Productivity growth in the face of nonexistent GDP may seem illusory, but it isn't
the more important point is that reducing labor force ties into lower gross production. this is bad. in fact there is an illusory aspect to the productivity growth. this is clearly seen in the fact that over the long term, productivity growth comes not from amputating work force, but from leveraging new technology. hence the importance of capital investment.
the important thing to realize about our so-called recovery over the past year is that it has not involved any rebound in business capital investment. without this investment, there is no sustainable productivity growth. instead, there is just more amputation of the mfg sector and more back rubbers and Realtors(R) selling overpriced houses to each other.
if you do not understand why this is a Bad Thing, then you are missing some important points.
To say manufacturing is more important than services is to ignore the last 90 years of economic theory and history
be careful about putting words in my mouth. i said no such thing. you need to look at what i actually said, not make a caricature of my statement.
obviously the service sector of the US economy has flourished. but like all things, there are limits. while it is nice if we all work at Starbucks when we don't give foot massages to actors, one way or another we have to pay the foreigners for the imported coffee and coffee cups and everything else which we import in excess of our exports, which results in our current account deficit on the order of $500 BILLION, or about 5% of GDP.
you will notice that other countries running 5% current acct deficits tend to experience things like hyperinflation and debased currency. the US has benefitted greatly from its geopolitical hegemony and in providing the world's reserve currency, such that it has been able to run a "deficit without tears" as the Frogs put it back in De Gaulle's day.
but the structural imbalances eventually reach a point where the whole system falls apart, and i suspect that day is soon for the US' deficit without tears. |
