Where does the lost productivity go?

he productivity gains of the last 50 years have all but disappeared. Exactly where has it gone? It is impossible to quantify its present location. We can't even say how much there was with any certainty. Therefore, I give here my best guestimate of what happened to it.

The Last Inch

If you are familiar with Solzhenitzen's Gulag Archipelago, you may recall that he referred to a phenomenon of human activity under stress wherein those who would survive tried to get "the last inch" out of everything. By this he meant maximising the usefulness of any object, situation or condition so as to optimize one's chances for survival.

Another relevant example would be ... the degree of cleanliness of an old warehouse. When it's new, it's completely clean. As it ages it gets dirtier and dirtier until it looks like an "old warehouse". The question is - "Why don't they clean it up completely?". And, of course, the answer is that it would not be cost effective. As everyone with experience knows, in this example it might take 10% of work to get the warehouse 90% clean and 90% more work to get the last 10% clean. Hence, it will never get clean again ... they are looking to make money, not cleanliness. Obviously, it will only be clean enough to facilitate production.

Thus, we see that in a stressed invironment, one pursues the "last inch" to survive. In a more relaxed situation (everyday civilization), it's just not economical to go to that extreme. And here we see what capitalism will do if left philosophically unchallenged. It will assume the jungle mentality of a stressed environment and will strive to get the last inch to survive (economically speaking). If all (or most) businesses adopt this mentality, it will indeed be "kill or be killed".

This is, I believe, where the bulk of the productivity increase of the last 50 years has gone. Businesses are investing their productivity windfall into straining to get that last little edge on their competitors. All that increase has gone into fruitless and pointless competition (an example is the headlight wiper on the Mercedes Benz) ... the last inch.

I am saying that there are countless millions of people pointlessly engaged in economic battle ... the outcome of which contributes almost nothing to the common weal. They are all being paid a salary (the increased pay you should have gotten) in order to perform needless "make work" tasks which seem necessary (to the jungle mentality) but aren't in the normal state.

90% to chase 10%.

Certainly there are many more "culprits" to point the finger at ... but ... the above situation is systemic to capitalism and is therefore most highly suspect. I think it has eaten perhaps 80% of that productivity increase all by itself.

Productivity loss breakdown by percentage (my guestimate):

  • 10% - Creating the welfare state (a common scapegoat)
  • 30% - Money transfer schemes (conscious attempts to defraud)
  • 60% - Pursuit of the last inch (when not necessary)

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