Wednesday, November 15, 2023

How Index Funds can fix Corruption in Post-Soviet States


In post-Soviet states, just like in the West, it is forbidden for politicians to own companies or shares in companies.

However, unlike in post-Soviet states, in the West politicians can own Index Funds as well as other such investments instruments that disperse the investments across the broad pool of shares.

The reason Western politicians allow Index Funds it to tie their income and prosperity to performance of the economy as a whole and not just some particular company. 

If a politician owns shares of Coca-Cola company for example, he would have vested interests in promoting Coca-Cola Company interests at expense of its competitors (Pepsi, RC Cola or Dr Pepper). That will eventually lead to monopolies and economy and prosperity will suffer overall.

However, if politicians own Index Funds, their prosperity is instead tied to the whole economy and not any one particular business. This they will instead have a vested interest in making sure economy functions properly and offers a fair treatment to all companies. 

They will have no special reason to oppose new companies or protect old ones. In fact, if new company will be more successful than the old, the whole economy will grow and their personal wealth with it. 

Because of that, when politicians in the post-Soviet will have money in Index Funds, they will gradually act like those in the Western countries.

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