AI Can Reverse Productivity Slowdown, Says Economist Julian Jessop
In brief
- Productivity growth has stalled since 2008 financial crisis, depressing wage and living-standard gains.
- AI adoption offers path to restore productivity growth and counter structural economic slowdown.
- Regulatory expansion shifts corporate priorities away from productivity and profitability.
Productivity as the Foundation
Productivity has been much weaker since the global financial crisis than before. This gap matters because enhancing productivity is essential for increasing wages and living standards. Without productivity gains, workers can't earn more. Employers can't expand. The entire growth engine stalls.
Jessop's argument is straightforward: getting productivity up is the best way to make people worth more to their employers. Higher-value workers command higher wages. That's how living standards rise.
AI as a Counterweight
The AI revolution will drive productivity growth, countering claims of a structural slowdown. Jessop sees AI not as hype but as a genuine economic lever. Improved productivity can drive economic growth without environmental damage, he noted — a critical point for economies balancing growth with sustainability.
This contrasts sharply with pessimistic narratives that treat slowdown as inevitable.
Regulation as a Drag
Jessop identifies a structural headwind: regulatory bloat. Regulatory increases have shifted companies' focus away from productivity and profits. The number of people regulating and managing regulatory rules has significantly increased. Compliance costs drain resources that might otherwise fund R&D or automation.
He also flagged broader fiscal concerns. Government borrowing and public debt are far bigger than they were ten or twenty years ago. The state has become too large, contributing to economic issues. These structural imbalances compound the productivity challenge.
Frequently asked questions
Why does productivity matter for wages?
Productivity determines how much value workers generate per hour. Higher productivity makes workers more valuable to employers, enabling wage increases and improved living standards.
How can AI address the productivity slowdown?
Jessop argues AI adoption can drive productivity growth and counter the structural slowdown that's persisted since 2008. AI-enabled automation and efficiency gains can boost economic output without requiring proportional increases in labor or resources.
What's slowing productivity growth?
Jessop identifies two main headwinds: regulatory expansion that diverts corporate resources toward compliance rather than innovation, and oversized government spending and debt. Both shift focus away from productivity and profit-maximizing investments.
