The modernization and integration of the eastern German economy continues to be a costly long-term process, with annual transfers from west to east amounting to roughly $70 billion. Growth remained sluggish in 2003, but picked up in 2004. Presumably because of generous sicktime benefits, Swedish workers report in sick more often than other Europeans.



Economists theorize that this is around 6% unemployment due to frictional unemployment and structural unemployment. Cyclical unemployment causes a slight variation above and below this natural rate. Economics, or a system of sharing limited resources, is really just one aspect of human existence but in a market economy, economics becomes more important than everything else.

Health, the environment, community - all of the physical, social, religious, and emotional aspects of our lives are subsumed or taken over by the economic aspects of our lives. Economic theory is very clear on the implications of such huge imbalances: Foreign lenders need to be compensated for sending scarce capital to any country with a deficit. The bigger the deficit, the greater the required compensation.

Economic growth is indeed slowing, in our view. After the torrid third quarter, which saw gross domestic product increase a whopping 4.9%, signs have emerged of weaker spending by both consumers and businesses. Economic conditions, and the president's response to them, are widely viewed as the cause of his loss of public approval.

Economic growth is an increase in the production and consumption of goods and services. For distinct economic or political units, economic growth is generally indicated by increasing gross domestic product (GDP).

Capital markets are underdeveloped and poorly regulated but have been growing. Poor corporate governance weakens stock market transparency. Capital is deployed here because, historically, we have been the most friendly nation for capitalists to deploy that capital. Capital's share of income has been the highest since the 1960s, while labor's share has been relatively low.

This has raised concerns over fairness, the sustainability of consumption growth (if labor's share of income is low), and a slowdown in profit growth if labor begins to get a bigger share.

Capital controls limit capital flight. And the government, unlike Japan's in the 1990s, has plenty of money if necessary to write off bad loans.

Taxes and social security contributions add to the cost of labor in the official economy and hence are key factors driving the growth of the shadow economy. The bigger the difference between the total cost of labor in the official economy and the after-tax earnings from work, the greater the incentive for employers and employees to avoid this difference and participate in the shadow economy.

Tax inspectors can pick the chip at random, download its contents to the tax computers and use it to issue tax assessments. The information thus gathered can also be crossed with and compared to information from other sources.