Trust and Governments

Crony capitalism works if a country has something of value to offer the world. Oil. Rare earth minerals. Tourist destinations. Cheap labour. Manufacturing. BPOs.

It can also work for a while if a country is an effective bully.

But it cannot work if a country has nothing much to offer, and is not powerful enough to be a bully.

Capitalism is beautiful because it creates conditions for innovation, by letting innovators and investors play the risk/reward game.

Most attempts fail, but the few that succeed, do so spectacularly. This lets the game go on.

Taxes from an occasional big victory keep the entire country afloat. Each victory creates hope in the minds of the game's spectators, and converts some of them into players in the next round. The cycle goes on.

But if the game is rigged in favor of the ruler's friends, other innovators stop playing. They migrate.

Investors stop investing, because outsized returns are not easy to create, unless you have local connections.

For as long as the master's favored players are able to create something the world wants, the status quo persists. But eventually, softened by the lack of competition, these players will fail. They will become slower. Less ambitious. More protective of their positions.

Then, the country will be in trouble.

The only way out will be for it to convince its citizens to start playing the risk/reward game of innovation again. To promise them that there will be a reset, and the rules will apply equally to everyone once from then on.

That however, is easier said than done.

Trust, destroyed in a single government term, can take decades to rebuild.