It probably won’t surprise you that the Productivity Commission is always writing reports about … productivity. Its latest is a glittering advertisement for the manifold benefits of capitalism which, we’re told, holds The Key to Prosperity.
Which is? Glad you asked. Among all the ways to co-ordinate a nation’s economic activity, capitalism – which the commission prefers to call the “market” economy – is by far the best at raising our material standard of living by continuously improving our … productivity.
Productivity is capitalist magic. It means producing more outputs of goods and services with the same or fewer inputs of raw materials, labour and physical capital. This involves not working harder or longer, but working smarter – using new ideas to reduce the cost of the goods and services we produce, to improve their quality and even to invent new goods and services.
Find that hard to believe? Keep watching the ad.
We’re told that sustained productivity improvement has happened only over about the past 200 years, since the Industrial Revolution. Then, 90 per cent of the world’s population lived in extreme poverty, compared with less than 10 per cent today.
Technological developments and inventions – including vaccines, antibiotics and statins – have driven huge increases in the length of our lives and years of good health.
In Australia, output of goods and services per person – a simple measure of prosperity – is about seven times higher than it was 120 years ago at Federation. This means people today have access to an array of goods and services that were unimaginable in the past.
For every 10,000 newborn babies in 1901, more than 1000 died before their first birthday; today it’s just three. For those who survived childbirth, life expectancy was about 60 years, compared with more than 80 today.
During their 60 years, the average Australian worked much longer hours than today, with little paid leave. The 48-hour week wasn’t introduced until 1916 and paid annual leave didn’t become the norm until 1935. Workplaces were far more dangerous.
Most people died before becoming eligible for the age pension (introduced in 1909) and the average wage bought far fewer goods and services, with a steak costing 5 per cent of the weekly wage.
Homes were more crowded – about five people per home, which were much smaller. We had outside toilets until the 1950s and washing machines and dishwashers didn’t become common until at least the 1970s.
By making goods and services cheaper and better, productivity improvement has increased the typical worker’s purchasing power. That is, it has reduced the number of hours of work required to achieve any particular level of material living standards.
For instance, the cost of a double bed, mattress, blanket and pillows has fallen from 185 hours of work in 1901 to 18 hours today. The cost of a loaf of bread has fallen from 18 minutes to four minutes.
More recently, the cost of a new car has fallen from 17 months in 1990 to five. The cost of a smartphone has fallen from 60 hours in 2010 to 16.
End of advertisement.
When you think about it, this is amazing. Objectively, there’s no doubt we’re hugely more prosperous than our forebears. Our lives are longer and healthier, with less pain, less physical exertion, less work per week, bigger and better homes, more education, more comfort, more convenience, more entertainment, more holidays and travel, more ready contact with family and friends, and greater access to the rest of the world.
We’re not just better off than our great-grandparents, we’re clearly better off than we were 20 years ago. Oldies like me can’t begin to tell our offspring how much clunkier the world was before computers and the internet.
And yet … the trouble with the higher material living standard we strive for – and economists devote their careers to helping us achieve – is that we so quickly take it for granted. It’s always the next step on the prosperity ladder that will finally make us happy.
We’re undoubtedly better off in 100 ways, but do we feel much better about it?
I suspect our lives are like a Top 40 chart – when one tune falls back, another always takes its place. There’s always one tune that sold most copies this week – even if this week’s winner sold far fewer than last week’s.
Whether they’re life-threatening or just annoying, there’s always a set of worries that mar our sense of wellbeing. Makes you wonder whether there might be more to life than prosperity. Human relationships, for instance.
Then there’s the possibility – beyond the purview of most economists – that prosperity comes at a price. Maybe the world we’ve created in our pursuit of prosperity comes at the price of more stress, anxiety, depression and loneliness.
And maybe the natural world is about to present us with a belated bill for all our prosperity: more droughts, bushfires, cyclones, flooding and higher sea levels. All of it in a despoiled environment.
