Mission
This Project will investigate the lower rate of aggregate productivity improvement even while individual applications of contemporary technologies produce impressive increases. The recent report, Productive Equity I attributed this and a material increase in income disparity to market conditions. Productive Equity II will take a closer look - differentiated by technology type, sector of deployment and use - at whether the conditions result from the characteristics of new technologies. Corrective polices differ with the findings. The consequences for productivity of market power, community resistance to job displacing technology and trade, geopolitical tensions impeding transactions - and the ‘secular stagnation’ and post- Covid capital markets contexts are to be considered.
Scope and Agenda
Productivity and its improvement define the resources available for societal use and living standards. New technologies and efficiency-determined trade are its engines. While contemporary new technologies show a significant productivity increase in individual deployments, aggregate national increases, in both developed and developing economies of any importance, have diminished markedly through the last decade and more. The same is true of investment, output and growth – all down by some 50%. At the same time, income distribution has become distinctly more disparate – further reducing demand as a result of a lower proportion of higher incomes being spent.
The first Project step is to assess what is/are the cause(s) – specifically, is technology a cause? An expert technological view would complement a completed study of the market conditions and related policies carried out over a two-year period by the Chumir Foundation and the Brookings Institution (Productive Equity I).
The following three conditions appear to erode what might be expected to be a more robust aggregate productivity improvement from new technologies. Awareness of the facts, understanding of the dynamics and discussion of appropriate policies are the ultimate purpose of this Project.
- Market Power – The measurements revealing diminished economic performance and the indices of enhanced market (monopoly) power of the leading firms and their skilled workers are clearly correlated. Do contemporary technologies feature characteristics that necessarily generate concentrated market power? Or, is market power the result of exogenous anti-competitive behavior or some other influence? The consequences might be the same – i.e. reduced competitive dissemination of productive innovation and less aggregate productivity improvement – but the policy response would differ. Since not all technologies and deployments are the same, the characteristics and their consequences must be considered by technology type, sector of deployment and use.
- Community Resistance – Job displacement is fueling some resistance to automation and trade. Further, middle-value repetitive tasks are disproportionately eliminated, thereby adding to income disparity. The fear is that the nature of the new technologies could give rise to dramatic numbers of job losses in the future. Such dynamics are crucial to productivity improvement and higher living standards. Misdiagnosing technology to be a ‘social evil’ would retard, if not forego, gains. Very large numbers of displacements from automation generally means a significant productivity increase. Ultimately, the real issue is the readiness of the market and workforce to take up available higher quality and income positions that technological innovation has historically produced. It is noteworthy in passing that should it come to it, some productivity enhancement taken in the form of greater leisure time would absorb surplus labor by a very limited reduction of weekly working hours. There are inevitably ‘winners’ and ‘losers’ – or extended adjustment periods by virtue of the numbers and concentration of location or training involved in the realization of the positive side of the ‘creative destruction’ process. Complementary adjustment and social contract policy merits examination to help needed market adaptation.
- Geopolitical Tensions – Current geopolitical tensions are causing risk-averse investors to change investment and trade transactions in ways that trigger lost efficiencies. A substantially less productive situation is certain to result from ‘de-coupling’ of U.S./China supply chain relationships. Allowing this to become a hostile rivalry, with a failure to talk and find shared interest ‘rules of the road’, would add to the losses already at issue for all sides from embargoes, quotas, tariffs and sanctions. Countries are, at the same time, buyers, sellers, investors, competitors and geopolitical rivals. The pandemic highlights the fact that, while living locally, thinking solely nationally, deprives us of methods and technologies that require global management. Science, creativity and individual life enrichment benefit from openness, exchange, and building on the ideas of others. Restricting technology transfer and professional contact with nationals of other countries is not often successful in blocking determined suitors, nor in stimulating productive markets. Might professional dialogue permit more dispassionate exchange and find some ability to cooperate to advantage?
Our purpose is to develop some realistic policy recommendations – and to call on the well-intentioned to engage, outside politically polarized governments for the moment, in constructive dialogue based on well-documented analysis.
