on >>...high productivity and ...<<
PRODUCTIVITY GROWTH. STUPID
All in all, the new paradigm economy has miserably failed by all accounts. Since there is little left to boast about, the reported stellar productivity growth has become the favorite topic in the economic discussion. Mr. Greenspan and numerous economists keep emphasizing that at this is the single most important factor affecting the economy's performance.
It strikes us in the first place that the stellar productivity growth that has been reported for the past several years has apparently failed to exert any of the great, beneficial effects generally ascribed to it. Why should it do wonders in coming years?
Second, we have to point out that the high esteem of today's American economists for productivity growth is unique. In onspicuous contrast, there is very little about it in the writings of the old economists. Even Joseph Schumpeter, in his large opus about business cycles, never mentions it. Why this silence? The old economists were, of course, fully ware of the importance of productivity growth. But regarding it as the dependent variable of capital accumulation, they focused on the key conditions fostering and allowing for a high rate of capital accumulation: savings, profits and investment.
In the end, in fact, it is all about capital investment. It is the critical mass in the process of economic growth that generates all the things that make for rising wealth and living standards. Capital investment creates demand, employment, income, profits and tangible wealth while the buildings, plants and equipment are produced. And with their installment, these capital goods create growing supply, productivity, employment, incomes and profits that, by the way, also repay the debts.
Strictly speaking, productivity growth is an abstract quantity that, by itself, creates neither demand nor supply and neither income nor profits.
(from The Richebächer letter july 2002)
dj
PS: I'm not (just;) needling Mike, I think this has some substance. But again, maybe I'm too much under the influence of my Austrian neighbours (Heinz & Co g) |
