Much has been made in the past of America’s superior productivity levels – 20 per cent ahead of Germany’s and France’s, with Gordon Brown’s Britain seemingly catching up. But all may not be exactly as it seems.
The first mystery: how is a $700bn trade gap (6-7 per cent of GDP) reconcilable with the highest productivity in the world? As the manufacturing sector of the US, and for that matter the UK, has shrunk to somewhere just north of 15 per cent of GDP, the trade gap as a percentage of manufacturing output only is more than 40 per cent. When countries and companies are outperformed on world markets like that, the productivity story sounds less convincing. Strikingly, the trade gap is not just with the cheap labour countries of the Far East; it has been growing significantly with Europe, despite the dollar’s near 80 per cent devaluation against the euro.
Which brings me to the second part of the riddle. How are these productivity levels being calculated?