Mon, Aug 23, 2004 - Page 9 News List

Productivity growth could end poverty -- if we care to attempt it

Though US economic growth can't keep up with the need for jobs, China and India are rocketing forward to catch up, increasing the total wealth of the world

By J. Bradford DeLong

Quarter after quarter, the macroeconomic news from the US teaches the same lesson: real GDP growth at a sustained rate of 3 percent per year is not enough to increase the employment level. Not even real GDP growth at a sustained annual rate of 4 percent is sufficient to increase the share of American adults who have jobs.

The underlying rate of labor productivity growth in the US, pegged at 1.2 percent per year at the start of the Clinton administration and at 2 percent to 2.5 percent per year at the end of the 1990s boom, now seems even higher: it is getting harder and harder to keep the estimated labor productivity growth trend below 3 percent per year.

How long this boom in productivity growth will continue is anyone's guess: optimists point to the fact that waiting behind the information technology revolution, ready for takeoff, is the biotechnology revolution, and behind that is a looming nanotechnology revolution. If such improvements in productivity do last, the vistas they will open are amazing: an America 50 years from now in which the average full-time worker earns not $40,000 a year, but the equivalent of today's $160,000 a year.

The US is at one pole of the world economy. China -- even with its economic miracle since the 1980s -- is at the other. But China's labor productivity is now growing at roughly 6 percent per year. If that rate can be sustained -- and if the Chinese economy becomes and remains integrated enough for us to be able to speak of it as a single entity -- China's labor productivity will be comparable to today's America sometime before 2050. And India? If the growth rates of the past 15 years continue, and if India remains united, its labor productivity in 2050 will be comparable to that of Spain today.

The world of 2050 will not be a paradise. There will still be some regions where failed states do not protect property, enforce the law, encourage commerce, educate their citizens, or construct the physical, social and organizational infrastructure necessary for people to make use of the magical technologies developed since the start of the Industrial Revolution.

Similarly, there will still be wars, fought with ever more brutal and destructive weapons. But we have good reason to hope that there will be fewer of them. Next winter, it will be 60 years since an army crossed the Rhine River bringing death and destruction, the longest such period since at least the late second century B.C., when the Cimbri and Teutones challenged the army of the Roman Consul Gaius Marius in the Rhone Valley.

The world of 2050 will not have "solved the economic problem." The economy is the realm of things that have value. Things have value when they are both desirable and scarce.

We humans are very good at figuring out ways to make scarce things desirable. But we do have an opportunity, and hence a duty, shared by no previous human generation: to make a world by 2050 in which nearly everyone has enough food to avoid hunger, enough clothing to keep warm, and enough shelter to remain dry -- plus a super-broadband Internet connection. The stakes in this round of humanity's poker game are huge.

The first step toward winning the jackpot is to shape global public opinion in support of creating a world without want. To make progress toward this goal is the touchstone of international relations today. We no longer have large states driven by powerful, aggressive ideologies to remake the world in their own image by any means necessary. The major sources and uses of power in the world today are softer, although not weaker. As long as we can keep it this way, we humans have a good chance of achieving our most important collective task.

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