1203 GMT November 19, 2019
Christine Lagarde used a speech in Washington to tell policymakers they could not simply wait for innovation to drive up productivity growth and help living standards recover from the legacy of the global financial crisis, The Guardian wrote.
She highlighted a poor global record on productivity growth in recent years and said IMF analysis suggested GDP in advanced economies would be about five percent higher today if the pre-crisis trend had continued for total factor productivity growth — a broad measure of what goes into production, such as research spending.
“That would be the equivalent of adding another Japan — and more — to the global economy,” the IMF managing director in a speech to the American Enterprise Institute.
Lagarde warned the world could not afford to leave productivity growth in the doldrums.
“Another decade of weak productivity growth would seriously undermine the rise in global living standards. Slower growth could also jeopardize the financial and social stability of some countries by making it more difficult to reduce excessive inequality and sustain private debt and public obligations.
“Leaning back and waiting for artificial intelligence or other technologies to trigger a productivity revival is simply not an option.”
Lagarde was speaking as the IMF published new research into the slowdown in productivity, a gauge of economic efficiency that is often measured by the output per hour worked in an economy. That paper highlighted three 'headwinds' holding back productivity growth: aging populations; a slowdown in global trade; and the 'unresolved legacy' of the global financial crisis in some big economies.
In the UK, productivity growth has been sluggish for years and is behind most other big economies, prompting the chancellor, Philip Hammond, to pledge more investment in infrastructure and other areas with a £23 billion national productivity investment fund.
Calling on all governments to do more, Lagarde sought to emphasize productivity as the most important source of higher income and rising living standards. “For example, the average American worker today works only about 17 weeks to live at the annual real income level of the average worker in 1915,” she said.
That kind of progress had been seen in many countries, she added.
“But this engine of prosperity has slowed down in recent years, with negative consequences for growth and incomes that look very hard to unwind.”
Lagarde said governments must use investment, education, regulation and incentives for business to ramp up productivity and “ensure that the next generation will be better off”.