Unemployment rates in the U.S. and the U.K. might be low, but a stall in productivity proves that both economies are far from full health, according to Nobel prize-winning economist Paul Krugman.
The noted Keynesian said Thursday that there had been an "unprecedented stall in productivity" in the U.K. since 2006, adding that the U.S. wasn't "doing great either."
There were several reasons for this shortfall, according to Krugman, who was speaking at the University of Oxford's Saïd Business School. These included a lack of improvement in technology and also the possibility that the U.K. was in a "disguised depression."
"All technology from the iPhone onwards has had zero impact on the British economy. It's made no progress whatsoever despite all of this stuff," he told the audience.
Productivity has been a hot topic this week in the U.K., with Mark Carney, governor of the Bank of England, also raising concerns. Economists have spoken of low-income, low-skilled occupations and new employees doing jobs they're not yet accustomed to.
Krugman joked that the Apple iPhone – launched in 2007 -- might not have driven advancements in labor productivity – rather, it may have had an adverse effect on people's attention spans.
He also said that the mystery of high employment but low productivity could be explained by semi-employed people, or "lots and lots of people calling themselves consultants."
"Employment is pretty good and that's the really, really weird thing," he added.
The widely-watched economist has been a vocal critic of the U.K. government's policies over the last five years. The ruling Conservative Party's program of fiscal retrenchment has been praised by the International Monetary Fund (IMF), however, and the party was re-elected last week with even more parliamentary seats than in its first term.
Krugman's main argument is that the supposed fiscal tightening actually stopped in 2013, which allowed the economy to recover, thus winning over voters at the ballot box.
"The largest challenge (for the U.K.) is that the government believes its own propaganda," he said at the discussion panel. "(They've been) given the chance to make the same mistakes again."
He referred to "disruptive, destabilizing policies" and advocated major public investment programs for the U.K. He even urged students in the audience to build a movement against the current policies of austerity.
"Try to build a foundation, because the wheel does turn and there will be another chance, however hard it may be to see that a week after the election," Krugman said.
Fellow panelists at the University of Oxford event were equally scathing about the ruling Conservative Party. Martin Wolf, chief economics commentator at the Financial Times, said the country wasn't being governed by "sane people" and that the U.K. economy was a "complete mess."
He called on policymakers to support innovation, reform corporate governance and liberalize land-use planning laws so more houses could be built. David Hendry, a professor at Oxford University's Oxford Martin School, called for more immigration to offset an ageing U.K. population and better education of new skills.
Not all analysts and economists believe that governments should spend more, however. Harvard historian Niall Ferguson launched a stinging retort at Krugman last weekend, arguing in the Financial Times that Keynesian economists had been "ignominiously humbled" by the results of the U.K. election.