PRODUCTIVITY AS A SOURCE OF LONG TERM GROWTH

Extract of Article written by Bart van Ark is executive vice president, chief economist, and chief strategy officer of The Conference Board, as well as a professor of economic development, technological change, and growth at the University of Groningen.

"Productivity is the only source of sustainable long-term growth. But there is no silver bullet to create productivity. And even drivers that work in some circumstances have the opposite effect in others. For example, more competitiveness doesn’t bring innovation under all conditions; labor market flexibility doesn’t always bring about higher skills; and, more generally, aggregate productivity growth will only rise if the winners gain more than the losers give up. In other words, allow failure to create success.

Moving the productivity frontier out results from breakthrough technologies and subsequent incremental innovations. Governments can support basic research to strengthen innovation, but after that, the best thing they can do is to get out of the way. The outcomes of innovation are highly uncertain. Even successful innovations often do not translate immediately into productivity gains. Each business needs to seek its own optimal efficiency by experimenting, learning, practicing, and implementing. Some call it entrepreneurship."

As Roberto Unger of Harvard Law School said, “At every level the greatest obstacle to transforming the world is that we lack the clarity and imagination to conceive that it could be different.” Nothing is truer as we contemplate the future of productivity.