The Productivity of Capital in a Period of Slower Growth

Charles L. Schultze and

CLS

Charles L. Schultze Former Brookings Expert

Martin Neil Baily

Martin Neil Baily Senior Fellow Emeritus - Economic Studies, Center on Regulation and Markets

Discussants: Dale W. Jorgenson and

DWJ

Dale W. Jorgenson

Robert E. Hall

Robert E. Hall Robert and Carole McNeil Joint Hoover Senior Fellow and Professor of Economics - Stanford University

THE UNITED STATES has invested a smaller fraction of its gross national
product in capital goods than almost any of its major international
competitors in the 40 years since 1948. Over this same period, average
labor productivity growth in the United States has also been among the
slowest. For the first 25 years of the period there was little cause for
dissatisfaction. U.S. productivity growth was higher than it was in the
prewar years, and the still higher rates in Europe could easily be explained
as a catch-up phenomenon. But after 1973 U.S. labor productivity
growth fell to only a little more than 1 percent a year, and in the
past five years net investment has dropped substantially.