Economics

The power of free market

Milton Friedman: The Power of the Market (Free To Choose – 1980) vol.1

America’s freedom and prosperity derive from the combination of the idea of human liberty in America’s Declaration of Independence with the idea of economic freedom in Adam Smith’s Wealth of Nations. Friedman explains how markets and voluntary exchange organize activity and enable people to improve their lives. He also explains the price system. Friedman visits Hong Kong, U.S. and Scotland.

Free To Choose: The Original 1980 TV Series
Free To Choose® is the ground-breaking PBS television series featuring Milton Friedman, Nobel Prize-winning economist. These programs, filmed on location around the world, have helped millions of people understand the close relationship between the ideas of human freedom and economic freedom. The interaction between those ideas has created in the U.S. the richest and freest society the world has ever known. Milton Friedman sees this success threatened by the tendency in the last few decades to assume that government intervention is the answer to all problems. In these programs, which first aired on January 11, 1980, Dr. Friedman focuses on basic principles. How do markets work? Why has socialism failed? Can government help economic development? The 1980 version consists of 10 one-hour programs.

Formarea pietei libere & criza financiară

Notițe de lectură  despre formarea pieței libere.
George Friedman  – “Următorul deceniu: de unde venim … și încotro ne îndreptăm” (2011) : Capitolul 3. Criza financiară și renașterea statului

Piaţa liberă modernă este o invenţie a statului, iar regulile sale nu sunt impuse natural, ci sunt rezultatul aranjamentelor politice. Motivul pentru care am ajuns la această concluzie este că fundamentul practic al economiei moderne este corporaţia, iar corporaţia este o născocire care a devenit posibilă datorită statului modern. Corporaţia este o invenţie extraordinară. Creează o entitate despre care legea spune că este răspunzătoare pentru datoriile unei afaceri. Persoanele care deţin afacerea, fie că sunt proprietari unici, fie că vorbim despre un număr mare de parteneri, nu sunt personal răspunzătoare de acele cheltuieli. Ele nu se expun pierderii unei sume mai mari decât investiţia iniţială. În acest fel, legea şi statul mută riscul de la îndatoraţi la creditori. Dacă afacerea eşuează, creditorii trag ponoasele. Nu exista aşa ceva înainte de naşterea „companiilor coloniale“ în secolul al XVII-lea. Înainte de acea vreme, dacă deţineai o afacere, erai răspunzător pentru fiecare parte a ei. Fără această inovaţie, nu ar fi existat piaţa de acţiuni aşa cum o cunoaştem noi astăzi şi nimeni nu ar fi investit în firme start-up şi în micii întreprinzători.

Pretutindeni în lume, criza din 2008 a redefinit graniţele dintre corporaţie şi stat, reducând autonomia pieţei şi puterea elitei financiare, ceea ce a avut un impact minimal asupra Chinei şi Rusiei, unde sistemul era deja puternic orientat spre stat. A avut un oarecare efect în Europa, unde puterea statală a fost întotdeauna mai puternică decât în SUA. A avut un efect substanţial în Statele Unite, unde piaţa şi elita financiară dominaseră încă din timpul lui Reagan. A aprins în acelaşi timp şi o dispută politică între stânga şi dreapta asupra justificării acestei modificări. În Statele Unite, în special, limitele sunt în continuă schimbare, iar disputa se poartă tot timpul în termeni morali. În ciuda fluctuaţiilor, întărirea statului va fi una dintre caracteristicile definitorii ale următorului deceniu, la nivel global.

Cel mai semnificativ efect al crizei din 2008 se va face simţit la nivel geopolitic şi politic, nu economic. Criza financiară din 2008 a demonstrat importanţa independenţei naţionale. O ţară care nu îşi controla propriul sistem financiar sau propria monedă era foarte vulnerabilă în faţa acţiunilor altor ţări. Această conştientizare a făcut ca anumite structuri precum Uniunea Europeană să nu mai fie la fel de bine privite ca înainte. În următorul deceniu, principalul curent nu va mai fi unul de limitare a suveranităţii economice, ci de creştere a naţionalismului economic.

Why states fail and how to rebuild them ?!

