According Nobel prize-winning economist, Paul Krugman, a country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.

If countries are to grow, either its people need to work harder (or longer…), or they need to increase immigration (as the US, UK and Germany have done) or they can work smarter and produce more with the same effort – not so easy…

Presumably more smart people are needed to work smarter, so investment in the education is surely an imperative?

Unfortunately productivity improvements have been sadly lacking this past decade and there are no signs of any improvement.

The FT commented on 30 May 2016 and offered a starting proposal for different types of countries;


  1. Mature economies with weak investment (eg US, UK, Germany) –> boost demand and productivity directly by taking advantage of historically  very low long term interest rates with increased public sector spending on infrastructure
  2. Advanced economies with less scope to borrow (eg Italy) –> reform “sclerotic” bureaucracies
  3. Emerging markets -> stop wasting money eg on fuel and other subsidies and invest in education and training.


Edward Luce of the FT makes one final comment, with particular reference to the US. A continued corrosion of infrastructure and a decline in the quality of public education and middle workforce skills continues the stretching of the income gap, enriching educated elites. Luce warns this could trigger a break-down in the democratic order. Luce argues for Universal Basic Income (UBI) to replace the messy overlap of benefits and “buy a measure of social peace”.

If the past trend continues, productivity stagnation is here to stay – a sobering thought for those hoping for an increase in living standards.