Driving the economy: The role of a special economic sector

Abstract

The paper examines the true source of economic growth, which allowed “break ing” the regime of the Malthusian trap (poverty trap) that had existed for thousands of years. The researchers hypothesize that the driver of the destruction of a stagnation regime and the for mation of a stable economic growth regime instead is the so-called special sector of the economy characterized in an extremely high return on capital, more than 100% per annum. The authors search for concrete examples in both the history of Modern Europe and the modern world economy to identify special sector’s segments and determine the rates of return to wealth in them. The methodological basis of the research includes the models of economic growth and Thomas Piketty’s concept of a connection between the economic growth rate and the rate of return to wealth. The application of the method of stylized examples allows considering the essence of the studied phenomenon in the most refined form on the basis of a quantitative assessment. As a re sult of the study, the researchers discover main types of businesses and specify their profitability for the Modern Age (trade in spices, tea, tulips, slave trade, privateering, etc.) and the present (film industry, oil production, pharmaceutical production, production of digital devices, etc.). The study reliably confirms the existence of the special sector of the economy, thus providing a basis for a deeper understanding of the mechanism of economic growth.

Keywords

• malthusian trap
• economic growth
• special economic sector
• technological development
• primitive accumulation of capital