Notes from the Margin – November 2012

Productivity games

This column appeared in the November 2012 Friday AM All month edition

Ever notice how when you ask someone “how are you?”, they’ll often answer “keeping busy”. It’s human nature to feel as is we’re somehow managing to get something done. While we’re good at keeping busy, we’re not, as a country, as productive as we could be.

In economics, productivity is the measure of how efficiently inputs are used to produce outputs in comparison to other countries. It’s arguably the most important measure of our global competitiveness. And, post-recession, I think this issue has our Prime Minister, his Minister of Finance and the Governor of the Bank of Canada working overtime.

To increase productivity, you either do more with the same amount of resources or do the same with fewer resources. Those are the choices all competitive economies must face.

On the up side, Canada has a lot going for it. A stronger dollar means our purchasing power is better than it was before. Big corporations have impressive cash reserves to invest and our banking system is admired the world over. However, the entrepreneurial culture isn’t set to the same intensity as it is in the US or the emerging economies known as the BRIC (Brazil, Russia, India and China)

If we wish to preserve our standard of living (read high paying jobs, strong education and quality healthcare), it seems to me the only way forward is to invest (do better with the same) in R&D and education and cultivate innovation and entrepreneurship.

The lack of productivity may explain what seems like a ferocious race to open trade with other parts of the world, accept foreign investment and subsidize big business so they’ll invest their reserves of cash. That path to productivity means bringing in more money in (direct foreign investment), opening up greater opportunity (free trade deals and new export channels such as pipelines) and securing labour through immigration to attract skilled workers and compensate for an aging population.

To some extent, the way things are, are the way things are. But the more we understand them, the better equipped we are to address them and develop a fully functional approach to solving the challenge of staying competitiveness while realistically considering the true long term costs and risks.

So next time someone asks “how are you?”, start by answering “productive”. A healthy economy is as much a state-of-mind as a numbers or political game. And getting better at what we do, whatever that happens to be, is a pursuit we can all afford to take on.

One Response

  1. […] out Louise’s Notes from the Margin – November 2012 over at her Blahgg […]

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