Remaking the Wealth of the Nations

By Md Shamsul A. Chowdhury

This book has found out the reasons as to why the "wealth of nations" differ from each other? Why the GDP per capita of Canada, and the U.S. were $43,248.5 and $56,115.7 respectively in 2015, whereas Mexico was languishing at $9,005, despite sharing common borders? Why is the per capita of Malawi not identical to Luxembourg or USA? Why the mountains of macro and micro economic studies failed to grow the economy up to expectation? Have the theories of capitalism and communism dissipated into thin air? Should the world think about an alternative option or formula for a better economy?

"Remaking the Wealth of the Nations" has carried out extensive research on different economies, economic theories, ideas, and found out the common causes of economic successes and failures of the economies. Finally, this book has given out appropriate solution through clearly defining and explaining a new formula of "Artificial Productivity" to help the economists, leaders, and policy makers to remake the economies.

• Language: English
• Publisher: Xlibris US
• Release date: Jul 23, 2018
• ISBN: 9781984536297

Md Shamsul A. Chowdhury

Md Shamsul Alam Chowdhury is an MBA from The George Washington University, Washington DC, USA. Mr. Chowdhury obtained his bachelor's degree from Chittagong University, Higher Diploma in Arabic from Dhaka University, and master's degree from National University of Bangladesh. He is an expert on economic development, social entrepreneurship, global security, and foreign policy issues. He has proven leadership ability to monitor and manage political complexity of humanitarian emergencies under the United Nations and has performed the highest level of role of administration and security of the office of a Head of the Government. Excellent qualifications in strategic planning, organizational development, utilization of intelligence, team building, and project implementation are other key strengths of his careers with over 22 years of active Military service. He has served in Bangladesh, Bosnia, Croatia, Liberia, and the United States of America. Mr. Chowdhury is a philanthropist and spends 10% of his income for the education of the children of underprivileged families. Apart from many articles, Mr. Chowdhury is the author of "The Dream of My Life", which was published by Page Publication, New York in 2017. It was a knowledge-based fiction to promote peace and humanity in the world. Remaking the Wealth of the Nations is his 2nd book with modern concepts and theories to help develop the economy of the nations.

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CONTENTS

ARTIFICIAL PRODUCTIVITY

TERMINOLOGY

MONETARY POLICY

LENDING INTEREST RATE

CAPITALISM AND COMMUNISM

COUNTRY ANALYSIS: HIGH-INCOME ECONOMIES

LUXEMBOURG

UNITED STATES OF AMERICA

SWITZERLAND

NORWAY

CANADA

SINGAPORE

JAPAN

SOUTH KOREA

ISRAEL

COUNTRY ANALYSIS: UPPER MIDDLE-INCOME COUNTRIES

MALAYSIA

CHINA

COUNTRY ANALYSIS: LOWER MIDDLE-INCOME COUNTRIES

INDIA

PAKISTAN

BANGLADESH

COUNTRY ANALYSIS: LOW INCOME COUNTRIES

LIBERIA

MALAWI

BURUNDI

ECONOMIC INDICATORS AND THEIR IMPACTS ON ECONOMY

CLASSIFICATION OF COUNTRIES AS PER GNI PER CAPITA (ATLAS METHOD):

EASE OF DOING BUSINESS IN 2018

HUMAN DEVELOPMENT INDEX

EFFECT OF LENDING INTEREST RATE ON ECONOMY

GLOBAL INNOVATION INDEX

REMAKING THE WEALTH OF A NATION

AGGRESSIVE LEADERSHIP:

CORRUPTION FREE ADMINISTRATION:

PRO-PEOPLE BUREAUCRACY:

BUSINESS FRIENDLY MONETARY POLICY:

BETTER EASE OF DOING BUSINESS:

TECHNOLOGY DRIVEN EDUCATION:

INVESTMENT IN R&D:

LOW LENDING INTEREST RATES:

POLITICAL STABILITY:

PRIORITIZING SERVICE AND INDUSTRIAL SECTORS OVER AGRICULTURE:

MINIMUM EXPENDITURE IN DEFENSE:

A MODEL ECONOMY - FORMULA OF ARTIFICIAL PRODUCTIVITY:

GLOBAL LEADERSHIP INDEX CALCULATOR:

