The Productivity Paradox

When it comes to the economic affluence of a nation and the ability of a country’s economy to improve the standard of living of its citizens and compete internationally, social scientists are in an unusual agreement that productivity “in the long run is almost everything” (Krugman, 1994:13). Manuel Castell (1996:80) throughout his extensive study of modern society as a network society seconds this observation and concludes that “productivity is the source of the wealth of nations“. Not only shifts in standards of living follow from changes in productivity performance. Less immediately related non-economic transformations in response to unequal national productivity gains occur, including major changes in the balance of global power relations. In this light, Krugman (1994:17) comments somewhat despairingly, the slowdown of “American productivity growth since the early 1970s becomes the most important single fact about our economy.“