The future will be shaped by what global productivity growth does next

Productivity growth is a shadow of its former self. It’s one-tenth of what it was 40 years ago in advanced economies, and even emerging economies are struggling to replicate the growth of the past. As the fundamental driver of long-run living standards, weak productivity growth is a serious problem. Lower living standards, bigger budget deficits, fewer jobs, lower wages, and higher inequality await if things don’t improve.

What is most striking about this period of low productivity is that it coincides with enormous advances in technology. An extra 3.5 billion people have gained access to the internet. The processing power of computers has increased exponentially while their cost and size have plummeted. Smartphones have multiplied, and online businesses have flourished. Email, GPS and advanced software have become widespread. The sharing economy is unlocking the full potential of idle cars and empty rooms and houses. Information and communication technologies (ICT) and artificial intelligence (AI) have reshaped many industries. The accumulated history of human knowledge is now at our fingertips.

Robert Solow famously remarked that “you can see the computer age everywhere but in the productivity statistics.” Economists have put forward a variety of explanations for the so-called “Solow paradox,” each of which implies a radically different path for productivity growth in the future. Our chapter in the just-published book “Growth in a Time of Change” models each of these possible scenarios to explore what the world might look like depending on who turns out to be correct.

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