08-24-2017, 12:37 PM
A couple of weeks ago I wrote about The Productivity Puzzle, - namely that despite our continuing technology advances, the US and other developed economies have experienced a sharp decline in productivity growth over the past 10 to 15 years. In an article published earlier this year, McKinsey offered three main possible explanations for this productivity growth decline: the difficulty of measuring productivity in the digital economy, the shortage of demand and investment opportunities, and the impact, - or lack thereof, - of technological innovations. “So far, though, economists have failed to reach consensus on the causes of the productivity growth slowdown or indeed the relative significance of the various arguments,” wrote McKinsey.
But another article, The New Class War by Michael Lind, offers a different, rather provocative explanation for our low productivity growth. According to Lind, the last few decades have seen the rise of managerial elites in advanced economies which have been pursuing profits by methods other than technology-driven innovation and productivity growth. Instead, they’ve been taking advantage of the significant reductions of trade barriers over this timeframe to pursue profits based on global labor arbitrage, as well as tax arbitrage and other forms of financial engineering.
Lind references James Burnham, John Kenneth Galbraith, and other political scientists and economists whose works I’m not familiar with. I found the article quite interesting because Lind’s explanation for our declining economic and productivity growth seems quite different from those of most other economists. Let me attempt to summarize his key arguments.
Irving Wladawsky-Berger: Global Arbitrage and the Productivity Puzzle