[sourcery]

Your argument rests on the assumption that "productivity gains" necessarily are achieved by actual strategic improvements in the infrastructure of production. Unfortunately, that has not recently been the case. Instead, the gains in productivity over the last few years have largely resulted from tactical measures that are penny-wise but pound foolish. Businesses are cutting expenses to meet profitability estimates, without much regard for long term (strategic) concerns.

Your argument also rests on the assumption that the heart of our economic problem is lack of productive capacity, where an increase in productivity would be helpful. But that, unfortunately, is not at all the problem that confronts us. Rather, the overriding strategic issue is overcapacity and other deflationary pressures. In such an environment, increases in productivity make the situation worse, not better. Otherwise, we would all be rejoicing over the extra supply of inexpensive goods coming from China, and inexpensive services coming from India (for example.)

Even in the case where strategically-beneficial productivity gains are occurring, there is still the high probability that the short-term (over the next dedade) consequences can be quite negative. Putting a lot of people out of work may eventually result in a much stronger economy, but will surely result at first in a recession or depression.

[Southack]

"but will surely result at first in a recession or depression."

Nonsense. You will not find that recessions always follow productivity gains.

In fact, productivity gains do not always even result in lost jobs/livelihoods. The biggest example of that point was probably the INCREASE in jobs/hiring/slavery that followed the invention of the cotton gin.

Likewise, more shipping jobs were created by the invention of the steamship, even though numerous "sailors" on the old wind-powered sailing ships got laid off in the process.