Many times I wrote about productivity growth and economic growth. Many times I said that with productivity growth of 0% y/y the economy cannot grow much more than 2%.
WASHINGTON, Feb 27 (Reuters) - U.S. economic growth braked more sharply than initially thought in the fourth quarter amid a moderate increase in business inventories and a wider trade deficit, but strong domestic demand brightened the outlook.
Gross domestic product expanded at a 2.2 percent annual pace, revised down from the 2.6 percent pace estimated last month, the Commerce Department said on Friday. The economy grew at a 5 percent rate in the third quarter.
We are not producing wealth. It is as simple as this.
If you produce one widget in one day and sell it for $50, you make $50 in that day. Now, if you improve your productivity by 100% and make 2 widgets in one day, your income grows to $100. You created wealth for yourself, wealth that can re-distributed.
This is a very simple example, but I am trying to show the importance of productivity growth in order to create wealth.
The way to become wealthy as a country is to increase the investments to improve productivity growth. Let's worry less about auditing the Fed and concentrate more on improving our productivity. Only then will we be able to say we are getting wealthy.
George Dagnino, PhD
Editor
The Peter Dag portfolio
Since 1977
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