It just seems like human nature to ruin a good thing.

As much as I am a strong proponent of free market capitalism, and against complex regulations and central planning, I understand government’s role in all this.

Capitalism and democracy teamed up in the late 1700s to form the big bang in economics, or what I call “When Harry met Sally.”

They’re opposites that balance each other – capitalism rewards people for their contributions, and democracy ensures that greed doesn’t take over.

We took Adam Smith’s theory of the “invisible hand,” limited government and laissez-faire politics… and combined it with Alexander Hamilton’s doctrine of a stronger government to enhance capitalism. We invested in common infrastructures, established a central bank with uniform monetary policies, and implemented financial and legal systems – things free market capitalism can’t do alone.

That’s why, together, these two ideologies complement each other – so long as they don’t get in each other’s way.

But, John Maynard Keynes screwed that up when he came out with the worst economic theory in history during the Great Depression.

His brilliant idea was that the government should fight downturns with deficit spending to offset declines in the private sector. He literally said that if it would help, the government should pay people to dig ditches and then fill them back up!

How uneconomic is that?

I’ve realized by studying history that it helps to get government involved when it comes to nurturing a developing country. They need infrastructure and export industries as such countries are rapidly urbanizing.

It works – if government doesn’t overdo it!

China’s government has overdone it, while India’s needs to step it up. With their rapid and unsustainable urbanization, China has a GDP per capita (adjusted for purchasing power) of $12,116, while India’s is $5,591. Malaysia, one of the wealthiest emerging countries with $26,145 GDP per capita and 75% urbanization, is an example of a government that got it more right.