JRGEE, see my notes 8607, 8612 and 8617 for some of the flavor of what's wrong here. I think I can sum it up by saying that these economies, and I mean all of them are a very long way from what you know of to be economies of competition where people make decisions based on quality, quantity and price. Those conditions are only true in North America (above the Mexican border), Western Europe and Australia-New Zeland. EVERYWHERE else, where 4/5 of the world's people live, economic goods and services, from products to capital are allocated based on who knows who and who pays how much. What you think of as the good-old-boys network doesn't even come close to describing what goes on here. Sometimes the distortions are done in the name of preserving culture (Japan is notorious for this one.) Other times, the insidious culture of naked graft and payoff for everything has an ancient history. Needless to say, when capital is invested based on firm and bank officials who get large cuts of the loaned funds (this is the Korean story right now,) the money is not guaranteed to firms with the best ability to pay off their loans, and there will be less productive assets with which to generate downstream cash flows anyway. Enough preaching. The road to truly open market economies will be a long one for this part of the world.
jess. |
