The Power of Productivity

I don't usually put books up on this site until I've read them, but I'm making an exception for The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability. Mr. Lewis was founding director of the McKinsey Global Institute in 1990, remained in that position for over a decade, and is now Director Emeritus. I'm only 75 pages in, but this is obviously a major book. If you believe that global economic disparity is a danger to America and want to understand the area, I recommend this book. Is he right? Don't know yet, but I think he's worth studying. I'll definitely be commenting further on the ideas from this book, but, to give you a taste, here are his ten main conclusions and a sample of what I think will be the most common criticism of the book:

Ten Main Conclusions

#1. Understanding the causes of poor economic performance requires an evaulation of performance and causes at the "sector" level rather than macroeconomic analyses.

#2. Differences in competition in product markets are more important in explaining a country's performance than are differences in labor and captial markets.

#3. A level playing field for competition in a country is critical for economic health.

#4. General education systems and educational attainment of the populace are not critical to productivity; OJT will suffice.

#5. If poor countries improved productivity and balanced their budgets, they would have plenty of capital for growth from domestic savers and foreign investors.

#6. Social objectives should be achieved by good competitive conditions leading to a bigger pie combined with direct tax transfers (for example, a low minimum wage coupled with Earned Income Tax Credits rather than a high minimum wage and unemployment compensation).

#7. Today's poor countries are burdened with much bigger governments that today's rich countries had at comparable levels of development. This leads to large portions of the economy becoming informal and untaxed, thereby disproportionately burdening legitimate, businesses and discouraging increased productivity.

#8. Intellectual and other elites in poorer countries reward themselves richly, but do not help their countries move from poor to rich.

#9. Poor countries can grow much faster than commonly thought by ditching protections for their indigenous industries and creating a level playing field for the most productive companies from rich countries to bring in their systems and techniques.

#10. Poor countries must become consumer oriented. It is consumption, not production, that counts. Producing goods that consumers do not want does not produce wealth.

Likely Criticism

The headline from an Amazon review says it all:

"If you love Wal-Mart you'll love this book, September 6, 2004 "

I'm not even going to expand on that. I will note that Lewis clearly seems to suggest that environmental and historical preservation initiatives need to balance the value of what's being "preserved" or "enhanced" against the limitation on value-creation inherent in such actions.