Although digitisation offers a potential way back from the slowdown of productivity growth, its benefits will require a strengthening of aggregate demand, write Jacques Bughin, Hans-Helmut Kotz, and Jan Mischke in Vox.
Labour productivity growth remains near historic lows in the US and much of Western Europe. While growth in labour productivity has been slowing since the 1960s in many of these countries, the recent two-percentage point average drop, partly preceding and partly following the Global Crisis, is particularly troubling.
Many competing explanations have been put forward for this deterioration. They include the role of mismeasurement (Byrne et al. 2016, Syverson 2016, Hatzius et al. 2016), financial crisis-related effects (such as weak balance sheets, credit constraints, zombie firms, and capital misallocation), or weak aggregate demand and rising uncertainty (Adler et al. 2017, Borio et al. 2016, Gopinath et al. 2017, McGowan et al. 2017). Structural shifts also feature prominently as contributing factors, including the significantly reduced pace of technological innovation (Gordon 2016), the maturation of global supply chains (Adler et al. 2017), a shift to services (Turner 2017), changing industry structure and dynamics (Andrews et al. 2016, Decker et al. 2016, Haltiwanger 2012, Grullon et al. 2016), secular stagnation, and a structural savings glut (Summers 2016).
In a recent report that we co-authored, we try to pinpoint which explanations matter most in the productivity growth slowdown during the period after the financial crisis (Remes et al. 2018).
The productivity decline: Half weak demand, half maturing ICT boom from the 1990s
While many elements play a role, looking at the big picture, we find that about half of the recent drop in productivity growth is from weak demand, particularly in Europe (Remes et al. 2018). The other half, and a more significant factor in the US, was the waning of the productivity boom that began in the mid-1990s with the first information and communications technology (ICT) revolution, also supporting the subsequent phase of restructuring and offshoring (see Figure 1).
Figure 1 Contribution to the decline in productivity growth, 2010-2014 vs. 2000-2004
Despite unusually strong employment growth, capital expenditures remained lacklustre (see Figure 2). Given an environment of low demand as well as ample capacity, there was no reason to boost investment. In particular, expenditures for equipment and structures fell significantly (while, notably, it kept growing in intangibles). This is especially evident in Spain, the UK, and the US – the three countries with the biggest real estate boom prior to the crisis. For example, investment in structures – including by companies as well as household investment in residential real estate – fell 23% and 26% between 2007 and 2009 in the US and the UK, respectively, in real terms. While gross investment as a share of GPD has been slowly inching up during the recovery, mediocre demand perspectives mean that, from a firm perspective, there is no incentive to add to the stock of existing equipment. Capital intensity growth is still at the weakest rate since WWII. And longer term, a pronounced shift in investment to faster-lived (and ever less expensive) software and other intangibles has additionally contributed to a decline in net fixed capital formation rates. Net capital accumulation, as a share of GDP, fell by more than 4 percentage points (2010-14 average versus 1985-89) in most countries analysed. In that context, it did not help that, in particular, public sector investment in core infrastructures has been scaled back, too. In fact, in some countries we actually find long-lasting net public sector disinvestment, which will translate into increased maintenance costs down the road. From the perspective of firms, this means higher user costs of capital. France, Germany, Italy, Spain, Sweden, the UK, and the US all experienced a longer-term decline of between 0.5 and 1 percentage points in public investment between the 1980s and early 2000s, and it has been roughly flat (or even decreasing) since then.
Figure 2 Capital intensity growth
The lack of a robust demand perspective has been a key constraint on firms’ propensity to invest (see Figure 3). We have found from our global surveys of business that 47% of companies that are increasing their investment budgets are doing so because of an increase in expected demand. Concurrently, uncertainty plays a pronounced role in holding back investment, theoretically raising hurdle rates (the required return on equity). On the other hand, financial constraints – access to and costs of funds – apparently, at least amongst our sample of firms, do not feature highly. Across our industry sectors, we find that weak sales in the wake of the financial crisis was a key factor holding back capital expenditures. At the same time, when demand started to recover protractedly, most industries had ample capacity and room to expand without needing to add to existing equipment and structures.
