The Soviet Union's total product grew by 5.1 percent yearly from 1928 to 1940 (Gregory and Stuart 1986:119), mainly from increased inputs of labor (primarily educated labor) and capital. As indicated in Chapter 3, during later development, 1971 to 1985, total factor productivity (TFP) or output per combined factor input fell by almost 1 percent yearly. The fact that President Mikhail Gorbachev could not turn productivity growth around contributed to Soviet collapse in 1991. In 1994, Princeton economist Paul Krugman (1994a:69–72) contended that East Asia's “miracle growth” was, like the Soviet Union, based only on the growth of inputs. Thus, because of physical limits on continuing input growth, Singapore and Korea were “paper tigers.” Their subsequent growth (save for the Asian financial crisis of 1997–98) indicated that Krugman was wrong, suggesting that previous East Asian productivity growth had been understated.

Krugman states (1999): “Productivity isn't everything, but in the long run it is almost everything…. A country's ability to improve its standard of living over time depends on its ability to raise its output per worker.” History bears him out. The rapid growth in productivity of Japan and a few Western countries since the mid-19th century has not been equaled by other countries. Since then, the United States, Canada, Japan, and most Western European countries experienced real growth rates in gross national product per capita in excess of 1 percent per year, a rate that means a rise to more than four times initial value by 2000 (Chapter 2000).