Opinion | Productivity is almost everything. By Jose Emilio Cervera

The Nobel Prize in Economics Paul Krugman He pointed out in his academic days at Princeton that productivity is not everything, but in the long term it is almost everything. It is true that not everything goes to increase productivity, but without increases in productivity there will hardly be business profits that remunerate capital decently, nor stable wage increases for workers, nor will coverage of pensioners’ income be ensured, etc. From a climate of greater financial, labor, tax, commercial freedom…, companies will be able to better overcome shock from abroad (geopolitical, energy, financial). The recognition that entrepreneurial talent is the main factor of productivity means giving it its well-deserved social reward. Realizing that our economy is becoming more conceptual and less physical every day implies that the chosen mix will be more realistic. Spreading a certain discourse about the excellence of competition supposes a contribution to the transparency and efficiency of the economic system through improvements in productivity.

The well-being of Valencians is an objective that is shared, at least, by the constitutionalist political groups present in the Corts Valencianes. Establishing a legislative agreement on productivity, based on an opinion prepared by a commission of experts, technical representatives of the tractor sectors…, and endorsed by the legislature, would mean the long-term guarantee of said well-being. It would also be convenient, in order to be plausible, for this agreement to be extended over a sufficiently long time horizon to overcome more than one legislative cycle. As a clue, the Ivie probably has the best productivity experts in Spain.

If the aforementioned agreement is not possible, the Consell on duty should initiate this process unilaterally and without delay. our GDP per capita it is lower than the national average and, therefore, the activity rate and productivity are also lower. The corollary of all this can be summed up, on a broader level, in that our GDP (in purchasing power parity, PPS) per person employed is lower than the EU-15 average, but much lower with respect to productivity per hour worked. In addition, since we joined the EMU, the national economic policy cannot tilt either in the exchange rate of our currency, or in internal interest rates. It seems clear that the long-term strategy cannot be other than improving productivity and responsibility requires acting now, procrastinating what is essential and urgent is not an honest option.

Productivity in the Community has had an anticyclical evolution over the years. In phases of economic boom it has decreased and, conversely, the decline has strengthened. This apparent paradox has its primary foundation, although not exclusively, in an intensive use of labor as a production factor in the upswing and, at the same time, in the discreet investment in capital, especially in the one with a high technological content, in the insufficient dissemination and communication of the findings in innovation, in the lukewarm efforts of sectoral concentration, in the willful reorganization processes of some companies, in the discreet use of new technologies, etc.

As has been indicated previously, at least the constitutionalist parties present at les Corts should agree on the assessment of productivity as the essential element to promote the employment and well-being of Valencians in the medium and long term. This coincidence in the diagnosis should lead to agreeing on a framework of legislative, budgetary and administrative measures that, going beyond the framework of a parliamentary legislature, configure a strategy that allows us to achieve a productivity rate in accordance with the competitive position of Spain, as the fourteenth power economy in the world (eighth in 2007) and fourth in the EU-24 (fifth in 2020, prior to Brexit).

It would be an agreement with a clear reward in the productivity value chain. The increase in productivity has the immediate effect of gaining in the efficiency of companies, that is, lower costs and improvements in the quality of products. Thanks to this, both the deepening of existing markets and the expansion to new ones are made possible, which leads to improvements in employment, in business profits, in investment and in consumption via wages and prices. In addition, it is necessary to assess the effects induced in the macroeconomic scenario: lower inflation, higher tax collection, real comparative advantages with respect to the nominal interest rates set by the ECB, etc.

From the most simplistic definition of productivity as a measure of economic efficiency, which shows as units of inputs economics become outputsto the most realistic ones that include, together with the inputs of labor and capital, the Total Productivity of the TFP Factors (innovation in processes, new technologies, economies of scale, managerial training, organizational changes, opening of markets, etc.) it is necessary to make a determined commitment to the generation of a business climate confident that it has, at least, a certain understanding on the part of the Consell. TFP is, above all, a sign of business efficiency and good management.

Countless empirical studies show great gains in productivity simply by significantly improving the current management of planning, control and supervision of operations and people, promoting communication within the company, putting an end to outdated social approaches based on command and control and in the micro management, propitiating staff assessment systems based on results, etc. In short, actions, all of them, that do not require large investments in new equipment, or significant additions of personnel, but are directly related to the PTN and, from there, we will have to agree that it is in the improvement of management and organization where the great bag of gains in efficiency and, therefore, in productivity at a global level is found.

We know that the productivity of companies is influenced by their size and by the characteristics of the sectors in which they operate. In the case of the Valencian Community, 95% of the business fabric is made up of small companies with few possibilities of activating, by themselves, the mechanisms described above to significantly increase their productivity and the cultural change that it implies. In parallel, the fact that two of our main economic sectors are construction and tourism, although they represent a notable contribution to the level of employment, their products must be consumed on the spot, which implies, in principle, less competitive mobility as they are less marketable and , therefore, with fewer options to reach significant productivity quotas. Other sectors that are also very present in the Community, such as ceramics, agribusiness and the automotive industry, are clear examples of tradable goods in which productivity is essential to be competitive and, therefore, they constantly strive to increase it.

Some final questions: Is a political pact on productivity in the Community possible today? can the unions grand class recognize that wage improvements depend on advances in productivity?; Can the emptied Spain be applied, also, to productivity in our territory?; Is our greatest business deficit the insufficiency of management?; will we build, like noah, the Ark when it is still raining, or will we wait for the Flood?; Should God have taken an eighth day to remedy the lack of leadership of some politicians in solving momentous problems?

José Emilio Cervera is a former Minister of Health

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Opinion | Productivity is almost everything. By Jose Emilio Cervera