Reading of the day -> The Economist: Why states fail and how to rebuild them
What we can learn from countries that failed to build themselves?!

failed-state-001_

– Few things matter more than fixing failed states. Broadly defined, state failure provides “a general explanation for why poor countries are poor”. Life in a failed or failing state is short and harsh.

– Lawless regions, such as the badlands of Pakistan and Yemen, act as havens for terrorists.[…] In the most extreme form of state failure, in places like Somalia, the central government does not even control the capital city. In milder forms, as in Nigeria, the state is far from collapse but highly dysfunctional and unable to control all of its territory. Or, as in North Korea today or China under Mao Zedong, it controls all of its territory but governs in a way that makes everyone but a tiny elite much worse off.

– The key to understanding state failure is “institutions, institutions, institutions”.

– States are not wretched and unstable because of geography—if so, how to explain the success of landlocked Botswana? Nor is culture the main culprit: if so, South Koreans would not be more than 20 times richer than North Koreans. Some societies have “inclusive institutions that foster economic growth”; others have “extractive institutions that hamper it”.

The world’s newest country, South Sudan has received billions of dollars of aid and the advice of swarms of consultants since seceding from Sudan in 2011, but has failed to build any institutions worthy of the name. South Sudan failed to build institutions that transcended tribal loyalties or curbed the power of warlords. There are plenty of government buildings, including state ministries of education, culture and health. But none of them does much. Nowhere in South Sudan does the state do what it is supposed to.

The fighting becomes tribal because warlords recruit by stirring up ethnic tension so that their kinsmen will rally to them. This creates a vicious circle. Lacking protection from other institutions, people seek it from their own tribe. Rather than demand evenhanded government, they back tribal leaders, knowing that they will steal and hoping they will share the spoils with their kin.

– “The politics of the vast majority of societies throughout history has led, and still leads today, to extractive institutions.” These tend to last because they give rulers the resources to pay armies, bribe judges and rig elections to stay in power. These rulers adopt bad policies not because they are ignorant of good ones but on purpose. Letting your relatives embezzle is bad for the nation but great for your family finances.

– But failed states are not doomed to stay that way. Even states that have collapsed completely can be rebuilt. Liberia and Sierra Leone were stalked by drug-addled child soldiers a decade and a half ago; now both are reasonably calm. The key is nearly always better leadership: think of how China changed after Mao died. Many bad rulers continue deliberately to adopt bad policies, but they can be—and often are—replaced with better ones.

Afghanistan case. Afghanistan’s president since 2014, Mr Ghani is a former academic and author of a book called “Fixing Failed States”. His TED talk on fixing broken states has been viewed 750,000 times. Now he is trying to put his own theories into practice.

World Bank in Moldova – The key constraints to private sector development

World Bank study outlines key constraints to private sector development in Moldova

Interview with Melissa Rekas

http://cdnapisec.kaltura.com/index.php/extwidget/openGraph/wid/0_o74eg8rb

Abdoulaye Seck, World Bank Country Manager for Moldova

”We are delighted to be strengthening our partnership with the Ministry of Economy and Minister Lazar on the very important agenda of improving the business environment. Moldova’s small market and lack of natural resources call for openness, smart business regulations and efficient trade policies and practices. These have the potential to help Moldova capitalize on its comparative advantages and successfully change its economic paradigm to one of export-driven growth.”

The analysis identifies five most pressing problems in the business environment that are adversely affecting companies’ productivity and competitiveness. These are: customs administration; tax administration; business regulation, consisting of licenses, authorizations, permits, and inspections; the competition framework; and access to finance

Life satisfaction and GDP? sau Aduc banii fericirea?

Cum influenţează banii fericirea? Influenţează creşterea economică sau un PIB mai mare fericirea?

Higher GDP, higher growth give us happines?

Life satisfaction

Odată ce ridici oamenii de sub nivelul sărăcii, aceasta îi face fericiţi.

Odată ce sunt bogaţi, mai bogaţi nu are acelaşi efect.

Lifting people out of poverty, clearly makes the people happy.

When you already rich, a little more doesn’t make you happy so much.