top
International
International
Indybay
Indybay
Indybay
Regions
Indybay Regions North Coast Central Valley North Bay East Bay South Bay San Francisco Peninsula Santa Cruz IMC - Independent Media Center for the Monterey Bay Area North Coast Central Valley North Bay East Bay South Bay San Francisco Peninsula Santa Cruz IMC - Independent Media Center for the Monterey Bay Area California United States International Americas Haiti Iraq Palestine Afghanistan
Topics
Newswire
Features
From the Open-Publishing Calendar
From the Open-Publishing Newswire
Indybay Feature

Paradoxical Upswing: The Growth Puzzle

by Thomas Fischermann (mbatko [at] lycos.com)
"Productivity is a very important standard of economic power. Productivity measures how much an economy produces per working hour.. A computer does the work. Vast numbers of office jobs have disappeared in the United States.. Will the person disappear like the horse in agriculture?"
Paradoxical Upswing

The Growth Puzzle

By Thomas Fischermann


[This article originally published in: Die Zeit 02/2004 is translated from the German on the World Wide Web, http://zeus.zeit.de/text/2004/02/US-Wachstum.]

In the US the new economy has arrived with the service providers. The economy hasn’t grown as fast in a long time. However jobs are hardly created.

Heads of American central banks traditionally surround themselves with an aura of omniscience. However even Alan Greenspan is taken aback these days. “The growth of American productivity is `astonishingly great’”, he declared at the beginning of November before a meeting of the Securities Industry Association in Florida. Productivity is a very important standard for economic power. Productivity measures how much an economy produces per working hour. In the US this amount rose five percent in the third quarter of 2003 compared to 2002, a new record. “Explosive” and “breath-taking”, American commentators raved. A computer now does the work. Vast numbers of office jobs are lost in the United States.

Greenspan is not only astonished; he also has an explanation. Together with a growing band of economists, he speaks of a return of the new economy. The economy will rise to the skies with the help of computers, novel management methods and global markets. In the late nineties imaginations and stock exchanges soared. This is becoming popular again. “The American economy is in the early stages of a technological revolution”, the Nobel Prize winner for economics, Barry Becker from the University of Chicago explained recently.

US Statisticians tend to estimate the growth of productivity too optimistically. Still the change is unmistakable. Before 1995 productivity in the US only grew around 1.4 percent annually on the average. In the meantime the US economist and hardened new economy skeptic Robert Gordon believes that it will grow around three percent annually in the future.

This could give further buoyancy to the American economy. Higher productivity means greater profits for businesses that will have more money left. Theoretically they could reinvest and hire additional workers.

The economy in the US grows statistically while the unemployment rate persists at six percent. At the beginning of the 1990s when the US also got back on its feet again, productivity grew far more meagerly than today and far more new jobs arose.

How is this possible?

The answer has to do with rationalization. In the early 1990s, only a sixth of all American employees still worked in the factories of processing businesses. These businesses replaced the rest by machines and low-wage jobs in distant countries. This hardly seemed possible in the fast growing service sector at that time. How can a robot or a worker in far away Taiwan replace a book dealer, teacher, secretary or marriage counselor? An increasing demand meant new jobs. Today ten years later, the service sector is regarded as just as capable of rationalization as factories. “We people will work faster in the future, tenfold, a hundredfold and a thousand fold”, predicts Raj Reddy, a researcher of artificial intelligence and its applications at the Carnegie-Mellon University in Pittsburgh.

These figures may be exaggerated. Still the first beginnings are clear. The advance of “paperless” work at computer screens allows mammoth banks and other corporations to shift enormous amounts of routine work to nameless back offices or distant countries. Many jobs are spared with the help of computers and better managerial organization. The delivery service FedEx outfitted its drivers with hand-computers that now do route-planning, save paper work and enable fewer and fewer drivers to deliver more and more packages. Heads of firms order industrial goods from steel presses to computer chips on the screen instead of employing traveling salesmen and brokers… Retail trade is responsible for a large part of the American growth in productivity. Supermarket chains like Wal-Mart have automated large parts of their logistics and warehousing. Their suppliers have also rationalized.

What was derided a few years ago as the weakness of the New Economy is no longer true: that the innovations from the world of bits and bytes only benefit a few branches near technology. The opposite is true. Many computer- and software manufacturers stumble or stray from the straight and narrow. However businesses like truck dispatchers or law offices record rationalization successes and increased productivity as Harvard economist Dale Jorgenson documented. These enterprises are first discovering the possibilities opened up by computers. The dot-com crash and the subsequent economic slack periods forced them to those possibilities.

Is this change a “ticket to the hell of unemployment” as the American economic magazine Business Week decried? Is the Nobel Prize winner for economics Wassily Leontief belatedly right? He predicted in the 1980s “the role of the person as the most important production factor will disappear like the role of the horse in agriculture.” Most economists bet against this. “Demand for human services is unlimited”, the Princeton economist and well-known commentator said.

The necessary reorganization of labor markets away from routine jobs that can be rationalized to new unknown tasks can last longer than the customary ups and downs of an economic cycle. The more fundamental is a structural change, the more miserably do the skills of the unemployed match the needs of the new boom sectors. This is well known from economic history. Large sectors of the population must be retrained or forced into law-wage jobs – as pizza deliveries, street sweepers and taxi drivers whose jobs no one knows how to rationalize away.

In a time of adjustments, this could continue for months or years with jobless growth, growth without additional employment. As the economist Jared Bernstein from the Economic Policy Institute said, “Jobless growth offers little comfort for employees who cannot understand the world when market analysts now break out in jubilation over the economic recovery.”




Add Your Comments
We are 100% volunteer and depend on your participation to sustain our efforts!

Donate

$110.00 donated
in the past month

Get Involved

If you'd like to help with maintaining or developing the website, contact us.

Publish

Publish your stories and upcoming events on Indybay.

IMC Network