Figure 3 Gross fixed capital formation
In addition to holding back investment, weak demand has also dragged productivity growth down through economies of scale effects. In finance, for example, productivity-growth declined – particularly in Spain, the UK, and the US – due to contractions in lending volumes (banks’ output), which banks were unable to fully offset with staff cuts due to labour as a quasi-fixed input (for example, to support branch networks and IT infrastructure). In the same vein, the utilities sector, which has seen flattening demand due to substantial efforts at increasing energy efficiency as well as declining economic activity during the crisis, was similarly not able to downsize labour. The need to support electricity distribution and the grid infrastructure requires a minimum amount of labour input.
We find a third way that demand has hurt productivity growth: through the changing structure of consumption baskets. For example, consumer preferences boosted productivity growth in both the auto and retail sectors from the mid-1990s to the mid-2000s, through a shift to higher value-per-unit, more effective-to-produce goods. In the meantime, that trend has slowed. In the early 2000s, the German and US auto sectors experienced a trend of customers purchasing SUVs and premium vehicles (i.e. higher value-added products). This boosted productivity growth by 0.4–0.5 percentage points in the auto sector during that period. That trend has slowed in both countries, which might be welcome for environmental reasons. Similarly, in retail, we estimate that consumers shifting to higher-value goods (e.g. higher-value wines or other premium products) contributed 45% to the 1995–2000 retail productivity growth increase in the US. This subsequently waned, also dragging down productivity growth.
A positive baseline future (2% a year in the next 10 years) if leakages are contained
The reasons behind the recent decline in productivity growth suggest that they are not entirely structural – as the financial crisis after-effects continue to dissipate, we expect productivity growth to recover (quasi-mechanically) from current lows across sectors and countries. On top of this, the good news is that our sector analysis reveals significant potential to boost productivity growth from a continuation of more typical productivity opportunities (such as operational efficiency gains), though mostly from the diffusion of digital technologies – themselves relying on the first ICT boom. Overall, we estimate that the productivity-boosting opportunities could be about 2% per year over the next ten years in Europe and the US, with the main part (60%) coming from the diffusion of digital opportunities.
However, leakages may challenge the realisation of this ‘digitised demand’ potential. While we found that weak demand hurt productivity growth in the aftermath of the financial crisis, looking ahead, there is concern that some demand drags may be more structural – or secular – than purely crisis-related. Broad-based income growth has diverged from productivity growth for a long while now. A declining labour share of income and a rising trend in income inequality have been eroding median wage growth. Moreover, the rapidly rising costs of housing exert a dampening effect on consumer purchasing power. It appears increasingly difficult to make up for weak consumer spending (of largely liquidity-constrained households) via higher investment. Of course, that very investment is influenced, first and foremost, by aggregate demand. In addition, rising returns on investment discourage capital expenditures relative to dividends. Demographic trends may further diminish investment needs through an ageing population having less need for residential and infrastructure investment. These demand drags are occurring while interest rates –endogenously reflecting expected mediocre growth perspectives – are hovering near the zero lower bound. All of this holds back the pace at which capital per worker increases, impacts company incentives to innovate, and thus puts a structural damper on productivity growth. In a low-pressure economy, the virtuous circle does not get under way.
The potential from digitisation may not materialise fully, and may further amplify demand leakages. First, as we have learned from previous technology revolutions, it often takes time for technological diffusion to translate into productivity (Oulton 2002). Given the disruptive nature of digitisation (Bughin and van Zeebroeck 2017), the adjustment costs are possibly higher with digital technologies than previously thought, and might significantly weigh on total added value; for example, we find that cannibalisation of incumbent revenues by new digital players put material pressure on nominal demand.
Second, digitisation may exacerbate demand effects, especially if the diffusion of digital technologies concentrates less on innovation than on pure technical automation that would compress the labour share of income and increase income inequality, by hollowing out middle-class jobs and polarising the labour market into ‘superstars’ versus the rest. Unless displaced labour can find new, highly productive (and thus high-wage) occupations, workers may end up in low-income occupations that, in a self-reinforcing manner, create a further drag on demand, limiting average productivity growth.
Thus, whether or not the productivity option is taken advantage of will decisively depend on policies to promote sustained demand, and thereby investment growth, while unlocking the innovation benefits of digitisation. Steps to do so include:
- Focusing public sector expenditures on infrastructure and education (Woetzel et al. 2016);
- Allowing for a substantial purchasing power of low-income consumers (with the highest propensity to consume);
- Unlocking private business and residential investment, including by lowering uncertainty and reforming land markets; and
- Supporting worker training (i.e. permanent education) to ensure that periods of transition do not disrupt incomes.
The productivity option holds out the promise of a big payoff. It would return advanced economies to robust economic health and promote widespread prosperity for years to come.
Galaxy Note 10 may use Samsung’s latest 64-megapixel camera
Samsung has unveiled a new 64-megapixel ISOCELL Bright GW1 image sensor today which is great news for the Galaxy Note 10. Given that the new sensor is expected to enter mass production in the second half of this year, there’s a good chance that we might see it on the company’s next flagship smartphone.
This new image sensor for mobile devices offers a higher resolution compared to any other sensor on the market right now. No wonder Samsung describes it as the “industry’s highest resolution” sensor for mobile cameras.
Galaxy Note 10 may feature a 64-megapixel camera
The 64-megapixel ISOCELL Bright GW1 has the highest resolution in Samsung’s 0.8μm-pixel image sensor lineup. It relies on the pixel-merging Tetracell technology to produce bright 16-megapixel images in low-light and detailed 64-megapixel images in well-lit conditions. It does that by merging four pixels into one while the color filter is descrambled for full-resolution 64-megapixel shots in good lighting.
There’s even support for real-time high dynamic range (HDR) of up to 100-decibels which provides “richer hues,” according to Samsung. The dynamic range of a conventional image sensor is around 60dB while that of the human eye is typically around 120dB.
Samsung has also announced an updated 48-megapixel ISOCELL Bright GM2 sensor today. The updated sensor also gets Tetracell technology in addition to a remosaic algorithm for well-lit environments. This should improve picture quality by reproducing colors that feel more natural and vivid. Much like the 64-megapixel sensor, the new 48-megapixel sensor also gets Super PD for high-performance phase detection auto-focus.
48-megapixel sensors have become quite common on smartphones now. Samsung’s Galaxy A80 has one as well. The company is clearly hoping to gain a lead in the megapixel wars with its new 64-megapixel camera. Samsung says that the sensor will enter mass production in the second half of this year. Therefore, it’s quite possible that we might see it on the Galaxy Note 10.
Samsung Galaxy S10+ vs Apple iPhone XS Max: Differences explained
For the past ten years, there’s been one battle in the smartphone world that’s raged fiercer than any other: Apple versus Samsung.
While there are now plenty of fantastic flagship products out there from other brands now, there’s still something about the Galaxy series from Samsung that gets people talking, and spending money. As for the iPhone, well, that’s the iPhone.
- Galaxy S10+ starts at £899
- iPhone XS Max starts at £1099
Perhaps the biggest difference between the iPhone and the Galaxy is the price. You’ll find in daily use – more than likely – that each has its benefits, and both are genuine flagships. But at £1099, the starting price for the XS Max is steep.
- Both have IP68 water/dust resistance
- Samsung is 157.6 x 74.1 x 7.8mm
- iPhone is 157.5 x 77.4 x 7.7mm
Both companies have had to juggle prioritising technological features and design. For Apple, you’ll notice how the rounded corners on the screen match the roundness of the phone corners, and how the bezel thickness is the same all the way round up to the notch.
That gives it a really pleasing consistent and symmetrical appearance from the front, but then that advanced Face ID technology has meant adding quite a hefty notch at the top, and that some times gets in the way of content.
For Samsung, the hardware team wanted to keep using that curved glass on the edges of the OLED screen, and that means the bezel isn’t uniform all the way around.
The bottom edge is thicker than the sides, and the top bezel, making it seem a little less balanced, but it’s not something that really bothers when you use it day-in day-out. Plus. That hole punch cutout means more of the front surface is dominated by screen.
Turn it to the back, and – despite the oddness of that long rectangle on the back – we like that it makes the rear symmetrical. Apple’s camera in the corner is iconic now, but protrudes quite far, even if it is really nicely finished.
Boiling it down to basics: both phones use high quality metal and glass work to make them look and feel every part the premium phones they are. They’re both near enough the same size too, although the curved screen edges do mean the Sammy is slightly narrower.
