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The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability Hardcover – April 16, 2004
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From Publishers Weekly
Lewis, founding director of the McKinsey Global Institute and former partner at McKinsey & Company, offers a detailed look at the local economies in several parts of the world including the U.S., Japan, India and Brazil. Based on the Institute's 12-year survey and analysis, Lewis concludes that the great economic disparity between rich and poor countries will ultimately have a negative impact on all nations. Lewis and his team examined individual industries within a country to evaluate the productivity per employee. The specific country-by-country distillations are easily understood, regardless of one's familiarity with economic theory, and readers will not be surprised by Lewis's discussion of the thriving Japanese economy, successful largely because of its domination of the automobile market. However, the more detailed analysis of Japanese business, which is limited by government policy including restrictive land regulations that have kept larger retailers like Wal-Mart away, is quite informative. The author's examination of American domestic productivity is also clear and accessible: in the 1990s, growth occurred in only six sectors, including four technological areassecurity brokers, microprocessors, computer assembly and mobile telephone services. As evidenced by the tech bubble, slowed growth in these fields has hurt the economy. Lewis concludes by explaining how various factors, including education, government controls and cooperation among countries, will play a part in future international economic stability. This is an insightful treatment of a complex issue that deserves a wide readership.
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And that's for one of the richest countries in the world. For the countries without resources, landlocked or with boiling ethnic/religious strife even the best policies will do little good.
Easterly Elusive quest for growth might be the most realistic read why the things are as they are.
He shows how, in markets sheltered from competition by barriers or regulation, productivity remains low and so do the returns on capital and labor. The studies are drawn from developed (Japan, US, Europe) and developing nations (Brazil, India, Korea) and go in depth into particular industries in order to understand the factors that drive productivity. No book in recent publication is as insightful on the true engine that drives development.
The author was the leading partner at McKinsey in charge of the McKinsey Global Institute, McKinsey's thinktank. Using McKinsey resources, which are unique and unavailable to any other economist, Lewis was able to analyze conditions that could only previously be seen from afar by economists. His training as a physicist also helped him synthesize phenomena, drawing the overarching themes behind producitivity.
I highly recommend this book, it will breathe new life into economists that may be losing hope that development is not possible in certain places due to such factors as environment or culture. It is accessive to non-economists as well, so I hope policy-makers would have a chance to read it and follow some of its good advice.
The most provocative conclusion is probably Lewis' refutation of Robert Reich's thesis in The Work of Nations: that education on and of itself will lift lesser economies out of poverty. Lewis, professionally trained as a physicist, very astutely and rationally argues that it is not education, but productivity, both in manufacturing and in retailing, that will lead these economies out of darkness, and productivity in a given job is a skill that can be learned quite easily without any formal education whatsoever, simply by imitating best practices from around the world; the example used most convincingly in the book is that of Mexican home-builders working in Houston, TX.
One surprising footnote, however: in his conclusion, Lewis actually DOES make a rather strong argument for the need for liberal education in the poorer nations, but not for the reasons you might suspect. The linchpin of his argument is that competition- free, unfettered, unrestrained, unadulterated competition- is what drives economic growth, and that the only way it really develops without tampering or interference by special interests is when a culture develops a mindset that the consumer, not the producer, comes first. Most Americans take for granted that the whole world thinks this way, but Lewis reminds us that this is not at all the case, and that education and the cultivation of critical thinking may be the only way to shift the focus from producer to consumer in poorer nations.
One thing a reader may find a bit odd about this book is that it was apparently dictated, for the most part, using voice-recognition software, and it shows. It acutally helps the book flow more seamlessly, but I sometimes found the conversational air to be a bit off-putting and longed for "harder edges" in the text. That, however, is a very small complaint in comparison to the outstanding quality of the scholarship, research, and thought contained in this volume.