ABSTRACT
Capital formation requires increased total savings. Most traditional analyses recommend an increase in public savings and public investment. Failure to consider the effects of economic incentives leads to the conclusion that tax rates should be increased and public investment expanded. Along with explicit taxes on work, minimum wage laws and "means" and "needs" tests for the state welfare provide additional disincentives to work. To encourage economic expansion the first objective is a reintroduction of basic incentives. Developed nations' policies include a distinct tendency for less developed countries to incur vast amounts of foreign debt obligations by the governments of less developed lands. The purpose of the debts is ostensibly to acquire social capital. State transfer payments subsidize inefficient industries, such as exportor import-substitute industries that rarely provides the incentives for these industries to become efficient. In general, tax and incentive structures leads to rapid economic growth that benefits the poor and unemployed the most.
