The productivity surge the world needs

Despite advancements in technology and a surge in productivity over the past 25 years, many economies are experiencing a slowdown. For advanced economies, this decline has resulted in slower productivity growth from 1.6 percent to less than 1 percent since the global financial crisis. Similarly, emerging economies have seen an acceleration in productivity growth post-financial crisis, but this has failed to maintain its momentum, falling to 3.4 percent annually compared to 5.9 percent between 2002 and 2007. This report aims to provide an overview of the most important features of productivity growth, why it has slowed, and what can be done to accelerate it.

To regain pre-financial crisis productivity growth, advanced economies need to invest in digitization, automation, and artificial intelligence. These technologies can fuel new waves of productivity growth and raise living standards. Among emerging economies, those that have sustained high investment in infrastructure and manufacturing have been more successful in maintaining their pace of productivity growth. With higher inflation and interest rates, there is hope that this will encourage productive capital allocation and discourage the increasing debt and inflating asset prices of the past two decades. AI has the potential to change work rapidly and broadly, creating fertile conditions for investment.

To mitigate the asset price inflation of the last two decades, which has created paper wealth and increased debt, productivity growth is essential. Without it, there is a risk of a Japan-style wealth reset or sustained inflation. The net-zero transition and improving living standards require productivity growth to achieve sustainable and inclusive growth. With the challenges of aging populations, the energy transition, supply chain disruptions, and inflated global balance sheets, productivity growth is more critical than ever. By investing in digitization, automation, and AI, advanced economies can achieve between $1,500 and $8,000 in incremental GDP per capita by 2030.

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