LESTER THUROW
339
Nobody can make the standard of living go up as long as productiv–
ity is falling.
Productivity is also falling because at the beginning of 1979
OPEC took 2 percent of the American Gross National Product
(GNP) and at the end of 1980 they were taking 5 percent. That is 3
percent less for Americans to get.
WILLIAM PHILLIPS:
I
don't understand how the rising price of oil
lowers productivity.
LESTER THUROW:
It
does not lower productivity, but you have to give
more of your goods to buy oil-it's a separate drain. The rising price
may also lower productivity; we will come back and talk about that.
BERNARD AVISHAI: How much of OPEC's money gets reinvested in the
American economy?
LESTER THUROW: A little, but not all that much.
It
is recirculated
elsewhere. And it does not make any difference whether it is rein–
vested in the American economy. Part of your income has still been
taken away from you.
The third thing that caused the standard of living to go down
was the recession we had in 1980 in order to fight inflation: it
knocked about 2 percent off the GNP. Again, this leaves 2 percent
less to be divided among the population.
There are also technical reasons why productivity is falling.
I
cannot give you a full-fledged, blow-by-blow account of every aspect
of the problem, but here are some of the things economists are
looking at.
I
sometimes argue that it is basically death by a thousand
cuts, because no one big thing has caused productivity to go down;
there are lots of little things.
One problem has to do with the tremendous variation of
productivity from industry to industry. So when the economy is
moving out of low productivity industries into high productivity
industries, you gain in productivity and vice versa.
In
America, from
1948 to 1965, productivity grew a little over 3 percent per year; from
1965 to 1972, a little over 2 percent per year; from 1972 to 1978, a little
over 1 percen t per year, and since then it has been negati ve. Back in
1948, agricu ltural productivity was only about 40 percent of the
national average. So when you took a worker out of agriculture and
put him into industry, you made a 60 percent gain in productivity.
People tend to forget that we still had a large proportion of the
population in agriculture in 1948, that we moved 9.2 billion man–
hours from agriculture into industry between 1948 and 1965. But by
1972, agriculture was no longer shrinking. The rate of agricultural
