Why a Rigged System is Toxic for the Economy?

Before responding to this question, it is essential to define what is a rigged system… Within a rigged system, a few abuses of power to control the system (government and economy) for their own interests at the expense of other people interests…

A rigged system is essentially a biased one where there is no equal rights, no equal chance and no equal opportunities for everybody to benefit of the same environment in deploying their talents and merits… The same rules are not applied equally to everybody…

The best way of illustrating a rigged system is to compare it with a fair one:

  • Within a fair system, the government supports equally all citizens and entrepreneurs while within a rigged one, only a category of citizens and entrepreneurs benefits of such support…
  • Within a fair system, winners in the market are made by competitive advantages such as innovations that reduce the cost and increase the quality of the products, the best strategies, etc… In a rigged system, barriers against new competitors, from cartels, oligarchies, and the abuses of the government powers destroy competitors in distorting the market to maintain rents of few vested interests…
  • Within a fair system, your talents, your merits and your ideas and projects are what define your success within an environment of equal chance and equal opportunities: if you work hard you get the results… In a rigged system, your success depends on your belonging to an oligarchy that defines who is in and who is out…

A rigged system often gives a wrong perception of stability untel its collapsing generates violence… A rigged system is toxic for the economy because it ends up by killing the entrepreneurship spirit needed to stimulate innovations and to maintain the competition within the market…

When you have a system that spends and destroys more resources in protecting rents of vested and special interests instead of investing them in innovations to produce more revenues and growth; you end up with a very dysfunctional society where the raise of inequalities becomes a high risk of structural violence that can lead to the collapsing of the system…

One of the reflexes of a rigged system is to demonize innovations that threaten the rents of vested and special interests by pretending that such innovations will set up a de facto monopoly… In fact such argument is a stratagem to avoid the entry of new competitors…

Any innovation that brings a competitive advantage by introducing cost effective products and higher quality of services is very healthy for the market… Normally such competitive advantage will be diluted over time either by new innovations or by the law of decreasing returns…

A market becomes totally rigged when new innovations from competitors are killed to maintain the rents of one of few inefficient players controlling the market, not by any competitive advantage but by barriers and all sort of backyard manoeuvres, often by abusing of the power, to maintain such inefficient players at the expense of new efficient competitors…

This is why fairness is critical and essential in supporting equally all entrepreneurs in the market and letting the best talents with the best products and services convincing consumers to win… Only a fair system generate more revenues and growth needed to create enough wealth for lifting the majority from poverty to the middle and higher classes and avoiding tensions that often end up in violent conflicts of control of scarcity and misery…

A fair system opens more opportunities to all for creating wealth… Before discussing about the (re)distribution of wealth, the system should first be fair in creating such wealth… Otherwise you get a rigged system that only spreads misery and violence…

Equality cannot be reached by levelling everybody to misery… However more fairness is possible by lifting the majority in the middle and upper classes. A rigged system cannot create sustainable middle classes… It destroys them…

By the way, Trump and other outsiders have been elected to protest against rigged and dysfunctional systems… If they fail in designing and implementing efficient reforms to make those systems more fair and functional; the worse is ahead! Absence or failure of reforms within rigged and dysfunctional systems are the open path to violent revolutions…

When the economy cannot produce enough wealth with needed growth and revenues to absorb growing social inequalities… There are only 2 possible scenarios in the end:

  1. the first one is to solve the problem with the design and the implementation of smart and efficient reforms to end the rigged system and allow more competition, more equal chance and more opportunities for everybody to be lifted to the middle and upper classes. Deng Xiaopping and Xi Jinping have got the right intuition for such reforms, which have averted a violent leveler in China 🇨🇳… Xi well understands the pressing urgency for China to break the rigged system in averting the collapse of the country…
  2. The second one is the scenario of either an absence or the failure of smart reforms to end the rigged system… In this case, the outcome will be the explosion of a revolution that can be violent… Many developed countries are going straight there. The collapsing of the soviet empire was exactly the outcome of failure of reforms, which reforms have succeeded in China…

Those who think that an economy driven by market cannot collapse like the soviet empire did are dead wrong… Any rigged system that fails to design and implement efficient reforms ends up by collapsing… It is part of the Laws of Nature…