February 18, 2006

Lewis – The Power of Productivity

Lewis, William, The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability, U of Chicago Press, 2004. 339 pp.

Amidst the headlines of the “cartoon war,” the last few weeks have also offered a small surge of news on the difficulties that European countries face in boosting their economic performance: reducing unemployment and increasing economic growth. Fareed Zakaria’ s recent article in Newsweek entitled the Decline and Fall of Europe is a quick and readable summary.

Zakaria quotes a particularly interesting OECD report, just released, called “Going for Growth” that points out that Europe, rather than catching up to America in per capita GDP has in fact been falling behind over the last 15 years. Efforts to catch up, while noteworthy and politically difficult, have essentially failed. When the GDP figures are adjusted by purchasing power parity (PPP), from country to country and around the world, we end up with shocking tables like the following:

gdp_ppp_2005.png
Source: CIA World Factbook

and this:

gdpbypop.png
Source: Adapted from Lewis, The Power of Productivity, 2004.

The United States doesn’t simply lead the world in GDP per capita (PPP adjusted). It is in a class (fully acknowledging its size) entirely by itself. Adding 1 million net citizens every nine months (one every 13 seconds), America is extending its lead in prosperity over not only poor and moderately wealthy nations, but over virtually all of its erstwhile companions on the “heights” of Mount Prosperity. Next-door neighbour Canada is the only eight digit population close to the US, coming in at 78% of US per capita GDP (PPP adjusted).

Most disconcertingly for those of us interested in history, the distribution of per capita wealth across the globe in the last century has barely budged. The only sizeable nation to make the jump from poor to rich in that period was Japan. Grimmer yet, after a half-century of international efforts at economic development, less than 5% of the world’s population has made it into the “middle-income” nations – ranked between 25 and 70% of US per capita GDP. That means we cannot expect any “new” wealthy nations (on a per capita basis) within most of our lifetimes.

Despite China’s massive growth in GDP, its per capita GDP remains very modest. As a recent commentator noted, China will get old long before it gets rich. And at current rates, both it and India would take centuries of per capita GDP growth to reach the levels currently held by the 300 million Americans living today.

The OECD responded to this disturbing pattern with a common European solution: redefine the problem out of existence. As described in a generally laudatory article in the Economist, the OECD decided that social values such as the desire for leisure, and the desire for greater income equality within a nation should permit the adjustment of the rankings of relative prosperity between nations. Well, money isn’t everything, we might grant, while still clinging to the idea that 82 million Germans earning 71 cents for every dollar 300 million Americans earn might just be a long term problem. Who pays for the old-age homes in 2025, for example?

Fifteen years ago, the folks at McKinsey Global Institute under the direction of William W. Lewis began studying globalization from a more anthropological perspective. This led them to focus on relative national productivity (the ratio of the value of goods and services provided consumers to the amount of time worked and capital used to produce the goods and services) at a microeconomic level. More specifically, they began examining countries, industry sector by sector, to identify the patterns of productivity within national economies.

To their surprise, their national productivity information tracked GDP per capita information (adjusted for purchasing power parity) very, very closely. Those nations that were most productive on average were also those that generated the most per capita wealth. To quote a summary of their work:

Fifty years of focus on the macroeconomic policies of developing nations didn't lift their income levels substantially: 80 percent of the world's people still get by on less than a quarter of the average income in rich countries, much as they did a half century ago. The McKinsey Global Institute’s research in 13 countries suggests that the productivity of the large industries where most people work—"old economy" sectors like retailing, wholesaling, and construction—has the most influence on a country's gross domestic product. To improve the economic welfare of individuals, countries must increase their productivity, primarily by encouraging economic competition.

Their conclusion:

Global economic agencies underestimate the significance of a level playing field. Competition is more important than education or greater access to capital markets in lifting a country's gross domestic product. To reduce barriers to competition, policy makers must stand up to business special interests and focus more on the welfare of consumers.

In The Power of Productivity: Wealth, Poverty, and the Threat to Global Stability, William Lewis takes the results of over a decade of research, and the country case studies, and assembles a compelling and very readable review of what productivity is, where it resides (within different countries) and how difficult it is to achieve in all but a handful of nations. He looks at both “best practice” and “bad practice.”

In the course of doing this research, he claims to have constantly tried to avoid using the United States as a benchmark but both his clients, and the productivity statistics, demanded otherwise. Apart from the steel, automotive and electronic industries in Japan, and retail banking in the Netherlands, virtually no other nation on earth has more productive agricultural, industrial, and service sectors than America. It is in the breadth of its economic productivity that the United States finds its great advantage over the rest of the world.

For Lewis, the absolute central issue is the competitiveness of product markets … responding directly to consumer need. The flexibility of labour and capital markets are important, but to him, they are secondary.

Nominal US competitors such as the EU leading industrial nations have some narrow productive manufacturing sectors but much of the rest of their economies (agriculture, housing, services) is quite unproductive. EU total GDP may well approach US levels but the EU now includes 170 million more people than the US. Per capita GDP, especially adjusted for PPP, still places the leading EU countries at little more than 70% of the US. The United Kingdom is a tiny bit more successful than its continental brethren, and Canada a touch still more productive. But the gap with the US is still astonishing, and still growing.

