Power of Productivity
By Arnold Kling
I strongly recommend an interview with William Lewis, author of The Power of Productivity. Lewis discusses how the McKinsey Global Institute set about examining productivity across countries. They wound up looking at what I call the new paradigm in economics.
Japan had the highest productivity in the traded goods manufacturing sectors. In the rest, the productivity was very low.
…all the so-called Washington consensus factors are the same for these sectors — the same exchange rate policy, same monetary policy, same rule of law, same set of governing institutions, same high quality education system, same infrastructure, same availability of capital…the macro conditions — the macro economic stability factors, the budget deficits — all of those factors are the same for these sectors in Japan.
…you get into a huge area of micro rules and regulations and incentives on managers so that basically they end up doing different things…In terms of the big operations, they have great difficulty in Japan getting hold of land. The local zoning authorities for a long time just outright banned big box stores, stores of over something like 10,000 square feet. That ban was put in place at the political influence of the small shopkeepers and others. The US objected to that and finally got that overturned, but it just got overturned into something almost equally ineffective which setup a lot of environmental and traffic and other kinds of potential obstacles, with the board determining whether to go forward dominated by local interest, local producer interest, local retailing interest.
Another topic where Lewis confronts conventional wisdom is education. He says that there is evidence against the view of education as a panacea for productivity.
The great bulk of the evidence about education came from competent multinational corporations of any nationality. Showing they could go virtually anywhere in the world and take the local workforce and train it to come close to home country productivity.
The interview is long and fascinating.