Why nations fail?

2014-01-27 17:12

Why nations fail?

Nam Sang-so
“Everything flows, nothing stands still. There is nothing permanent except change. Change is the only constant.” These are the abstract quotes of Greek philosopher Heraclitus, who is known for his doctrine of change being central to the universe.
The world after the 16th century was dominated by European nations. Spain and Portugal in their ocean-cruising eras shared the world but soon they had to concede the hegemony to the sailors of England and Holland and dropped out of the race.
Why, because they remained unchanged.
England, which had first succeeded in the Industrial Revolution and obtained the most industrial power in the 18th and 19th centuries, now stands behind the late starters of Germany and the United States because the country refused to change.
The most notable case of a rise and fall may be that of China. Until the mid-15th century, the country was a technically and culturally advanced nation. Under the Ming Dynasty, China enjoyed a golden age, developing one of the strongest navies in the world along with a rich and prosperous economy.
In the early 20th century, however, China went downhill and was considered an underdeveloped country. Since World War II, however, China has undergone major changes and advanced economically and practically, thus antagonizing the United States thanks to Deng Xiaoping’s reform into a market economy.
Why are some nations rich and others poor, divided by wealth and poverty? Is it culture, or the geography? The answer is “no,” according to James Robinson the author of “Why Nations Fail.” None of these factors is either definitive or destiny.
Otherwise, how can we explain why Botswana has become one of the fastest-growing countries in the world, while other African nations, such as Zimbabwe, the Congo and Sierra Leone are mired in poverty and violence? Robinson conclusively shows that it is manmade political and economic institutions that underlie economic success.
Korea, to take just one of the most fascinating examples, is a remarkably homogeneous nation, yet the people of North Korea are among the poorest on Earth while their brothers and sisters in South Korea are among the richest. The South forged a society that created incentives, rewarded innovation and allowed everyone to participate in economic opportunities. The country kept changing to adapt to the changing world. Sadly, the people of the North have endured decades of famine and political repression, with no end in sight because the country’s leadership does not want to change.
Every living thing has a limited lifecycle. In order to thrive in a changing environment, the living matter relies on the basics of survival of the fittest. The next generation must be somewhat different from the current one by inserting heterogeneous genes into it. Pure blood alone cannot meet the demands of a transforming environment.
So it’s clear, as Heraclitus said in 535 B.C., that diversity or multiculturalism is the answer to survival. China’s rise and fall impresses upon us that a nation’s fate won’t be determined by its economic or technical power alone. The country had lacked variations and yet it seems to still refuse to diversify the people.
South Korea, very fortunately, long ago abandoned any effort to remain a homogeneous nation and welcomes immigrants, following in the footsteps of the U.S. ― the strongest nation not because of its economic or military powers, but its power of diversity.  America won’t fail; nor will South Korea.
The writer is a retired architect. His email address issangsonam@gmail.com

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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