Right at the start of the video, Jon Hilsenrath, (WSJ Economics Editor) frames the conversation:
"The prosperity of the whole country, and the prosperity of you and me, depends on productivity."
But what does this really mean? And is it always true?
Personally, I don't trust absolutes—and "prosperity depends on productivity" sounds pretty absolute to me. Let's closer look at this claim and see if it stands up to scrutiny.
Okay, so how does productivity relate to prosperity?
Paul Krugman, who writes about the economy for the New York Times, says:
“Productivity isn't everything, but, in the long run, it is almost everything.
A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”
Colford, Christopher , 2016, “Productivity for prosperity: 'In the long run, it is almost everything’ ”, The World Bank, Article date 2016-11-15, Accessed 2022-09-20
On the surface, this statement seems reasonable enough. After all, if a country can produce more goods and services per worker, then shouldn't that lead to a higher standard of living for its citizens?
For one thing, "raising output per worker" simply means that a country is producing more goods and services. It doesn't necessarily mean that those goods and services are being distributed in a way that benefits everyone.
In fact, it's quite possible for a country's output (AKA productivity) to increase while the standard of living for most of its citizens decreases (if, for example, the increased output is going to a small elite group while the majority of citizens see no benefit).
Second, is more consumption really a sign of prosperity? After all,"a country's ability to improve its standard of living over time" could just mean that households are buying more and consuming more.
Is overconsumption a good thing?
And what is a 'standard of living' anyways? Here's what Investopedia has to say: