Thursday, 23 November 2017

The bizarre failure of productivity to improve in construction.

In the last 20 years, productivity in Germany and Japan has not risen at all. In France and Italy it’s fallen by one sixth. And in the US it’s halved since the late 1960s. That’s according to this Economist article. Absolutely hopeless.!!!!

According to the Economist, the industry has become LESS capital intensive because builders are put off investing by boom and bust. It has also failed to consolidate. Another significant problem is different building codes in different parts of the same country.

However, we had boom and bust 50 years ago, and presumably also different building codes in different parts of the same country. So neither of those strike me as good explanations.

The Economist rightly considers mass production pre-fab as a possible solution. Strikes me that will never really get off the ground in a big way absent very very large scale mass production of apartment units.

The head of one of the UK’s largest construction firms said a few decades ago at a House of Commons investigation into this that the scale of investment needed to really reap the benefits of mass produced apartment units would require more money than an individual firm could come up with. Unfortunately I forget his name or the firm he worked for.

Possibly this is an area where Mariana Mazzucato’s ideas on entrepreneurial governments might work. For all the tens of thousands of words she writes, she seems a bit short of actual examples of where the entrepreneurial state idea would pay dividends.

On the other hand, it may be that productivity improvements are just not possible at the moment. After all, the typical house is constructed much the same way as in Roman times: one brick or stone plonked on top of another with mortar in between, plus wooden floor joists and wooden floor boards, plus tiles on the roof.

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