Prof. Finn E. Kydland was a co-recipient of the 2004 Nobel Memorial Prize in Economics. He was Invited Speaker at the Science for Development Conference that has been organized by the Rencontres du Vietnam Association at the ICISE Conference Center.
Vietnam News interviewed Prof. Kydland in Quy Nhon, on the sidelines of the Conference.
What is your view on large State owned enterprises (SoEs) in economic development?
It’s an extremely bad idea. You’ll see that in China, for example. I think China, with the same use of resources, could have grown substantially faster than it has done and that is in part because of the lack of development in the financial and banking sectors. State-owned banks tend to favour the big State-owned companies and I don’t think bureaucrats are the ones who know which are the best or most promising projects. I don’t think they have the expertise or the incentives to identify the best projects. A market economy potentially works much better because of the market incentives to learn how to identify such projects.
Việt Nam, not unlike many other countries, relies on GDP as a single all-powerful indicator of growth. What is your view on this approach to measure growth?
Typically, there are two basic components: consumption expenditures and investment expenditures. In developing countries, investment expenditures are very important. For example, if a bigger chunk of GDP was consumption then it’s not a good thing for developing economies. Successful developing economies have been willing to forgo consumption, not completely but reduce it below what we call a steady state, and instead devote more of their GDP to investment which allows them to grow faster. In return for giving up consumption today, you’ll get to enjoy more in the future than you otherwise would have.