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Productivity in Crisis - Armies of Middlemen Living on the Backs of the Productive Few

27/04/2016 12:08

To an otherwise comprehensive overview of the UK's productivity crisis by Duncan Weldon in The Guardian on Monday, one key factor could be added. Paid work is not necessarily productive, and not all productive work is paid.

Productivity is the measure of GDP per hour worked. Traditionally, it grows by introducing new methods and technologies, so that a given quantity of goods or services can be provided by a smaller number of people. This frees up other people to create more new wealth.

But the figures ignore all the work that people do freely for themselves, their families and communities - work that GDP does not measure. A paid child-minder is "productive", but a parent minding their own child is not, according to official measures. This means that a lot of the most useful work is left out of the productivity data.

And just as unpaid work should be treated as productive, much paid work should be recognised as unproductive, and the amount of such work has grown rapidly in recent years. Record levels of UK employment reflect more and more people trying to extract a share of existing production, rather than creating anything new.

For example: many of Britain's consumer goods are imported. They don't start generating UK GDP until they arrive in the country, but then they generate a lot. A pair of training shoes made in a vast factory in Bangladesh might land at Felixstowe Docks with a value of £5. By the time the consumer gets out their credit card that value has risen to £80, even though the shoes are essentially the same.

Along that £75 supply chain are advertisers, retailers, wholesalers, lawyers, accountants, property agents, managers, bankers, financial traders, government inspectors and many others, all working to add transactional complexity, in order to extract their share.

One upon a time, a pair of shoes was made by a cobbler who dealt directly with a customer. It was slow, and in that sense inefficient, but at least there were no middlemen to ramp up prices for the customer and take a big chunk of the cobbler's earnings. Now, the supposed inefficiency of a crafts-person has been replaced by the real inefficiency of the supply chain. The number of middlemen is rising faster than the economy is growing and each truly productive worker carries a couple of transactional workers on their back.

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