Are we prepared for a low growth world?

Flip Chart Fairy Tales

Duncan Weldon declared himself a productivity pessimist earlier this week:

Productivity – the amount of output produced for each hour worked – rose at a fairly steady annual rate of about 2.2% in the UK for decades before the recession. Since the crisis though, that annual growth rate has collapsed to under 0.5%. The OBR has decided to revise down its future assumption on productivity from that pre-crisis 2.2% to a lower 2%. That small revision was enough to give the chancellor a large fiscal headache in his latest budget, but it still assumes a big rebound in productivity growth from its current level. What if that rebound doesn’t come?

It’s still perfectly possible to argue that productivity pessimism is overdone, that we are still suffering the lingering after-effects of the financial crisis that will eventually end. But with each passing year that becomes more difficult. A good strategy is…

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