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Paul Vallely: The problems with productivity 

09 February 2018

GDP is a flawed measure of well-being, says Paul Vallely


OUR problem, they keep telling us, is productivity. An economist on the radio this week explained this as “output per worker”. In lay language, that means that we do not make as many widgets in an hour as other nations do. Apparently, we produce 30 per cent less than the Germans, French, and Americans. Forgive me if I express some doubts here.

All those nations still, in that very old-fashioned way, actually make things. The British economy, in contrast, we are constantly being told, is now dominated by services rather than manufacturing. Some 80 per cent of our workforce is, in some way or other, in the service sector.

I shall use myself as an example. Suppose that, instead of writing one column a week here, I were to write two. The editor might object that he did not want more than one opinion piece by the same person. I could, instead, write more words, but the space allocated to me is fixed.

Perhaps I could improve my productivity by just writing faster. But that is tricky, too. Some weeks, I spend a fair bit of time reading around the subject before I begin to write. This week, as you’ll see below, I’ve been reading up on the subject of gross domestic product (GDP), and whether it is an effective measure of the nation’s economic activity. Not something on which you can opine off the top of your head.

Other weeks, I write fairly swiftly, but, on reflection, only when I have been thinking about the subject for some days. How do you measure productivity there? It’s like measuring a waitress by how many customers she serves, but taking no account of whether or not people leave her restaurant happy with the time and care that she has taken to look after them.

Another economist on the radio this week, Diane Coyle, Professor of Economics at Manchester University, talking about how flawed GDP was as a measure of national economic well-being, gave this great example: if a man marries his cleaner, and she carries on cleaning but now without pay, that lowers GDP. This is because anything done in business or government is included, but anything done in the household is not. Britain’s improved GDP in recent decades disguises the fact that women are now going out to work and paying others to do what they used to do themselves.

But that’s not all. The fastest-ever growth in our GDP came at the end of 2008 — giving no warning that the financial system was about to go into meltdown. GDP has no way of measuring the environmental cost of growth. To concrete over rural England would probably increase GDP, but at what cost? So much that contributes to the quality of life cannot be quantified. How do you measure the value of poetry?

Which brings me back to productivity. Apparently, our national problem is that we have under-invested in equipment, skills, and infrastructure. Perhaps the answer for me personally is to buy a new computer. Do let me know whether next week’s column is a superior product as a result.

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