An excellent review of what drives economic growth
Posted by Charles II on February 22, 2013
Michael Pettis has a fascinating post titled “A brief history of the Chinese growth model.” But where China has succeeded, it has been by copying the early American growth model (including, one might add to Pettis’s piece, generous use of slavery or near-slavery).
If you want to know why we became a rich nation and have subsequently faltered, this article is a great place to start. I would argue that as to the latter, we have both failed to protect our infant industries but, more important, have failed to get capital to them in an effective fashion. Our venture capital system provides capital, but at extortionate rates. There is tremendous dishonesty and even corruption in start-ups. Government funding is limited, wasting entrepreneurial time on writing lots of small applications, often ends up going to big corporations rather than start-up companies, and is sometimes wasted in ways that should involve consequences to the entrepreneurs that lie. Our banking system is completely ineffectual for start-ups.
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