An Interview With William Lewis

June 20, 2005 10:18 PM

How Powerful Is Productivity? TCS interviews Former Carter Staffer (and Democrat) William Lewis, who makes some interesting remarks about worker productivity: There were many disparaging comments made in the US and maybe even stronger abroad, (and especially in Japan) about how the US labor force was getting what it deserved because it was lazy, uneducated and maybe even dumb. And of course, the Japanese then showed -- the really capable, competent Japanese manufacturing companies -- showed that was wrong by coming here, building their own factories, managing American labor and taking a lot of other local inputs and coming within five percent of reproducing their home country productivity.
posted by Kwantsar (11 comments total)

Interesting read, thanks. I found I could replace Lewis' term "informality" with "greased palms", and it would go a long way to explain why businesses in my city are either locked into the "pay for play" system for municipal contracts, or are forced to leave for lack of licensing, and further, why the city has stagnated, to some degree.
posted by Rothko at 11:11 PM on June 20, 2005

Probably the first article I've ever read on the TCS website which actually made sense, as opposed to being obvious propaganda.

Some glowing blurbs from the McKinsey website. Includes Jared Diamond and Robert Solow. Brief review from Foreign Affairs. List of the book's conclusions.

The bottom-up approach seems great. I'm more dubious about the idea that giving more power to consumers is the key to economic development in poor countries. My impression from other reading (e.g. on the Asian tigers) is that the problem is saving and investing. And maintaining a high savings rate usually involves holding down consumption. I'm curious what Lewis has to say about the industrialization of South Korea and Taiwan.
posted by russilwvong at 11:56 PM on June 20, 2005

interesting! but i'm not sure about the precis tho, that "Even though GDP per capita is the all-encompassing measure, GDP per capita is determined primarily, almost entirely, by productivity."

like i wonder what he'd say about france having higher multi-factor productivity than the US :D

In addition, American statisticians count firms' spending on software as investment, but in much of Europe it counts as a business expense, and so is excluded from final output. Thus the surge in software spending since the mid-1990s inflated America's GDP growth relative to elsewhere.

oh and factor-four (-ten :) productivity!
posted by kliuless at 4:30 AM on June 21, 2005

this was interesting. esp. about why US was so early in consumerism.

in the end he talks about what would get the poorer countries to change their thinking on this type of stuff. but is the consumer model the only way? is the US/western economy the only successful one? (and what is successful?)

I don't know how to put it into words, but can consumerism last forever? for everyone? if all the countries were like the west/Japan, would it still work??
posted by evening at 4:50 AM on June 21, 2005

Reading this guy is frustrating. I think he can't see the forest for the trees. Sure, Wal-mart is more 'productive' than a mom-and-pop store, but I don't think many people would describe the victory of Wal-mart over the mom-and-pop as some triumph of capitalism. The guy even says most of the former mom-and-pop workers end up working at Wal-mart, which, while probably not literally true, does show he acknowledges that they've gotten their butts kicked by the big box.

He goes on to say education's not the way out of the poverty trap because his research showed forty percent of Germany's unemployed went through their much-vaunted apprenticeship system. Well, hell. Everybody in that country's had at least that much education. Tell me that stat again when everybody in America is that educated.
posted by atchafalaya at 5:23 AM on June 21, 2005

Atchaf: Yeah, but the bit about unequal productivity in Houston and Brazil would be a good counter-example to the idea of education.
Now, something that is important to note is that productivity and GDP, while a part of living standards, do not represent the quality of life of the citizens of a nation. And while becoming productive and rich are (ig)noble goals, raising the HDI is probably something more citizens would care about. It's also important to realize that while he (and his former clients) have an interest in beating the drum for direct foreign investment, almost none of the rich economies in the world today were built like that (you could argue for post-war economies like Japan and Germany, but they were built with aid money and not with foreign companies investing). And while I'm not advocating autarky, the great strides in development in both Mexico (ironically, under Dias) and Thailand, have been made by increasing the local consumer base by increasing the local production base. Foreign investment can be just as centrally planned as communism, and local production can be faster at meeting local needs (while returning more of the investment to the local economy).
He is right about the informal sectors, but not just in their detriment to foreign investment: informal sectors sap cash from local businesses too. But the continual push from G8 the tack that will solve these problems. In essence, they're demanding greater informality toward their own interests, rather than demanding greater formality (and enforcement) across the board. (This is reversed for intellectual property, which multinantionals are definitely demanding greater formality).
posted by klangklangston at 6:11 AM on June 21, 2005

almost none of the rich economies in the world today were built like that (you could argue for post-war economies like Japan and Germany, but they were built with aid money and not with foreign companies investing).

