Big Benn and the honey pot men
To extend that, we might think of the emergence of one crucial technology as being akin to a major environmental change, bringing on very much the same rush to exploit the new business or environmental niches.
But, as previously noted, we've not really got enough information to be able to sort through all of these competing stories. We're thus not really able to definitively state what we should be doing to get that higher growth back. Sure, we can fall back to theory and so I can shout about free markets and everyone else can insist that really what we need is Tony Benn back to design another Concorde for us. But the information we want to provide us with a definitive answer, well, it's not really there.
For example, this following argument is entirely consistent with all of the information we've got. It could thus be the true explanation: I even believe that it is the true explanation but I'm stumped if I know how to prove it or even how anyone else might do so.
The secret being that there was fuck all economic growth between 1929 and 1945. The decades after that were simply playing catch up and we're back to normal now.
To think about what produces economic growth for a bit. Essentially, we can increase our inputs or we can make better use of the inputs we do have. Both increase production which is our economic growth. A rising population is an increase in potential inputs (just as one ageing into retirement is a fall in them). A rise in education is a rise in higher level inputs as better skilled labour.
Women moving from the household into the market is a rise in labour again, as we don't measure household production as part of that economy. The other stuff is “total factor productivity”. We're making more from each unit of inputs, not just increasing the number of inputs. And total factor productivity (TPF) growth has indeed slowed: we know how to account for those changes in inputs and population and that's really what we're measuring with “productivity growth”.
The major determinant in TFP change is technological change. So, if productivity growth has been slowing then technological change must have been doing so. This isn't what we want, of course, and thus why we'd like to find the answer.
However, back to that no growth between 1929 and 1945. Yes, we all know about the Depression but didn't the economies all revive as Britain went to war? Well, yes and no, that's more of a trick of gross domestic production (GDP) accounting than anything else. We're really trying to make stuff that people can consume and making stuff to blow up stuff, or making stuff to be blown up, isn't really economic growth in that sense. And in GDP the value of whatever a government does is defined as however much the government has spent on doing it. Not, as with the rest of GDP, on the value that people are prepared to cough up for it.
Concorde flew 2.5 million passengers supersonically from 1976 until 2003
But in that period, technological change went on much as before. Some would say it accelerated and I don't think that's really true, but no matter. It certainly didn't stop, which is all my argument requires. So, if we had the continued technological change that made TFP improvements possible but we had fuck all economic growth, then there's a certain bolus of possible economic growth available when we stop bombing the shit out of Germany.
And arguably that is what happened. But note again that I can't prove this: but it is a story that meets our known facts and is, of course, most conveniently in line with my own political and economic prejudices.
Which, to bring us back to our current state, means that sure, productivity growth today is slower than it was in the time of Big Unions. But not because of: it's just a coincidence that the unions thrived when we were playing catch up from the 1930s and '40s.
And – just for kicks – there's another possible explanation of the same facts.
Charles I. Jones, an economist at Stanford University, has “disassembled” American economic growth into component parts, such as increases in capital investment, increases in work hours, increases in research and development, and other factors. Looking at 1950–1993, he found that 80 per cent of the growth from that period came from the application of previously discovered ideas.
This is superficially similar to my own point. But it differs in detail. For people do point to the way that the State funded and directed must research and development post-war. And then tell us that the productivity growth came from that State involvement. But if all the basic research that we were applying to practical matters in that time came from before that time it cannot be the funding method of that time responsible, can it?
It must have been that the more private industry-oriented R&D programmes of those earlier times were responsible. And we've even opened to us the claim that the post-war State funding is what has left us bereft of the new technologies to apply now. That would attractively sink Mariana Mazzucato's idea that we owe all to the State if nothing else.
While I, obviously, have an attraction to the idea that post-war growth was just growing into the potential from the technological advance of the '30s and '40s, it's not my intention at all here to insist that that must be correct. Happy to expose you to my ideological prejudices but not to force them upon you.
The point is that we've a number of internally consistent, mutually exclusive, explanations for what happened and all of them take account of the available facts reasonably well. Meaning that we've really not actually got enough of those facts to determine what were the real driving forces. Over-arching economic theories don't work all that well, for we've not got the information to be able to decide between them. ®