Productivity Can Return If The Central Banks Would Give It A Chance

Tyler Durden's picture

Commodity-king Andy Lees (ex-UBS and current manager of ALM Macro) explains that today's declining global productivity is and was always a consequence of government policy of taxing productivity in favor of social transfers. The gradual dumbing down of capitalism and move towards social democracy over the last 50 years relied on building a Ponzi scheme of financial innovation to keep the illusion alive. But, he offers hopefully, system dynamics of the natural environment (how land that was once lost to the desert by over taxing it can be returned to a productive use) offer hope that this ponzi trend can be broken.

As Andy Lees writes,

This video looks at the system dynamics of the natural environment, and how land that was once lost to the desert by over taxing it can be returned to a productive use.



To do so you need to put the land aside stopping all animals feeding on the land. Immediately you get back grasses which forms a perennial root system which allows microbial communities to live. The grasses stop the sunlight irradiating and sterilizing the land, and instead the root system allows rainfall to be absorbed into the land rather than washing it away. The system becomes accumulative rather than dis-accumulative system of less micro matter, less biomass, less water and less “biodiversity”, all of which sounds very familiar to today’s economy.


All systems work similarly. Unfortunately today’s economic equivalent is the declining global productivity resulting in factor mobilization and the consumption of the so-called Mises Reserve fund, or productive surplus generated in excess of the scarce resources needed to sustain a society’s capital and existing standard of living, that is being depleted. The economy is in this dis-accumulative phase which means the slowing productivity of recent years and declining productivity of last year will compound at an increasing pace unless the economy is allowed to restructure. Without productivity, the growth we have today is unsustainable , but the good thing is, it can be turned around.  Unfortunately a lot of today’s deserts highlight that societies are not willing to make the short term sacrifice for the long term gain.

As Andy concluded previously,

The positive is that the present mess is of our own making, and that it can be reversed if we so choose. Growth is not being constrained by a technology frontier, but rather by the systematic misallocation of the factors of production that has been central to government and social philosophy. By transferring capital from productive to unproductive uses, we are altering the time preference for money and thereby borrowing directly from the future. Given that the difficulty of scientific advancement gets harder and harder, and needs more energy and more computational power and thinking to get over that hurdle, there is a limited amount of time before the present system of factor mobilisation or horizontal expansion has consumed down our balance sheet to the point that advancement is no longer possible. Whilst I think and hope that is still a long way off, the closer we get to that level, the greater the rationing of capital away from present unproductive uses will have to be. Marginal policy change will have less and less impact.


The system has to change. The issue is whether government and ultimately society can survive during the change; whether the public can unite behind a leadership that can implement tough decisions and allocate capital productively, or whether further sacrifice will be needed first, and how that sacrifice may come.

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What will it take for someone to choose short-term pain as the necessary solution to longer-term destruction?