Exports Do Not Magically Increase Productivity

That seems to be the argument of a Washington Post article that reports that firms are finding ways to increase output without hiring more workers. Of course firms are always finding ways to increase output without hiring more workers, this is called "productivity growth."

Rather than being a problem, productivity growth is a good thing. It means that we can produce more with the same amount of work. Alternatively, we can have the same amount of output while we only work fewer hours. Productivity growth only creates a problem when we have a seriously mismanaged economy. In this case, productivity growth can lead to unemployment because the government fails to take the steps necessary to sustain demand (i.e. spend money) or divide employment (e.g. through work-sharing).

The implicit argument in this article, that increased exports provide a magic route for increasing productivity, is silly.

--Dean Baker

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