What is the best country for investors to live in?
That depends on what we mean as "best."
From my vantage point, the best country would be the one with safety and security for my money and protection of personal freedom. If anyone not from the United States were to ask me, "What is the best country for investing and living?" my first answer would be the United States.
Now, why is that?
I would expect that many people, if not most, would ask, "Aren't there lots of problems in the United States?"
My reply is something along these lines.
Let's think of the whole world as a messy and sometimes dangerous neighbourhood. Then picture the United States as the best house in the nasty neighbourhood. Everyone, given a chance, would like to move in. The choice best depends on the choices compared. Since nothing on this earth exists in a vacuum, then understanding context is everything.
There are endless lists compiled by non-governmental organisations, think tanks, and prestigious universities that rank countries. All are data-based and try to use objective criteria to establish a priority or hierarchy.
The problem with these institutionalised methodologies is that they overlook subjective factors—sometimes controversial and politically incorrect — that are usually more relevant and impactful, such as the influence and differences in demography, geography, historical culture, and religion.
Categorising The World
Thomas Barnett, the author of The Pentagon's New Map, War and Peace in the Twenty-First Century, provided a refreshingly candid approach to globalisation by analysing security, economic, political, and cultural factors with a prediction of future war and peace. As Barnett sees the world, it is divided between the "functioning core" countries and those of the "non-integrating gap". This viewpoint reflected the circumstances as of 2004.
The functioning core includes the United States, Mexico, Brazil, Argentina, Chile, Canada, the European Union countries, Russia, Israel, South Africa, India, China, Australia, and New Zealand. Effectively disconnected from the core are the other countries of the world—the non-integrating gap— with some operating in what Barnett calls “the seams”.
Within or between these disconnected or core countries are the world's primary active trouble spots in which some form of conflict exists. The functioning core countries fight an economic war themselves and, for violence, use the non-functioning states as proxies.
Threatening the world with nuclear disasters are Iran and North Korea. Russia and the European Union (primarily Germany and France) support Iran, while China supports North Korea. The EU wants the United States to continue protecting it from Russia and China. They are willingly committing their economic future dependent on Russia and China.
Adding to the confusion is that of the European Union, Russia, and China, each actively seeks to undermine the United States and take its place.
American Military Protection
Barnett points to the unique role the United States plays in making international stability possible for every country. Essentially, the United States does not endeavour to build an empire but uses its superpower military capability to contain dangerous countries and radical revolutionaries that unduly disrupt the world's economic order.
The United States spends more money on defence than all the other countries of the world to maintain global capabilities. No other country has a sustainable economic capacity to be a global military superpower.
Looking At Europe
Britain exited the EU because the majority of Brits outside of London abhorred Brussels' rules and regulations, especially its immigration policy. It should have been expected. For over 250 years, Britain has been culturally and philosophically divided from France and Germany since the Enlightenment - the difference between a common law country and civil law countries.
Recall that the Enlightenment, the Age of Reason, started in England, enabling the British to rise from a second tier to the first tier of power. Importantly it provided the intellectual basis, the philosophy, upon which the modern era grew throughout the 18th century. It was the basis for the creation of the unique political concept of the United States of America.
German and French intellectuals at the time broadly followed a Counter-Enlightenment philosophy. Many of the French elite espoused a collectivist social philosophy, while many in Germany wanted to retain their ethnic identity with their traditions of faith and duty. While the United States and the British (outside of London) have a clear idea of who they are, France, Germany, and other Western European countries are crippled by the confusion caused by postmodernism and multiculturalism.
As highly regulated, highly taxed welfare states, Germany and France and the other social democracies of Europe do not make for an attractive location for long-term wealth safety and security. Their headlong plunge into so-called sustainable energy to save the climate in the next century has produced no benefit to the world or themselves. Instead, energy costs have risen dramatically, putting their economy at a decided disadvantage compared to the United States. Germany, among other EU countries, have tied their energy future to Russia. Just crazy.
Europe's tax system undercuts capital formation while intrusive regulation, high energy costs, and low worker productivity destabilise manufacturing and service industries. Western Europe's future outlook is no match for the United States.
Should an investor consider investing in or moving to Mexico, Brazil, Argentina, or Chile? From an economic viewpoint, I realise these countries are more like still developing economies. If someone is essentially a day trader, then they may consider taking a short-term position. Regarding personal safety and security, except for Chile, most countries in Central and South America are on the travel warning list.
