Only growth and market economies can save the planet.

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?

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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Poland and Ukraine, so close and yet so far apart.

Spoilers. In Poland, reforms of the economy were made even during Communist rule. Following the end of Communist rule, ambitions to join the EU and support from the EU and IMF gave further impetus to reform. As one of the earlier reformers, Poland has turned into a growth engine. Not being part of the Soviet Union was a bliss for Poland but being a Soviet republic turned out to be a curse for Ukraine. No reforms were made by its post-Soviet leadership during its first three years of independence.

Opaque liberalisations and privatisations that followed enriched former “Red directors”. During this time the oligarchs emerged. They have since not only dominated large sectors of the Ukrainian economy but also the political arenas. From then on, Ukraine’s people have been robbed and deprived of reasonable standards of living. While the influence from external factors, especially the EU, was beneficial for Poland, Russian influence and armed interventions have prevented Ukraine from growing.

 

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Life in liberal countries is more free and prosperous than in autocratic regimes

Updated post about institutions and prosperity.

In a previous post I showed how a future EU membership gave the Baltic countries, and East European countries incentives to reform their economic and political institutions which shape the behaviour of households, firms and politicians.

This post takes the relationship between institutions and growth beyond the EU.

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