The slowdown of productivity is a fact, said Professor Adam Glapiński, Governor of Poland's central bank NBP, during the 8th Annual NBP Conference on the Future of the European Economy.
All speakers were looking into “The Mystery of Low Productivity Growth in Europe”. Gilbert Cette, Deputy Director General for Economics and International, Banque de France, reminded that slowdown of productivity started in the 1950s in the US and in 1970s in Europe. Professor Daniel Sichel from Wellesley College admitted that economists still don’t understand the slowdown of the 1970s. “We have to acknowledge that we may not find the explanation,” he said.
What is the impact of technology and how to measure it?
“We are surrounded by innovation, but revolution done by iPhone doesn’t compare to the one done by the steam engine,” said Prof. Glapiński. “The modern technology influenced everything but productivity, so maybe the problem is how to measure productivity in the digital era,” he added.
Eric J. Bartellsman, Professor at the Vrije Universiteit in Amsterdam, stressed that technology will change production in a disruptive way. And he thinks that so far, it’s mismeasured. Carol Corrado, Senior Advisor and Research Director in Economics at The Conference Board, reminded that when talking about technology we have to remember that in majority it’s intangible. Intangible investment gives a more comprehensive picture of innovation. “Since 1997, intangible investment has been bigger that the tangible one,” she said and added that if investment in i.e. artificial intelligence (AI) is not represented in intangible measures then productivity is mismeasured.
Jakub Growiec, Economic Advisor in the Economic Analysis Department, NBP, is convinced that the effects of ICT are already coming to an end. “We are in the digital era,” he said, “so is the GDP per capita a sufficient measure?” Mr. Growiec thinks that it’s not, because it doesn’t measure digital goods, such as entertainment or open access to scholarly publications. “There are no adequate measures for the digital era,” he added.
Looking for solutions
Prof. Sichel thinks that mismeasurement is not a good explanation of the productivity slowdown but admitted that to understand digital economy and intangibles new measures are needed. “We have to look at the supply side”, he said. “The effects of technology are fading, and innovation is less impressive as it was in the past.” The same goes for the demand side. “Weaker demand leads to weaker supply, especially in the post-crisis times in countries with smaller capital investment,” he added.
“On the other hand, technology should not be completely excluded in measuring productivity.” Prof. Sichel reminded that it will not change productivity overnight. “AI, self-driving cars, cloud computing, robotics, 3D printing — all will transform economy in 5-10 years”, he said. Prof. Bartelsman added that economists should not overestimate the near future and underestimate the long perspective.
Lars Rohde, Governor of Denmark’s central bank, Danmarks Nationalbank, is convinced that bigger women participation on the labor market could boost productivity growth, “especially in face of demographic trends in Europe, and in Poland in particular,” he said.
Central Europe and Poland
Hubert Gabrisch from Wiesbaden Institute of Law and Economics stressed that one of the biggest successes of Poland is the shrinking income gap between Poland and Western Europe (measured in PPP). “We have to remember that convergence growth is ending, and the FDI inflow will be weaker,” he said. According to him the major question is how to stimulate domestic savings and capital investment. He thinks that the solution is to create a surplus in trade through stronger integration with the European Union.
Anna Kosior, Head of the World Economy Division at NBP, said that all CEE countries are continuing convergence and closing the GDP per capita gap. “This will be supported by the EU funds and productivity growth, which needs macroeconomic stability,” she said. CEE countries have macroeconomic stability, and a high level of human capital, essential for the productivity growth.
Professor Karsten Staehr from Economics and Research Department at the central bank of Estonia, Eesti Pank, is convinced that the CEE countries will move forward, and will not end up in the stone age. “But if it happens, we will live by the seaside, wear fur coats and eat oysters. So far,” he added, “not many CEE citizens can afford that.”