Populists and Productivity
According to the view prevailing in Silicon Valley and other global technology hubs, we are entering a new golden era of innovation, one that will radically increase productivity growth and improve the way we live and work. So why haven’t those gains appeared, and what might happen if they don’t?
NEW YORK – Since the global financial crisis erupted in 2008, productivity growth in the advanced economies – the United States, Europe, and Japan – has been very slow both in absolute terms and relative to previous decades. But this is at odds with the view, prevailing in Silicon Valley and other global technology hubs, that we are entering a new golden era of innovation, which will radically increase productivity growth and improve the way we live and work. So why haven’t those gains appeared, and what might happen if they don’t?
Breakthrough innovations are evident in at least six areas:
- ET (energy technologies, including new forms of fossil fuels such as shale gas and oil and alternative energy sources such as solar and wind, storage technologies, clean tech, and smart electric grids).
- BT (biotechnologies, including genetic therapy, stem cell research, and the use of big data to reduce health-care costs radically and allow individuals to live much longer and healthier lives).
- IT (information technologies, such as Web 2.0/3.0, social media, new apps, the Internet of Things, big data, cloud computing, artificial intelligence, and virtual reality devices).
- MT (manufacturing technologies, such as robotics, automation, 3D printing, and personalized manufacturing).
- FT (financial technologies that promise to revolutionize everything from payment systems to lending, insurance services and asset allocation).
- DT (defense technologies, including the development of drones and other advanced weapon systems).
At the macro level, the puzzle is why these innovations, many of which are already in play in our economies, have not yet led to a measured increase in productivity growth. There are several potential explanations for what economists call the “productivity puzzle.”
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