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One of the reasons corporations will only invest in Africa if the investments are projected to be massively profitable is because of the perceived geo-political risk.  

Of course if they weren't so busy extracting huge profits in the first place, the geo-political risk might be less. However that is the point at which corporate planners and financiers throw up their hands and exclaim that ensuring stability isn't their problem.  They deal with countries as they find them and assess the risks accordingly

Hence Singapore gets massive investment even though it is one of the highest cost places in the world to do business.

Complex businesses (as opposed to simple extraction processes) require a diverse skill mix and a more sophisticated regulatory environment (i.e. bribery only gets you so far). It thus requires a diverse middle class and more sophisticated political structure.  

Generals/dictators are really bad at understanding and enabling complex economies to develop. Democracies are much better at facilitating the complex trade-offs between highly differentiated interest groups and skills sets required

Hence, with few exceptions, participative democracies are better than militaristic dictatorships at developing economically.  Conversely, economically underdeveloped states also tend to be underdeveloped politically - i.e. have militaristic/authoritarian command economies.

The myth that dictatorships are more efficient is one of the great myths of the modern age - unless you measure efficiency in terms of killing and imprisoning people.  

Interestingly, one of the things most holding back US economic development at the moment is an increasingly dysfunctional political system dominated by corporates whose individual interests are inimical to the development of their competitors and the economy as a whole.

It will be interesting to see how China's polity develops in the context of an increasingly sophisticated economy. The strains are certainly there.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Jun 24th, 2011 at 07:57:48 AM EST
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