In Robert Solow‘s (in)famous growth model, perhaps the most important part was what is now called the “Solow residual” or “Total Factor Productivity” (TFP)–the part of economic growth that cannot be explained by changes in the input of the factors “capital” and “labour”, which is, in effect, the result of technological progress. In other words, TFP is a reflection of us learning how to produce more with the same amount of input. A recurrent theme in this blog is that quantitative GDP growth is highly problematic, mainly due to the related pressures on natural ecosystems. However, even if we decide to stop growing–or, better, to stop focusing on growth–, it is not obvious that we can actually achieve it. And TFP is one of the reasons why this isn’t as simple as many in the degrowth movement seem to believe.
Productivity growth is a process that essentially “just happens”. It is the result of the intrinsically human strive to make things better, more efficient, easier. It is the result of human inventiveness and creativity. Hence, it cannot be stopped if required. However, increases in productivity are a growth driver. While themselves being only a qualitative factor, productivity growth confronts us with a dilemma–when we as a society become more productive, it means that we need less labour to produce the same amount of goods as before. If we do not want increases in unemployment rates, we have then two options to absorb this effect: either to produce more goods or to reduce average working hours. Many post-growth theorists have a simple response to this challenge–let us reduce working hours to a more pleasant level, say 20 hours per week, and use the so gained free time for whatever social and individual activities we might wish to engage in. There is not much I could say against that–except for the question: what are we supposed to do when productivity growth doesn’t stop?
Let us assume that we as a society agree that 20 hours per week (on average) is the optimum, which would mean a gradual reduction by a factor of around two (today we are working around 40 hours per week on average–actually somewhat less, since the unemployed do not count in working hours statistics). I assume here that there exists an optimum amount of labour per week that we would like to have, i.e., that a reduction in working hours towards zero is not socially desirable (labour having an intrinsic value for most human beings). Assuming now a productivity growth rate of 1 per cent per annum, after some 60-70 years we would arrive at an output level equal to today, but with 20 hours labour per week. We do not want the economy to grow bigger, but we also do not want to work less. So, when the reductions in working hours have already absorbed all productivity growth without the latter to stop, what then?
The only answer I got for this question so far is: productivity won’t keep growing so long as for the problem to emerge. As can be seen in the chart on the right (I “stole” it from The Economist, hopefully they won’t notice), it seems that those who gave me that answer might well be right. Productivity growth in rich countries has been falling for years. However, just to count on this development to continue exhibits a striking similarity with what many pro-growth economists do when confronted with the problems current levels of production cause: they tell us that our economies have grown so long that it is reasonable to assume that they will grow further, they talk about backstop technologies and other beneficial effects of human ingenuity and market mechanisms, effectively saying that catastrophe won’t happen because it has not happened yet. This is wishful thinking, in both cases. Things might work well, but actually we do not and cannot know whether they will. According to the precautionary principle, we should at least consider the worst-case scenario: that productivity will keep growing. It might grow at a very low pace, but if it does grow, we will encounter problems sooner or later. What then?
I do not have an answer to this question. And I still believe that it is better to start the transition towards a post-growth society as soon as possible than to wait until we know the answers to all relevant questions. But we should be aware that these questions are still there, unsolved, and try to find answers. Because sooner or later we might need them.