> > Floyd Norris: An Exaggerated Productivity Boom May Soon Be a Bust
> >
> > By FLOYD NORRIS
> >
> > [P]roductivity is not what it was cracked up to be. And therein lies
> one of the great fallacies of the recent boom and bubble.
> >
> > Productivity — at least as measured by the government — zoomed in
> recent years, rising at a faster rate than at any time since the 1960's.
> That increase helped to persuade many economists that it was a new era,
> one in which old economic verities might not apply.
> >
> > Rising productivity meant that the economy could grow rapidly without
> fear of inflation while the information technology revolution, in the
> year-old words of John T. Chambers, the chief executive of Cisco Systems,
> enabled companies to "reduce costs, generate revenue in new ways, empower
> employees and citizens and provide the agility needed for the Internet
> economy's rapid pace."
> >
> > Now productivity is falling, and Mr. Chambers is coping with a
> collapse in demand that he did not see coming and still cannot quite
> believe. This week he was still talking of Cisco returning to a 30
> percent to 50 percent annual growth rate when the economy recovers.
> >
<Ellipsis>
> > Productivity booms are not permanent things.
I wish people wouldn't do this. We _don't know_ whether or not the
productivity boom of the late 1990s was real or not. We may not know for
decades. (The productivity boom of the 1920s turned out to be permanent and
real, but we couldn't be sure until the 1950s or 1960s, when it became
clear that labor productivity growth had a long-lasting acceleration in
about 1919.) We _do_ know that when the economy slows or recesses,
realized labor productivity always falls. The latter is what Norris is
referring to, but he can't generalize from that to statements about the
trend of productivity growth. Nor can I.
There's a kind of "Say's Law" mystification of productivity growth. It's
assumed that when productivity trends upward (or does so at a faster rate)
that's automatically a good thing. Even ignoring external costs, etc., a
rise in productivity may be a disaster if demand doesn't rise in step. All
else constant, rising productivity means that demand _has to rise_ in order
to keep unemployment from rising (one formulation of Okun's Law). But
demand doesn't always rise, especially with the way that capitalists are
always striving to push wages (and thus ultimately, consumer demand) down
and the way in which capitalist investment can "stop on a dime" causing the
economy to stall.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~JDevine "Segui il
tuo corso, e lascia dir le genti." (Go your own way and let people talk.)
-- K. Marx, paraphrasing Dante A.
