If you’re an investment banker, you’re well aware that productivity is the lifeblood of long-term economic growth. Yet just how important is productivity?
Rewind 100 years and compare the standard of living in Argentina to that of the United States. Surprisingly, the two countries are fairly close. Fast forward to today, and the standard of living is drastically different. What happened over the past 100 years that improved the lot of Americans so much more than the lot of the Argentinians?
The answer – productivity. Overall, economic growth (productivity growth) expanded by, on average, 2% per year more in the United States than in Argentina. Granted it is only 2% per year, but when that is compounded over 100 years it makes a remarkable difference.
That’s why productivity growth is so important.
Shifting now to a comparison of productivity growth by U.S. president. Which president would you guess comes in first place – who is the president whose administration saw the largest expansion in American worker productivity? Which president would you guess is the worst?
Productivity Growth by U.S. President
Here’s a look at productivity growth by American president. The vertical axis is the percentage growth in productivity since the start of the given president’s administration. The horizontal axis is the number of months the president was in office (thus for Obama, it’s the number of months he’s been in office so far).
Each line represents the experience of a given president. Before looking, take one last guess on which president is the best and which is the best.
Fascinatingly, the “productivity king” of the American productivity experience is George W. Bush (Bush II). Over Bush’s tenure, productivity expanded by almost 20%. The next closest is Bill Clinton at about 18%.
One the other end of the productivity spectrum is probably much less surprising. The worst president for productivity growth was Jimmy Carter, at an amazingly low 2%. The next worst president for productivity growth is Barack Obama, at an almost similar amazingly low figure of just 8% over his almost 7 years.
Thinking About the Broader Picture
The surprisingly broad differences in productivity growth among the American presidents suggests that perhaps Americans presidents might be able to influence, but certainly not control, productivity growth. George W. Bush was certainly a free market president, as was Bill Clinton, Eisenhower, and Reagan.
On the other end, perhaps the least favorable presidents towards free market competition are Barack Obama and Jimmy Carter.
In looking at productivity growth by U.S. president, some surprising figures show up. Lots of factors, of course, influence productivity performance, almost all of which are not in control of the American president. With that said, it is somewhat surprising to see how productivity has varied through the years and the various administrations.