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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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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Wage and capital shares in Sweden.

Spoiler: Measuring income equality in the classical way where a nation’s income is distributed between capital and labour, shows that the wage share in Sweden has increased since 1993. In order to properly measure how the capital share has developed, one must take the depreciation of the capital stock into account.

This adjustment shows that the capital income share of factual income (wage compensation + gross capital income – depreciation) decreased from 34% in 1993 to 22% in 2018.

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How to turn a country into a corrupt autocracy – the Orbán way.

Spoiler: Hungary have benefitted enormously by joining the EU. Joining the EU meant that Hungarians were guaranteed civil rights that were unthinkable when Hungary was a communist country. The EU membership also meant that living standards increased to levels far higher than before. Hungary has also received more of EU funding than average of the ten countries that joined the EU in 2010. Despite this, Orbán has since he became prime minister, again 2010, set out on a path violating Hungarians’ civil rights, freedom of the press and rule of law. These are steps towards a more autocratic and corrupt society where elites are free to enrich themselves.

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