It was inevitable that the question of deflation and productivity would lead to Elmer J. Fudd. Millionaire, owner of mansion and yacht, the longtime Warner Bros. cartoon foil explains (literally, starting around 5:00) the virtuous circle of productivity, profit, reinvestment, growth and more productivity, in this strictly-for-completists short, based on the Grimm story of the shoemaker and the elves, from 1956:
Though I actually saw this short as a kid (and remembered only the Jehosaphat/Rumpelstiltskin gag), I owe the discovery to Mark Vargus, who uses it in an excellent rebuttal of the old argument that profits resulting from better productivity are always hogged by the bosses:
We no longer live in the age of tenant farmers, where the ability of workers to move in search of new and better jobs was greatly limited by technology and politics. Today a worker who feels that the local job market is not willing to pay him fairly for his efforts is not prevented from moving long distances in search of better paying employers. This forces companies to pay closer attention to how well they pay workers. If they fail to recognize the most productive of their workers, they could lose them to other companies.
My question: Is there some equation for the effects of inflation/deflation on productivity measures? I mean, you could argue that a lot of the very strong worker productivity growth of the U.S. this decade has been illusory, because the value of what was being produced was overstated. On the other hand, despite the downward stickiness of wages Vargus describes above, for the past few years it has been quite difficult to tell the boss man to shove it and get another job.
Vargus has another interesting point in an aside:
Sadly, some of this short lecture is no longer true due to government interference in markets as the payment of dividends to investors is no longer common. Instead companies work to increase their market valuation and stock holders look to see their portfolio values increase, rather than holding stocks for the dividend payments. However, that argument belongs in an article all its own.
I have owned a few stocks over the years, but I don't recall ever receiving a dividend, and I'm not even sure what the mechanism is for paying a dividend on an equity product, so ascendant is the psychology of increasing market valuation. (Yes, I know there are some fancy dan stocks out there that still pay dividends, or are supposed to.) In fact, it's only through popular culture, in the form of movies and TV where Charles Coburn or Mr. Drysdale rub their hands over stock dividends, that I know this was once a really important feature of the market.
Speaking of which, the above cartoon, with the meaningless title Yankee Dood It, has an interesting provenance. Per wikipedia, it's one of three Warners cartoons sponsored by the Alfred P. Sloan Foundation. Given his disinterest in cartoons, it's unsurprising that Jack Warner didn't mention it in his memoir My First Hundred Years In Hollywood, where he does spend a lot of time talking about the political contexts of his more propagandistic films. But it's still an interesting window on the politics of the fabulous fifties: not just that somebody felt the need to argue that productivity benefits somebody besides greedy bosses, but that they made the argument through the commander of a militarized corps of elves.