Albania unchained

Spoiler: The Stalinist Hoxha made Albania the poorest country in Europe. To paraphrase Marx and Engels, by overthrowing the communist regime, the Albanian proletarians had nothing to lose but their chains. Or perhaps a shotgun and a bunker, which were the average endowments of an Albanian household. When the communist era was over, the Albanian economy began to grow. And its growth rate has been higher than most other European countries.

The economy has improved more than the political situation. Even though free elections were held in 1991, the political situation in the country has been tumultuous. Manipulations of elections, repressions of political opponents and riots have from time to time plagued the country since the end of communism.

Assessments of how the political situation develops, vary. Albania is slowly moving, and sometimes backwards, from an authoritarian past towards a democracy with guaranteed civil rights.

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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.

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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.

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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.

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