If today's GDP figures are to be believed - which is a big if - productivity has slumped. The ONS says GDP fell 0.3% in the last two years whilst total hours worked rose 2.2%. This implies a drop in GDP per hour of 2.4%. What's more, productivity is 3.3% lower than it was five years ago.

My chart, taken from the Bank of England's database*, puts this into historic context. It shows that, unless productivity recovers significantly in the rest of this year (which is possible), we'll see the first fall in peacetime five-year productivity since 1932, and only the second such drop since the late 1880s.

Now, I'm prepared to believe that productivity isn't really this bad: maybe GDP has been under-recorded and employment over-recorded; there's a lot of noise in the latter.

However, it's unlikely that data revisions will overturn the big message of my chart - that productivity growth has been trending downwards since the late 60s. As Noah Smith says, something big happened in the 70s.

To some extent, this something is simple mean reversion. If we split annual peacetime productivity growth into distinct periods we get:
1856-1913 = 1.3%
1920-1939 = 1.7%
1947-1973 = 3.1%
1973-2011 = 1.9%

What stands out here is the fast productivity growth during post-war period. The last 40 years of weaker growth look normal compared to the pre-war period.

This poses the question: why did productivity grow so well in the golden age?

Part of the story is that post-war reconstruction permitted a productivity catch-up. The new equipment firms bought after the war embodied the technological gains made in earlier years, but these gains natually eventually slowed down; Verdoorn's law predicts that rapid growth for any reason (eg growth of our export markets) will be associated with rapid productivity growth; and low commodity prices helped spur productivity too.

On this view, the golden age was a happy period which simply cannot be reattained.

This is undoubtedly part of the story. But is it the whole story?What if social democracy itself contributed to that productivity growth, for example:

- The belief that Keynesian policies would ensure full employment, along with a framework of statist planning, gave firms the confidence to invest, and better capital equimpment means more productive workers.

- Full employment and strong trades unions meant that managers could not make big profits merely by depressing wages, and so had to look for genuine efficiency gains.

- Workplaces in which managers consult with unions, and so gain cooperation, find it easier to grow productivity than dictatorial workplaces;industrial relations weren't entirely conflictual in the 60s, remember.

What lends this view some credence is the sluggish productivity growth of the pre-1914 period. This suggests that free markets on their own do not unleash rapid productivity improvements.

If this line of thinking is anywhere near-correct, then a serious recovery in productivity requires big political change.