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I do not think is about legitimacy. It is just pragmatism.

The point is that it is a necessary condition for people to invest in the first place. You can easily observe that countries with stable political, tax and economic conditions receive a bigger share of capital investments, to their benefit (or dare I say the benefit of their people?).

You do not need to preserve capital's rent from all threats neither. Competition is ok (it is even preferable).

But what I am struggling most with your sentence is the implicit notion that capitalism is someone, that it has an aim or a goal ...  just a few steps away from conspiracy theory.

(I know I am being bad faith there.)

'La fin désastreuse a répondu aux moyens indignes' Germain Tillion

by Rom on Tue Mar 20th, 2007 at 04:42:16 AM EST
[ Parent ]
Hmm. Interesting issue.

To what extent is the metaphor accurate? Is the system unified enough to display intent, an aim, a goal? Does the global system have a goal, at least implicitly? Is the shared goal of self-enrichment dominating the system enough to give the whole system an intended goal, which may be different from the actual outcome?

You don't need an explicit conspiracy to have people act in concert ...

by Colman (colman at eurotrib.com) on Tue Mar 20th, 2007 at 04:47:15 AM EST
[ Parent ]
On the other hand, if 18 rich families in the US were able to grease up the politicians enough to get rid of the Estate Tax, what couldn't the likes of Murdoch do?

It is not conspiratorial to assert that there are a few (very few) people who had an almost unimaginable amount of influence on the consensus opinion. And a lot in economics and politics is the consequence of shifts in the consensus opinion.

"It's the statue, man, The Statue."

by Migeru (migeru at eurotrib dot com) on Tue Mar 20th, 2007 at 04:50:37 AM EST
[ Parent ]
There's that at well. The herd instinct is quite strong - in fact, it's pretty much the default whenever you don't pay close attention.
by Colman (colman at eurotrib.com) on Tue Mar 20th, 2007 at 04:54:30 AM EST
[ Parent ]
Any advanced enough political system secretes its own justification. For example capitalism has had Hayek, etc...

Right now the narrative of capitalism, with unstated and stated goal of promoting the commpetion of individual "rational" desires in free markets, is less and less disputed in public discourse. It is considered as the only natural and legitimate mechanism for organising our societies. This wasn't the case 30 years ago, and was quite clearly the result of propaganda on its behalf - "Greed is good" in the 80's for example.

In France, the MEDEF (boss's union) is busy creating and promoting a narrative of "lets reward the risk taking of the entrepreneur" (ignoring the facts that the CEO's of large companies that are in this union bear very little actual risk themselves)...

Un roi sans divertissement est un homme plein de misères

by linca (antonin POINT lucas AROBASE gmail.com) on Tue Mar 20th, 2007 at 05:36:44 AM EST
[ Parent ]
You can easily observe that countries with stable political, tax and economic conditions receive a bigger share of capital investments, to their benefit (or dare I say the benefit of their people?).

No. At best this is a very generous oversimplification. At worst it's simply wrong.

The countries that receive investment are those that promise the highest return on it.

Instability can be a negative factor because it obviously increases risk. However - there's absolute no evidence that directly links investment to stability.

In effect, stability is only one means to an end. As globalisation spreads it's clear that stability isn't required - at least not to the extent of the European model - because returns from developing countries are so high that increased profits more than offset increased risk.

Also, developing countries are easier to 'manage' by force because they lack democratic traditions, and because workers have much lower expectations of representation and democratic effectiveness and a much higher tolerance for sweat-shop working conditions.

When a country's labour costs are less a tenth of what they would be in Europe, businesses can easily tolerate a bit of extra security spending, and perhaps the occasional riot, because the bottom line still looks better at the end of the quarter.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Mar 20th, 2007 at 06:55:43 AM EST
[ Parent ]


In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Mar 20th, 2007 at 07:03:43 AM EST
[ Parent ]
Well, developed economies attract much more investments than developing ones:

Foreign Direct Investment (UNCTAD 2006)

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Tue Mar 20th, 2007 at 08:48:32 AM EST
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Sorry, wrong link!

Here it is: Foreign Direct Investment (UNCTAD 2006)

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Tue Mar 20th, 2007 at 08:55:46 AM EST
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I did not mean to say that there would be more investments coming from developing countries to developed ones than the other way around.

I just meant that stability brings about investment.  I used country, I could have used company, or project or sector or whatever. And whatever the source of the investement (cross-border or domestic).

Now someone will tell me that investment brings stability, and not the opposite. Well, both are probably true.

And yes, stability of the tax / legal framework is not the only factor at play in the investment decision.

'La fin désastreuse a répondu aux moyens indignes' Germain Tillion

by Rom on Tue Mar 20th, 2007 at 10:20:15 AM EST
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