The blog provides a left-wing non-partisan perspective on socio-economic issues in Russia and throughout the world. The focus is on qualitative development of national economic systems and ensuring flexibility in economic policies to meet the challenges of the 21st century. Email: leftistobserver@gmail.com

WHAT COMES FIRST: A CHIKEN OR AN EGG?

We are being incessantly convinced by developed countries that their economic progress can be fully attributed to the business-friendly microeconomic environment they have created. But independent economists from emerging economies realize quite well that this is a cunning little lie with detrimental consequences for further economic development of a developing country. They know that these laissez-faire mantras aren’t worth a rotten egg because the developed world’s economic history clearly shows that it was large-scale investments that made their advantages in technologies and trade possible over the last several centuries.

This chicken-and-egg dilemma always gets turned upside down when presented by corporate lobby to the na├»ve public in both developed and emerging countries. These market-charmers do correctly point out the leading role of long-term investments in ensuring economic development, but they place them after the microeconomic practices of individual economic agents. Confusing cause and effect is very typical of modern economics – the macroeconomic stability, so necessary for a business-friendly environment, is claimed to be a by-product of free market.

Unfortunately, most people have not been inquisitive enough to stop this lie from spreading any further. It is sufficient to have a look at what historically brought about free market in order to see that – thanks to massive exploitation of colonies by European countries, slave trade, drug trafficking, legalized piracy and deliberate government spending aimed at encouraging such practices – private free enterprise was able to thrive.

Western superpowers’ methods of enrichment back in the days were far from the ideals of democracy and free market, but that does not stop developed countries from lecturing the emerging economies and even imposing economic policies. Horrible genocide and crimes committed by the Western world for the sake of plundering colonies thus lowering domestic production costs are not included in college books.

In fact, they should. This is exactly what any Economics 101 book should start with. Then it should point out the fact that economic growth and then economic development occur as a result of massive long-term investments (whatever form they might take), which create favorable macroeconomic conditions. It is because of those conditions that microeconomic successes are possible.

Boris Anisimov

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