CLASSIFICATION OF LEADERSHIP IN ARTIFICIAL PRODUCTIVITY:

WEIGHTAGE CALCULATION METHOD OF

GLOBAL LEADERSHIP INDEX CALCULATOR (TABLE 51):

CALCULATION OF WEIGHTAGE OF A NATIONAL LEADER:

WEIGHTAGE CALCULATION METHOD OF ARTIFICIAL PRODUCTIVITY:

WEIGHTAGE CALCULATION OF A MODEL ECONOMY USING ARTIFICIAL PRODUCTIVITY MATRIX:

POTENTIAL COUNTRY CLASSIFICATION UNDER ARTIFICIAL PRODUCTIVITY:

REMAKING THE WEALTH OF A NATION

USING ARTIFICIAL PRODUCTIVITY FORMULA:

AN EXAMPLE OF REMAKING THE WEALTH OF A NATION USING ARTIFICIAL PRODUCTIVITY FORMULA:

OPTIONS TO TRANSFORM COUNTRY B FROM LOW INCOME

TO LOWER MIDDLE-INCOME COUNTRY:

SUMMARY:

BIBLIOGRAPHY

ARTIFICIAL PRODUCTIVITY

The focus of this book is not just on the economy but also to proffer actionable solutions for nations to help improve the quality of life of their citizenry. The economic contours vary from man to man, family to family, society to society and eventually, country to country. This begs the question: why does that happen? Why is it that the economy is not identical to each other? Not unsurprisingly, there is not one specific answer, and the economists remain divided in their viewpoint; their solutions range from deriving insights from the ancient era to promulgating the economy of individuals and nations.

N. Gregory Mankiw, a Harvard professor of economics, defined economy in very simple terms. He opined that an economy is essentially a group of people dealing with one another as they go about leading their lives. In his book Principles of Microeconomics, he said that the behavior of an economy tends to reflect behavior of individuals who make up the economy. On what basis do these individuals take their decisions? Gregory enlists four overarching principles about individual decision making: 1) People face trade-offs 2); The cost of something is what you give up getting it; 3) Rational people think at the margin; and 4) People respond to incentives (1).

Gregory further explained that, as we go about our lives, many of our decisions end up affecting not just us, but also other people. He outlined another three principles to demonstrate how people interact with each other: 5) Trade can make everyone better off; 6) Markets are usually a good way of organizing economic activity; and 7) Government can sometimes improve market outcomes. The above decisions and interactive principles make up the economy. Furthermore, Gregory lists out three more working principles concerning the economy: 8) A country’s standard of living depends on its ability to produce goods and services; 9) Prices rise when the government prints too much money; and 10) Society faces a short-run trade-off between inflation and unemployment (1).

We will consider the aforementioned ten principles of micro economies, whenever needed, during the course of our analytical discussion. We will gradually examine as to how far the economy of a nation, society or individual depends on the above principles. Are there any other indicators that have a profound impact on the outcome of the economy in the modern world? We will primarily focus on the ways in which an economy grows. Is it possible for anyone to influence or control the growth of an economy?

We all have a general idea about the growth of humans, plants, economy and technology. In biological parlance, the evolution of human growth entails from a one celled zygote to an adult human being. The different stages of human growth encompass physical, social, emotion and cognitive developments. The growth stages are interrelated and assume great significance for the future of every human being. The performance of an adult human is largely predicated on the way they are groomed up right from their infancy. Here are the six growth stages (or development of physical growth) of a human being: 1) Infant; 2) Toddler; 3) Pre-School; 4) School; 5) Adolescent; and 6) Adulthood (2).

Infant is defined as a child under the age of one. An infant totally depends on others to survive especially, on his/her mother. It signifies a critical stage of human growth because many important developmental progressions occur during this time. It is at this phase that the baby begins to recognize and interact with others. They attempt to understand, express themselves and try to acquire language skills, crawl and pull-up to develop motor skills.

Toddler phase occurs between the ages of 1 to 3 years. The baby begins to walk unsteadily, develop conversational skills and start solving problems, before they eventually acquire basic social skills. The most important aspect of human development occurs during this phase because the baby tries to become gradually independent in this phase. Meanwhile the pre-schooling stage can be defined between the ages of 4 to 5. The baby focuses on expanding attention and practicing discipline. So, that’s how a human baby grows in a nutshell. The growth phase is identical for trees, plants, animals, technology, social revolution, and so forth (3).

