America Leads

 Even though productivity has been rising slowly in the last few years, America still tops the international league table for productivity.  Why is this?

Well, possibly the most significant reasons are:

Firstly, America is a high-tech country.  It leads the way in software development , and probably still in hardware design.  America therefore implements new technologies as an early adopter and other countries have to play catch-up.  This early lead means that America gets the real first-mover advantage for most significant technologies (though countries like South Korea are fast catching up.)

Secondly, America has high quality universities which provide an effective pipeline of new talent.

Thirdly, though linked to the technological advantage, is America’s commitment to capital investment, both physical (infrastructure, equipment) and intangible (software, patents). 

This  sets it apart from, and above,  many other economies. Non-residential investment has run at about 17 percent of GDP in America since the mid-1990s, consistently higher than the share in large European economies, according to John Fernald of INSEAD, the leading French  business school.

What’s more, public and private R&D spending of 3.5 percent of GDP is surpassed only by Israel and South Korea.

Fourthly, America has a high turnover or churn rate  rate for companies, with nearly a fifth of companies being created or dissolved annually. Thus fosters innovative firms can rapidly emerge and obsolete ones can gracefully exit.   Start-ups find financing easier than do their counterparts elsewhere.

None of this is rocket science.  (Actually, some of it is ... see reason one above).  Other countries can learn the lessons but would have to invest over a number of year to reach the same point - and this would, in many countries, be mitigated by a reluctance to take risks.