- What factors affect countries' growth and money?
Just now·3 min read
If you were a country how will you make money?
Photo by Marco Oriolesi on Unsplash
Money is and will be for a long time topic of the modern world. It helps people elevate themselves, fulfill their dreams, gives them freedom, but at a technical level running behind it, putting everything else apart just to get a taste of it is problematic and worrisome. The same goes for the corporations when they put cash bonuses and bottom line at a higher priority than human health and working conditions, we get something like DuPont and Ohio, or Deep Water Horizon and Louisiana. But how can the government make money???
Country can make money in primarily 4 ways. Assuming it is a stable economy, meaning not war-ridden, and no hyperinflation.
- Increase Debt
Governments borrow money all time, from the open market using bonds and notes, from other countries, and from institutions like World Bank, Euro Bank, and IMF. It is more likely countries from growing economies and smaller economies will borrow from institutions but as the US did with its massive borrowings during 2008 and now again in 2020, they took debt or raised money from creditors with a promise to pay them back at a later date. This is also sometimes referred to as money printing leading to decreasing the value of the currency
2. Reduce Spending
They are certain projects and services that government has a monopoly and commitments on like Children Education, Infrastructure, Defence, Healthcare. The government has to do good by it and it needs to be done regardless of the cost or revenue. However, to make more money or rather spend less money they need to cut programs, make fewer new roads, buy one plane less, or fund fewer hospitals. This does increase cash in hand but the risk-reward of this step is always debated.
3. Increase taxes
Taxes are the best way for the government to raise money. But for it, to work people should be making more money so the economy should be good, or the country will do targeted taxing like the people who are already rich have to pay a lot, there is capital gains tax, people who are making money from extra money. The ripple effect of this becomes people moving to different parts of the world, generating complex financial instruments to reduce the risk and volatility and harder for people to enter the open market.
4. Increase export
This goes in union with increasing taxes, however, I have put it in a different bracket because in many cases export of goods and services has a massive impact on the countries economy. Like in the case of the Middle East and Russia they have a monopoly in the market, of oil and petroleum. They dictate the price and set whatever price they choose and because of the massive demand for oil and gas, this gives them an undue advantage. Similar in defence with the US, Russia and France or India with Spices, and IT Services or China with computer chip manufacturing, or at a smaller scale Avacados and Mexico. They are virtual monopolies, can dictate prices and therefore increase revenue.
These are all risk-reward calculations with the objective of the best path forward in current and future times making a country more secure, stable, healthy and welcoming to the world.
- Date of publication:
- Tue, 05/04/2021 - 13:32
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