The IMF just published a fascinating report, titles Gone with the Headwinds: Global Productivity.
The discussion note explains how productivity has been held low in developed economies for a while, and more so post financial-crisis; emerging markets were doing rather better until the financial-crisis brought their productivity levels low too.
The paper says clearly that improving productivity is the only means by which we will improve our standards of living. Or, in my jargon, get ourselves out of the funk we are in and out of this new normal.
The article states,“If sustained, low productivity growth would have profound adverse implications for progress in global living standards, the sustainability of private and public debts, social protection systems, and the ability of macroeconomic policies to respond to future shocks. It is therefore paramount to understand the root causes of the productivity slowdown and address market failures and policy distortions that may have played a role.”The paper identifies the main causes as follows