(146-1) February 25 2015. Though there are signs the economy is improving on paper—six long years after the Great Recession--the current American Business Model isn’t delivering for most most Americans. And productivity is suffering.

DESPITE ALL THIS NEW TECHNOLOGY, RECENTLY U.S. PRODUCTIVITY GROWTH HAS BEEN LOUSY.

WHY?

I DON’T THINK IT IS A MYSTERY. IF YOU TREAT YOUR WORKERS BADLY (AND AS WORMS), THE WORM WILL EVENTUALLY TURN—EVEN WITH FEW WORKER RIGHTS AND NO TRADE UNION.

From the NYT of February 23 2015.

Wage stagnation is a decades-long phenomenon. Between 1979 and 2014, while the gross domestic product grew 150 percent and productivity grew 75 percent, the inflation-adjusted hourly wage of the median worker rose just 5.6 percent — less than 0.2 percent a year. And since 2002, the bottom 80 percent of wage earners, including both male and female college graduates, have actually seen their wages stagnate or fall.

For the moment, I am just going to focus on the productivity issue. Much is being written about the mystery of why productivity has been increasing so slowly recently—despite the truly dramatic improvements in the capabilities of our technologies, but I don’t regard this situation as being mysterious at all.

Productivity gains come from (1) MOTIVATION: People working smarter because they are motivated to do so; (2) CAPABILITIES. Capital investment so that people can work smarter; (3) KNOWLEDGE & TRAINING. These are the requirements which enable people to know how to work faster.

Let me list me list the reasons why I think productivity is increasing at such a slow rate.

• MOTIVATION. All too often, U.S. management has adopted an adversarial, divisive, and destructive stance towards employees. On top of that senior management is greedy—and can be seen to be so to the point of excess. A consequence is that all too many employees are de-motivated. Bad managements=Lousy morale=Poor productivity. Personally, I believe this is the single greatest drag on productivity.
• CAPABILITIES. American business has been under-investing for years—particularly since the Great Recession. Money which should have been spent on plant and equipment has been spent on share buybacks, Otherwise, there has been a tendency to hoard cash to the tune of trillions of dollars. In addition, infrastructure has suffered from a truly horrendous lack of investment—thus putting up costs.
• KNOWLEDGE & TRAINING. Thirdly, U.S. business has largely dodged responsibility for training—and tried to foist it on on government—while at the same time extolling the virtues of the private sector while chastising government. This feckless and hypocritical attitude has hade exactly the results one might expect.

I don’t pretend the above are the only reasons for our poor productivity performance recently—merely that they are the principal ones. Others include.

• THE DISTRACTION FACTOR OF NEW TECHNOLOGY. Computerization does help us to do many things that previously were impossible—but they also encourage us to waste many hour a day. E-mail and internet browsing are a mixed blessing.
• THE CUMULATIVE EFFECTS OF AN UNDER-EDUCATED WORKFORCE. U.S. policies, whether deliberately or otherwise (a matter open to some debate) seems to be geared towards creating an ever increasing, poorly educated, under-class. Its members tend not to vote—which helps the Republicans greatly—but they also act a steadily increasing drag on the productivity of the economy.

The Right Wing likes to blame government—taxes and regulations in particular—for everything that is wrong with the economy.

If government was intrinsically as inefficient and flawed as its critics like to maintain, then clearly countries with activist governments like the Scandinavian countries, Germany etc. would be demonstrably less efficient and less productive.

In practice, the reverse is true.

The following is taken from a McKinsey report. The Swedes annual productivity growth of 5.7 percent over the period 1993-2010 is just plain remarkable—and this is a country where taxes are high and government is particularly active. They also take long vacations and work shorter hours—yet they do better in a host of ways than we do—and they live longer.

Why don’t we learn from them? Because it doesn’t suit a small number of Americans who do extremely well from the status quo—and the rest of us either feel helpless or are ignorant.

From 1993 to 2010, the Swedish economy grew at an annual rate of 2.5 per cent, outperforming the EU-15 as well as the United States. Sweden’s GDP growth per capita, 2.0 per cent per year over the same period, was also higher than in the EU-15 and the United States. As a result, Sweden advanced from 14th to 11th place in OECD’s ranking of countries by wealth and Sweden’s GDP per capita is currently 15 per cent higher than the OECD average. Sweden also scores high on several other key metrics that are commonly used to assess a country’s economic performance. The country has a comparatively low public debt, a balanced budget and a current account surplus. The strongest growth engine in the Swedish economy over this period has been the international sector, i.e. the manufacturing industry, business and financial services, and commodities (illus. 1). This sector accounts for around one third of the Swedish economy, and its value added grew by 4.3 per cent per year from 1993 to 2010. The manufacturing industry, in particular, has achieved a rate of annual productivity growth of 5.7 per cent, which is very strong by international standards. However, Sweden also differs from other European countries in that the number of jobs in the manufacturing industry is actually increasing if the share of business and financial services that are sold directly to the manufacturing industry is included.

VOR words c. 500

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