Lecture 4 within “Modern Economic Issues”, by Robert Whaples, is about productivity, increases in which are what drive improved per-capita living conditions. One of the big questions that occupied economists is why Europe has lagged in labor productivity (output per worker-hour) compared to the U.S. The consensus seems to be that formation of new companies is important but that the destruction of big inefficient companies is equally important. The Europeans have been comparatively reluctant to let their dinosaurs go extinct, which means that a lot of resources (capable people, production facilities, capital) are tied up by inefficient management and structures. Aside from direct subsidies to the big and struggling, the Europeans have kept dinosaurs alive by making regulations so complex that small companies can’t afford the time and effort to get required permits, etc.
The lecture made me wonder if the sluggish U.S. recovery since the 2008 collapse might be partly due to the fact that the American government has done so much to favor the big. The biggest banks got the most cash. Chrysler and GM were preserved in the form that had led them to insolvency, rather than being allowed to have their parts folded into new enterprises. States handed out all kinds of subsidies for establishing or maintaining facilities but these subsidies were available only to big and established companies. Regulations have become more complex to the point that competition from small or new companies is further discouraged.