Putin’s home-made Middle-Income Trap

poiler: The Russian economy is stagnating. The Russian growth rate is exceptionally low. The 2008-2019 average annual Russian growth rate was 0.7 percent to be compared by 3.9 percent per year for the average Upper Middle-Income economy. The Russian economy appears to be in a Middle-Income Trap.

Resource-rich countries can escape the trap by implementing policies that exploit new sources of sustained growth. This has not happened in Russia. The reason is that sustained growth requires growth-friendly economic and political institutions because such institutions favour the creatin of new firms but may threaten the incumbent economic and political elites’ business.

The Russian Middle-Income trap is made of Putin. It is a political economy trap which is characterised by institutions that favour the deals-based relationship between Kremlin and the oligarchs.

While this may seem counter-intuitive, it is deliberate. Putin doesn’t care about growth. He cares about sovereignty and stability.

Continue reading

World Press Freedom Day 2021

Spoiler: Today, 3rd of May, is World Press Freedom Day 2021. Press freedom is under duress in many countries and journalists are being harassed, jailed and killed by authoritarian regimes.

It’s not getting better. More journalists were reported missing, imprisoned, or murdered in 2020 than in 2019. A lot of this took place in Belarus where Lukashenka, with support of Putin, decided to clamp down on journalists whose reports about how his police’s brutal attacks on peaceful demonstrators.

Decreased world press freedom goes hand in hand with the increased autocratisation of the world. Autocratic leaders do not want a free press to report about its nefarious activities. Belarus and Russia lead the fight against the free press.

Continue reading

Luka and Putin, a match made in Hell.

Spoiler: just when you thought that they couldn’t be more bizarre, Lukashenka and Vladimir the Underpants Poisoner (Putin for short), accused USA of plotting an attempt to assassinate Lukashenka. But in a way, it makes sense. In their world, people who demand freedom and democracy are foreign agents trying to overthrow them in “colour revolutions”. If successful, the best Luka and Vladimir can hope for is an escape to a country whose government turns a blind eye to toppled corrupt killers like them.

But that is unlikely to happen. The two dictators are about to “merge” even though they deny it. The accounts of the latest meeting suggest that their union building is “progressing”. They mention a lot of areas where their co-operation is going forward. But let’s have a look at some areas they don’t mention.

Continue reading

The stagnating Construction industry slows down Swedish growth

Spoiler: The historically meagre productivity growth of the Swedish Construction industry is a serious problem. Low productivity growth for an industry does not have to be a problem if the industry is small relative to the rest of the economy. But it is problematic when a large industry’s share in the economy is increasing over time at the same time as its productivity growth is stagnating. The Swedish Construction industry’s contribution to overall Swedish productivity growth is almost as small as the public sector’s contribution.

Unless the Construction industry’s productivity growth increases, the other industries’ productivity growth will have to increase. The increases will have to be continuously higher as long as the Construction sector’s share of the economy keep increasing. The reasons behind the weak productivity growth are well-known. Weak competition, many and complex regulations, municipal monopoly of the planning process for buildings, and other factors leading to high entry costs making it difficult for new firms enter the markets.

Continue reading