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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
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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
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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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