James Meadway in Novara Media:
New research from US business think tank Conference Board shows that the rush into the digital economy is doing nothing for capitalism’s global woes.
Far from spurring the system to greater and greater heights, digital technology seems to be having no impact on the growth in productivity that is crucial to the system’s long-term future. Measured as output per worker, global productivity has risen just 2% a year in the past few years, compared to 2.9% a year in the decade before the 2008 crash. Strikingly, Conference Board reckons almost none of this productivity growth has emerged because new technology has made work more efficient. And with sick man of Europe Britain leading the way, the productivity slowdown here has been worst out of all the so-called ‘advanced economies’.
One traditional culprit for low productivity is low investment, which continues to falter. Business investment in Britain has been falling for some time, but this is about more than just the uncertainty induced by the government’s Brexit failures, since investment is also weak across the advanced economies, including the US and Germany.
As discussed in my previous column, in the place of investment, companies (especially large companies) are hoarding cash at record levels, with British companies holding nearly £700bn unused in their bank accounts, and paying out record amounts to shareholders, often using share buybacks. IMF figures show US corporations making payouts worth 0.9% of their assets to shareholders last year, but making investments worth just 0.7%. At the same time, financial chicanery has become routine for non-financial corporations, with the growth in the use of dubious debt instruments like collateralised loan obligations piggybacking the wider expansion of corporate debt.