Monday, March 30, 2009

Welcome to the ultimate in banana republics! (via Reddit)

Written by a former chief economist at IMF.

"Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon — correctly, in most cases — that their political connections will allow them to push onto the government any substantial problems that arise."

(emphasis mine)

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