Underlying Problems of Global Recovery. The Example of Productivity
Most thoughtful public discourse on economics in democratic nations is rare and fragmented. Such discussions are easily branded as the territory of experts, idealists, and theorists. Most readers of major news sites are surely frustrated by the seeming loss of thought that surrounds them.
At the core of the distraction agenda is a lack of discussion on policies to increase productivity in major capitalist systems as a principal vehicle for global economic recovery. It is true that the scholarship on productivity has become highly complex. However, we need data on how efficiently we produce the goods and services that we use, how to curtail wholesale environmental damage, and whether policies can be devised to increase productivity but also to encourage economic growth and better social welfare.
Much of the present discourse is focused on labour productivity rather than total productivity and a form of thinking that plays directly into the hands of conservative, embedded dogma. Measured labour productivity levels are the product of capital, technology, planning, and management. The common focus on demand as the central element conditioning productivity is not viable and is usually badly applied to policy. Indeed, if increased demand promotes new investments in goods and services as prices rise, then new investments increase the efficiency of production through a variety of factors like improved externalities or infrastructure, industrial innovation, and confidence in the market.
The trouble is that in most Western nations this simplicity is dumbed down with the claim championed by fiscal conservatives that lower taxes, especially on businesses, will increase demand and have a trickle-down effect on productivity and production.
If their logic was sound, then tax relief would be maximised to target the working poor, and lower-middle classes. Taxes would not be lowered for the top 1%. Unfortunately, in much of modern capitalism, Jeff Bezos and other robber barons don’t typically invest in factories, workshops, innovative laboratories, and so on unless it directly impacts their personal bottom lines. For a perfect illustration, Amazon is pursuing automation to cut down on labour costs. The notion of an economy and its investors using capital to invest in industry because of lower taxes is frankly ludicrous. It is crass cynicism and it is at the heart of all conservative economic dogma.
In addition, governments need to take into account the environmental effects of new growth surges. Any consistent policy towards productivity would advocate taxation on wealth, and on energy or other polluting industries because corporate profits are not being invested in internal technical innovation to decrease their carbon footprint. They additionally do not go into improved relations between large producers and their suppliers, many of which are small and medium-sized companies. The spread of existing best techniques within an economy, industry, or region, as well as between regions, is the most neglected aspect of productivity studies and policies.
We have come a long way from fiscal conservatives with their dogmatic position on taxes. Acknowledgment of the many supply-side elements of increased productivity, as well as an understanding of how demand-side elements actually function, could vastly improve the economic performance of rich nations. And this is needed more than ever. Not only because of the pandemic and Ukraine, but because modern capitalism has shifted towards truly massive investments in land and built-up property, insurance, and pension funds, carried in portfolios that have no knowledge of the needs and dynamics of enterprises in goods and non-financial services.
They have no loyalty to particular fields outside of concerns with how to increase their portfolios, not by delving away at technical improvement, but by examining the gaps in legislation and the advantages in complex regulations that allow the rich to hone tools for getting richer and striving workers to continue working at a losing level.
This seismic fault at the core of modern capitalism is automatically retrograde for the global system. The avenues are multitudinous, from dampened foreign trade and investment, insufficient physical infrastructures, and, yes, the vociferous attack on public sector workers for being so intrusive. Whilst fiscal conservatives will continue to lobby for tax relief and continue blaming ‘the other,’ the investors and CEOs will go their merry way, and that way seldom takes them onto a high street in Bradford or a sidestreet in Glasgow. Indicative of the many ironies of our transitional world – it was the World Bank, back in 2006, prior to the economic collapse in 2008, that warned us that 21st-century capital was to be very highly concentrated in the absence of wholesale institutional and regulatory reforms.
But the problems of radical action through imaginative policy seem insurmountable. So many government budgets are eaten up before any new administration settles in. Budgets are committed to the military and social services, for appeasing the vested interests in agriculture, and the energy industry. The huge debt expenditures needed to cover the massive social costs of COVID, and now Ukraine, conduct a chorus of restraint, of short-termism that force heads down and keep imaginations trapped in the amber of convention and protection.
The chances of increasing national debts to obtain the funding for innovative public projects that might redirect private capital, create infrastructure, and provide a healthy environment for new training and educational streams, all of which are positive external economies for all firms, are the slimmest they have ever been. To argue that the productive investment of new public debt could be anti-inflationary and pro-growth and welfare-creating hardly ever arises in the media or in parliamentary level discourse. The rhetorical distractions of dangers from ‘the other,’ from labour unions, and from government investment itself, cover that seismic gap at the centre of the capitalist stage as the civil societies of democracy are distracted by the hidden commanders of the limelight.