walton@ametek.UUCP (09/04/86)
I'm back, after a long absence. I'm really too busy to put in a lot
which is original, so much of this is a quote from Lester Thurow's
review of a book called "The Positive Sum Strategy," a book which
advocates restoring American productivity growth primarily by "getting
the government out of the way of business."
A wihle back in Poli-Sci, someone mentioned that Henry Ford paid
his workers in his first factories the then-princely sum of $5 per day
in order to attract good workers, as an example of good business also
being good for workers. Manchester in "The Glory and the Dream"
points out that 5 years later, after their productivity had increased
by more than a factor of 10, those same workers were still getting $5
per day. Is it any wonder they unionized?
Here is the edited quotes from Thurow's article:
When they are examined, the productivity growth statistics form a
dismal picture of American technological progress. From 1948 to 1965
productivity increased at a rate of 3.3 percent per year. After 1965
a gradual but very persistent decline began. From 1977 to 1985
productivity growth averaged only .7 percent per year. In 1985
nonfarming business productivity actually fell .3 percent.
Productivity often falls during recessions, but 1985 was not a
recession year. It marked another kind of ominous event: it was the
first year since the data have been kept in which a fall in
productivity was not accompanied by at least one quarter of economic
decline.
Whatever is happening, it is happening only in America.
Productivity growth rates in every market economy fell after the first
OPEC oil shock in 1973. Yet the rest of the industrial world
rebounded after the second OPEC oil shock in 1979 and since then has
enjoyed productivity growth rates that are four to six times those the
U.S. has posted.
Put bluntly, the authors [of the book under review] recommend
that, with the exception of spending more on R&D, government should
get out of the way, reduce its role in the American economy and let
the market work its magic.
Where the analysis breaks down technically is its failure to
follow the advice of Harvey Brooks to "scan and adopt foreign"
practices. There is no scanning of Europe, although Europe has a
trade surplus with the U.S. that approaches the surplus achieved by
Japan. If too much American equity is the problem, for example, how
do the authors explain the fact that among industrial countries the
U.S. (with the exception of France) has the most unequal distribution
of income?
If excessive government spending is the problem, how do the
authors explain the fact that the OECD has just announced that the
Japanese government now spends a larger fraction of Japan's G.N.P.
than American governments (local, state, and Federal) does of the U.S.
G.N.P.? How do they square their analysis with the fact that since
the Japanese have only a small defense budget, social spending is now
a greater proportion of government outlays there than it is in the
U.S.? If overall government spending is the problem, why is
productivity worst in the country--the U.S.--that now has the smallest
government sector among all major industrialized countries?
Are high taxes the problem? What do the editors and authors who
call for lower taxes have to say about the contribution by Dale
Jorgenson, professor of economics at Harvard? Jorgenson shows that
the effective American corporate tax rates were far higher in the
1950's and 1960's, when productivity was growing at a rate in excess
of 3 percent, than they are now, when productivity is growing at less
than 1 percent per year.
Me again: To take another example, Thurow shows that during the 6
years from 1979 to 1985, blue-collar worker productivity (the same
unionized, lazy, overpaid people who've been so criticized in this
forum) had an average productivity INCREASE of 3 percent per year.
Overall business productivity fell largely because of the addition of
white collar middle managers, who are totally non-productive.
I don't think Thurow's productivity figures are the entire story;
nor I suspect does he, since he is specifically responding to a book
recommending ways to increase productivity. He does not mention, for
example, that America is also alone among Western industrial nations
in increasing the number of employed people during the last 5 years;
Germany has been essentially flat by this measure, and the number of
employed people in England is actually shrinking. Our GNP growth,
while slow, has been larger than in Western Europe as well.
However, I think he makes his central point eloquently: government
intervention in the market is not, in and of itself, bad, and it is
certainly not evil. It should be judged on the practical criterion of
whether it works.
Anyone who wants to flame on this should go get the September '86
issue of Scientific American and read Thurow's article for yourself.
It isn't long, and the magazine is widely available, so you've got no
excuses.
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