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The Power of Productivity

Wealth, Poverty, and the Threat to Global Stability

The disparity between rich and poor countries is the most serious, intractable problem facing the world today. The chronic poverty of many nations affects more than the citizens and economies of those nations; it threatens global stability as the pressures of immigration become unsustainable and rogue nations seek power and influence through extreme political and terrorist acts. To address this tenacious poverty, a vast array of international institutions has pumped billions of dollars into these nations in recent decades, yet despite this infusion of capital and attention, roughly five billion of the world’s six billion people continue to live in poor countries. What isn’t working? And how can we fix it?

The Power of Productivity provides powerful and controversial answers to these questions. William W. Lewis, the director emeritus of the McKinsey Global Institute, here draws on extensive microeconomic studies of thirteen nations over twelve years—conducted by the Institute itself—to counter virtually all prevailing wisdom about how best to ameliorate economic disparity. Lewis’s research, which included studying everything from state-of-the-art auto makers to black-market street vendors and mom-and-pop stores, conclusively demonstrates that, contrary to popular belief, providing more capital to poor nations is not the best way to help them. Nor is improving levels of education, exchange-rate flexibility, or government solvency enough. Rather, the key to improving economic conditions in poor countries, argues Lewis, is increasing productivity through intense, fair competition and protecting consumer rights.

As The Power of Productivity explains, this sweeping solution affects the economies of poor nations at all levels—from the viability of major industries to how the average consumer thinks about his or her purchases. Policies must be enacted in developing nations that reflect a consumer rather than a producer mindset and an attendant sense of consumer rights. Only one force, Lewis claims, can stand up to producer special privileges—consumer interests.

The Institute’s unprecedented research method and Lewis’s years of experience with economic policy combine to make The Power of Productivity the most authoritative and compelling view of the global economy today, one that will inform political and economic debate throughout the world for years to come.

Read an excerpt.

368 pages | 37 line drawings | 6 x 9 | © 2004

Economics and Business: Business--Industry and Labor, Economics--Development, Growth, Planning, Economics--International and Comparative


“The question Lewis set out to answer was why poor countries are poor and rich ones rich.  It had been asked before, and answered by looking at the big differences between nations: history and culture, capital markets, labor markets, etc.  Lewis’ approach was to look at specific businesses.  He made a point not to focus on export industries, like cars in Japan and software in India.  Each is only a sliver of that country’s employment. . . .  This is a valuable book.  . . . Lewis confirms much of the free-market canon, and in a way that the free-marketeers have generally not done and some of them refuse to do.  They should read it.”--Bruce Ramsey, <I>Liberty

Bruce Ramsey | Liberty

“Bill Lewis’s book aims to distill the lessons from a large body of original research on a question of enormous importance: what determines the performance, especially the productivity performance, of national economies and the industries within them? I was able to participate in much of the research, and I can report that I learned a lot about the sources of productivity in both the manufacturing and service sectors of modern economies. The obvious answers are only part of the story. Readers all around the world will see vital issues in a new light.”<\#209>Robert M. Solow, winner of the 1987 Nobel Prize in Economics

Robert M. Solow, winner of the 1987 Nobel Prize in Economics

“One of the central questions of economics concerns why some countries are rich, why other countries are poor, and how poor countries can best be helped to become rich.  Among the many authors of books on this subject, Bill Lewis has the big advantage that the governments of many major countries asked him and his colleagues to investigate their economies and to advise them. His comparative perspective, consistent framework, and crystal-clear writing make this book a compelling read. It is also a delightful and surprising read: for instance, you probably never guessed why Japan produces automobiles much more efficiently than it produces milk.”<\#209>Jared Diamond, Professor of Geography at UCLA and author of the Pulitzer Prize-winning book <I>Guns, Germs, and Steel

Jared Diamond, Professor of Geography at UCLA and author of the Pulitzer Prize-w

“A “bottom up” analysis of productivity (as opposed to the usual macroeconomic approach) that is fascinating, diverse, and complex.”--Richard N. Cooper

Richard N. Cooper | Foreign Affairs

Table of Contents

1. Findings: The Global Economic Landscape
Part 1 - Rich and Middle-Income Countries
2. Japan: A Dual Economy
3. Europe: Falling Behind
4. The United States: Consumer Is King
5. Korea: Following Japans Path
Part 2 - Poor Countries
6. Brazil: Big Government Is Big Problem
7. Russia: Distorted Market Economy
8. India: Bad Economic Management from Democratic Government
Part 3 - Causes and Implications
9. Patterns: Clear and Strong
10. Why Bad Economic Policy around the World?
11. New Approaches
12. So What?
McKinsey Global Institute Reports
Recommended Readings

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