Income inequality has been growing by leaps and bounds in developing countries. While some of those countries are creating more billionaires every year, millions and millions of people are stuck in utter poverty, without any light at the end of the tunnel. They can break out of this vicious cycle by revisiting and renewing the existing economic models, emphasizing exploring and inventing forward-looking growth and income opportunities for the so-called 99%.
To properly explore growth opportunities, developing countries should start at the national level, gradually drilling down to the state, local, and individual (yes, individual) levels. The onus is on all of us. A renewed "private-public partnership" economic growth model would be ideal for developing countries...
1. Develop Basic Infrastructure with Private Cooperation. A developing country with well-developed infrastructure can attract more high quality foreign and domestic investments than their counterparts who are struggling to ramp up their infrastructure. Therefore, instead of selling out their natural resources, developing countries should intensify the development and expansion of necessary infrastructure by enticing private companies (well-known local and foreign) to provide the leadership in that sector. For example, those companies could be encouraged to build new toll highways and bridges, railroads, metro, and light rail, ports, airports, rural electrification, telecommunications, etc. shouldering all costs in return for all revenues (at pre-negotiated resell rates) from those projects for the first 15 to 20 years.
2. Entice Neighbors to Follow the Successful Example. Of course, with the rising prosperity comes the border issue. A good leader sets examples that the neighboring countries spontaneously follow. Today, we live in a world of economic cooperation and free trade, so building a Chinese wall around the country's border does not lead to lasting economic prosperity. Instead, the prospering countries must encourage the weaker neighbors to follow the successful example and shore up their necessary infrastructure, paving the way for a concerted regional revitalization and growth by avoiding the refugee problem from the neighboring countries.
3. Develop Regional Economic Zones. As the regional renewal gains momentum, countries must work together on creating their economic zones, letting goods and services flow freely across borders without the costly and unnecessary taxes, tariffs, and other financial barriers. With economic zones in place, it would be easier to convince corporations to build toll-ways, bridges, waterways, etc. across borders, offering better scalability and enhanced economy of scale. Developing countries must experiment with and use (macroeconomic) growth models that are sustainable. G-7s down to BRICS must aid and cooperate with the developing countries that become signatories to an international economic model emphasizing regional growth, renewal, cooperation, and development of industrial zones.
4. Create Tax and tariff-free Enterprise Zones. With the rapid growth and expansion of the necessary infrastructure, countries will need to set up tax-free or, at least, tax-abated enterprise zones around the country. It does not make sense to build all infrastructures around a handful of big cities, making them even more overcrowded. It must be a distributed and decentralized economic model, emphasizing enterprise zones, including affordable housing. 10-15 year tax abatement is an excellent incentive to attract an array of significant and diverse groups of companies worldwide, vertically integrated with the growing infrastructures. A decentralized model would help people live close to their roots – an ideal way to keep employee turnover and absenteeism low, with morale always high.
5. Invite Private for-profit to Build Institutes of Higher Technical Education. As those countries start to develop the service sector (atop the manufacturing industry), a steady flow of qualified employees with higher technical education would be needed. Again, instead of the local governments getting involved and controlling this layer of education, the private for-profit companies could be invited to build and run the institutes, with initial concentrations in enterprise zones, as an added enticement. While the acceptance must always be merit-based, governments must significantly subsidize all economically disadvantaged students to avoid implementing a quota system down the road.
While local governments should refrain from running all non-essential services (which they should outsource to the private sector), they must be involved in properly managing their natural resources and all essential services like military, law and order, taxes, primary education, healthcare, clean water, etc. The developing countries built on moral (not religious) high grounds are more attractive to investors. For example, in many third world countries in Africa, Asia, and Latin America, young women do not have equal access to education (which is a crime against humanity!). "Equal access to education" is a primary metric all foreign companies must use in evaluating the investment climate of a developing country.
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