AI, productivity, & geopolitics

The disruptive impact of generative AI will boost labour productivity growth and will be a major vector of geopolitical rivalry

Long-time readers of these notes may recall my argument in 2020 that a productivity renaissance is quite likely over the next decade, after a sustained period of declining productivity growth since the 1970s across advanced economies. 

The basic argument was that the pandemic shock led to substantially increased investments in capital and technology, changed business models (digital, virtual), as well as introduced more flexible working models.  And tight labour markets across advanced economies create incentives for labour productivity enhancing investments.

However, the productivity data available so far are not that encouraging.  Data through to Q1 show a flat trend over the past several quarters after an initial productivity recovery/surge in the early stages of Covid.  And the near-term projections from the OECD, IMF, Conference Board, and others also suggest a muted productivity growth outlook.