Category Archives: Growth and inequality

The stagnating Construction industry slows down Swedish growth

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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

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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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Autocracies are bad for the future generations.

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Spoiler: Rule of law is weaker, and corruption is stronger in autocratic countries. This is not only detrimental for today’s generation but also for future generations. The reason is that stronger corruption and lower levels of social trust in autocracies distorts incentives and thereby savings and investments decisions. This makes innovation weaker in autocracies than in countries which are characterised by institutions rendering them rule of law and weak levels of corruption.

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Another corrupt year passed by

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Spoiler: Transparency International’s Corruption Perception Index 2020 shows little progress. Corruption declined 26 countries but increased in 22 countries. More than two thirds of the 180 countries that are covered, score below 50 on the index where 100 is the utopian score for a country without corruption.

There is as usual a clear difference between autocracies and democracies. Transformations of countries from autocracies to democracies normally brings about less corruption. And corruption normally grows stronger in countries which turn autocratic as the Hungarian example shows. Poland seems however to be an excemption. Even though its government has reduced the media’s freedom and the judiciary’s independence, the members of the government do not seem to have taken advantage of these opportunities to enrich themselves.

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