Canada is worth consideration. It's economically stable, believes in human rights, private property, and would fit in nicely with the United States with a couple of modifications. Free speech is under attack. Multiculturalism and postmodernism are rapidly causing the new religion of secular relativism.
Considering that nearly the entire population of Canada lives within 100 miles of the US border, an investor might enjoy having more choice in investment opportunities and a far wider variety of places to live in the United States. When wintertime hits in Canada, there are an awful lot of Canadians spending four to six months in their condos in Florida and other warm US states.
New Zealand And Australia
New Zealand and Australia are not in the same investment league as the United States. But they offer a place that, like Canada, provides a good investment environment and a first-class life quality. If someone doesn't mind moving to the opposite end of the world, some adventurous people will consider New Zealand or Australia.
It does not strike me that India is anywhere close to the same league as the United States. A big country but still in the developing stages. There's a lot of money to be made there but at risk of political and economic conflict. Someday, India will curb its systemic governmental corruption, build a modern transportation system, clean up its rivers, and put in electricity and toilets throughout the country. Until then, treat investment in India as risky and living there, being kind, as exotic.
Many claim that China will overtake the United States. These same people asserted that mainland communist China would perpetually keep its hands off the democratic capitalism of Hong Kong. What foolishness.
It is hard to understand the China of today without some understanding of its relatively recent history. The Qing dynasty overthrew the Ming Dynasty in the 1600s. By the 1800s, the Chinese population had tripled but became subject to Europe's growing industrial power. After the First Opium War in 1842, China was strong-armed into a one-sided trade treaty and gave up some territory, including Hong Kong. Over the next decade, China's economy suffered, compounded by the peasants' unrest because of Christian influences and European egalitarian democracy ideas. This led to a civil uprising. The Qing dynasty was about to win that civil war when its attention was diverted because of the Second Opium War outbreak against the Europeans in 1860.
The weakened Qing dynasty ended at the turn of the century. However, the lingering European political influences of the civil war and then the Bolshevik revolution in Russia caused China's communist movement. In the 1940s, Mao and the communist rose up, the events of World War II and its aftermath unfolded, and China is a communist country today. A totalitarian state predictably politically unstable and rightfully fearful of a revolution.
China possesses little ability to innovate or create. It relies on “borrowing” technological advances from other countries that have lax internal security of their intellectual property.
China has an unsolvable demographic problem. Its younger generation cannot support the needs of the elderly population bubble. And its former one-child policy resulted in likely 100 to 150 million more young males than females. The social impact is unpredictable.
While economists highlight China's GDP growth rate, at least 800 million people are living at a subsistence level. China depends on importing food to ward off the genuine possibility of wide-spread famine. Although China threatens military confrontation in the region, this lack of food supply independence renders that display more a matter for internal propaganda consumption.
It also habitually misallocates investment capital. It has built massive empty cities, highways with no cars, and high-speed railroads that will never be profitable enough to cover operational expenses.
Anyone investing in China takes on the risk that its communist legal system is Kafkaesque. Unlike the US, which gives financial aid to other countries without asking much in return, governments learn that receiving an investment by China is merely a ploy to enable it to plunder. The bottom line is that China does not adequately protect foreign capital, while immigration is discouraged.
Categorising the nation-states of the world into the functioning core and non-functioning gap with some countries operating in the seams is good for a basic analysis. These can be further divided, or placed into a hierarchy, depending on how competently countries operate and the stability of their respective political system. Historical experience proves that liberal democracies with free-market capitalist economies protecting personal freedoms and private ownership of property, function best. If this is the case, then the United States is the best country for investing and living.
Denis Kleinfeld is highly regarded as a lawyer, teacher and author. His private legal practice, Kleinfeld Legal Advisors, is located in North Miami Beach Florida. He is an Adjunct Professor at the LLM Wealth and Risk Management Program, Texas A & M School of Law. His private practice focuses on strategy planning of domestic and international tax, legal, financial, matters involving the wealth and risk management for private clients and private businesses. He is co-author of the two-volume treatise, “Practical International Tax Planning,” 4th Ed. published by Practicing Law Institute. He is the contributing author on Foreign Trusts published in “Administration of Trusts in Florida” by The Florida Bar and authored chapters for the American Bar Association’s in “Asset Protection Strategies: Wealth Preservation Planning with Domestic and Offshore Entities Vols. I and II.” He is a contributing author to the “LexisNexis Guide to FATCA”.