Return on capital of the same systemic level: chapter 11.
1. Let’s consider two countries, A and B.
In both A and B, entrepreneurial activity is, let's admit it, divided into twelve sectors. In A, the average profitability of four of the twelve sectors is three times higher than that of the other eight sectors. In B, there are also four sectors at the top of the ranking and in order of decreasing profitability, but their average profitability is only one and a half times greater than that of the other eight sectors.
2. B has an advantage over A in its most profitable sectors.
As the most profitable sectors in B are less profitable than in A, export outlets in these sectors are more open and domestic outlets are less exposed to the best quality/price ratios of foreign competitors.
3. B also has an advantage over A in its least profitable sectors.
In B, the least profitable sectors are more profitable than in A, because more effort is made than in A to raise them. In A, average profitability, all sectors combined, is more difficult to raise and maintain at its sufficient level at full employment. In B, the proportion of under-profitable firms is lower than in A. In A, the resistance of the entrepreneurial fabric to times of economic downturn is weaker than in B.
4. With a per capita income that is more or less the same in A as in B, life is cheaper and the need for pensions by transfer is lower in B than in A.
The differences in the direct rates of return (a concept defined in the previous chapter) of services and goods, depending on whether they are the most or least purchased, are smaller in B than in A. As a result, life is cheaper in B than in A. The need for pensions by transfer is less in B than in A, for two reasons: first, in the stock of capital, the proportion that returns to savers is greater; second, the sum of profits is higher than it would be if the rates of profit on capital of enterprises were more dispersed around their average than they are. as can be demonstrated algebraically.