DCO-ZXE089-20040200-jgfPP1 Productivity & Prosperity William W. Lewis Competitiveness Congress Istanbul November 8, 2005.

DCO-ZXE089-20040200-jgfPP1

Productivity & Prosperity

William W. Lewis

Competitiveness CongressIstanbul

November 8, 2005

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WORLD DISTRIBUTION OF PER CAPITA GDP BY COUNTRYU.S. Dollars, at PPP High income countries

Middle income countries

Low income countries

0

5

10

15

20

25

30

35

40

0 1000 2000 3000 4000 5000 6000

ChinaIndia

Mexico

Brazil

IndonesiaPakistanBangladesh

Russia

Nigeria

Vietnam

South AfricaPoland

Spain

Korea

GDP per capita, 2002U.S. 2002 $ thousands

PopulationMillions

Norway

Germany

France

U.K.Japan

Canada

Italy

U.S.

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• Capital and technology • Scale and capacity

utilization

• Skill level of personnel • Organization of functions

and tasks, marketing and other operational factors

GDP per capita

Employment Labor productivity

Capitax=

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CONCLUSIONS

• Sector level analysis is necessary to find causal factors of economic performance

• Education is not as immediately important as most people think

• Distortions in competition in product markets are more important than labor or capital market problems

• Today’s big governments in poor countries are a handicap today’s rich countries did not have when they were poor

• Consumers are the only political force that can stand up to producer interests, big government, and the technocratic, political, business, and intellectual elites

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CONCLUSIONS

• Sector level analysis is necessary to find causal factors of economic performance

• Education is not as immediately important as most people think

• Distortions in competition in product markets are more important than labor or capital market problems

• Today’s big governments in poor countries are a handicap today’s rich countries did not have when they were poor

• Consumers are the only political force that can stand up to producer interests, big government, and the technocratic, political, business, and intellectual elites

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DUAL ECONOMY IN JAPAN

Relative productivity levelsIndex U.S. = 100

Employment100% = 12.473 million employees

0

20

40

60

80

100

120

140

160

0 20 40 60 80 100

Steel

Automotive parts

Metal workingCars

Consumer electronics

Retail Housing construction

Food processing

U.S. = 100

Beer

Soap and detergent

Computers

10 30 50 70 90

11 Industries

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CONCLUSIONS

• Sector level analysis is necessary to find causal factors of economic performance

• Education is not as immediately important as most people think

• Distortions in competition in product markets are more important than labor or capital market problems

• Today’s big governments in poor countries are a handicap today’s rich countries did not have when they were poor

• Consumers are the only political force that can stand up to producer interests, big government, and the technocratic, political, business, and intellectual elites

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Organization of laborLabor productivityM2/thousand hours

Construction costU.S.$/M2

U.S.(Houston)

Brazil(São Paulo)

U.S. Brazil

Subcontractors

Blue collar background

40

Mexican agriculture

10

Brazilian northeast agriculture

• Less specialized

• Similar educational background

U.S. Brazil Brazilian gap

BLUE COLLAR TRAINABILITY – CONSTRUCTION OF SUBSIDIZED HOUSING

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CONCLUSIONS

• Sector level analysis is necessary to find causal factors of economic performance

• Education is not as immediately important as most people think

• Distortions in competition in product markets are more important than labor or capital market problems

• Today’s big governments in poor countries are a handicap today’s rich countries did not have when they were poor

• Consumers are the only political force that can stand up to producer interests, big government, and the technocratic, political, business, and intellectual elites

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LABOR PRODUCTIVITY, OUTPUT, AND EMPLOYMENT IN U.S. COMMERCIAL BANKSIndexed to 1980 = 100

60

70

80

90

100

110

120

130

140

150

Output

1970 72 74 76 78 80 82 84 86 90 1992

Employment

Productivity

Deregulation

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CONCLUSIONS

• Sector level analysis is necessary to find causal factors of economic performance

• Education is not as immediately important as most people think

• Distortions in competition in product markets are more important than labor or capital market problems

• Today’s big governments in poor countries are a handicap today’s rich countries did not have when they were poor

• Consumers are the only political force that can stand up to producer interests, big government, and the technocratic, political, business, and intellectual elites

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GOVERNMENT SPENDING VS. GDP PER CAPITA

India (2000)

Brazil (2000)

Japan (1950)

France (1913)

U.S. (1913)

0

5

10

15

20

25

30

35

40

0 5,000 10,000 15,000 20,000 25,000 30,000

GDP per capita1990 U.S.$

Government spending As percent of GDP

Russia (1998)

U.S. (2000)

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Percent urban employmentINFORMALITY IN BRAZIL

0

10

20

30

40

50

60

70

1988 1990 1992 1994 1996 1998 2000

Informal

Formal

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CONCLUSIONS

• Sector level analysis is necessary to find causal factors of economic performance

• Education is not as immediately important as most people think

• If poor countries take care of their productivity problems, they will get the needed capital

• Distortions in competition in product markets are more important than labor or capital market problems

• Today’s big governments in poor countries are a handicap today’s rich countries did not have when they were poor

• Consumers are the only political force that can stand up to producer interests, big government, and the technocratic, political, business, and intellectual elites

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5. Consumers have political clout US Consumer advocacy

1914, Walter Lippman“We hear a great deal about the class-consciousness of labour. My own observation is that in America today consumers’ consciousness is growing very much faster.”

1906, Senator Robert La Follette“The welfare of all the people as consumers should be the supreme consideration of the government.”

1932, President Franklin Roosevelt“I believe that we are at the threshold of a fundamental change in our popular economic thought; in the future, we’re going to think less about the producer and more about the consumer.”

1960, John F. Kennedy“The consumer is the only man in our economy without a high-powered lobbyist. I intend to be that lobbyist.”