A Simuka Advisory Partners argument for why productivity is the precondition, not the trade-off
← Back to ThinkingThere is a comfortable way of talking about economic growth as one priority among several — to be balanced against equity, sustainability, and social peace, and sometimes sacrificed to them. In a wealthy economy that has already crossed into prosperity, the framing is at least arguable. In a poor economy with a fast-growing population, it is not. At low levels of productivity, growth is not a preference that competes with fairness and stability. It is the condition on which both depend. A low-growth world is not a gentler or a more equal one. It is an unequal, unstable one.
The point is worth making because the opposite assumption has quietly taken hold — that growth is the concern of investors and ministries of finance, while everyone else can attend to distribution. The arithmetic does not permit the separation.
Development is, at its base, a problem of arithmetic. A country's living standards rise when output per person rises, and they rise sustainably only when output per worker — productivity — rises. Where productivity stagnates and the population climbs, the sum does not close: there are more people to share an output that is barely growing, and poverty falls slowly, if at all. Redistribution cannot substitute for this, because in a low-output economy there is little to redistribute; dividing a small pie more evenly produces shared poverty, not shared prosperity. Every economy that has pulled large numbers of people out of poverty has done so by producing more per worker — not merely by sharing what it had differently. Growth is what gives a young worker somewhere productive to go.
A government in a low-growth economy is pushed into a narrowing corner. Its tax base is thin because incomes are low. Its obligations are rising because a young population needs schools, clinics, and — above all — jobs. And increasingly its options are foreclosed by debt service, as the cost of past borrowing crowds out present spending; across much of the continent, governments now spend more servicing debt than on health or education. Without growth, the budget becomes a zero-sum contest over a fixed or shrinking pool — creditors against citizens, one region against another, this year's salaries against next year's investment. Growth is what allows a state to meet its commitments without choosing which of them to betray.
Capital is priced on two things: growth and risk. A low-growth economy offers thin returns, and — because the two are connected — it carries high risk. When the pie is not expanding, the temptation to change the rules grows: currencies come under pressure, policy reverses, and the implicit threat to investors' claims rises. So capital demands a steep premium or leaves altogether, which makes the productive investment that might have lifted growth scarcer and dearer. Low growth, untreated, is self-reinforcing: it raises the cost of the very capital that could end it.
This is the part most easily overlooked. Growth is what makes an economy positive-sum. When output is rising, one group's gain need not come at another's expense; the argument is over how to divide a surplus. When output stagnates, distribution becomes the only game in town, and it is zero-sum — every claim is a claim against someone else. That is the soil in which instability grows: grievance displaces possibility, capture replaces contribution, and politics turns on dividing what exists rather than building what does not. An unequal outcome and an unstable politics are not two separate dangers in a low-growth economy. They are the same danger, seen from two angles.
If growth is productivity, and productivity decides whether the arithmetic closes and the politics holds, then the question of stability runs back to one that most political debate never reaches: how well are a country's firms actually run? In the long run, output per worker is set inside the firm — and the most accessible lever on it does not wait on the power grid or the sovereign balance sheet. The evidence here is now hard to dismiss: a standard package of management practices raised productivity in a controlled trial by roughly 17 percent within a year, with no new capital. Management behaves like a technology — it can be specified, taught, and adopted — and its returns accrue to whoever runs the business better.
A well-managed firm, in this light, is a positive-sum machine. It lifts output per worker, which is to say it manufactures the surplus over which a stable, less unequal politics can be built. That is the unglamorous connection between a single company's operating discipline and a country's social peace.
The instability of a low-growth world is not a fate to be awaited but a path to be avoided, and the exit is not a slogan about inclusive growth. It is the concrete, repeatable work of making firms more productive, one at a time — because that is what generates the surplus from which fairness and stability are actually paid. The alternative is the arithmetic that does not close, and the politics that follows it.
Growth is not a preference. At low productivity, it is the precondition for very nearly everything else a society says it wants.