What countries are we talking about?

Upper middle class income countries are the main countries in this futuristic study. This report/study focuses on 9 out of these countries. The study leaves out small countries, petrol countries, China and Cuba. The focus are on Argentina Brazil, Mexico, Colombia, Peru, Malaysia, Thailand, Turkey and South Africa. Especially Brazil and South Africa is apparently interesting in the study of the middle income trap.

Middle income countries and politics: The political capacity is weak in the middle income countries. In the sense of fractures society, a low bureaucratic and fiscal capacity, which means the countries may have great difficulties to take care of a rising economic growth and a large increase of multinational companies and so on. There is as well an absence of threat and incentives for complacency.

Growth into middle income leaves a weak state: It was described that growth into a middle income country leaves weak state. Weak state in the sense of low fiscal capacity, which concerns informality, direct and tax morale. Multinational Corporation’s ability to control the market and to transfer pricing is a sign of a weak state. In the middle income countries is there also a low income tax and a low income tax can leave a weak state.

Bureaucratic capacity in the middle income state: Prior development tasks were easier than the futuristic task named middle income trap. The expanding primary education has for example had effect on the state because of the low bureaucratic capacity in the middle income state. A larger primary education needs a greater bureaucratic capacity.

Democracies shorten time horizons: Few incentives for politicians to initiate conflictual policies that will not show immediate results. Heightens importance of long term social coalitions. Divergent interests and the missing education coalition can be solved in a shorten time according to Ben Ross Schneider.

MNC and domestic firms

Multinational corporations (MNC) competing with domestic firms. Multinational corporations are 1/3 to ½ of the largest firms in the countries. Multinational corporations are mostly in higher manufacturing and services. Domestic firms are though dominating in commodity.

Formal versus informal workers in the different market areas. Informal sector is 40-50 % of economy.

Equality

The middle income countries has high inequality. Large middle income countries have low equality compared to High income OECD countries.

There are debilitating effects of inequality in politics means Ben Ross Schneider.

Ben Ross Schneider stated that inequality reduces cooperation, governance and coalition building:

In equality increases a countries vulnerability to volatile populism and clientelism. Entrenched elites shape extractive institutions to their favor. Mexican telecoms is an invention because of increased vulnerability to clientelism and volatile populism. Ben Ross Schneider mentioned that scientist named North, Robinson and acemoglu has written about this particular subject.

MNC are not interested in equality. MNC can move, find lope holes or train in-house. Big domestic business are non-tradable and commodities. (The business are renting for private training solutions) Workers are not interested according to two different principles: 1. Formal sector has in-house training. 2. Informal sector does not require skills.

Curiosities: 2/3 of respondents in Latin America are satisfied with local schools for their children.

There was no description of what kind of equality they were comparing or what state are admirable to escape the middle income trap.

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