Stable Money. I call this the Magic Formula."

Yes, that's a magic formula. Fantasy aside, the real way is to repeal/abolish regulations to clear the way for thousands of small manufacturing starts. The debt regime will collapse regardless of magic formulas.


37 posted on 02/15/2013 5:07:16 PM PST by familyop (We Baby Boomers are croaking in an avalanche of rotten politics smelled around the planet.)
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To: 1rudeboy
Look. Our current "leaders" are the problem. Republican and Democrat alike. They've done everything they can to bring this country down economically so they can bring us down politically, militarily, socially, and every other way. It's all laid out in Agenda 21. Over regulating and overtaxing is part of the plan. Sending our industry and manufacturing overseas is part of the plan.

They want us poor! Poor people are easier to control. They've rigged the whole system to make it difficult to create wealth here. They didn't eliminate the creation of wealth they moved it overseas so we can not benefit from it. They had to move it. Even under the most burdensome regulation and crushing taxes the process of wealth creation would still remain here and the American people, hardworking and resilient, would still thrive.

Regulations and Taxes are easy to fix, you just sign a piece of paper, but physically destroying or moving our industrial infrastructure and giving away the technology is irreversible. The consequences are catastrophic and not something we can ever recover from. The men that deliberately did that with malice and forethought ruined this country for generations. They are the worst kind of traitors and should be dealt with as such.

38 posted on 02/17/2013 9:15:18 AM PST by Count of Monte Fisto (Republicans are to the Democrats as the Generals are to the Harlem Globetrotters)
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