The Price of Prosperity. Why Rich Nations Fail and How to Renew Them Book Review

Todd G. Buchholz

Chapter 1 - Fall in Fertility Rate

Nations fail because they grew rich and fertility rate drops

Nations grow rich and reduce the need for children to work the farms

Without population to sustain armies and economy, countries are conquered easily

This is not to say that Fertility Rate is the sole cause. There are other causes such as over expansion, slave rebellion and etc.

• Gave some evidence from Sparta, Rome and Southern US
• Sparta is great but after conquering nations, they got many slaves and people stopped reproducing
  • Population dropped around 80% over more then 400 years
  • Got conquered by neighbours
• Rome
• Southern US
  • Got rich from slaves
  • Slaves replace need for children to work the farms

Chapter 2 - Globalisation

Countries cannot grow rich without trade

Trade brings in new products but also destroys many traditional businesses such as heartland businesses.

Countries that do not trade (either by force or self imposed) at best stagnate, more likely to decline.

• Trade is still good for country to prosper

Globalisation

• Pros
  • Cheaper goods
  • Higher productivity
  • Possible higher exports
• Cons
  • Made in wherever cheaper
  • Jobs are exported out

Venice outsourced their military to mercenaries but kept their prized industry within the country.

Venice managed to continue being rich but relied on others for the most important thing: defence.

• Merceneries loyalty lies with whoever can pay more
• Ottomans offered merceneries higher pay and the merceneries turned their guns back towards Venice
• Venice raised tax to fight off bidding war but in the end it crippled its economy

US

• Rich feel they are carrying ever heavier load
  • top 10 percent pay over 70 percent of taxes
• Bottom 90 percent fear they will never achieve the middle-class standard of living that even high school dropouts could muster in the 1950s and 1960s

Chapter 3 - Debt

Preindustrial country: debt is bad

Industrialised country: debt is okay, but bankruptcy is bad and carries a stigma

Postindustrialised country: debt and bankruptcy shed their stigma

US is stage 3.

People are more willing to care and take risks with their immediate family (linked to the amount of DNA shared).

Countries tend to be more reckless with borrowing as the future generations are binded but they are not eligible to vote.

Rich countries have higher debt because they can.

Ratio of retiree to worker increases

Gov pad their budget deficit to low interest offered by short term borrowings which tend to have lower interest rates on the yield curve-

• Good for short term but bad for long term as you can lock in low interest rate instead
•  

Moral hazard on bankers as they have less skin in the game.

Govalisation allows

Globalisation allows capital to flow easily and flood markets that cannot absorb the large amount of money, pushing their currency up and hurting their economy

Chapter 4 - The Problem with Work

Rich country youths show the following traits

• Less driving licence
• Less likely to relocate to other cities/states
• Less likely to work when young
• Less likely to study “hard” subjects even if they are more highly paid

Working young teaches different skill

• To know that u will hate doing menial jobs
• Punctuality and etc

People feel entitled to collect welfare.

People who don't work, pay no tax. People who do, feel resentful.

Disability benefit exploited by the masses.

• Claims of back injury and mental illness are becoming big even when most ppl are desk bound.
• Once someone gets these claims of unemployment claim, there is no incentive to go to work.

Retirement/sloth makes people stupid. People tend to be more forgetful.

People who have no ambition and not active tend to have their brains degenerate

Work keeps a country going

If citizens are dependent on welfare, the country will start to lose innovation. Country will have to start increasing tax and discourage the young. Soon it becomes a vicious cycle. The young lack ambition and the country gets less innovative and cannot keep up with competition.

Prosperity and passing time accumulate more bureaucrats

Wars and revolution sweep aside these regulations that retrained free commerce. Protectionism hurts the country.

Country start to enact many certifications and training required for professions that might not even need certification for customer protection. These helps to protect those that are currently hired but not for the new people.

• Eg: Hairdressing and flower arrangement course require longer training than a policeman
• New job seekers need to find time and money to join the industry
• Consumers pay more due to dampened competition

Chapter 5 - Patriotism, Immigration and Grit in the Era of the Selfie

For a rich nation to survive, its national character, culture and share stories need to be past down to the young and new immigrants to prevent globalisation from destroying them

In the past, countries can still use a single religion to rally the people but not now as people are less religious.

Heterogeneous society breeds suspicions and people tend to withdraw from civic life.

Eg, Yugoslavia and Habsburgs. Many district ethnic groups, languages and etc but nothing in common to unite them.

Part 2

Chapter 6 - Alexander and the Great Empire

Having a sense of superiority helps to rally people/ boost morale to your side.

Talk about Alexander the great.

• Taking different actions to unify his empire.
• Minted coin with his face
• Wherever he goes, he follows their culture.
• Married different places royalty.
• Kept the conquered lands royalty safe and in good hands. Treated them well.
• Fought together with his men. Called them companions, almost equal to them. Always the first to charge.
• Hired trusted locals to rule their own part.
• Trained a large amount of local troops as though it is their own.
• “Good leaders and strong nations must figure out new solutions when old solutions fail.”
• He could see solutions that no one could (sometimes solutions are borrowed from history).

Chapter 7 - Ataturk and Turkey

Just talking about Ataturk and the history of Turkey forming and what he did

Chapter 8 - Japan

Conclusion -

To build cultural identity.

• Get immigrants to sign papers at historical sites.
• Same goes for students who want to borrow for study loans.

For social security and benefits.

• Only increase benefits to retirees if economy grows as they tend to benefit more than their grandchildren.
• Increase retirement age when life expectancy and health improves.
• Provide large tax rebates for 2nd kids onwards.

Better laws.

• Give mobility credits for ppl who move out of states to find employment.
• Give bonus for finding jobs before unemployment benefits epire.
• Non hazardous jobs should not be licensed.
• Change disability benefit such that partially disable people can still work instead of retiring.
• Give extra social security benefit for young people who work before 21 years old to encourage them to learn the trade early.

I have posted earlier on my personal blog.

I will add on my personal thoughts and views on what I observe and if it fits with what the author argues.