Corruption is Bad for Any Economy

Ask SmallIvy

If you look back on past US markets, you’ll actually find that the stock market has done better under Democratic Presidents than under Republican Presidents.  Whether this actually means that Democratic Presidents do a better job for the stock markets (which is not really the economy) than Republicans is debatable.  Maybe markets like more government control because it brings stability.  Maybe corporations spend so much money lobbying politicians that they know nothing truly bad will be created regardless of who is in office.  Maybe, because things like tax policies and inflation have a lag on their effects between the time policies are implemented and the time the effect is felt, the good things Republicans do are not felt until a Democrat is in office and vice-versa.  (I do believe Bill Clinton and George Bush, for that matter, were riding the Reagan wave that it took several tax increases and several years to kill.)  There are also factors like who is in the House and Senate, since they are the ones that actually make the laws, where the President just carries them out.  And let’s not affect the profound effect the Federal Reserve, who is no more government than Federal Express, has on the markets.

Still, regardless of your political philosophies, the evidence is that the stock markets should do just fine, regardless if the person in office has a “D” or and “R” by his/her name.  What should be of more concern to the investor is corruption.  Throughout the world, if you find people who are very poor, you’ll find “leaders” who are very corrupt and a whole system beneath them where bribery and political favors are the normal way of doing business.  This creates an elite class, where those who have the money and can pay the bribes, and an impoverished class who have no chance of improving their station in life because they can’t, unless perhaps if they can marry into the elite class.

The growth of graft by underlings when there is corruption at the top is understandable.  Mismanagement at the top with leaders who only care about themselves results in massive job losses and public servants not being paid regularly.  Security guards, tax collectors, and others discover that they can get the money they need to feed their family by leaning on those they are supposed to serve for bribe money.

Such an economy does exactly what Pope Francis warns against – creating a barrier where many do not have access to the economy.  Many take his words to be a challenge to capitalist societies, but really the situation he describes is true of places like Cuba, China, and Russia, not places like Taiwan and the USA.  Places where control over the economy has been given to a few people, who then use that control to enrich themselves and punish political enemies.

In the US election this week, we have a choice between two candidates.  One of which, Donald Trump, is certainly not the ideal candidate for those who want smaller government.  The other candidate, however, has shown herself to be corrupt to the core, surrounding herself with a cadre of advisors and minions who will rob the people blind if she were put into office.  The Small Investor is, therefore, putting its endorsement behind Donald Trump.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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