Existential question

A vacation is a good time to ponder and this one in Canary Islands (a Spanish territory that’s nearly Moroccan, although only by geographic proximity) is no different. The difference however is that this time what spurred my thinking was the location itself.

I always had this assumption in my mind that developed economies are indeed developed because of the work ethic and enterprise of their people supported by decent (doesn’t have to be totally devoid of corruption as Italy shows us is the case) governance, preferably of the democratic kind.

However, having looked at the attitude of staff and the level of service at what’s a 4-star resort I’m staying in, it made me rethink my assumption. I’m not saying the service here was terrible. But it was at a level achievable by even a comparable resort in a developing economy, at probably one-third the price.

So, what drove developed countries like Spain or Italy to their current level of development? I am hardly surprised why the US, and to some extent, UK and Germany are among the most developed nations.

US has a work ethic second to none, people work hard (and play hard), and a sizeable proportion of the population is enterprising and risk-taking who think and do big (on which the rest of the population, and probably the rest of the world, free-rides). This article is a great example that exhibits how the US ecosystem is geared towards dreaming up great ideas and bringing them to life.

Other countries such as UK probably can attribute some of the success to the Empire that helped kick start an economy which was followed by the subsequent era of legendary engineering.

What propelled other countries into becoming a developed country and what can other countries like India learn from their journey? (I’m limiting myself to democracies here – I’m least interested in how autocracies can reinvent themselves.)

If you draw parallels from business looking at what makes a company successful and apply it to nations, it’s primarily down to resources: people (right amount of rightly qualified people) and natural resources such as land, location, minerals, gas etc.

This may explain why a country like India is where it is. There is a serious mismatch between the available natural resources and population size. Now if you add other extraneous factors such as governance, it only makes the situation worse. This doesn’t however seem (I say “seem” because I am no expert on the Spanish economy) to explain why, for instance, Spain is more prosperous than India. I need to do more research on this topic.

Whatever defined the journey so far, students of competitive advantage will remind you that it is equally important to sustain the competitive advantage to remain successful. So, irrespective of how the world arrived at its current economic state, are we already seeing the beginning of a new equilibrium? Countries that got a head start for various reasons are beginning to see time catch up? Is it a wake up call? If so, we should be thankful to the bankers and bureaucrats who brought on the financial crisis.

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