Wednesday, August 27, 2008

Basket Case Countries

I'm starting a list of basket case countries. These are countries with economy going to hell, because of mismanagement. Surprisingly, many of them have a lot of natural resources, or great climate suitable for modern agriculture, or both. This list is by no means complete, new candidates are welcome.

Of course, all countries are different. Some basket cases in the list have people dying of famine, when others don't. But in all cases economic situation is bad and becoming worse.

Why compile this list? Two reasons. First of all, these are countries where you don't invest. Second, sometimes government can change and new one bring some sensible changes. If you can catch such a moment, you can make a killing. You can also short candidate countries with hope that they develop into basket cases.

Mismanagement can be of two types:
Type 1: good intentions leading to hell
Type 2: government intentionally makes population poor, it's easier to suppress poor people.
Corruption is high in both cases. Some people can say that there is no corruption in North Korea, I disagree. Corruption by power is even worse than corruption by money and results are worse as well.

Type 1 is usually easier to change. Sometimes government understands its own mistakes, or it can be replaced peacefully or with minimal destruction. Type 2 is usually created by people who would try to keep power no matter what. Changes are possible with type 2 as well, China being the most famous example.

Basket cases:

Zimbabwe. That's the saddest story here. Ten years ago this country fed itself and about another population of the same size. Now it needs food help from international organizations. Political situation is well known: type 2 mismanagement.
North Korea. I don't think comment is needed. Type 2.
Iran. Type 1. Or 1.5 (both 1 and 2).
Turkmenistan. Type 2. Lots of natural gas and oil, spent on idiotic projects. People live at about average African level.
Uzbekistan. Much better living conditions than in neighboring Turkmenistan, but government is really bad. Type 2.
Sudan. Type 2.
Cuba. Type 2.
Belarus. Type 1.5 (Lukashenka might even want the best for his people, although I doubt it).
Syria. Type 2.
Venezuela. I think type 2, but somebody might make a case that Chavez is really concerned with well-being of his compatriots.


Bolivia. It's definitely type 1 and might escape the trap, although serious magic is required.
Argentina. Unless tax and spend government is replaced, it will be basket case. Despite being one of the best food producers in the world. Type 1.
Russia. Sad personal story for me, I was born in that country and still have friends and relatives there. Type 2. If my idea about what's going on is right, Putin takes country the same way Stalin took in 1930s. Development of last 5 years matches my forecasts way too good. Corruption by power is about to replace (or supplement) corruption by money.
Egypt. Type 1, candidate for the last 50+ years, but manages to balance on the edge somehow.
South Africa. Economic policy is almost OK so far, but politic development is making me wonder. Constant support of Mugabe of Zimbabwe, attempts to discredit obvious choice for the next president, Zuma, are not encouraging signs. Might become type 2 if my suspicions are right, I hope they are wrong.
Equador. Socialist or close to that government, type 1.

There are also the whole groups of countries which are always candidates:

Arab countries. Maybe Jordania and Iraq are exceptions, but it's too soon to tell.
Almost all Africa. Ghana and Botswana are the only exceptions, but even they can be destroyed by mismanagement.

I will continue soon. Keep reading.

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