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Reason Foundation

Growth, Technology, and Globalization

Samuel Staley
August 12, 2009, 9:42am

Rob Atkinson, president of the Information Technology and Innovation Foundaton, has written a highly insightful article on the relationship between economic growth, globalization, and technology. This should be "must reading" for anyone interested in U.S. economic competitiveness and the rising economic power of nations such as China. (The article is Chapter 9 in the recently released book Social Justice in the Global Age.)

As I have mentioned elsewhere, China is set to become the next dominant economic power because of the rising productivity and growth generated by its domestic economy. Rising productivity is building a middle class that can sustain future growth even as its reliance on the exports falls.

Atkinson explains why this happening and the implications for public policy. More specifically, he rejects the demand-side macroeconomic strategies in favor of productivity improving ones that improve efficiency and market dynamics. As Atkinson writes:

"There is a progressive alternative which can be termed “growth economics”. Growth economics is based on the view that the path to higher incomes is by raising domestic productivity by all firms in all sectors. It is also based on the view that it is not the amount of capital (financial or human) that nations have that is most important, but how that capital is used.34 And it is based on the view that is micro-economic factors (e.g., product and labour market competition, technology policies, etc.) that are more important to growth than macro-economic ones.

"Under a growth economics doctrine, the central task of global economic policy should be to
encourage all nations to make raising domestic productivity a key priority. For example, Indian retail banking is just 9 percent as productive as U.S. levels and retail goods sector productivity is just 6 percent. If India could raise productivity in these two sectors to just 30 percent of U.S. levels, it would raise its standard of living by over 10 percent."

Atkinson is still a progressive, so he favors redistribution, but in my view the core of his analysis and the broad outlines for the way forward are spot on.


Samuel Staley is Research Fellow


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