The Soviet Union’s total product grew by 5.1 percent yearly from 1928 to 1940
(Gregory and Stuart 1986:119), mainly from increased inputs of labor (primarily
educated labor) and capital. As indicated in Chapter 3, during later development,
1971 to 1985, total factor productivity (TFP) or output per combined factor input
fell by almost 1 percent yearly. The fact that President Mikhail Gorbachev could not
turn productivity growth around contributed to Soviet collapse in 1991. In 1994,
Princeton economist Paul Krugman (1994a:69–72) contended that East Asia’s
“miracle growth” was, like the Soviet Union, based only on the growth of inputs.
Thus, because of physical limits on continuing input growth, Singapore and Korea
were “paper tigers.” Their subsequent growth (save for the Asian financial crisis of
1997–98) indicated that Krugman was wrong, suggesting that previous East Asian
productivity growth had been understated.
Krugman states (1999): “Productivity isn’t everything, but in the long run it is
almost everything. . . .A country’s ability to improve its standard of living over time
depends on its ability to raise its output per worker.” History bears him out. The
rapid growth in productivity of Japan and a few Western countries since the mid-
19th century has not been equaled by other countries. Since then, the United States,
Canada, Japan, and mostWestern European countries experienced real growth rates
in gross national product per capita in excess of 1 percent per year, a rate that
means a rise to more than four times initial value by 2000 (Chapter 3). The most
important sources of this growth were capital formation and increased knowledge
and technology.
Now, such continuous rapid growth may be more difficult. Given limited mineral
resources, improved technology and increased capital accumulation will be essential
for expanding (and perhaps just maintaining) real planetary product per capita in
the future. Technical advances, such as better mining techniques (especially for using
ocean resources), may mitigate our limited mineral supplies; and microminiaturization
with integrated circuits (for substantial reductions in materials required), and the
development of renewable power sources based on the sun, either directly through
solar cells, or indirectly through water power, wind power, and photosynthesis, will
help us use our resources more wisely.