Let’s now examine the differences between natural growth and artificial growth. Why is artificial growth necessary to complement natural growth? How does it help a human baby acquire the requisite qualities to become a demanding human capital in future? How can he/she become a dominating figure in the society or a country at large through artificial growth and contribute more significantly than others? In this chapter, we will carry out an analysis to answer these questions and find out as to why some people are forced to reconcile with inferior qualities due to the lack of requisite facilities or a planned approach to the ideal development of a human being.

What is natural growth? Natural growth refers to the normal increase or growth of living being without outside support or care. Let’s take the example of a sapling in a deep forest. The sapling grows naturally without receiving any care from others. We can also consider the example of a forest animal. The baby animal grows without the support from others, except their parents.

Similarly, we can define the natural growth of a human being. Let’s consider the instance of a baby that is born in a developing country i.e. Bangladesh, Sierra Leone or India. How do the babies of an underprivileged family grow? As it turns out, they are born and grow in a normal way. In such countries, most parents are often unable to provide their children with adequate nutrition, healthcare, education, clothing, or shelter due to financial constraints. These are the basic necessities for a baby to grow up healthily as a good human capital. They are born, grown up and get aged without deriving any meaningful support and care from their illiterate and poor parents. Ultimately, most of them are impelled to follow the footsteps of their parents in earning their living as a daily labor, rickshaw puller, farmer, machine operator or fisherman.

It goes without saying that their parents can’t send them to good schools, colleges and universities primarily due to poverty. In addition, they cannot make a plan for their child’s future. As a result, these children end up growing haphazardly and which then affects their ability to contribute to a country. In other words, they fail to grow as a demanding human capital to meet the global challenges. They continue to suffer like their parents and remain under the poverty line. This is an example of natural growth.

On the other hand, babies born in well-to-do families are provided with the best possible nutrition for their physical growth, better healthcare, good quality education, good nursing, healthy living conditions, and the best possible environment. They study in better schools, colleges and universities. They belong to privileged families and their parents have a plan for their growth and future. Inevitably, they end up growing as a highly demanding human capital and contribute a lot to their society and the country at large. We will term this example as artificial productivity because the babies are complemented with additional care and facilities from their parents and society.

Let’s take the example of Ivanka Marie Trump. She was born in Manhattan, New York to the Czech – American Model Ivana Marie and American Real Estate Mogul Donald John Trump, who is currently the country’s president. She was born at a Manhattan elite family and grown under a highly caring atmosphere. She studied in Chapin School in Manhattan, Choate Rosemary Hall in Wallingford, Connecticut, Georgetown University and subsequently went to the business school of University of Pennsylvania. Her rich parents and associates had a good, sustainable plan for her growth. Ultimately, she emerged into an overwhelmingly successful woman in modern world. This is a fine example of artificial growth or productivity of a human being.

Now let’s take the example of a baby of a machine operator of Michigan with a salary of $27,603 - $36,457. What are the growth prospects of such a baby? How do the parents ensure better education and care for their children? How do they even run their underprivileged family with very low income? How do they plan for their babies in future? How can their parents ensure proper nutrition, education, accommodation and healthcare for their babies to grow as a good, productive human capital? Needless to say, the situation is still better in a democratic, high-income country such as the USA.

What about the underprivileged children of developing countries like Ethiopia, Ghana or Liberia? Most of them are born in abject poverty and end up remaining poor along with their parents. These poor parents can’t formulate a good plan or policy to foster their children’s future primarily owing to the following reasons: 1) Lack of education 2) Lack of adequate knowledge 3) No ambition 4) Poverty and 5) Inadequate resources to make a plan to nurture their children etc.

However, there are examples that many of these impecunious children have performed extremely well in their life with their aggressive posture, hard-work, innovation, self-driven implementation of their plan, and established themselves as highly demanding human capital in the world. We can cite the example of Henry Ford, Walt Disney, Ralph Lauren, Steve Jobs, Richard Branson, John Paul DeJoria, Oprah Winfrey, J.K. Rowling, Daymond John, Chris Gardner and many more.

