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February 26, 2017



Most such 200 year graphs, you can see historical events like WWII and Thatcher. This is clearly not random noise, but doesn't seem to tie obviously into the historical narrative either.

Maybe it is more to do with globalism; the first peak at 1870 is the start of 'new imperialism'. Imperial lands were for the first time things you could invest in as a regular capitalist (as opposed to a 'venture state' like the East India company). And 1970 is the date when the end of the war in Vietnam made the same true of much of the third world.

Peter K.


That's how I've been thinking about productivity. Tight labor marktets and social democratic macro. Unfortunately economists are trained not to think in these terms.

Also since the Reagan/Thatcher revolution, productivity increase have coincided with financial bubbles like the Dot.com tech stock and epic housing bubbles. Massive leveraged ponzi schemes are "increasing productivity" or profits.



Stewart S

There is another explanation. The proportion of service industries in the economy has grown rapidly and accelerated with globalisation. It is difficult to squeeze productivity gains out of hairdressers and care workers.

The slowing technical change hypothesis has been proposed many times in the past, e.g. James Galbraith and seems to make more sense than just trying to blame it on capitalism. If it was just neo-liberalism I would expect to see weaker effects in countries with different models. I think that there is too much ideology in your arguments.

Bekett's Dog

Do you link any of the productivity slowdown with the 'orthodox' Marxist analysis of the Tendential Fall in the Rate of Profit? The fall begins at the end of the period of productivity growth and has not recovered as the rate of profit hasn't either (depending on which analysis you use).
One of the most plausible explanations for the continued fall even with the moderating factors of neoliberalism is the increase in the moral depreciation of capital. This has arguably accelerated with the information technology revolution. More and more firms seeking to gain advantage by replacing hard and software at greater and greater rates but with no actual increase in productivity (or profitability). This suggests even more technology in an installation phase (possibly an endless one). (On a similar vein David Harvey cites Brian Arthur's analysis that the evolution of technology is often largely driven by trying to solve problems the technology itself has created: better touchscreen phones, more than how we use the existing technology for productive gain.)
Thus, the surplus capital absorption problem is addressed by: rent seeking in property; increasing investment into fictitious capital (novel financial instruments); investment in new technology with little productivity gain, other than by increasing the productivity in the technology sector itself. All of which results in little genuine investment.
I am not sure the economic policy response to this (if you accept the analysis, but don't believe in the imminent socialist revolution)? Two policy elements being to deliberately target higher inflation (as a means of deleveraging debt) and taxing non-productive wealth holding (such as a land tax))?

Steve roth

Another possible explanation?

Wealth concentration has been skyrocketing since circa 1980.

The inevitable result: the annual velocity of wealth has been plummeting, from 27% to 18%:


For pretty obvious reasons: declining marginal propensity to spend out of wealth.

Less spending, less production.

Even while capacity — at least as measured by available labor hours — has steadily increased:



Of course Neoliberalism does not increase productivity. That's just propaganda as the statistics show.

What happened in the 1970's - The oil crisis, in 1973 and 1979, followed by Thatcherism-Reganomics.

But what is economics for?

We can't motive CEO's due to the effects of Maximising Share Holder Value, although some haven't got the message.

We can't motivate workers by treating them as widgets, the Vitality curve is a very bad idea.

Profits from innovation can be huge, Google, Amazon, etc. Although not as big as monopoly profits in a network business (e.g. Microsoft)

Slow growth is the consequence of deliberate concentration of wealth to the already wealthy.

The Golden Era was an era of greater equality at least in the UK. Inequality depresses growth.

The rate of technological change is greater then ever, just look at the device you are reading this on.

Countries with different models (mercantilism) like China?

Steve roth

Oops, replace first link with:


John H. Morrison

I found the opening paragraphs hilarious. These days, those arguments can only be parody -- nicely refuted by the rest of the article.

I have noticed a general misunderstanding of "productivity". One way to increase "productivity" is to lay off workers while keeping production unchanged. Overall, that tends to backfire because the workers buy fewer things, but it benefits the firms that do it. (It's "the Prisoner's Dilemma", "the tragedy of the commons", "the race to the bottom", etc.)

If you've introduced a self-checkout system that eliminates ten jobs and replaces them with one job, you've greatly improved productivity.

For reasons like this, I think that "productivity" and "economic growth" should be decoupled.

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