The Success of Failure
By Arnold Kling
Virginia Postrel cites the research of McKinsey’s William L. Lewis on international differences in productivity growth.
Food processing in Japan, Mr. Lewis writes, “has more employees than the combined total of cars, steel, machine tools and computers,” or about 11 percent of all manufacturing workers. While Japan’s fiercely competitive auto industry is the most productive in the world, its food-processing industry is only 39 percent as productive as the United States industry, McKinsey found.
The difference is that in Japan, old firms are propped up, which takes away their incentive to improve. In the U.S., inefficient firms are allowed to fail.
For Discussion. As health care and education become a larger share of the economy, will the U.S. productivity advantage vanish?