For example, Henry Ford was a farm boy who had brought revolution into the transportation industry of the USA. He was a self-taught watch repairman who managed to build a sprawling Ford empire. Ford is an exception as he displayed an aggressive character and innovation which set him apart from other farm boys. So, the lesson we can learn from his life is that it is possible for a farm boy to be the emperor of a massive transportation company like Ford. Another genius example is Walt Disney. Walt was also raised in a farm. He used to earn his livelihood by drawing pictures for his neighbors. He went through the phase of joblessness when no one was even willing to consider hiring him. Today, Walt Disney is the paragon of success all over the world.

Similarly, Ralph Lauren was born and grown up in a family where his father was a house painter. While he used to sell ties to his class-mates to earn some much-needed cash, he was ambitious enough to be a millionaire. He gradually catapulted into the wealth and fame which he commands today.

The story of Apple Founder Steve Jobs is no less inspirational. Having been abandoned for adoption by his biological parents, he had to drop out of college due to heightened poverty. Jobs actually lived on free meals offered by a Hare Krishna temple. He used to return Coke bottles for money. Yet, Steve Jobs is a house hold name today and someone who ignites the minds of millions of young, impressionable young adults who are raring to make it big. Similarly, billionaire John Paul used to sell newspapers as a nine-year-old child to support his family. He worked hard and went on to launch the Paul Mitchell line of hair products with a loan of $700. We all know the success story of Paul Mitchell today.

Oprah Winfrey was born to a housemaid and a coalminer. Owing to poverty, she used to wear dresses made out of potato sacks and was even molested by her relatives. Now, Oprah is one of the most famous TV personalities in the world. In a similar story, Daymond John was a black boy who used to sell popular wool hats at half the market price. He is now one of the most influential motivational speakers in America. Chris Gardner is another story of the rags to riches phenomenon. He was physically abused by his stepfather as a child and grew up in a foster home. Exhibiting great resilience and tenacity, he worked his way up to become the CEO of his own stockbrokerage firm, Gardner Rich & Co.

These personalities have exemplified the fact that although it is not possible to reach the pinnacle of wealth and fame with an indigent background, traits like aggressiveness, tenacity, confidence and hard work can indeed help them accomplish their goal at the end. While these examples can certainly be cited to motivate and inspire children of underprivileged families, they can’t be considered as general guidelines for the successes of every human being.

Some of the poor parents, take the above historic lessons seriously, and try to transform their children into success stories like Steve Jobs in the future. They work harder to be able to afford their children’s healthcare, education and future. These poor parents sometimes borrow ideas from financially solvent parents in order to groom and grow their children as demanding human capital.

They want to know from their wealthy neighbors as to how they can educate their underprivileged children and convert them into better human beings for a better and financially solvent life. On very rare occasions, these wealthy families give them good and doable advice. Some good neighbors do give out helpful advises for their children taking inspiration from the above-mentioned success stories, but it is very difficult to implement them because many poor parents can’t even afford to give their children three square meals a day. Consequently, most of these underprivileged children become a social burden rather than being a capital in their adulthood. In most cases, they follow the footsteps of their low-income parents due to absence of a workable policy and the required facilities.

As mentioned above, the focus of our current analysis is not human growth per se, but the economy. We have cited the above examples to juxtapose between the economy of a nation and an individual human being. The growth of an economy and human beings is identical. To grow into a successful human being, parents have to take care of their children at all stages of life - from their infancy through adulthood, otherwise the children might get derailed or even die at any stage.

Well-meaning, educated parents create a good environment to help their children to imbibe ethics, values, respect, honesty, and patriotism etc. at the pre-schooling stage of their life. These capable parents send them to good schools for better education; provide them with adequate shelter, healthy food, and best possible healthcare to make them into a highly demanding human capital in a global competitive marketplace. The poor but ambitious parents at least counsel and motivate their children, illuminate their pathway so that they can be transformed into a demanding human capital through hard-work, education, and knowledge.

The growth of an economy bears great resemblance to the growth of a human being. Much like their well-meaning counterparts (parents), knowledge-based leaders and policy makers also need to take care of an economy from their infancy stage, otherwise the economic environment might end up getting spoiled. Generally, these human beings are greedy specially in the developing countries and most of them prioritize personal interest over the common or national interest.