- Galaxy S10+: 6.4-inch curved, Dynamic AMOLED, Quad HD+ 19:9
- XS Max: 6.5-inch flat, OLED, 1242 x 2688, 19.5:9
- iPhone Notch versus S10+ dual punch-hole
Samsung’s OLED panel is QHD+ which means it’s sharper than Apple’s 1242 x 2688 resolution OLED screen. It’s a slightly longer ratio 6.5-inch versus Apple’s 6.4, and it takes up more of the available space.
Technologically, it’s better than Apple’s too, being HDR10+ compliant versus Apple’s HDR10. But, in real daily use, you’re not going to notice that difference really.
Both screens offer fantastic colour reproduction, detail, brightness and contrast.
Which ever phone you use, you’re going to get a fantastic display, but each has its compromises. That iPhone notch, with some games and apps, will cut off some of the app detail.
Samsung’s minor flaws are different, in that, sometimes the slight curvature means the very top and bottom of some video gets every so slightly distorted.
The other element is that apps often have a black bar to disguise that punch hole camera, making the picture look uneven, with one flat edge, and one with rounded corners.
- S10+: Triple camera – wide, ultra-wide and zoom
- iPhone: Dual camera – wide and zoom
- S10+: 12MP f/1.4 + f/2.5, 16MP f/2.2 and 12MP f/2.4
- iPhone: 12MP f/1.8 and 12Mp f/2.4
With the Samsung, its combination of the regular, 2x zoom and ultra-wide cameras is so useful, and means we miss our real cameras less than before. It’s like carrying around a camera with a wide and zoom lens.
With that said, we think the actual end results from the iPhone, considering it’s just point and shoot, are a little better. Samsung’s primary camera – which has that mechanical aperture – seems to leave photos looking a tiny bit more flat. iPhone’s HDR makes daylight shots more dynamic.
And the iPhone’s actually decent in low light, despite not having that dual aperture like Samsung. Neither has great night modes though, unlike a few other smartphones. We also think that iPhone’s video looks nicer, a bit smoother, detailed and vibrant straight out of the camera.
Hardware and software
- Galaxy S10+: 8/12GB RAM, 128GB/512GB/1TB
- iPhone XS Max: 4GB RAM, 64GB/256GB/512GB
- Galaxy S10+: 4100mAh battery, 15W fast wireless charging
- iPhone XS Max: 3174mAh (approx), 7.5W wireless charging
- Samsung OneUI vs Apple iOS 12
If it was down to pure numbers, Samsung’s 4100mAh battery beats the iPhone’s 3,174mAh capacity. But with iPhone’s optimisations, we found – again – fairly similar results. But the key take away is that you’ll easily get through a full day with either phone, without needing to plug them in.
So software and features – there’s lots to love here. Samsung, as always loads the phone up with extras. It has DeX – which is a desktop computer like experience, that requires nothing other than a standard cable to connect to a monitor and a Bluetooth keyboard and mouse. It also has a headphone jack, and removable storage.
iPhones do not have any of those things.
There is iMessage though, and iOS is generally better supported in the software and accessories market, what’s more, Apple customer service is really good, comparatively.
Face ID, despite requiring that notch feels a far more natural way to unlock the phone than using the ultrasonic in display fingerprint sensor on the Samsung, and fails a lot less often, if at all. Similarly, Apple Pay for contactless is supported by more of the big banks than either Samsung or Google Pay.
Both clearly have their benefits, it’s about choosing which is more suited to what you need.
In truth, it doesn’t matter too much which of these phones you buy. If you’re in the Apple ecosystem and regularly use features like AirDrop, iCloud and Apple Pay, you’re going to be delighted by the XS Max.
In all of our phone testing, Face ID is the most convenient way to unlock your phone.
However, if you want to save money and Apple’s ecosystem holds no value to you, the Samsung is the way to go. You’ll get a great display, camera and performance, plus you’ll save yourself a good chunk of change.
MYSTERIOUS HACKERS HID THEIR SWISS ARMY SPYWARE FOR 5 YEARS
IT’S NOT EVERY day that security researchers discover a new state-sponsored hacking group. Even rarer is the emergence of one whose spyware has 80 distinct components, capable of strange and unique cyberespionage tricks—and who’s kept those tricks under wraps for more than five years.
