Falling productivity & Labour Alienation

In the summer of 2019, I wrote two essays concerning productivity and innovation. You can read the first part here and the second one here.

In those essays, I explained why productivity has been declining across developed nations and described why innovation is key to reviving productivity which, in turn, is essential for progress.

Recently, the World Bank (WB) also published a 460 page report on productivity trends. It found that productivity has been declining since the 1980s. This trend was already in motion for developed economies (DE), prior to the GFC in 2008. But most emerging economies (EM) saw accelerated labour productivity growth before the GFC. However, the GFC market a downwards turning point for labour productivity across the world.

The biggest factor that that explains the global slump in labour productivity is a decline in investment, specifically investment in innovation.,q_auto:good,fl_progressive:steep/
World Bank

However, I want to offer an alternative explantion for why productivity has been declining. This view is inspired by Karl Marx’s view on alienation of labour.

I do not believe that this theory holds universally across time. It appears to only be valid for certain periods of time rather than for the entire human history. For eaxmple, it doesn’t hold during the Industrial Revolution when humankind was liberated from the necessities of life by machines: by freeing us they enabled us to create and explore more, ramping up labour productivity.


However, when the economic system is malfunctioning, the burden of life’s necessities increases as living standards decrease. As such, Marx’s theory of alienation of labour becomes more relevant as people need to give up the higher meaning of creation to sustain his / her living standards.

Therefore, the theory is preconditioned by a) a decline in economic development and by b) changes in perception about living standards – it is most valid when individual choice becomes an illusion.

The thesis goes as follows: from a psychological perspective, people do well activities that bring them meaning. We all want to do more of what fulfils us. In practice, this means that if someone works on a product or service that he or she finds meaningful for whatever reason, then that person will not only go the extra mile in ensuring that the end result is of high quality but they will also desire to take on further responsibilities and improve the process of “work” – in this case, work is no longer a soul-crushing routine but something akin to a calling, a quest.

An important ingredient for this desire is the link between us (the creators) and the product / service (our creation). When this link is weakened and / or broken, this desire to do better and to do more diminishes until it completely vanishes. Karl Marx called this broken bond between the worker and his / her work as the process of labour alienation.

Marx believed that this was the result of class division in society and of private property – I think he was wrong on the causes of labour alienation, but he was right on the conclusion.

I do not believe that Marx, or any thinker of his time or before him, could have comprehended that class division was a natural by-product in human society as a result of the absence of technological advancement which was needed to free people. This misunderstanding seems to arise from the politically charged arguments that Marx makes, suggesting that his view was that political ideas have the power to free people.Such perspective has been proved incoherent and false by H. Arendt in The Origins of Totalitarianism.

With the exception of Ancient Rome, and only for a confined time was this true: “If a man were called upon to fix the period in the history of the world during which the condition of the human race was most happy and prosperous, he would without hesitation name that which elapsed from the accession of Nerva (A. D. 96) to the death of Marcus Aurelius (A.D. 180). The united reigns of the five emperors of the era are possibly the only period of history in which the happiness of a great people was the sole object of government.” wrote Edward Gibbon in the Decline and Fall of the Roman Empire.

Innovation is what eventually set people free. As for the idea of private property causing alienation from our work, as long as we have biological bodies, we need to own – our  existence as human beings is indispensable from owning property because the act of ownership is the link between us and our actions and thus, between us and society at large. Without owning property, we would not have a stake in society today, or in its future.

That said, Marx’s conclusion of the end result of labour alienation is correct: the work becomes so external of the worker that it no longer belongs to him / her. In other words, the creators become estranged from their creation.

That said, Marx’s conclusion of the end result of labour alienation is correct: the work can become so external of the worker that it no longer belongs to him / her. In other words, the creators become estranged from their creation.

This leads to a disconnect with the broader world: as one no longer has ownership over his / her creation, that person becomes disinterested in that particular work, even to the point of feeling distain towards it.

Assuming that this has been the case with the rise of global chains of production (which outsourced the creation of products and services to others and thus, it deprived people in more developed countries of producing their own “stuff”, while those who were paid [less] to produce were not the end beneficiaries of their own labour either, thus depriving them from enjoying the fruits of their own effort.

When you add lower wages it means that people are not only unhappy with what they do but the trade-off akin to “I do what I don’t enjoy but at least I have a decent living” decays.

This creates a multitude of unfulfilled and disgruntled people that, psychologically speaking, do not want to do better or to do more. It means therefore, that, perhaps, the lower productivity is also telling us something of the mental state of the labour market in countries (and more specifically, industries) that have seen a drastic drop in productivity over the last few decades.

Categories: Economics

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