Category Archives: Growth and inequality

Corruption is stronger in autocratic countries.

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Spoiler: Corruption is cancer. It incurs welfare losses by distorting households’ and firms’ consumption and investment decisions. It increases inequality and environmental damages. It reduces trust between people and between people and public authorities.

It is lower in democracies with a free press and an independent judiciary. It is and was higher in autocratic countries. It is lower in market economies. Socialist countries are and were also autocratic, and corruption is and was pervasive in these countries. Corruption is weaker in former socialist countries that have become more democratic.

EU makes a difference. Corruption is higher in non-EU former Soviet republics and East-European countries. But once inside EU, Member States can again turn autocratic and become more corrupt.

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Yellow vests without a case.

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Spoiler: The Yellow Vests’ claims that inequality in France is increasing are not justified. Wages constitute the most important share of total incomes and real earnings per capita kept growing despite the Financial crisis. Nor did labour shares in total GDP decrease and real wages increased more than labour productivity. And no indicators indicate that inequality has increased.

In fact, France also has one of the most generous welfare programs in the OECD which hasn’t prevented the Kremlin to spread lies and pay people to demonstrate and riot.

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Only growth and market economies can save the planet.

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Spoiler: Global warming is a real problem that needs to be addressed. However, policies appeasing the cries of alarm demanding de-growth and socialism would be disastrous for our planet. Most of the growth today is intensive. That means that we consume more of less material-intensive products such as information- and telecommunication services. The production of such requires less inputs of material and energy than production of goods. Continued growth including digitalisation, more use of robots and artificial intelligence in the production processes will therefore mean even less use of resources than today while less growth or de-growth means the opposite. And the good news is that de-coupling is possible.

De-coupling can only take place in market economies. Socialism and planning economies would only make matter worse. The belief that concentration of power in the hands of a few people should solve the problem of global warming ignores the fact that there has never been any more environmental damaging system than the planning economies in Soviet Union, its satellite states, China and North Korea. Market economies are much more capable of fostering new ideas and transforming these into innovative products through technological progress than planning economies. But markets alone won’t do it. Policies that affect relative prices supporting green technology and provide incentives for innovation are necessary.

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Russia – a technology superpower or a shithole country?

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Spoiler. Once a year or so, Putin addresses the Russian people. During these shows, he likes to boost about Russia’s super weapons. He also boosts about the technological capacity, or even superiority of Russia. But the explosion at the White Sea casts some doubt about Putin’s claims. The development of these nuclear driven missiles is a technology that the US for good reasons decided not to pursue decades ago.

The above-mentioned failure reflects the disastrous economic policy that has turned Russia into a low-productive economy with weak innovation capacity. But Putin does not care about ordinary Russians welfare. What he does care about is keeping the grip on power and protecting his oligarchs’ wealth. 

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