ECONOMY

The end of decisions free of pain

Serious debate on productivity has never taken place in Greece: Everyone knows it is low, while most accept the fact as self-evident and adapt themselves accordingly – besides, survival in a regime of low productivity is always more convenient than under conditions of high productivity. True, improving an economy’s overall productivity requires tackling a number of factors that are difficult to change; demographic aging, for instance. There is very little, if anything, a government can do to stem demographic decline. But there are other areas where a lot can be done: A rise in spending on research and development by 1 percent annually, for instance, brings about an 18 percent improvement in productivity in the long-run; improving the level of training of the workforce has commensurate results. Any 10 percent growth rate in trade in the eurozone gives a 3 percent boost; and a 1 percent rise in the number of work hours leads to a 0.25 percent fall in productivity in the long-run. So the means are not a mystery; the issue hangs on the willingness and/or ability to instigate the appropriate policies. The biggest relevant question is, indeed, whether Greek society can stomach a productivity shock. Until now, priorities have been different and mechanisms for serious decision-making have usually been strongly influenced by the anxiousness to present respectable fiscal management figures and absorb the huge European Union investment subsidies. But now the time when productivity will become everyone’s concern seems to be fast approaching. Even if there is reluctance to adapt, reality will force the adaptation. The end of easy solutions is within sight.