The End of Want?
Quarter after quarter the macroeconomic news from the United States teaches the same lesson: real GDP growth at a sustained rate of 3% per year is not enough to increase America's employment level. Not even real GDP growth at a sustained annual rate of 4% is sufficient to increase the share of American adults who have jobs. The underlying rate of labor productivity growth in the US, which we pegged at 1.2% per year at the start of the Clinton administration and at 2% to 2.5% per year at the end of the 1990's boom, now seems even higher: it is getting harder and harder to keep the estimated labor productivity growth trend below 3% per year.
How long this boom in productivity growth will continue is anyone's guess: optimists point to the fact that waiting behind the information technology revolution, ready for takeoff, is the biotechnology revolution, and behind that is a looming nanotechnology revolution. If such improvements in productivity do last, the vistas this will open are amazing: an America 50 years from now in which the average full-time worker earns not $40,000 a year, but the equivalent of today's $160,000 a year.
The US is at one pole of the world economy. China - even with its economic miracle since Deng Xiaoping went on his Southern Expedition - is at the other. But China's labor productivity is now growing at roughly 6% per year. If that rate can be sustained - and if the Chinese economy becomes and remains integrated enough for us to be able to speak of it as a single entity - China's labor productivity will be comparable to today's America sometime before 2050. And India? If the growth rates of the past 15 years continue, and if India remains united, its labor productivity in 2050 will be comparable to that of Spain today.