Capitalism

How to make an economy efficient (cheap), cost of business and chess

One way to make an economy competitive is to make its main "ingredients" cheap.

Low Taxes
Low taxes reduce the cost of produced items and services.

Cheap Labour
Cheap labour reduces the cost of produced items and services, allow s more employment of labour intensive industries.

Cheap Energy
Cheap energy reduces cost of heavy industry, transport and logistics.

Cheap agricultural resources
Cheap agricultural resources reduce the cost of food for people, so ir creates demand for different goods and services.

Cheap mineral resources
Cheap mineral resources reduce the cost of industrial and chemical goods.

Cheap Plastics
Cheap plastics reduces the cost of goods in general, especially consumer goods.


In global competition large companies always look for the most favorable country to run business operations. Usually it's about cheap labour and low taxes. But a country could also be competitive if it reduced the cost of the main "ingredients". Too often base industries like utilities, mining, oil & gas are owned by private companies which try to maximize profits. But by maximizing their profit, they often make whole industries uncompetitive. In some cases, cap the cost of "ingredients" to cost price, could allow many other industries to flourish.
In many cases such a decision would make sense, strategically speaking: a bit like in chess, where it is encouraged to sacrifice low value pieces short term in order to win the game longterm.
Russia did this quite cleverly, where profits from sale of oil is capped at 42 USD/barrel, all excess is going to the sovereign National Wealth Fund which invests in more strategic projects for longterm economic growth.

Survey: Good vs Bad Business?


Recently I am noticing more and more two types of doing business, which I defined as Company A and Company B. The first one is vastly preferred in developing countries, while the second is more and more common in the First World.

Company A

Company B


Provides good local direct and indirect employment with decent wages Outsources labour to cheap third party country or has low-wage local employment
Pays incomes taxes locally Pays low or no income taxes (foreign tax residency or creatively uses tax credits)
Sustainable Relies on state welfare, bailouts
Provides customers with good price/quality value Sells overhyped/overpriced goods or services
Competitive Uncompetitive, operates in monopoly or cartel mode
Average profits and shareholder payouts High profits and shareholders payouts
Develops organically with R&D and improves goods/services Uses R&D money for share buy-backs or other financial schemes



Which type of company do you think is right in your context : 1)as a person and 2) for your country ?