Technology is about to put an end to Putin’s fossil Czardom.

Spoiler: Technological progress is making green energy cheaper. This is bad news for Putin. He became president when oil prices started to rise again. Putin has done nothing to reform the economy, so the Russian is still heavily dependent on fossil fuel prices. Energy related revenues constitute more than a third of Russian budget revenues.  

World market demand for fossil fuels falls as countries strive to attain zero carbon emission targets. This will translate into low future growth for the Russian economy and make it difficult for Putin to fulfil his promises about higher living standards for the Russian people.  Russian foreign policy will also have fewer instrument. The Kremlin won’t be able to use gas or oil to weaponize foreign policy when other economies become less dependent on fossil fuel.

Continue reading

Why European Champions is a bad idea.

Spoiler: French and German government want to create “European Champions”. Following the EC decision to block the merger between Alstom and Siemens, Berlin, and Paris push for less strict competition rules in the EU. They were later joined by Rome and Warsaw.  Pushing for European Champions is a bad idea. EU competition rules are designed to benefit consumers. Consumers will be harmed by relaxed competition rules that allow some firms to gain more market power by weakened competition.   

In concentrated markets become, prices are higher, and outputs are lower. Profits are higher but real wages are lower, so capital shares of income are higher and labour shares lower. Income inequality is higher in a society with weak competition.

In fact, it would be counterproductive to amend the pro-competitive EU framework for making it easier to subsidise potential large EU tech firms. Intense competition on domestic markets is beneficial for innovation and export competition on international markets.

Continue reading

Den offensiva ryska upprustningen

I korthet: Insändare i Sydöstran 2/12 2020 om den ryska upprustningen. Eftersom Ryssland inte har utsatts för något externt hot sedan Sovjets kollaps, så har syftet varit offensivt. Det har människor i Georgien och Ukraina fått erfara.

English summary: This post is a letter to the newspaper indicated above. The subject of the letter is the massive Russian military armament which has taken place since Putin became president of Russia. He has undertaken this in spite of the fact that Russia has not been exposed to any external threat since the collapse of the Soviet Union. The armament was of course made for offensive purposes. People in Georgia and Ukraina have become the victims of the Russian armament.

Continue reading

Why Strategic sovereignty is a bad idea

Spoiler: A lot of people cried wolf at the outbreak of the Corona crisis. Media reports of shortages of medical goods led to demands for increased production inside the EU of such goods. These demands came at the same time as some countries closed their borders and prevented exports of medical goods to other countries.

But these demands have been proven wrong. Most medical goods were produced within the EU, and trade with medical goods increased dramatically during the crisis eliminating the shortages. This and earlier experience from trading with the rest of the world show that decreased globalisation and specialisation will give us fewer resources and make us less resilient when future pandemics occur.

The export restrictions were counterproductive. The correct policies for combatting pandemics are trade-facilitating. Lowering tariffs and reducing the number of Non-Tariff Trade Barriers are obvious policies. In fact, decision makers across the world have realised this and have now introduced trade-facilitating measures for covid-19 goods that cover more trade than the trade-restrictive measures that were initially introduced. The correct policies within the EU is of course to make sure that the functioning of the Single Market is not harmed by trigger-happy politicians.

Continue reading