How countries compete
The competitive advantage principle can be applied to countries as well (if you are looking for in-depth information read about comparative advantage which is a more complex theory of international economics).
What makes some countries grow faster than others? Why China was able to achieve such an outstanding development over the last decade? The Harvard Working Knowledge website published an interesting interview with Richard Vietor who wrote a book called “How Countries Compete”.
When asked about what fuels a country’s economic growth he answered:
“Key ingredients (also described in my book’s conclusion) include sound fiscal and monetary policies, secure property rights, high savings and investment, an absence of corruption, and exports that are competitive in enough areas to eventually balance imports.”
Vietor also mentioned that China, India and Singapore are the best positioned countries to compete on our global economy. You can read the complete interview here.
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There is a lot any country could learn from Singapore. However in most western democracies including Australia, people waste so much time arguing who gets what and how much. This is not consistent with aiming for comparative advantage.
Interesting contraditions from Vietor.
- China’s banking system is a bit of an incomprehensible mess rife with fraud and corruption (at least Barron’s thinks so–I’m in no position to know first hand). And what is China’s fiscal policy? Only communist party insiders–not a Harvard prof–know the answer to that
- India is in the bottom half in transparecy.org’s corruption index rankings
- Nobody really knows China’s import/export balance. Guess at this is like guess the finances of your local church. Neither will let you peek at their books–so its all just guess work.
So these countries really don’t have what according to Vietor makes competitive states. So how are they so well positioned to compete globally?
Vietor conveniently doesn’t mention the one overwhelming competitive advantage China and India have: vast armies of near slave labour.
nibletes, I agree with that both those countries will need to surpass some obstacles in order to keep growing and avoid some kind of economical implosion. Even if we consider that, however, I still think that they are in the better position.
Russia is another well positioned country. It also has huge political issues, but this does not remove the premise that it might be one of the fastest growing countries over the next decades.
Regarding the near slave labour, I will need a complete essay to discuss that :), I will try to write it soon.