U.S. Economic Productivity Drops; China and India Are the Future Economies, Asserts NBER

Nov. 13, 2022 (EIRNS)—The U.S. Commerce Department’s National Bureau of Economic Research (NBER) published a study in its October 2022 bulletin which showed that labor productivity growth in the American economy averaged just 1.1% per year from 2010-2019, a period in which China’s economic productivity growth, for example, was 3.9% per year. The well-known American economist Robert Gordon (The Rise and Fall of American Prosperity) participated in the study.

As of 2022, however, U.S. productivity growth was clearly negative throughout the year; the Labor Department reported Nov. 3 that productivity dropped by more than 1.0% year-on-year in all three quarters of the year thus far, the first time this has happened in 40 years, despite strong fluctuations of employment rates during those decades.

China’s economic productivity growth has also dropped over the past year due to repeated “zero COVID” lockdowns, but it has remained positive at just below 1% through the first three quarters of 2022. China’s economy’s much stronger productivity growth than that of the United States throughout this century is the most fundamental recommendation of its currency as a trade and reserve currency for a new international economic architecture.

In fact, the NBER study finds that based on these patterns in productivity growth, by late in this century India and China will be the first and second largest and highest-productivity economies in the world.

The more important measure of technological advance, called total factor productivity, is more difficult to measure and therefore data on it lag by several years; but China’s TFP growth in the decade after the 2008 financial crash averaged roughly 2.5%/year, and 3%/year in the decade before that, while that of the U.S. economy was in the range of 0.5%/year.