Stimulating the Economy

Our economic policy is geared entirely toward stimulating job creation rather than building efficient, highly productive enterprises. As a result, we stimulate an economy of simple things: small-scale production and individual entrepreneurs, the construction sector, handouts to small farms in rural areas, and so on. The effectiveness of this policy is extremely low. The underlying logic is that stimulating labor productivity growth would increase unemployment, since jobs disappear where productivity rises.

At first glance this seems correct, but in reality the effect is exactly the opposite. When an official is tasked with stimulating job creation, we end up supporting unsustainable enterprises that later fail to withstand competition and close down.

By contrast, stimulating labor productivity itself initially reduces the demand for labor, but it raises the well-being of workers employed in high-productivity sectors. Rising prosperity increases their incomes, and that in turn boosts consumption and savings in the country. Consumption stimulates demand and creates the need for new production and new jobs, while savings provide the resources to invest in and build these new enterprises. Highly efficient businesses are more resilient and competitive, so in the future they expand and create new jobs.

It is also sensible to focus first on improving existing enterprises rather than financing new ones, since this is cheaper and carries fewer risks.

Therefore, in my view, our programs should be aimed at financing improvements to individual business processes, technologies and production facilities that specifically raise labor productivity.

For example, they could finance digitalization, automation, further stages of processing, robotization and so on.

Only in this way can we move toward producing genuinely competitive goods with high export potential.