International markets may worry about the pending turn in the interest-rate cycle, and whether asset price levels already achieved will eventually be justified by global economic performance.
Regional markets and businesses may worry too about oil prices, which have come under pressure again.
Policymakers around the world may further worry whether they have the tools to counter any further downturn or outright slump in activity, considering that monetary levers have been applied to the maximum, and the room for fiscal flexibility has been mostly utilised. Debt and credit trends — two sides of the same coin — are being stretched again towards breaking point.
And all parties may additionally be concerned about geopolitical and security issues that create a degree of strategic risk, not least around the Middle East.
Economists, though, increasingly have alighted upon productivity statistics, which may sound dry and detached, but in fact are at the heart of the regeneration vital not only for keeping peace in various jurisdictions, but also for paving the way for countries to pay for their preferred lifestyles.
For, the continuation of a sustainably rising trend in living standards is not really the product of sequential bursts of stimulus, whose effects may well dissipate — they are just one by-product of the regrettable realities of even benign political governance, besides the strand in any society which has a thirst for redistributive power (see box).
Wealth creation
What analysts and their studies repeatedly find is that, while government undoubtedly has a role to play in producing collective goods and services where it is efficient and equitable for national utility and welfare, the essence of robust, continual wealth creation derives mainly from innovation and entrepreneurship, very often most visible among smaller and medium-sized enterprises (SMEs).
While the state may frequently acknowledge that point, however, its reaction in many cases is to create artificial supports for those entities rather than recognise that their essential need, in countries already well developed, is to be less burdened by interference.
Thus, while the authorities among the leading economies have ensured the provision of monumental financial liquidity at cheapest cost — necessarily so in the emergency conditions of recent times — the key to turning the corner convincingly away from global crisis depends not on further infusions (keeping so-called zombie firms “alive”) but actually on steadily withdrawing that life-support so that dying companies and sectors can be duly replaced by fresh ventures.
This basic thesis dates back many decades and is often referred to as “creative destruction”. It says that continuing change is important not for itself, in a purely revolutionary way, but is integral to material economic growth. It means that costs will be incurred variably and intermittently for some, while the broader benefits are explored and secured.
As for productivity, that refers specifically to output per worker, so that a historic, associated fear is that of automation and the displacement of labour by capital and technology. Correspondingly, governments seek to protect the most vulnerable to such trends, as well as to contrive means of transiting employment from lower to higher skill capabilities and value-added contributions, notably from manufacturing industry to services.
Productivity growth
As to the Gulf, the efforts directed to make the transition to a better skills base in this information age and digital world is well documented.
The latest annual study by the US Conference Board business research group has identified that, while trend productivity growth across the world is currently “tepid”, and noticeably declining across developing economies, “most Gulf states generally showed improvements in labour productivity growth in 2014”, led by Bahrain at 3.1 per cent and Qatar at 2.3 per cent.
Of course, one particular year’s data have to be treated carefully. Yet, since such numbers reside ultimately at the root of national well-being — despite being obliterated by the noise of everyday policy-setting adjustments and market news — it will be as well to keep an eye on them, and return to their underlying drivers, another day.
