Productivity Increase = Economic Growth

Capitalism’s inherent feature is “destructive creation,” said Marx. Decades later, Schumpeter stated that “the capitalist system incessantly revolutionizes the economic structure FROM WITHIN.” Unfortunately, subsequent economists failed to live up to these notable figures for a long time. The relations between the riches of nations and the riches of Productive Knowledge (technology), which is a product of the “Creative Mental Labor” of the human mind, gain increasing acknowledgment among economists. Once upon a time, mainstream economists assumed that the key to progress was the accumulation of homogenous capital goods. Nowadays, everybody acknowledges that economies cannot grow continuously by accumulating more of the same capital goods. The critical question, to which we are seeking an answer in this chapter, is: What are the dynamic forces causing the incessant productivity increase (economic growth) in economies? The answer is that productivity increases due to technological progress, which is the product of the creative mental labor of the human brain. In other words, “technology,” “knowledge on production,” or “productive knowledge” gives occasion to a dynamic and uninterrupted economic growth process. By the way, productivity increases imply “economic growth,” both for firms and for countries.