Global productivity growth slowed for the third year in a row, according the US Conference Board stats. The Board reckons that output per person employed grew just 1.7% in 2013, down from 1.8% in 2012, 2.6% in 2011 and 3.9% in 2010. Growth has only slowed in two previous years in the recessions of 2001 and the Great Recession of 2008. And these figures include all the previously fast-growing emerging capitalist economies of India and China.
This slowdown seems to me another signal that the world economy (or at least the advanced capitalist economies) is struggling with a depression. It also shows that increasingly world capitalism is failing to provide dynamic growth
(see my post, https://thenextrecession.wordpress.com/2012/09/12/crisis-or-breakdown/). I delved into the Conference Board data and calculated productivity growth in the advanced economies since the 1960s. This is the graph of what I found.
In the next graph, you can see that the dynamism of the advanced economies has been waning decade by decade.
Globalisation and the hi-tech revolution of the 1990s reversed the productivity growth decline in the 1990s, but in this century productivity growth in the advanced economies has headed towards stagnation. Only productivity growth in the emerging economies has enabled world productivity growth to stay near 2% a year – and, as the Conference Board data show, it has not stopped productivity growth slowing in the last three years.
Real GDP growth can be considered as made up with two components: productivity growth and employment growth. The first shows the change in new value per worker employed and second shows the number of extra workers employed. The mainstream neoclassical economics view is that these components are independent of each other and are exogenous to the economy. Technological advances and population growth are independent variables to the processes of the capitalist mode of production.
The Marxist view is the opposite: that they are endogenous. In Marxist economics, employment growth does not depend on population growth as such but on the demand for labour by the capitalist sector of the economy. Capitalist investment is the determining variable and employment is the dependent one. Capital accumulation can be positive for employment as investment grows, but it can also be negative as machines, technology (robots) replace labour (see my post https://thenextrecession.wordpress.com/2012/12/12/apples-robots-and-robber-barons/). Similarly, productivity growth is really the flipside of the growth in investment. Capital accumulation aims to raise profitability by the introduction of new techniques that raise productivity and relative surplus-value. No new technique is introduced unless the individual capitalist reckons it will deliver more value than otherwise.
The flaw in the capitalist productivity process is that the drive for more productivity to undercut rival capitalists leads to a tendency of the rate of profit to fall that, over time, exerts itself over the rise in the rate of surplus value and other counteracting factors to that tendency (see my post, https://thenextrecession.wordpress.com/2013/05/19/michael-heinrich-marxs-law-and-crisis-theory/). This leads to a crisis of profitability that can only be resolved by a slump and the devaluation of the existing capital employed in order to start the process of accumulation and growth again.
What the productivity growth figures show is that the ability of capitalism (or at least the advanced capitalist economies) to generate better productivity is waning. Thus capitalists have squeezed the share of new value going to labour and raised the profit share to compensate. But above all, they have cut back on the rate of capital accumulation in the ‘real economy’, increasingly trying to find extra profit in financial and property speculation. Look at the growth in the accumulated stock of capital in the advanced capitalist economies.
So we have productivity growth of under 2% a year in the world – that’s about 3% in emerging economies and under 1% for the advanced economies, which currently represent 52% of world GDP (the forecast for that share is a slip to 48% by 2025).
As the Conference Board put it: “Emerging markets, and especially China, account for the bulk of world’s productivity growth. But the years of rapid, easy improvement appear to be over. Since these countries remain significantly less productive than mature economies in US dollar terms, the ongoing shift of economic activity away from the latter adds to the global productivity slowdown.”
The story for productivity is repeated for employment growth in the advanced economies. Employment growth is way less than 1% a year in the 21st century.
If you add (to productivity growth) an employment growth rate globally of just 1% a year, then global growth is going to be little more than 3% a year for the next decade (and a maximum of just 2% a year for the advanced economies), unless this ‘depression’ rate of growth and employment is simply a cyclical downturn that will swing up as the world economy recovers. The evidence of the data suggests that it is not and the dynamism of world capitalism is waning. Marxist economics would say that is because investment growth is waning and that is because profitability remains low by the standards of the golden age of the 1960s and below levels even in the 1990s.
Neoclassical economics likes to use a more sophisticated measure of productivity called total factor productivity. This measures not just the productivity of labour employed, but also the productivity achieved from innovations. Actually it is just a residual from the gap between real GDP growth and the productivity of labour and ‘capital’ inputs. So it is really a rather bogus figure. But taking it as face value, the Conference Board finds that total factor productivity dropped below zero for the global economy in 2013 indicating “stalling efficiency in the optimal allocation and use of resources.”
Worse, as productivity growth slows, it seems that global inflation is also slowing with several key economies heading into a deflation of prices – another classic indicator of depression. This is worrying the IMF and IMF chief, Christine Lagarde, appealed to central banks to act against this “ogre of deflation”. We ordinary mortals may think that static or falling prices is good news for our cost of daily living, but for the strategists of capital it means tighter profit margins, weaker investment growth and an end to ‘recovery’. If people expect prices to fall, they hold back on spending until they do. And if there is no inflation, then those corporations or governments with large debts find no relief from any fall in the real value of debt. So they must find more of their taxes or profits to repay debt.