This chicken-and-egg dilemma always gets turned upside down when presented by corporate lobby to the naïve 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.