This is a reply to Chris Trotter’s comment on a previous Friday Graph blog of mine that required a separate entry so another graph could be included.
An interesting graph, Roger.
As you quite rightly state, MFP measures the influence of innovation and technological improvements on the productivity of our business enterprises.
Have you given any thought to the fact that the period of rapid MFP growth depicted in the graph coincides with the widespread adoption of the personal computer in New Zealand workplaces; the opening up of the Internet from 1992 onwards; and the rapid take-up of the mobile phone as an essential tool of business?
All of these technological changes were responsible for substantial productivity gains, but none of them are attributable to the neoliberal economic reforms introduced by Roger Douglas and Ruth Richardson.
The extent of gains from these technological changes has been debated by economic researchers. Some have found evidence hard to find.
But assuming – as I do – that they exist, they would have contributed to productivity growth in other countries besides New Zealand. And they would likely show up especially in the industry group communication services.
The graph below shows that MFP growth in communication services in New Zealand over the period 1986-2008 far outstripped that in Australia (despite both countries adopting the new technologies).
Why is this? A plausible explanation is that New Zealand moved further and faster than Australia with respect to deregulation and privatisation of its communications industry.
This would be consistent with other evidence in the chart that New Zealand outperformed Australia in industries that were reformed most, notably also agriculture and transport.
New Zealand’s outperformance stands out even more clearly if the comparison is made over the reform period (rather than includes the past 10 years when productivity slumped).
Incidentally, no serious economist would label the reforms as ‘neoliberal’. For an explanation, see this speech of mine.