Productivity and Industrial Policy

  • Tim Hazledine


There is no more puzzling big number in economics than productivity — the per capita gross national product that determines a country’s standard of living. Why are some mature industrial economies more productive than others? Why does productivity grow faster in some places than elsewhere? And, the biggest puzzle of all, what happened in 1974, when productivity growth virtually collapsed right across the world economy, never, it seems, to fully recover?


Productivity Growth Assembly Line Industrial Policy Full Employment OECD Economy 
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  1. 3.
    See M. N. Baily, ‘Comment’, Brookings Papers on Economic Activity (2:1979) p. 436.Google Scholar
  2. 4.
    See Michael Denny and Melvyn Fuss, Productivity: A Selective Survey of Recent Developments and the Canadian Experience, Ontario Economic Council Discussion Paper Series (Toronto, 1982) pp. 42–3.Google Scholar
  3. 6.
    Joe S. Bain, International Differences in Industrial Structure (Yale University Press, 1968);Google Scholar
  4. summarized by F. M. Scherer, Industrial Market Structure and Economic Performance, 1st ed (Rand McNally, 1970), p. 94. Bain’s data are for the 1950s.Google Scholar
  5. 7.
    See Tim Hazledine, ‘The Anatomy of Market Power in Canadian Manufacturing Industry’, paper presented to the Canadian Economics Association Meetings (June 1983).Google Scholar
  6. 10.
    E. F. Denison, assisted by J. P. Poullier, Why Growth Rates Differ (Brookings, 1967) p. 332. Quoted by Kravis, ‘A Survey …’.Google Scholar
  7. 12.
    Edward F. Denison, Accounting for Slower Economic Growth: The United States in the 1970s (Brookings, 1979). Summarised in The Brookings Bulletin, vol. 16, No. 2.Google Scholar
  8. 14.
    As a quite typical example, see the Economic Council of Canada’s Eighteenth Annual Review: Room to Manoeuvre (Ottawa, 1981) p. 84. One Council member, R. B. Bryce, who is probably the most distinguished practitioner of macroeconomic policy that Canada has had, noted his reservations about the neoclassical econometric model underlying the Council’s recommendations, and about the policy conclusions drawn from the model (ibid., pp. 95–8).Google Scholar
  9. 16.
    For a horrifying expose of this industry, see James Fallows, National Defense (Random House, 1981).Google Scholar
  10. 18.
    Robert B. Reich, The Next American Frontier (Times Books, 1983). See too Reich’s articles in Atlantic Monthly (March and April issues, 1983).Google Scholar
  11. 19.
    Robert Bacon and Walter Eltis, Britain’s Economic Problem: Too Few Producers (Macmillan, 1976), p. 112.Google Scholar
  12. 20.
    The debate on industrial policy is particularly vigorous in Canada, when constant comparisons with the great southern neighbour can induce feelings (mistaken, in my view) of inadequacy in size and performance, and consequent calls for remedies. The pro-high tech etc. view has been most vigorously espoused by the Science Council of Canada, eg John Britton, James Gilmour, and Mark G. Murphy, The Weakest Link — A Technological Perspective on Canadian Industrial Underdevelopment (Science Council of Canada, Ottawa, 1978). Notable attacks on the doctrine by economists are Donald Daly, ‘Canada’s Comparative Advantage’, Economic Council of Canada Discussion Paper (Ottawa, 1979), and R. J. Wonnacott, ‘Industrial Strategy: A Canadian Substitute for Trade Liberalization’, Canadian Journal of Economics (November 1975).Google Scholar
  13. 26.
    See J. W. Kendrick, ‘International Comparisons of Recent Productivity Trends’, in W. Fellner (ed), Essays in Contemporary Economic Problems: Demand, Productivity, and Population (American Enterprise Institute, Washington 1981), and Organisation for Economic Co-operation and Development, Productivity Trends in the OECD Area, Working Party No. 2 of the Economic Policy Committee, Note by Secretariat (October 1979).Google Scholar
  14. For a survey, see Andrew Sharpe, ‘A Review of the Productivity Slowdown Literature’ (Long Range and Structural Analysis Division, Department of Finance, Ottawa, October 1982) (draft).Google Scholar

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© Tim Hazledine 1984

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  • Tim Hazledine

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