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How to evaluate the economy of a country before you get involved there!

December 18, 2013

In 1776 Adam Smith wrote the Wealth of Nations. The book brought together Capitalists (C), labor unions (LU), government officials (GO) and private entrepreneurs (PE) to interact and develop a system (Rules) how to exploit natural resources using individual skills, social and educated talents within the culture. The wealth of any nation is determined by the set of rules that C people, LU people, GO and PE have created and chose to enforced. Only the United States ($$$$$) started its economic journey in history with a fabulous Constitution. All the other countries on earth just picked up all kind of junk rules as they struggled through their histories (I am not apologizing for my statement about junk rules because my statement is true).

Capitalism describes the relationship between those people who provide capital (bankers, credit holders, wealth inheritors, crooks, etc.), those people who provide labor (workers, unskilled, semi-skilled, skilled), those people who organize the economic system (individuals, groups, governments) and those individuals, committees, families, religions, armed forces or groups that control legally or by force the countries’ natural resources.

How do you measure a nation’s wealth?

Smith did not include the human factor in his great economic theory (I will speak on that at the University of Rome on January 24th). The human factor determines the wealth of a nation more than all the other factors combined because only the human factor is responsible for the values and validity of the set of rules chosen that govern the economy. The simplest way to evaluate the economy of a country is to search Google for a nation’s GDP, GDS, GS, and GDS/GDP and GS/GDP. Each of these rules or ratios will provide you with rich data on the sum total of economic activity in a given country. For example, if the ratio                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         of Gross Sales to Gross Domestic Products is 3/1, you can draw tentative conclusions on costs, prices, unemployment and inefficiency all in one breath!

By the way, I do not think that you will find a respectable study of these ratios to date, so I suggest that PhD candidates get to work on it!

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