Tuesday, December 9, 2014

Building a Country from Scratch

If I were building a country, and I wanted it to be successful, in the 19th century and before, I would want to make sure it had natural resources – forests or coal or sheltered coastline.

Today, success is more about the institutions and the people that are in them.
As such, the first goal of a country should be to build human capital. This means that education is paramount. Early education needs to be funded, and the universities need to be strong.

You also need these people to be healthy. One thing to focus on would be infant mortality. A successful country will have a longer life span, but a lot of that is just cutting infant mortality. Possibly look at life expectancy at a certain age.

Also we need to make sure that infrastructure and physical capital are built out, but that is harder to quantify. The physical capital needs to go hand in hand with the human capital and the universities (and private R&D) to fund technical innovation. 

All this needs to theoretically take place where markets have low barriers to entry and are open and transparent and free – ie Economically free per the heritage foundation

Thing that gets me though, is the role of institutions. In “Why Nations Fail” Acemoglu and Robinson talk about the role of institutions in creating a successful country. The reason Mexico didn’t succeed with a lot of the starting points the U.S. did was the institutions that we had, like English Common Law.
Also, I would want an independent, rules-based central bank and to issue my own currency. 

And then we wait for Capitalism to fall from its inherent contradictions, and the rise of socialism and the eventual withering away of the state.