In many of them,
there are no credit or capital markets to speak of. The government
doesn't borrow from savers through the marketplace - but
internationally, often from multilaterals.
Outlandish default rates result in vertiginously high real interest
rates. Inter-corporate lending, barter, and cash transactions
substitute for bank credit, corporate bonds, or equity flotations. As a
result, the private sector's financial leverage is minuscule. In the
rich West $1 in equity generates $3-5 in debt for a total investment of
$4-6. In the developing world, $1 of tax-evaded equity generates
nothing. The state has to pick up the slack.
Growth and employment are public goods and developing countries are in
a perpetual state of systemic and multiple market failures.
Rather than lend to businesses or households - banks thrive on
arbitrage. Investment horizons are limited. Should the state refrain
from stepping in to fill up the gap - these countries are doomed to
inexorable decline.
The Distributive Justice of the Market
By: Dr. Sam Vaknin
Also published by United Press International (UPI)
Also Read
The Principal-Agent Conundrum
The Green-Eyed Capitalist
The Misconception of Scarcity
The public outcry against executive pay and compensation followed
disclosures of insider trading, double dealing, and outright fraud.
Pages:
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126