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August 6 - August 18, 2017
Perhaps this is because stimulus campaigns are motivated by an impulse to protect people from the free market, and reform campaigns are motivated by a desire to free people to compete in the market.
One standard tactic to look out for is the use of state oil, gas, or electric companies to suppress prices, in a misguided effort to prevent high inflation.
China’s financial dependence on cigarettes perhaps explains why the state tobacco company is allowed to sponsor elementary schools, where its banners proclaim, “Tobacco helps you become talented.”
In the Middle East and North Africa as well as parts of Central Asia, many governments spend more on providing their people with cheap fuel than on schools or healthcare.
Energy subsidies keep fuel prices irrationally cheap, encouraging people to burn too much fuel and spew more of the carbon emissions that contribute to global warming.
Another way to judge how well the state is managing the private sector is to watch for good versus bad privatizations.
most governments in the emerging world are now willing to part only with minority stakes.
India, for example, has adopted a de facto policy of what I can only describe as privatization by malign neglect: The political class can’t bring itself to sell off old state companies, or to reform them either.
This approach—refusing either to privatize or to protect state monopolies—is the worst possible combination for the government’s finances.
Though it is easy to sketch in broad strokes, the connection between economic reform and faster growth is so devilishly complex in the details that when researchers go looking for data supporting the connection, they often don’t find it.
given how many different factors influence growth, no single act of the state will stand out in fancy statistical correlations.
when the state is investing wisely and moving toward creating predictable and stable rules, good thin...
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what “structural reform” often entails is the creation of an efficient legal regime governing the purchase of land to build factories, the lending of capital to finance the construction of those factories, and the hiring and firing of workers to staff them.
Though it is politically incorrect to say so, some cultures seem more eager than others to embrace sensible rules governing land, labor, and capital.
The opposite of a rule-based system is one based on the deals cut between political bosses and their clients, which can be even more complex.
India may be the world’s largest democracy, but it still has a relatively loose respect for the whole idea of following rules.
In assessing the touch of the state, the question to ask is whether the government is interfering more or less.
The basic answer is that Dubai had built an open house in a closed neighborhood.
Many people in the region have a stake in ensuring nothing happens to undermine the safe haven status of Dubai, a place where Taliban rebel leaders, Somali pirates, and Kurdish guerrillas can gather to cut deals or trade guns so long as they keep their heads down and don’t disturb the local peace, as author James Rickards describes the scene in Currency Wars.
But geography is not destiny; the potential advantage of proximity to the United States or China will ebb and flow with the strength of those economies, and many countries on or near major trade routes and rich markets will not take the steps necessary to prosper from their position.
Nations that qualify as geographic sweet spots combine the pure luck of an advantageous location with the good sense to make the most of it
In Dubai the state is unobtrusive, but everything is monitored, often by surveillance camera.
This high-tech and well-financed state presence may help explain why Dubai has so far not been the target of a successful terror plot, although it has disrupted several in recent years.
spot likely winners, I track which countries are doing the most to exploit their location by opening doors to trade and investment with the world and with their neighbors, and to balance growth in the major cities with the provincial regions.
the general perception that we live in an increasingly interconnected global economy no longer holds,
The growth rate of global trade flows has slowed quite abruptly.
this stagnation in global trade may not be just a temporary disruption.
One is a major shift in China,
Another reason is a turn for the worse in geopolitics.
Ten years beyond its 2005 deadline, the Doha round is technically alive but dead in the water.
The old consensus born in good times—that more free trade is better for all countries—has been deeply shaken in the post-crisis slow-growth world.
During hard times, nations often turn inward and bar foreign businesses from competing in their home market.
A nation’s chances of economic success are greatly improved by prowess in manufacturing goods for export, which highlights the importance of location.
Worldwide, flows of goods amount to about $18 trillion a year, significantly greater than flows of both services and capital, which account for about $4 trillion each.
Vietnam is building an old-school manufacturing powerhouse, reminiscent of Japan in the 1960s, and is turning itself into a new geographic sweet spot.
some smaller nations are shifting focus to building regional trading communities and common markets.
the splintering of a continent into faltering and successful regional trade regimes is not that unusual.
Mercosur’s leaders have pursued growth strategies based on heavy populist spending and state intervention, and they have not welcomed free trade.
Pacific Alliance
GEOGRAPHY IS NOT DESTINY
Within a generation the Asian powers used cheap labor to more than make up for the cost of shipping goods all the way from the Pacific to Europe and the United States.
China dredged rivers and harbors to create six of the world’s ten busiest ports, all of them man-made.
Instead of choosing nations with the lowest wages, such as Bolivia or Egypt or Nigeria, manufacturers are choosing countries such as Vietnam, Cambodia, and Bangladesh for a combination of reasons.
Bangladesh is attracting much more textile production than India because it offers fewer bureaucratic hurdles.
“South-South trade.”
Opportunities to carve out new global trade routes, particularly those connecting the South to the South, are therefore numerous.
China seems to understand well the basic rule that a nation makes the most of its location by opening itself to the world and to its neighbors, and by making sure its own provinces participate in the opening.
Encouraging the regional spread of growth has always been part of China’s plan.
No nation is too remote to reconnect to global trade routes,
To make the most of any geographical advantage, leaders also have to bring their own most backward provinces into the global commercial flow,
