The Fourteenth Banker Blog

March 29, 2010

Productivity Growth, Jobs Report, and Misery

Filed under: Running Commentary — thefourteenthbanker @ 6:33 AM

According to Ben Bernake, productivity growth is the source of improvement in living standards.    That’s “Old Economy” and it is based on the illusion that monetary measures are accurate representations of living standards.     I suppose that could be somewhat true, in aggregate, if living standards were really a function of money.     Or, if money was stable.    Or, if accumulated monetary wealth represented real lasting wealth, or future productive ability of real goods, or what we can purchase in a college education for our children and grandchildren.    Perhaps if the hour of labor counted was an hour of satisfied employment with job security, a reasonable workload, a few moments for rest or reflection, a lack of harassment, no death by a thousand goals, the ratio might mean a little something more.

However, it is time to rescind that statement.     It has become perverse.    Now productivity growth means maintaining or growing output as measured in monetary terms while minimizing payroll and benefits.     Add a dollar of sales and cut pension contributions and you get productivity growth.     Raise prescription co pays and you get productivity growth.      Increase salaries in the Executive Suite, offset with decreases in the ranks by the same amount plus $1.00, and you get productivity growth.

That is not productivity growth.     Let no one say when GDP increases from its abysmal prior year levels, and employment is frozen, and real wages growth is negative, and gun shop sales are booming, that we had productivity growth.

Robert Kennedy in 1968 made these comments on what GNP (now GDP) measures.

For too long we seem to have surrendered personal excellence and community value in the mere accumulation of material things. Our gross national product now is over 800 billion dollars a year, but that gross national product, if we judge the United States of America by that, that gross national product counts air pollution, and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for people who break them. It counts the destruction of the redwoods and the loss of our natural wonder in chaotic squall. It counts Napalm, and it counts nuclear warheads, and armored cars for the police to fight the riots in our city. It counts Whitman’s rifles and Speck’s Knifes and the television programs which glorify violence in order to sell toys to our children. Yet, the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play; it does not include the beauty of our poetry of the strength of our marriages, the intelligence of our public debate for the integrity of our public officials. It measures neither our wit nor our courage neither our wisdom nor our learning, neither our compassion nor our devotion to our country it measures everything in short except that which makes life worth while.

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