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The Crumbling States of America

Spoiler: USA has changed from being exceptional in a good way to being exceptional in a bad way. The dynamism of US product markets has decreased. It shows up in lower firm growth, higher concentration and weaker competition. This has led to increased inequality, lower investments, innovation, and productivity growth. At the same time, horrible things are happening with parts of the population. Life expectancy rates are declining because people are dying from suicide and drug abuse. Since this is happening mainly to people with low education and incomes, inequality in health is increasing.

To reverse the developments, the political system needs to be more transparent and less sensitive to rent seeking by large enterprises. But unless the Trumpian tendency to autocracy is reversed, it will be difficult to make the necessary changes.

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Putin vetoes human rights

Spoiler: After the collapse of the Soviet Union, Russia granted to take the place of the Soviet Union as a permanent member of the United Nations’ Security Council. That was a mistake. The position has mostly been used to block investigations into human rights violations, Russian occupations of other countries’ territories, protect pariah regimes and block UN aid to refugees.

After Putin came to power, Russia has used its veto to prevent the UN to act against regimes who violate human rights and even persecute their own populations. The first vetoes blocked UN actions against the regimes in Myanmar and Zimbabwe. These vetoes were not based on any considerations of what was going on in the two countries. They were supporting China’s vetoes. The Chinese regime was not interested in having UN missions in countries where China had invested.

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Real wage and labour share developments in Sweden.

Spoiler: Analysing inequality in Sweden by looking at developments of capital and labour shares 1960-2019 show that inequality is not a big issue. Labour’s share in GDP is closely related to the real wage. Growth of hourly real wages has not lagged labour productivity growth.

In the previous post, I showed that the wage share had increased in Sweden since 1993. That conclusion may be based on the initial point in the sample. In fact, it wasn’t. The wage share has been, as Kaldor suggested a long time ago, relatively constant over a long period of time. In this post, I will take a longer view on capital and wage shares in Sweden.

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Belarus would have done better in the EU

Spoiler: The rumoured success of the Belarussian economy spells Russia gas and oil subsidies. The subsidies have propped up the Belarusian economy. Refining subsidised imported oil from Russia and selling it at world market prices provided Belarus with revenues. Much of these have been used to sustain the inefficient State-Owned Enterprises (SOEs).

The oil revenues were also used to decrease poverty and provide the citizens with a decent health care. But Lukashenka’s economic model is not sustainable. For a decade now, growth has been disappointing. The reduced subsidies from Russia has not been helpful but the main cause for stalling growth is the low productivity growth.

A planning-type economy where capital and labour are allocated by bureaucrats according to development plans have preserved the inefficient industry structure. Administered prices and wages have worked in the same direction and prevented renewal of the economy towards a more productive industry structure. Most of Belarusian GDP growth is due to increased amounts of input while contribution from total factor productivity growth is low and practically absent since 2010.

The Belarusian people which already was frustrated over the lack of civil rights, would have been better off if Belarus had joined the EU. The people in the former communist countries, which are now EU members, are not only freer but also more prosperous than Belarusians.

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