The Good And The Bad From Rising Productivity

Robert Reich explains the good and the bad of rising productivity. Output in the US is being produced with fewer people because of technological advances. We are producing as much as we produced before the crash in 2007 with 6 million fewer workers. We benefit from the increase in productivity in many ways. We get lower prices for many products along with higher quality. One problem is in the distribution of the gains from productivity. They used to be shared between labor and capital, but most of the gains are going to the owners and managers of capital. This leads to a problem in aggregate demand. The share of income that is spent by the super rich is less than the share of income that is spent by ordinary Americans. Some businesses can compensate by selling their products and services to the rising middle classes in emerging market economies. Other businesses, particularly small businesses, are unable to do so.

Reich proposes two solutions to the maldistribution of income. We need a more progressive tax system, and an expansion of public services that benefit everyone. Politically this will be difficult to accomplish because the public is badly served by the media from which they get most of their information. Moreover, one of political parties has an agenda to make the tax system less progressive and to drastically reduce investments in public services.

Reich's article focuses on the immediate issues that need to be addressed by rising productivity and the redistribution of income to the super-rich. Technological advances and rising productivity are going to continue well into the future. We will be faced with the problem of building an economy, and a demand system, that is less dependent upon labor as the source of income.