Productivity Puzzle

I’ve looked into growth accounting for more than 3 years of my Economics education, variously as a Bachelors student as well as in my Masters. Singapore ourselves have had to confront this issue long ago. My LSE Econs 101 Professor was the one who in many ways ‘decried’ the composition of Singapore’s growth in “A Tale of Two Cities: Factor Accumulation and Technical Change” (1992).

A relatively recent ADB paper looking over that debate with a fair degree of hindsight suggested that in the context of today’s pursuit of development, we are kind of past those considerations. The whole debate was merely transitory in terms of our understanding of productivity but had some implications on our economic measures/policy which continued till today. In any case, I don’t want to discuss the measures; rather, I want to return to the fundamentals to argue that productivity simply isn’t an economic parameter (the way population isn’t). And our obsession with it as an economic parameter results in consigning this to the responsibility of economic bodies/agencies.

Productivity as one may simply observe, varies across countries, places, organisations and contexts. Institutions shape productivity, but so do weather conditions, not just that which is produced from land but also that which is from labour. Levels of education, the content of education within the system, as well as culture – all of these shapes productivity. In fact, the conversations around water coolers, morale of a body of people – all of these shapes productivity and it’s plain to see. Do we think we can incentivise productivity in a systematic manner?

There is this strange imagination that the answer may lie within enterprises but I afraid that is seriously misguided. Government investment will probably have to take place within the education system, and to consider society and culture at large. For example, a potential area is looking at unlocking large potential in the arts – there are lots of talented artist locked up in low wage roles who would be able to generate impressive economic returns by deploying their talents into better use. At the same time, there is scope in getting the public better educated in the arts, to step up their appreciation of intangibles in life rather than being locked into a material chase. This will also help to create a small market, with which we could crowd in more demand and supply.

It is not even about values, though I must confess I don’t agree with the prevailing societal value of an obsession with material. Given that culture and education has lasting, systematic impact on productivity, why are we not placing more attention on that? Enterprises, unless they are large organization with the ability to propagate useful, efficient best practices in the economy, would be ill-placed to impact the socio-cultural forces affecting productivity.

The government have so many more levers than just the economic agencies to drive productivity growth. By classifying lacklustre productivity growth as an economic challenge, we miss out the big picture and the opportunity to help the society progress in what may be traditionally considered non-economic dimensions.