Why China won’t catch-up with USA

Spoiler: The Chinese growth is slowing down. Communist China will never be able to make it to the richest economies even if it becomes the largest economy due to its size. Even if the Chinese has moved up the value-added ladder, it will become never become as innovative as USA.

Knowledge and innovation are not only cumulative, but they are also collaborative processes. The formation of these depends on interactions between scientists, researchers and other people involved in the innovation process. Free access to flows of information and knowledge is reinforcing the processes. Such conditions are more often found in democracies than in autocracies which explains why the former type of countries are more attractive to live and work in. Furthermore, scientists and researchers that move from autocracies to democracies become more productive.   

Further obstacles are the prioritization of the SOEs and the demographic change. Pouring investments and ordering banks to throw good money after bad is hampering growth. The Chinese working age population is getting older and smaller. But the communist regime is committing is committing genocide instead of trying to reverse that development.

Continue reading

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.

Continue reading

Graph of the day – Something is terribly wrong with the US police forces

I’m a big fan of the USA. They played a major role saving democracy and freedom in the WWII and afterwards. First by defeating Nazis on the Western front together with the British but also by providing the Soviet Union with guns, vehicles, food, clothes, boots and raw material which the Red Army used to defeat the Nazis on the Eastern front. And after the war, US troops stayed in Europe which prevented the Red Army from invading us. Even if Sweden was not a NATO country, we co-operated closely with NATO and USA.

The main reason for me being a fan is however not its military. There are two major reasons for my “Americanism”. The first reason is the political system with its checks and balances and a constitution protecting the citizens from the state. The second reason is the vibrant US economy which has made lives easier and richer by the production of a vast number of innovations.

Continue reading

Bolivia – another socialist president gone rogue.

Spoiler: It wasn’t a coup. Morales’s manipulation of the vote-counting in the Presidential election turned people against him. This was his last, of many, attacks on democracy in Bolivia. Since 2006, Morales has concentrated power, placed lackeys in the Constitution court, limited the independence the judiciary, attacked the media and oppressed civil society organisations. But Morales shall have credits for improving the lives of many Bolivians. Since he became president in 2006, extreme poverty has been halved, inequality has decreased and GDP per capita has on average grown by some 3.2% per year. At the same time has life expectancy increased by five years and neonatal mortality decreased by almost 50%.

The reality is not black and white even if one sometimes gets that impression from reading the news. The opponents to Morales are no angels and I would not accept an invitation from the interim president who abuses her interim presidential powers to the extent that security forces’ killings of pro-Morales demonstrators can go unpunished. The security forces’ killings and detentions of Morales supporters are of course unacceptable. If she doesn’t keep her promises of new and fair elections, sanctions should be imposed.

Continue reading