Feature
Productivity and investments
The 1990s is often referred to as a productivity “miracle” for the United States, as if such growth was unheard of. While productivity growth did indeed accelerate substantially in the late 1990s relative to the preceding 25 years, its pace of improvement remains well below that which characterized the first quarter-century after World War II.
One clear reason behind the productivity slowdown that characterized the 1973-95 period was the steep falloff in business fixed investment as a share of the economy (i.e., spending by businesses on structures, equipment, and software). Despite the financial sector claiming ever-increasing shares of national income in recent decades, there has been nothing to show that the financial sector has contributed significantly to increases in productivity.
