Sunday, December 12, 2010

Uncompetitive Nations

The news is ripe with dozens of countries that are running huge deficits which basically includes just about every country banks will lend money to. I've been reading some statistics about this recently. One says that the US collects $20,000 in taxes per household and spends $30,000. Politicians get elected by creating public sector employment so it is difficult to see how this is going to be solved without a huge amount of pain. The banks in Ireland were recently bailed out and the cost of the bail out was $33,000 for every man, woman and child in the nation of 4.5 million people. Clearly a Darwinian survival of the fittest will weed out some of the less competitive nations over the next few decades. You say it can't happen? 103 of the 195 nations on Earth didn't exist in their current form 50 years ago.

Over a dozen countries emerged after the dissolution of the USSR. A good analogy was that the USSR was like a conglomerate that filed bankruptcy and all the divisions got sold off into separate companies. Going back to the Ireland situation, can a country of 4.5 million people afford many layers of government? Doesn't appear to be a competitive economy of scale working for them. Watch for whole layers of overhead to disappear in countries in the European Union and some of these nations will look more like states.


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