The McKinsey Quarterly has a feature asking why poor countries,
to a depressing degree, remain poor: Their answer is the "Power
of Productivity."
But wait, don’t we already know how to help poor countries? Let’s
look at the record. After World War II, the IMF, the World Bank,
et al., spent 50 years and untold billions investing in infrastructure,
capital assets, educational and health reforms, etc.—but to negligible
effect. Then, following collapse of the Soviet Union, reformers
focused on macroeconomic factors such as minimal government deficits,
low interest rates, free trade, price decontrol, and privatization. These
nostrums were applied to, among others, Argentina, Brazil, India, Mexico,
and Russia itself. Yet none of those countries is threatening to
become the next Germany or Japan.
How about education? Didn’t the superior Japanese educational
system get credit for Japan’s accelerating productivity in the 1980’s
(especially against the painful comparison with the US’ relatively insipid
performance)? While a high-quality education is devoutly to be
desired for many reasons, the evidence is of little linear correlation
with higher productivity as a worker. If the product US high schools
turn out is so inferior to its Japanese counterpart, why do Japanese-owned
car factories in the US Sunbelt achieve 95% of the productivity of factories
in Japan? For that matter, how can illiterate Mexicans
be world-beaters in productivity at construction sites in Texas?
So what does this have to do with law firm management, already? McKinsey
concludes that the only effective spur to higher productivity in the
long run is truly unfettered competition. So the moral is: Don’t
bemoan the fact that your competitors are getting better, smarter, faster,
and more global all the time. In the long run, it will make you
and your partners richer.
