Thursday, July 06, 2006

Political uncertainty - a money machine

The first priority for developed countries was to maximise their own growth, achieve high levels of prosperity, enviable living standards, high standards of education, etc. Heavy protectionism is typical at this level.

The second priority for the developed world was to trade more openly with others of the same ilk, so that there could be a mutual gain. National champions, tariffs and subsidies became less important, as inclusivity became more important. The EU is one such unit.

What else can the developed countries do to continue growing?

If these were the colonial days, colonial empires would overrun many poor countries. However, those days are long gone, and many of us in the west try to imagine that it didn't happen (through absolving ourselves of the consequences of interference).
Developing countries have been the object of attention from the West for financial gains for a long time. From the old-school mining industry, to the new-school financial markets (sovereign risk). The wealth of political uncertainty that developing countries present is the chowder that feeds volatility in financial markets. Without volatility, markets are boring, traders make very small margins from closing one position and re-hedging another, moving horizontally, etc. The market cannot thrive without volatility and developing countries have it in abundance. Volatility separates the risk loving from the risk averse. It is the sieve that sorts the wheat from the chaff.

I do believe that, within the developed countries alone, avenues for money making (new instruments/derivative products, etc) have almost been exhausted, and due to good macro-economic management, the economies are sound (sound economies do not thrive with volatility). Heavy business regulatory burdens from the respective developed country governments are the only thing that creates some "noise" in that it causes firms to merge or relocate, in an effort to reduce the amount of tax burden, or to take advantage of a loophole in regulation. This is by no means the future for developed countries.

Very soon, investors will be queuing up to invest even in the most unthinkable countries (which I will not mention. I don't want any embassies writing to me). If you are reading this from a poor country, wondering what the future holds for the nation, wondering whether the west will ever help poor nations like it should, take heart in the knowledge that the west will be falling over itself to throw money into developing countries. Why? Not because of benevolence, but because of greed. The desire to make money will take western conglomerates to the doorsteps of the most impoverished in the poor world.
Needless to add, political uncertainty fuels the arms trade, which in itself is big business that involves developing countries.
Ironically, someone else's greed will put food on your table - finally !

"Man has almost constant occasion for the help of his brethren, and it is in
vain for him to expect it from their benevolence only......It is not from the
benevolence of the butcher that we expect our dinner, but from his regard for
his own interests"

- Adam Smith


Blogger Ken said...

:) Quite right. The dollar a day continent can brace itself for a second wave of colonization. Only this time it wont be by the sword and musket rather by dollars and euros.
I dont really see the poorer countries avoiding this, rather I just hope we can find a way of benefitting from it.

Monday, July 10, 2006 4:14:00 pm  

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