Monthly Reflections-Populism and Productivity

Populism and Productivity
by Ken Alderman, May, 2017

Populism is a political doctrine that espouses a commitment to the good of the common citizen. It is typically viewed negatively in that it appears to, or is assumed to, appeal to the prejudices and emotions of people of less means and educational attainment and portrays a dark and pessimistic vision of the future. Maybe it’s neither positive nor negative, but rather a reflection of the reality of growing income inequality, an aging population, the impact of globalization and the growing trend of replacing workers with automated devices. Add to this the inability of societies to continue to support a large and expensive social contract due to high debt levels and low economic growth and much of the governed becomes very dissatisfied. So, what’s the solution?

One solution that would clearly help is raising productivity. In general terms, productivity measures how much is produced per unit of input, with inputs being both capital and labor. Since labor and capital are in limited supply, how efficiently an economy uses these resources is important to growing household incomes and to raising standards of living for the population as a whole. A typical example of increased productivity is replacing workers with machines in manufacturing. Machines don’t get tired, don’t make mistakes, perform a task repeatedly with the same quality of execution and don’t take vacations, need sick leave or go on strike. There are many more subtle ways productivity is enhanced, such as writing a computer program to automate the input of data previously entered into the system by a team of people. Next time you get frustrated with the automated call system when calling your cable provider, think of it instead as a productivity enhancer (for the cable company, not you).

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