In a talk at the Kaspersky Security Analyst Summit in Singapore Wednesday, Kaspersky security researcher Alexey Shulmin revealed the security firm’s discovery of a new spyware framework—an adaptable, modular piece of software with a range of plugins for distinct espionage tasks—that it’s calling TajMahal. The TajMahal framework’s 80 modules, Shulmin says, comprise not only the typical keylogging and screengrabbing features of spyware, but also never-before-seen and obscure tricks. It can intercept documents in a printer queue, and keep track of “files of interest,” automatically stealing them if a USB drive is inserted into the infected machine. And that unique spyware toolkit, Kaspersky says, bears none of the fingerprints of any known nation-state hacker group.
“Such a large set of modules tells us that this APT is extremely complex,” Shulmin wrote in an email interview ahead of his talk, using the industry jargon—short for advanced persistent threat—to refer to a sophisticated hackers who maintain long-term and stealthy access to victim networks. “TajMahal is an extremely rare, technically advanced and sophisticated framework, which includes a number of interesting features we have not previously seen in any other APT activity. Coupled with the fact that this APT has a completely new code base—there are no code similarities with other known APTs and malware—we consider TajMahal to be special and intriguing.”
It’s remarkable how long TajMahal remained undetected.
Kaspersky says it first detected the TajMahal spyware framework last fall, on only a single victim’s network: The embassy of a Central Asian country whose nationality and location Kaspersky declines to name. But given the software’s sophistication, Shulmin says TajMahal has likely been deployed elsewhere. “It seems highly unlikely that such a huge investment would be undertaken for only one victim,” he writes. “This suggests that there are either further victims not yet identified, or additional versions of this malware in the wild, or possibly both.”
Those initial findings may indicate a very cautious and discreet state-sponsored intelligence-gathering operation, says Jake Williams, a former member of the National Security Agency’s elite Tailored Access Operations hacking group. “The extensibility of it requires a large developer team,” Williams notes. He points out also that the ability to avoid detection and the single known victim suggest extreme care in targeting, stealth, and operation security. “There’s all kinds of stuff here that screams opsec and very regimented tasking.”
Shulmin says Kaspersky hasn’t yet been able to connect TajMahal, named for a file the spyware uses to move stolen data off a victim’s machine, to any known hacker groups with the usual methods of code-matching, shared infrastructure, or familiar techniques. Its Central Asian target doesn’t exactly provide any easy clues as to the hackers’ identities either, given the vagueness of that description and the countries with sophisticated hacker teams with Central Asian interests, including China, Iran, Russia and the US. Nor has Kaspersky determined how the hackers behind TajMahal gain initial access to a victim network. But they do note that the group plants an initial backdoor program on machines, which the hackers labelled Tokyo. That backdoor uses the tool PowerShell, often exploited by hackers, to allow the intruders to spread their compromise, connect to the a command-and-control server, and plant TajMahal’s much more multifunctional payload spyware, labelled by the hackers as Yokohama, with its dozens of distinct modules.1
Yokohama’s Swiss Army-style versatility is what stood out most to Kaspersky’s researchers. While it includes many of the usual, powerful capabilities of state-sponsored spies, it also has some more idiosyncratic features: When a USB drive is plugged into an infected PC, it scans its contents and uploads a list of them to the command-and-control server, where the spies behind TajMahal can decide which files they want to exfiltrate. If the USB drive has been removed by the time the hackers have made up their minds, TajMahal can automatically monitor the USB port for the same drive to pull off that file, and upload it the next time it appears. The spyware has other modules that allow it to flag files that have been burned to a CD, or put into a printer queue.
While none of those features are particularly flashy, they signal a careful adversary taking pains to discern which files among the vast and messy contents of a victim’s computer might be worth stealing. “One would not print information, save it to a USB stick, or burn it onto a CD if this information was not important in some way,” Shulmin says.
Considering its sophistication and eclectic features, it’s remarkable how long TajMahal remained undetected. The Central Asian embassy victim, Kaspersky says, had been compromised since at least 2014. But the compile times of various elements of TajMahal—the time stamps that indicate when a piece of it was programmed—indicate it was active both before and long after that date. Some modules dated back to 2013, while others dated as recently as 2018.
“Somehow, it has stayed under the radar for over five years. Whether this is due to relative inactivity or something else is another intriguing question,” Shulmin writes. “It is a reminder to the cybersecurity community that we never really have full visibility of everything that is going on in cyberspace.”