Greenspan Is Optimistic about Increasing Productivity
October 19, 2001
While some economists see the collapse of the dot-com economy as evidence productivity rates may be on a long-term dive, Federal Reserve Chairman Alan Greenspan argues that we have yet to fully exploit the potential of networked computers and other technology.
- In testimony before Congress, Greenspan said that productivity growth in the last half of the 1990s arose from corporate managers and workers being forced to act because of foreign and domestic competition -- while being liberated from regulation and energized by strong faith in the economic future.
- They reorganized their businesses to take advantage of technology, traveled to disseminate knowledge and raised capital easily in the soaring stock market.
- Accordingly, annual growth of non-farm output jumped from an average of 1.3 percent per hour of work in the period 1973-95 to 2.5 percent in the period 1995-2000.
- But even the higher productivity growth of recent years is below the long-term average prior to the slump of the 1970s: from 1947 to 1973, non-farm output per hour of work grew at an average annual rate of 2.9 percent.
A study by McKinsey Global Institute singles out Wal-Mart Stores Inc. for its contribution to improved productivity. Innovations at Wal-Mart -- from its big-box outlets to its high-tech warehouse logistics -- pushed other retailers to improve efficiency, the report says.
Source: David Wessel, "A Green(span) Light for Productivity?" Wall Street Journal, October 19, 2001.
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