Japan was almost the opposite. The american government didn't care about being "fair" with Japan, they cared about having a shining beacon for the virtue of capitalism, and so they basically cannibalized the US economy, the Japanese got protectionism at home and open markets abroad. This didn't really hurt the US as a whole (auto workers lost out, but americans in general got much better cars) but it was fantastic for Japan.

Yet, for some reason G8, the IMF, etc think the best thing for poor countries today is the exact opposite

Reading this guy is frustrating. I think he can't see the forest for the trees. Sure, Wal-mart is more 'productive' than a mom-and-pop store, but I don't think many people would describe the victory of Wal-mart over the mom-and-pop as some triumph of capitalism.

Not to be offensive, but I just don't understand this fetishization of mom'n'pop type stores. They're really inconvenient, why should people in small towns be forced to pay more for things, and drive around all day just sate someone elses sense nostalga?
posted by delmoi at 10:42 AM on June 21, 2005

Sure, Wal-mart is more 'productive' than a mom-and-pop store, but I don't think many people would describe the victory of Wal-mart over the mom-and-pop as some triumph of capitalism.

I don't think most people here have any experience with the sorts of mom-and-pops that WalMart beat the crap out of. By and large, they weren't anything like cute little urban boutiques. They weren't anything like friendly local urban grocers or general/convenience stores.

The ones I dealt with as a kid in exurban Florida were poorly stocked, usually with whatever the owners felt like carrying because it's not like you were going to drive an hour to get a different hand mixer, unpleasantly staffed, unhelpful, expensive, and as generally grubby and unpleasant to be in as a contemporary Wally World. All because they didn't have to be anything else, as your alternative was driving an hour into Tampa and back.
posted by ROU_Xenophobe at 11:42 AM on June 21, 2005

delmoi - I didn't get it until I moved to Vermont. Depending on what you're buying, service is the real benefit. Now I avoid Home Depot whenever possible because I've experienced what the local hardware store (even Ace) can do.

However, I do agree that there is some fetish about them. I have no idea where I'd go for a laundry basket except for the (big) grocery store or one of the big box stores (since I avoid Wal-Mart).

So I think there are some things that are best for the smaller stores, and some things that are great for the big stores.

on preview: ROU's point makes a good case for a healthy mix. I think when either type dominates, they get cocky and lax -- the competition keeps them useful.
posted by evening at 11:47 AM on June 21, 2005

I think there are good points, and bad points. He certainly has a point regarding the impact of productivity in per capita GDP. But, modestly speaking, I think I could have made that point better:

A few years ago I visited Nepal. I went hiking with an organised tour. With porters. Porting is the most common way of transporting cargo in the Nepalese mountains, and it's easy to see why: there are no roads, and the paths are steep. The soil is poor and eroded, so there's not much to feed mules with either. The life of a porter is quite a wretched one: they start working very young, about 8 or 9 years old. They carry very heavy loads (up to 60 kg - 120 lb.) on awful paths wearing just flipflops. As a result, many of them have injured or deformed limbs and spines. There's no guaranteed work, no health insurance, no nothing.

I calculated what a porter may transport during his entire working life. If he walks 30 km (17 miles) a day, carrying 40 kg (20 lb.), 6 days a week (I'm being generous, unemployment is widespread) during 40 years (again, a generous estimate of their working life), he will transport some 15 thousand metric tonnes kilometre. A German truck driver, driving a 40 tonne truck at a steady 100 km/h on an autobahn will achieve the same in...less than four hours. Less than half a working day. And without breaking a sweat.

That's why the Third World is poor. Bad conditions to start with (those mountains), but also lack of infrastructure (roads), capital (to buy a truck) and education (to learn to drive the truck).

Where he ventures unsteadier ground, however, is where he equates "high productivity" with "large multinationals" with "formal economy". Large corporations are not necessarily highly productive, nor particularly law-abiding (note the candid remark by Carrefour that they "know everything about bribes"). Also, the relationship between high productivity and big government is two-sided: it isn't just that only a high productivity society can sustain a big government, in many ways a big government, building infrastructure, funding education and, not least, ensuring legal certainty (instead of the rather more unstable arrangements of the informal economy), is also necessary for a high productivity society.
posted by Skeptic at 1:19 PM on June 21, 2005

Er...40 kg. is 80 lb., of course...
posted by Skeptic at 1:23 PM on June 21, 2005