More fundamentally, I believe that the trend in productivity growth has ratcheted up, and this development has been the driving force behind the recent extraordinary productivity growth. What might be wrong with this assessment? Some analysts have cited the low level of business confidence today and the possibility that it could inhibit economic growth.
But sentiment rises and falls, and this period of pessimism, too, will pass. Others contend that productivity growth itself can be a problem because efficiency gains are achieved by a reduction in payrolls, which tends to deflate aggregate demand. I do not want to dismiss the notion that "downsizing" or "rightsizing" can be painful in the short run. It can be.