Productivity UP ... Jobs DOWN

Created on 2016-08-22 18:09

Published on 2016-08-22 22:16

Peter Drucker famously said 'You manage what you measure'.

I argue that you had better be measuring the right things, and argue that economists and corporate decision makers have not been measuring enough of the right things for many decades.

Most corporate boards are committed to the idea that it is their job to maximize their company profits for the benefits of the investors. This is a convenient idea that probably fits well with the personal interest of most board members, but also is dangerously wrong, and an idea that is bound to result in dangerous dysfunction of the socio-enviro-economic system.

Decision makers in business understand that technology is enabling increased productivity, and that increased productivity means the ability to make more product with less labor which in turns means more profit. This has resulted in a virtuous upwards cycle for profits and the owners of companies, but a vicious downward cycle for labor / workers. Net net, business and productivity have delivered job destruction during the past 50 years on a scale never seen before in the history of economics.

The sad thing is that technical innovation is being funded in the main to increase productivity ... and in due course to enable even more job destruction.

If GDP growth is way faster than productivity growth, then maybe there might be some job creation ... but why do people in old industrial economics need to consume more and more when in fact most of their material needs are satisfied? And why do people in old industrial economies have to work longer and longer at lower and lower wages in order to make ends meet? And why do we ignore the existential threats of environmental degradation and climate change that result from more and more GDP growth on a planet that is a fixed size but now has to support more than 4 times the population than it had in 1900 and maybe as much 100 times the increase in consumption and stress on planetary capacity as billions of people move up the economic ladder. 

Business decision makers measure profit and make decisions to grow profit, but they don't measure impact on people and society and they don't measure impact on resource depletion, environment degradation and ecosystem performance. These metrics enable higher profits and everything else has been ignored!

Worse ... nobody else does the necessary measurement. I would argue that leaders of society as a whole ... civic leadership ... political leadership ... should be in play to balance the power and influence of business ... but they seem to have been effectively absent for the past 50 years or more!

My hope ... my goal ... is for those that work with numbers to figure out how to measure everything that matters as rigorously and as efficiently as we measure money transactions and profit ... and to get these numbers into the mainstream of public discourse as much as profit performance, stock prices and GDP growth. With any luck this will help dispel the myth that business and productivity creates jobs when in fact it is actually the complete opposite!

A lot is at stake. 

Peter Burgess ...