August 23, 2021

Measuring productivity

When economists talk about productivity, they mean profit per employee.

The trouble is that profit is blind.      Companies can (and do) generate profit in many ways, not all of which create actual value, many of which destroy value.  For example, if I plant a tree in my garden, I create value, but no profit.  If I pay you to plant it, profit arises from the same value created.   If I pay you to cut it down again, more profit is created, but the original value is destroyed.  If you use it to make a piece of furniture, new value is created.

The problem with capitalism is that it depends on the perpetual growth of profit.   That means that once the easy sources of profit (feeding, clothing, housing people) have been used up, new sources have to be found.

Often these seem trivial – meal kits for busy families for example – but others are more troubling.   Weapons of all kinds; drugs that manage the symptoms of chronic illness, but don’t cure; collagen extracted from executed political prisoners; palm oil from trees grown where rainforest once was.  In fact, looked at carefully, almost all our ‘profit’ has come from destroying value somewhere else.

Profit is a very poor proxy for value.   We need to find a better measure.  Urgently.