“Sustainable growth is based on increased productivity and equality”, Ben Bernanke once said. He is right and it’s essential to achieve in today’s world. In this short video McKinsey Global Institute partners James Manyika, Jaana Remes and Richard Dobbs look at the patterns of global productivity:
Some of you readers questioned if it’s possible to predict productivity. According to James Manyika: “It’s always very difficult to predict if you can predict productivity or not. But when we look at sectors across the world we do know what the enabling environment looks like”. He proceeds to say that technology is a big part of it as well as competitive markets and labour regimes. And not to forget, rules on how you use land and equity.
Focusing on the short term is, according to Jaana Remes, dangerous because we need to put emphasis on long term growth. Above all providing a policy environment that encourages productivity, investment and avoids protectionism.
High productivity but lower wages
Dobbs correctly points out that in the past years of high productivity corresponds with high job creation. But that overlooks the fact that in the past salaries also rose during such years. That hasn’t been the case the last few decades because productivity has risen much faster than wages. And the fact that technology is taking over both blue and white collar jobs in the West has further increased the downward spiral of wages. And unless we want autocratic rulers in charge we need to increase wages.
Income gap increasing
According to Oxfam the 1 percent richest people in the world will soon own as much as the remaining 99% do. The main reason is what Thomas Picketty stated that return on capital is so much higher than economic development. Researchers are of the opinion that technology is a main reason for that. In the past increased productivity and higher salaries have gone hand in hand.
One solution to make sure all human beings have food on their table and a roof over their head is an unconditional basic income in which all citizens or residents of a country regularly receive an unconditional sum of money. The concept is actually being discussed in countries around the world. The the European Union, Asia, North America, Africa, Asia, Oceania and South America are looking into that possibility. Implementing a basic income would make it easier to allow technology to take over jobs without poverty increasing drastically. And hopefully make it more difficult for demagogues so win elections.
Anger about inequality fatal
Throughout history anger about huge gaps between the haves and have nots has been one of the strongest political forces for change. An interesting aspect here is that equality between countries is increasing while inequality is on the rise inside all countries thanks to neoliberalism. Ben Bernanke was right when he said that sustainable growth is based on increased productivity combined with equality. There are no easy answer to the problem of increased inequality. But it will definitely become an increasingly important issue all around the world unless it’s addressed. It’s hence high time that politicians and business leaders make an effort to increase equality. Otherwise we will move into an era of dictatorships.
Do you agree with Ben Bernanke that increased productivity and equality are necessary for sustainable growth? Should the world start focusing on long term growth again? How can we make high productivity create both growth and higher salaries again? Is an enabling environment, as outlined by Manyika essential for increasing productivity? Is it a good idea that the 1% wealthiest people own as much as the remaining 99%? Or, could that in the long run lead to instability? What’s your opinion on basic incomes to all citizens? Is that necessary in order to avoid poverty when technology takes over more and more jobs? Or do you have any other ideas that can make higher productivity and growth possible without increased unemployment and poverty? Do you believe it’s essential to reduce the income gap to save liberal democracy?
Video: McKinsey & Co. – Picture: Fibonacci Blue