alt Hacker NewsThe failure of this parable is the assuming that money that comes in to Squanderville is spent on consumption.
In reality people in Thriftville invest money in Squanderville and that money grows new sectors other than manufacturing while the share of manufacturing as GDP declines everywhere.
If they're the "investors" then aren't they also the equity owners? Yes they're growing new sectors, but they own the profits of those sectors, not the people in Squanderville, who have no capital left to invest. Hence the "colonization" analogy in the parable.