National leaders must select their decision-making circle based on the fact that the future of an economy depends on these decision makers. These powerful people must have the requisite knowledge, be dynamic, honest and ethics driven, and must be able to prioritize national interest over their personal interests so that they can become good parents (decision making circle) to grow their respective countries’ economy as a high or upper middle-income economy. If the decision-making circle is dishonest, ignorant, and careless, then that economy will never grow possibly beyond the low or lower middle-income level.

National decision makers and modern economists must follow some formula, economic theories or guidelines right from the economic stage of infancy so that the economy is better guided to achieve its goal. The million-dollar question (no pun intended!) is: which guideline or formula should the national leaders or national economists follow?

There are thousands of complex economic theories and guidelines in the world; which ones should they be following? Majority of economists are following the existing formulas but are still falling short of their economic goals. So, what are they doing wrong despite having good intentions to grow their economy? Is it the case that existing economic theories and formulas have reached their saturation point and are no longer valid for the highly competitive modern world?

To be able to answer these questions honestly, we need to undertake well-calibrated discussions as to how and why the economies of different nations differ from each other? We toned to find out whether invisible hands have any decisive role on the outcome of a country’s economy. We also need to carefully analyze why is it that the wealth of nations differs from each other? Is the wealth of a nation a natural phenomenon, or can man-made interventions make a difference?

The essence of this study is to ascertain why economy differs from one country to another. Why was the GDP per capita of Canada and the US at $43,248.5 and $56,115.7 respectively, in 2015, whereas Mexico was languishing at $9,005, despite sharing common borders? Do these boundaries make any economic difference at all?

Is there any invisible magic behind the differences of national economies? Is there any influence of powerful yet invisible hands? Have the theories of capitalism and communism dissipated into thin air? Why is it that despite mountains of macro and micro economic studies, to the economy has not grown up to expectation? Why is life becoming increasingly uncomfortable for most people in the modern world?

To find out appropriate solutions for the aforementioned ambiguities, we shall carry out extensive research on some high-income, middle-income and low-income countries in the successive chapters. We will find out how and why some countries with less manpower and no natural wealth is doing better (economically) than others. We will finally bring out the solution and make formulas to help countries grow their economy and present a better and prosperous life for their citizenry.

Let’s first analyze the differences of the GDP per capita of some of the countries as illustrated in Table 1:

Chart/Table 1: GDP per Capita of Some Selected Countries from 1960 - 2016 (Source: (4)

From the above table, it can be inferred that the growth of GDP per capita is not identical to each other. For example, the GDP growth of Korea Republic is 174 times in 2016 as compared to 1960. The GDP growth of Singapore and Hong Kong is more than 100 times in 2016 than what it was in 1960. Similarly, China’s growth rate is more than 90 times in 2016 than 1960. All these countries, except China, transformed their economies from low or lower-middle income (1960) to high-income countries in 2016.

China is already the 2nd largest economy globally. China has also transformed its economy to an upper middle-income country and is on its way to becoming a high-income country. On the other hand, the GDP per capita of countries like Malawi and Burundi has grown only 6.68 and 4.06 times, respectively in 2016 than 1960.

The GDP per Capita of Bangladesh, China, India and Pakistan was $88.7, $89.5, $81.5 and $82.5 in 1960, which increased to $1,358.8, $8,123.2, $1,709.4 and $1,468.2 respectively in 2016. Similarly, the GDP per Capita growth of Bangladesh rose from 1960 to 2016 is 15.32 times, whereas this growth was 90.76 times for China, 21.03 times for India, and 17.80 times for Pakistan. We have to accept the fact that the GDP growth has not occurred naturally but is predicated on the policies of the government along with their implementation mechanism and efficiency.

Let’s now take a hypothesized formula to best describe the resultant economic growth of a country i.e. G = H + P. Here G = GDP per Capita, H = Human Capital (natural growth capability of a country), and P = Policy of the government for economic growth. The type, quality, effectiveness and efficiency of H of a country largely depend on the P. Here, H is constant for all the countries because all human beings are largely created equal in terms of their intellectual capacity.

