Living standards around the world could fall unless governments invest more in research and education that can help revive weak productivity growth, International Monetary Fund Managing Director Christine Lagarde warned on Monday. Lagarde said in a speech in Washington that the private sector alone will not be able to generate enough innovation to lift productivity to acceptable levels without government help. Her remarks were accompanied by release of an IMF study that found that the 2008-2009 financial crisis and deep recession played a bigger role in slowing productivity than previously thought, stifling global demand and investment. (http://bit.ly/2nCMDqd)
Economists have long viewed productivity gains as essential for sustaining higher wages and living standards, but have struggled to explain a protracted slowdown in productivity growth since the early 2000s. Lagarde said the post-crisis recession has left a "permanent scar" on output per worker and total factor productivity, a broad measure of innovation that includes both labor and capital inputs.