With all these enterprising, hard-working, and creative people, millions of them, what could possibly be wrong with the place? Well, for one thing, the earthquake destroyed most homes. If this had been the United States, this earthquake would not have caused the same level of damage. This led many outsiders to think that somehow the absence of building codes was the core of the problem, and hence the solution is more imposition of government control.
The core of the problem has nothing to do with a lack of regulations. The problem is the absence of wealth ..
Where is the wealth? There is plenty of trade, plenty of doing, plenty of exchange and money changing hands. Why does the place remain desperately poor? If the market economists are correct that trade and commerce are the key to wealth, and there is plenty of both here, why is wealth not happening?
.. It is this: trade and commerce are necessary conditions for the accumulation of wealth, but they are not sufficient conditions. Also necessary is that precious institution of capital.
What is capital? Capital is a thing (or service) that is produced not for consumption but for further production ..
In a developed economy, the vast majority of productive activities consist in participation in these capital-goods sectors and not in final-consumption-goods sectors.
Many people (I’ve been among them) rail against the term capitalism because it implies that freedom is all about privileging the owners of capital.
But there is a sense in which capitalism is the perfect term for a developed economy: the development, accumulation, and sophistication of the capital-goods sector is the characteristic feature that makes it different from an undeveloped economy.