As the recovery of economies takes hold, so do the expectations that associate the open phase after the overcoming of the pandemic with more than the mere restoration of lost growth. The transformative hopes derive, on the one hand, from the technological acceleration, basically digital and pharmaceutical, and from the organizational improvements in the companies experienced during the confinement. On the other, perhaps more decisive, of the intentions of the economic policies adopted, beyond the mere stimulation of aggregate demand, especially in the EU and the US.
Promoting the transformation of economies was the purpose defined a year ago by the European Commission in its recovery plan and in the conditions of the Next Generation EU fund. The investments of this fund are linked to technology-intensive destinations, such as the decarbonization and digitization of economies, but also to possible multiplier effects such as wide-ranging reforms and the participation of private investment. These decisions have also strengthened the dynamics of regional integration itself, basing possible advances on the necessary fiscal union.
The economic policy of the new US president, for his part, in addition to restoring the culturalism damaged by the previous one, is not limited to achieving the mere recovery of lost economic growth, but rather to broadening the potential growth of that economy and even to to directly influence the patterns of income and wealth distribution that have been in force up to now. Hopeful is also the rise in business investment observed in recent months, especially in the most knowledge-intensive sectors, in contrast to the massive allocations of liquidity to buy back own shares or generous dividend policies.
These claims to expand potential growth and make it more inclusive try to make a virtue of necessity, giving political responses to two sets of evidence prior to the emergence of the pandemic: the collection of excesses that the economic system has revealed in the two recent decades, on the one hand, and the need to improve the fundamentals of economic growth and its sustainability over time, on the other. Exponents of the first set are found in the growing inequality in the distribution of income and wealth, the excessive concentration of market power in some sectors, climate change or the avoidance of tax obligations by some large multinationals. These other claims are based on poor productivity records to base future growth on greater investment intensity and innovation, favoring higher productivity. More specifically of this component, not because of residual in its estimates less central in the determination of prosperity, which is the total productivity of the factors, a mixed bag where aspects that have every day greater explanatory capacity about potential growth are collected. of economies. Various elements, such as the adaptation of the institutions, would contribute to improving the quality of the transformation processes of the factor endowment in final production.
Efficiency and inclusion are part of the purposes of the new analytical approaches to economic growth and the regeneration of the economic system, of which the concentration in these weeks of numerous books accounts. One of the most complete is that of Philippe Aghion, Céline Antonin and Simon Bunel, The Power of Creative Destruction, synthesis of an ambitious research program whose main purpose is to analyze “how the transformation of capitalism can direct that power associated with the Schumpeterian paradigm towards the achievement of inclusive and sustainable prosperity”. It is not an original purpose, but the authors try to formalize the compatibility with that innovative tension associated with the dynamic of creative destruction enunciated by the Austrian economist in his book Capitalism socialism and democracy, in 1942.
This work can certainly be a useful support in the open tension in our country to enhance the transforming levers, not so much of productive models as of the way of doing things, of what ultimately determines the advances in productivity, and therefore hence in expanding potential growth. There is long evidence of the poor performance of our economy’s productivity and the widening of inequality. The IVIE has been documenting it extensively for a long time and professors Andrés and Domenech illustrated it very well in their latest book. Two very important areas in the evolution of total factor productivity are those addressed in the latest issues of the magazine Spanish Economy Papers, edited by Funcas. The headline of the one coordinated by Professor Emilio Huerta, The Spanish company between efficiency and inequality: organization, strategies and markets, speaks for itself of the intentions of the analyzes. The most recent has been directed by Professor Xosé Carlos Arias, The quality of institutions and the Spanish economy, and reveals the need to strengthen the institutional infrastructure. Both are pieces that, in addition to revealing the availability of analytical and investigative capacity in our country, provide great utility for the provision of that necessary diagnosis for the adoption of specific decisions.
There is no reason to conclude that the Spanish economy does not have the same possibilities to carry out this creative transformation that can define a new stage. If the endowments of capital (physical, technological and human) can, in general lines, be homologated with those existing in the most advanced economies, that Solow residual, the total productivity of the factors is not so close. That is where the strengthening of intangibles such as the quality of the business function or organizational capital has a place, analyzed for a long time by professors Salas, Huerta and Myro. But also that of public institutions, the diversification of the supply of the financial system and, ultimately, trust and fair play.
Schumpeter was not exactly optimistic about the future of capitalism, Aghion, Antonin and Bunel remind us. He anticipated that some of the excesses, such as concentration and the market power of large conglomerates, would put small and medium-sized companies out of the game, seriously threatening the ability to undertake and innovate, favoring the triumph of the bureaucracy and interests. created. Correct regulation and proper functioning of institutions can prevent this.
The contribution that the pandemic has made has been to intensify the alarms that had sounded long ago. And to specify new attitudes and even decisions, such as the recent ones of the G-7, which do nothing but strengthen some of the most eroded foundations of capitalism itself and make it more inclusive. The US and Europe seem to have consistently taken that direction. Spain also does not lack guides to travel along this essential itinerary, to expand the multipliers of European funds and thereby modernize the economy and reduce some of the vulnerabilities that the pandemic exposed. Protection and reassignment, these are the two fundamental missions, fully compatible with the creative reconstruction process, that the need to overcome the pandemic can turn into a virtue.
Emilio Ontiveros (@ontiverosemilio) is the author of the book ‘Excesos. Threats to global prosperity ‘, edited by Planeta.