When you think of the world’s biggest economies , which countries do you think of? For thousands of years the answer was India and China.About  2000 years ago, India made up of 33% of the world’s economy, China had the 26% or combined 59% of the world’s economy was China and India. 2000 years was the time of Christ, yet most Europeans never thought of the world in that fashion – they likely thought the world revolved around Rome. Now 2000 years later those two countries are regaining their lost status, what should you do? In the book Growling Tiger Roaring Dragon by David Smith published by Douglas & McIntyre, Vancouver, 2007 the author offers ideas. First, the more important question is why did those two countries take so long to dominate the world’s economies.

The reasons are different by they have not changed and it is something dividend investors need to pay attention to. For India in the 17th and 18th century the biggest cotton industry in the world was located in India. It was not mechanized which is the reason the UK factories and the industrial revolution became number one. The India industry was very labour intensive and locked into that form of production. The spinners and weavers were essentially self-employed and had no interest in technological innovation and neither did the Indian middleman merchants. The ruling British and East India Company made money sending cotton to England and how it was produced was not the issue. For years the system worked for those involved, few people had a desire to change anything, so when changed happened, in another country, the industry could not adapt and stagnated the economy.

In China the country had the finest navy, innovative people a view to see what goes on beyond its borders.  The classic case is gunpowder. The Chinese invented it used in for fireworks, but Europeans found the method to use gunpowder  in arms or warfare which changed the world. The Chinese had all ingredient to be an empire willing to expand and then the leadership changed. The new Emperor turned the country inward and away from innovation, away from what others in the world were doing and stagnated his country. If he had been forward-looking likely this would be written in Chinese.

Linking to dividend paying stocks, the lesson to learn is how does your dividend paying company make money and are they tied to the process or is it adaptable? If it is adaptable how open is the company to actually adapting it? Those questions look at senior management and its openness to change, because it can soon be left behind or stagnate because its unwillingness to change.

There are more questions than answers, till the next time – to raising questions.