Politicians want to promote supposedly promising branches of the economy with state-financed large-scale programs. But even Adam Smith knew why this path leads astray.

Adam Smith based on a painting by Charles Smith

Noh Corona, the world will be different than before, it is often said. This statement is as correct as it is banal, because humanity has never returned to a bygone world. Panta rhei (“Everything flows”) – this knowledge is already said of the ancient Greek philosopher Heraclitus. What recurs are economic challenges and the resulting economic policy consequences. In the debate about the role of industry in the old industrial nations and the financing of economic growth in the euro states through an EU fund, figures of thought known from history are celebrating a renaissance.

In 1949 the Dutch economist Petrus Johannes Verdoorn published an article in the Italian magazine “L’Industria”, in which he explored a connection between the growth of the economy and the growth of labor productivity. At the time, the Dutchman worked for a United Nations commission that dealt with the economic reconstruction of Europe and wanted to gain an assessment of the growth potential. On the basis of data for European countries from the 19th and early 20th centuries, Verdoorn came to the conclusion that an average increase in economic output of one percentage point was accompanied by a growth in labor productivity of 0.45 percentage points for his observation period.