We often hear that we’re in the midst of a technological revolution. Everything from computers and the internet to robotics and artificial intelligence is transforming our world and improving the way we work. Yet, oddly enough, this massive wave of innovation doesn’t seem to be reflecting in the economic data.
Between 1974 and 2008, the UK’s productivity growth was an impressive 2.3% per year. But since 2008, that growth has shrunk to around 0.5% per year. Even worse, UK productivity was down 0.6% in the first quarter of this year compared to last. And it’s not just the UK; similar trends are happening in most Western nations.
So, what’s going on here? How can we be witnessing such an incredible surge in technological advancement and yet productivity has slowed to a crawl?
Some might argue that we’re all just distracted by technology, spending our time chatting on Whatsapp, watching videos on YouTube, or aimlessly surfing the web. But experts say there could be deeper reasons behind this apparent paradox.
Two main explanations have been put forth. One is that we’re not measuring the impact of technology properly. The other is that the benefits of technological change might take decades to fully materialize.
Dame Diane Coyle, a recognized expert in productivity, believes that our current statistics might not accurately capture the influence of digital technology on the economy. She uses the example of companies that have switched from investing in-house IT to outsourcing overseas. While this move can make a company more efficient, the way we measure economic size might make the company look smaller, not larger.
Dame Diane also refers to an 1885 yearbook of statistics that focused mainly on agriculture, even though it was at the peak of the industrial revolution. It’s a perfect illustration of how data might miss significant shifts in the economy.
The second explanation comes from Nick Crafts, emeritus professor of economic history. He believes that the current technological revolution might just be happening more slowly than we expect. He points to the history of the steam engine and electricity, where the full economic impact took decades to realize.
So are we stuck in a technological limbo? Not exactly. The key to winning the productivity race might not be about the technology itself, but rather how we adapt and use it.