Monday, June 30, 2014

Malinvestments, New Normal Economy

The Changing Nature of Middle Class Work Washington's Blog: "...In general, subsidies are mal-investments that siphon money from productive sectors to prop up politically powerful unproductive sectors. Economies that enforce mal-investment eventually decline, as years of under-investment hollow out the parts of the economy that are propping up all the parasitic sectors. The protected sectors beset by soaring costs (healthcare, higher education, major weaponry programs, finance, etc.) will undergo the creative destruction of technology-based productivity gains for the reason that they are already unaffordable, not just to households but to the nation. These low-productivity bastions of secure, high-paying middle class jobs cannot keep increasing their share of the national income. Either productivity will increase and costs fall or these sectors will implode as their costs exceed the nation’s ability to fund them. Take fast-rising healthcare costs and slow-growth GDP and extend the lines on a chart: can healthcare absorb 90% of GDP? Clearly that won’t happen; the sickcare system is already breaking down at 20% of GDP...." (read more at link above)

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