So, P actually yields the difference from man to man, society to society and country to country and not a natural phenomenon. P is the outcome of any government’s policy decision. It is actually the main catalyst of economic growth, which totally depends on the government, its public and economic policy, and implementation mechanism.

In the above example, if the government’s public and monetary policy, and their implementation mechanism, would have been similar to Bangladesh, the GDP per Capita of Bangladesh, China, India and Pakistan should have been $1358.8, $1371.06, $1,248.50 and $1263.82 in relation to 1960 because it was almost identical in 1960. On the other hand, if this was similar to China, the GDP per capita of these countries could have been $8050.59 (Bangladesh), $8123.2 (China), $7,397.10 (India), and $7,487.7 (Pakistan) respectively in 2016.

In reality, the GDP per capita of these countries were $1,358.8, $8,123.2, $1,709.4 and $1,468.2 in 2016. So, why is there such a massive difference between the GDP per capita of these close neighbors in 2016 than compared to 1960s? Is capitalism or socialism responsible for the differences? Is it the invisible hand which has caused such discrepancies?

Or, is it just because of the territorial boundary of a country or due to belongingness to a different government? Bangladesh, India, China and Pakistan are the close door neighbors to each other. Logically, they should have a similar per capita income in 2016 (identical to 1960s) but as it turns out, the per capita income of China is much higher than this trio.

The per capita income of Bangladesh was better than India and Pakistan in 1960s, but it was reversed in 2016. This difference is only attributed to the P, which has made the ultimate difference from 1960 to 2016. Now we should define this most important factor of an economy – as P.

P is the singular most dominating factor of an economy. P = Public Policy + Monetary Policy + Fiscal Policy + Implementation Mechanism. Public policy includes the forms of government, its political ideology and agenda for its citizens. More specifically, the monetary policy includes the Central Bank’s policy to support the Government’s political agenda, monitoring and changing the interest rates with a view to stimulate economy, increasing employment opportunities, and controlling inflation. It also shapes up the fiscal policy to support research and development, innovation, and entrepreneurship so as to support the private sector to make the market more attractive to international buyers and investors.

Implementation mechanism includes the role and ideology of political leadership, governance, bureaucracy, professionalism, corruption perception, democracy, human development, investment opportunity, and rule of law, etc.

Now, what exactly is meant by the natural growth of an economy? What’s the rationale behind the artificial growth of an economy? What is natural productivity, and how is it different from artificial productivity? Notably, there is no definition of natural growth and artificial growth of an economy. Therefore, we will define Artificial Productivity based on the above analysis.

Artificial Productivity is a new terminology for our concept of modern economy to help flourish the economy in the modern world. In the above analysis, although P is the government’s policy and its implementation mechanism, Artificial Productivity is the resultant force of ‘P". Artificial productivity is the sense to the effect that the actual productivity of a nation depends on something else, which is beyond the gift of nature (H). The greater the resultant force or Artificial Productivity, the better it is for the economy.

It must be remembered that economy is neither automatic nor robotic. It is the quality and efficiency of the human beings which ultimately drives an economy. Let’s see how the resultant force of artificial productivity influences the economic growth of a nation:

chart%202.tif

Chart/Table 2: Resultant Force of Artificial Productivity

In the aforementioned table, the horizontal line AB denotes the natural productivity of an economy, which is considered constant as discussed in the previous paragraph. Natural growth is the outcome of natural productivity. It can be defined as the production (natural resources, products and services) which are gifted by nature and produced by humans with no acquired knowledge, except that which is naturally inherited i.e. H in the previous formula. The workforce of natural productivity is illiterate and has no idea about technology or global development. The workforce of natural productivity has no ambition, and they generally live off the ground like primitive humans.

On the other hand, artificial productivity represents the vertical line i.e. AC in the aforementioned table. It is the result of artificial productivity. This artificial productivity is driven by a knowledge-based and highly efficient workforce. They are educated, science driven, and world changers. Artificial productivity workforce is highly ambitious, motivated and competitive. They want to maximize their achievement and make no qualms about being on top of the economy. Here, AC is the desired economic line of this force. If all the economic indicators remain favorable, the artificial growth would always have been along the AC line.

In the above table, there are other lines as well i.e. AD, AD1 and AD2. These lines are the resultant force between the natural and artificial productivity of an economy. The strength and environment of different economic indicators