Today’s unexpected decline in forth quarter productivity calls attention to
yet another “new era” myth that refuses to die.
Despite conventional misconception, U.S. productivity growth in the late 1990’s
was merely a statistical illusion, not an economic reality. Ninety percent
of the supposed productivity gains were related to the manufacturing of computers,
which were sold to U.S. business to increase efficiency. However, more powerful
computers did not enable U.S. manufacturers to produce more consumer goods.
When one measures productivity, it is the production of consumer goods, not
capital (or instrumental) goods that counts. If capital investments do not
lead to greater production of consumer goods, what good are those investments?
Amazingly, government statisticians are able to persuade gullible Wall Street
analysts that America is becoming more productive, while overwhelming empirical
evidence reveals the opposite. If America is really so productive, how come
the merchandise trade deficit is exploding, and why are factories shutting
down from coast to coast?