Greenspan: Poor Productivity Means Economy Is in Trouble (Video)
Just last week, Alan Greenspan appeared on CNBC saying in no uncertain terms that the United States economy is “not strong.” This morning he returned to the news to explain why the US has a major productivity problem. Though Greenspan doesn’t acknowledge it directly, this is a sign of America’s waning global economic power and decay into a consumer society. It’s no wonder that Greenspan advocated gold investment last year – outside the headline jobs numbers, nearly every measure of the economy is terrible.
Follow along with this transcript:
Greenspan: If you look at the data, we have zero productivity growth in the last couple of years. Productivity growth, almost exactly percentage point to percentage point, shows up in the GDP figures, slightly adjusted for the non-business sector. But the point at issue here is we are not showing an increase in output-per-hour. That has ramifications through the average wage issue, employment. In fact, if you don’t get productivity right in an economy, you’re economy is in trouble.
CNBC: It’s hard for lay people to understand exactly what you’re talking about. We all think we’re working. I’m trying to be productive. We’re working hard, we’re working more hours. Productivity could be held back by what factors, in your view? Not just whether or not we’re coming to work early and leaving late.
Greenspan: Basically, to ask the question and answer it… How much do we produce in the hours that we expend? That obviously affects the wage rate, because one of the iron laws that we’ve observed for a long time is that the real wage of the economy – and that includes compensation for all levels, including profitability – the real wage must move with real output per hour. It’s double-entry bookkeeping in a sense. It is, and that’s what the problem is. We’re probably 1-2 percentage points lower in GDP growth than we should be.
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That was a jaw-dropping supposition on the part of the host: he said that he’s working longer and harder as an example of productivity when he’s got it backwards. Productivity improves when you work fewer hours and less hard and still produce the same. In an individual’s case, perhaps by telecommuting, and in the case of a business, by using technology or know-how to require less expense (his company doesn’t want him to work longer if he’s paid by the hour unless he’s better than everyone else at it). It is foolish to centrally plan the economy when those people are chosen by a public who know what they know by listening to this kind of “information” from “experts.”