It's possible that West is not doing the latter, but the article does imply that this is the case.

It didn't sound like that to me. It sounded like some people had absurd standards for scaling phenomena, and he was rightly dismissing them.

If humanity's productive output has recently (relatively speaking) reached the point of diminishing returns,

There's nothing recently about it. Diminishing returns is a pretty general phenomenon which happens in most periods; Tainter documents examples in many ancient settings, and we can find data sets suggesting diminishing returns in the West from long ago. For example, IIRC Murray finds that once you adjust for population growth, scientific achievement has been falling since the 1890s or so.

then a). we can no longer extrapolate the growth of productivity in cities by assuming past trends would continue indefinitely, and b). this does not bode well for the Singularity, which would entail an exponential growth of productivity, free of any diminishing returns.

It doesn't bode much of anything; I referred to you my list of 'what diminishing returns does not imply' for a reason: #1-4 are directly relevant. Diminishing returns does not mean no exponential growth; it does not mean no regime changes, massive accomplishments, breakthroughs, or technologies. It just means diminishing returns; it's just an observation about one unit of input turning into units of output as compared to the previous unit of input and outputs, nothing more and nothing less.

This is obvious if you take Tainter or Murray or any of the results showing any diminishing returns in the past centuries, since those are precisely the centuries in which humanity has done the most extraordinarily well! One could say, with equal justice, that 'this does not bode well' for the 20th century; one could say with equal justice in 1950 that diminishing returns bodes poorly for the computer industry because not only are chip fab prices keeping on increasing ('Moore's second law'), computing power is visibly suffering diminishing returns as it is applied to more and more worthless problems - where once it was used on problems of vital national value (crucial to the survival of the free world and all that is good) worth billions such as artillery tables and H-bomb simulations, now it was being wasted on grad students and businesses.