The last half-century has witnessed unprecedented growth in both GDP and GDP per capita. Historically, an increase in GDP was always brought about by a combination of two factors: expanding the labour force and increasing its productivity. According to the mckinsey.com website, the global economy as a whole is expanding thanks to efforts of managers and bosses to make their businesses more competitive. Innovations and investments aimed at surpassing competitors contribute significantly to global prosperity.
We need productivity growth
What makes the difference is productivity of labour, which is increased when new technology or managerial approaches are developed and introduced. Productivity has been a key factor contributing to GDP growth ever since the time of the Industrial Revolution. Its importance now, with the rise of IT and many new markets emerging, is still essential. It is not easy to predict what the productivity of workers in the future will be. The fact is that only sustained growth in labour productivity can fuel GDP growth rates. Today, GDP growth rates are relatively high but a sharp decline in the number of available workers could threaten these rates.
It is achievable
There are considerable opportunities for increasing productivity: new possibilities offered by modern machinery and artificial intelligence can boost the productivity of knowledgeable workers. With new technology, many processes can be greatly improved. The talent pool can be also richer if women become more fully engaged economically. To sum up, a demographic slowdown today does not necessary mean there are times of economic stagnation ahead. Productivity improvements are the primary source of long-term success. To sustain economic growth we must focus on the causes of productivity differences between companies, industries and states. Sometimes there are significantly different levels of productivity between two industries within a single state.
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