Dismal productivity trends need not continue

The OECD – Organisation of Economic and Cultural Development – recently painted a dismal G7 economic picture claiming  ‘slowing rates of productivity growth’ in advanced nations over the last ten years or so

Other data suggests the same trend is underway in many less affluent nations according to an article by Marc Levinson – his gloomy forecast is ‘the outlook across most of the world is sluggish economic growth that will raise wages and improve living standards only slowly over the longer term – and this will lead to festering discontent among the many who are falling behind’:

  • In the short term, a business cycle rebound, large government deficits, very low interest rates and healthier banks have combined to boost economic growth and raise many incomes
  • In the longer term, however, the rate at which living standards improve depends almost entirely on the (labour) productivity growth rate – and governments everywhere have poor records with this – their spending, tax and monetary policies cannot do much to help


Since the Industrial Revolution (labour) productivity growth:

  • First grew slowly, then faster in the late 19th century, sluggish in the early 20th century, and strongly (~ 5% p.a.) post-WW2 encouraging the development of welfare states and many entitlements to state healthcare, pensions and other social benefits
  • Then a slowdown at the end of the 20th century led to stagnant wages as welfare states became more burdensome despite a spurt in the late 90s as business re-organised around the internet


Overall, billions of people experienced unimaginable improvements in their quality of lives as a result

Now, however, labour productivity growth has flat-lined in just about every advanced national economy, being less than 1% per annum for most – this has led to wages stagnating, real spending power falling and inequality looming ever larger

Populations had got used to ever-rising incomes and generations always being richer than their parents but that has all come to a juddering halt

Some top businessmen now say: “Life is unfair so most people had better get used to it”

Equally, some government ministers offer no hope and just bemoan the fact that: “There’s no magic-money-tree to pay for public sector pay rises and our (inefficient) welfare state”

But that’s simply not good enough

We need leaders with energy, ambition, creativity and courage coursing through their veins – people who genuinely strive to improve the lot of their fellow-men and women

For  a start, different governments can each make a significant difference by comprehensive planning and coordinated investment in:

  • Education creating labour-forces capable of handling more complicated and value-adding work
  • Infrastructure, enabling truckers to move freight longer distances more quickly and allowing employers to recruit from wider labour pools
  • Research into areas like agriculture which can lead to higher crop yields per acre
  • International trade deals, not only to lower tariffs and increase trade volumes but also increase competition amongst suppliers to be more efficient and innovative


But most national performance improvement potential – revenue, wealth and wages growth – lies in the hands of private sector managers, especially the 80% of laggard companies that exist in every sector they have

All such businesses have huge potential to improve their productivity levels and results – indeed, most of their managers may well be working hard, doing their best and believing they could do little more – and, without good performance measures and ‘productivity knowhow’, they’re probably right

But the measures they need are already known and there’s plenty of new/ better ideas, technology, business methods, products or services, customers and markets at home and abroad for them to choose from which would make a big difference

Businesses just need the right people on the bridge – not mere watchkeepers whose only order is ‘steady as you go’ because they can’t see the opportunities, or rocks, ahead and wouldn’t know what to do even if they could

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