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BOOK REVIEW
Over-hyped
hypermarkets
The Power of
Productivity: Wealth, Poverty and the Threat to Global
Stability by William W Lewis
Reviewed by Gary LaMoshi
As the United
States mourned the death and endlessly rehashed the life
of former president Ronald Reagan last month, The
Power of Productivity was the right book for the
moment. America's so-called  Reagan revolution
transformed the debate about the role of government in
the economy and, to a shocking degree, much of his
then-radical doctrine became mainstream thinking.
World development institutions adopted the
tenets of Reaganomics. Fighting poverty required
deregulation, including dropping protection of domestic
industries and restrictions on foreign investment.
Making the rich richer would let growth trickle down to
the poor. Under these principles, the World Bank and
International Monetary Fund steered the former Soviet
bloc's transition from communism and guided the recovery
of developing economies in Latin America and Asia but
still haven't made a dent in poverty.
Of the
world's 6 billion people, 5 billion live in countries
with per capita gross domestic product (GDP) 25% or less
of the US figure; in fact, a majority of the poor live
where GDP is less than 10% of Uncle Sam's. Particularly
troubling, author William W Lewis says, Japan was the
only country to go from poor to rich during the past
century, though he adds that Japanese government
development strategies credited with the advance were a
hindrance, not a help.
The failure of
free-market radicalism to solve crises and deliver real,
sustainable economic growth has prompted a reassessment.
Perhaps wrenching open developing markets to global
competition without reference to local conditions and
politics is not the best prescription in every case.
They also note that the fastest-growing economy over the
past two decades features "socialism with Chinese
characteristics".
Lewis's book represents "The
Empire Strikes Back" against such thinking. The reason
free-market policies have mainly flopped, Lewis claims,
it's that they're not being implemented heartlessly
enough. Too much of the world still isn't safe for
Wal-Mart.
Global "big box" stores, such as
Wal-Mart, Carrefour and Tesco, are at the heart of the
book's virtually self-evident central thesis: countries
become rich because of high productivity. The central
engine of US productivity growth during the late-1990s
"new economy" boom wasn't Yahoo! or Cisco or Citigroup,
but Wal-Mart, according to Lewis's research team from
McKinsey Global Institute. Productivity growth drives
economic growth and that eliminates poverty, Lewis
explains, so what the world needs is Carrefour, the
French hypermarket that's even more productive than
Wal-Mart.
For Lewis, the presence of
hypermarkets indicates that a country embraces the
ideology of productivity. It means that zoning laws,
labor rights, tax policies and capital restrictions have
been sufficiently neutered, and that the public is
sufficiently steeped in the culture of consumerism to
support hypermarkets.
Consumerism is at the
heart of Lewis's thesis and his thoughts. Throughout the
book, he drops reminders of his Starbucks lifestyle
among Washington's power elite. In a revealing insight
into the "consumption mindset" that Lewis holds key to
growth, he writes with barely concealed horror of a
visit to pioneering growth economist Ed Denison's "small
office with metal furniture and a few bookshelves".
Denison wasn't consuming his load in the war on poverty.
Founding director of McKinsey Global Institute
and a former top partner at the legendary consulting
firm, Lewis spearheaded studies across a dozen years and
13 countries - including Japan, South Korea and India -
aiming to discover the secrets behind productivity,
particularly in services, at the sector level, the
economic grassroots. McKinsey associates doggedly
captured data in the favelas of Rio de Janeiro,
the milking sheds of Haryana, and the Soviet-era steel
mills of Siberia to assemble an unprecedented body of
knowledge.
Perhaps the most surprising finding
is that in this age of globalization some of the biggest
productivity gains can be made in mundane, low-tech
sectors such as selling noodles and the entirely local
business of building homes. What's a shame is that so
many of these previously unknown microeconomic data get
twisted to confirm tired conventions of free-market
radicalism.
Even though many old ideas come
creatively disguised in new clothes, The Power of
Productivity often sounds like a greatest-hits album
from the Wall Street Journal editorial page. There's
even an echo of that newspaper's attack on "lucky
ducks", US workers who earn so little they avoid most
income taxes. According to the Journal, that makes these
working poor more fortunate than executives earning
hundreds of times more money. Lewis decries similar
"unfair" competition to global retailers from pushcart
vendors and dirt-floor stores in slums that skirt taxes
and other regulations the giants must follow. The
free-market radicals contend that leveling the playing
field means enforcing the rules equally, to ensure that
the whales eat the minnows.
What's gone wrong in
the past, Lewis contends, is that regulations haven't
been loosened enough. Lewis concedes that governments
mean well when aiming policy to achieve social goals,
such as avoiding unemployment or protecting local
business, but these actions make all of society poorer.
Much better to let the economic pie get bigger, the
rightists preach, so that everyone can enjoy a larger
slice. Their recipe may produce a bigger pie, but global
firms and unfettered capitalists will try to eat it all
unless someone stops them.
In essence, Lewis
poses the question: Is it government's job to act in the
public interest, or should it back off and let markets
decide what's best? In other words, should government or
business write the rules that touch people's lives most
directly? It's a bedrock issue of public policy that
deserves real debate, particularly at a time when so
many parties want alternatives to continued growth
disappointment.
Lewis wants to avoid that debate
in favor of simple answers in the Reagan tradition. The
problem is big government. The solution is the
marketplace. Individual rights matter most to drive
consumerism. The economic evidence for that remains
dubious, despite this massive study and the real-life
radical reforms of New Zealand, Chile and others. In the
US, economic growth under Reaganomics mainly widened the
gap between rich and poor.
Still, Lewis dresses
his paean to consumerism in the sackcloth of helping the
poor. For all the fine words of Reagan and Lewis, you
can't help wondering if they really care about fighting
poverty any more than Wal-Mart does.
The
Power of Productivity: Wealth, Poverty and the Threat to
Global Stability by William W Lewis. University of
Chicago Press, April 2004. ISBN: 0-226-47676-6. Price:
US$28, 370 pages.
(Copyright 2004 Asia Times
Online Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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