Japan leads the world in the productivity of several sectors of its economy. Its techniques (such as the Toyota Production System) are adopted with great success by American plants, so we know that great productivity is not culture-specific in some ethereal way. But much of the rest of the Japanese economy reaches productivity levels barely 40% of the US in areas such as food processing, housing construction, retailing and wholesaling. When averaged across the economy, Japan fairs little better than Europe in average productivity and GDP stats. And its growth in productivity, like the Europeans, seems stalled in comparison to America since the early 90s. The tremendous post-WW2 global injection of capital and labour, which offers medium-term increases in productivity as an economy industrializes, has come to an end. The Japanese public is still willing to put up with dismal returns on its savings in order to subsidize the inefficiencies of the Japanese economy. For how long is anyone’s guess. Vast portions of the populace in the Japanese economy are working at very low levels of productivity. Housing, for example, operates less productively than the United States did in the 1930s.

Korea, a dweller on the “foothills” of the GDP wealth curve, is trying to follow Japan’s approach to productivity growth but it shares the same narrowness of high-productivity sectors across its economy. And it shares its same vulnerability to stagnation and economic crisis when the ability to improve productivity by working longer or adding cash reaches a limit. A protectionist economic system ensures that only a select few sectors of the economy actually face international competition and exposure to methods of improved productivity.

When Lewis turns to Brazil or Russia or India, virtually no portions of their economies reach 50% of the level of productivity of the United States, unless they are small industrial enterprises run according to Japanese or Western management principles as fully-controlled branch operations. For much of the agricultural sector, per capita productivity in these nations can run as low as the single digits, in some cases, merely one or two percent as productive as the United States. In light of the fact that 65 million Indians are in the dairy farming industry alone (the largest group of people in the world in one business), it’s little wonder that Indian per capita GDP will remain very low for a very long time. The much vaunted Indian IT industry, operating at 50% of the productivity of the United States, yet represents 0.1% of the Indian workforce. Islands of productivity as small as this can’t make a dent in the average stats of a nation where 60% of the workforce is still in agriculture.

Lewis admits that his research surprised him a number of times over the decade or so that information was assembled. In the early part of the 20th century, when the United States had a per capita GDP somewhat similar to the middle-income nations of the modern world, the portion of GDP represented by the American government was about 8%. Today, for countries such as Brazil and Russia, struggling their way toward increased productivity, the percentage is closer to 40%. Thus the relative amounts of per capita capital available for private commercial economic expansion in these countries are a fraction of what was available to the American economy before the First World War!

So what about that American economy? Apart from a few industries where Japan and the Netherlands have something substantial to teach it, why does America keeping growing wealthier than everyone else? Was it the computer boom of the 90s?

According to Lewis, no. The industries (large enough to make a real dent in the productivity stats, remember) that made the greatest gains in the 80s, 90s and 00s weren’t high-tech. They were the massive retail and wholesale businesses who employ millions and sell to tens of millions more. Those businesses, typified by Wal-Mart, were able to rationalize, consolidate and optimize in ways unmatched by the companies of any other nation in the world. The disruption to local businesses, mid-sized wholesalers and retailers is well-known. Sears and K-Mart and a huge number of small paper-pushing wholesalers entered very troubled water and many did not survive. In their place, new giants appeared … much as standardization and automation had struck the agriculture, manufacturing, and housing businesses in America decades before. More importantly, Wal-Mart’s methods were matched by a new generation of retail stores … the Targets, Office Depots, etc. that applied the new information technology to improve their businesses. Silicon Valley itself may only have had a modest impact on the productivity stats of America but the spinoff benefits of its products, especially once AMD began to compete with Intel, were applied to vast sectors of the economy with tremendous success.

In a brief review for a focused blog, it’s impossible to do justice to the broader microeconomic argument which Lewis provides across hundreds of pages. One could do worse however than read the interview with Lewis in TCS Daily which was so striking that I purchased his book for further study. There is also additional information at the McKinsey website on the title.

I can summarize his arguments briefly and then turn to some implications for the Anglosphere:

1. Poor national economic performance can be better understood by analysis at the level of individual industries rather than macroeconomics alone.
2. Differences in capital and labour markets are overstated as determinants of national economic performance. Differences in competition in product markets are much more important.
3. While attention to exchange rates, inflation and government solvency were emphasized to developing nations, the importance of a level playing field for competition in a country was vastly underestimated.
4. The importance of the education of a workforce has been taken way too far. Education is not the way out of the poverty trap. Workers around the world are successfully trained on the job for high productivity. In a favourite Lewis anecdote, illiterate Spanish-speaking unskilled labourers in Houston have some of the highest construction productivity levels in the world because of the system they work in and how they are trained.
5. The solution for developing countries does not start with more capital … it starts with the way that it organizes and deploys the capital and labour it has. Balanced budgets and better productivity would allow most countries to access all the capital they need from both domestic and foreign sources.
6. “Social objectives” which distort markets severely and limit productivity growth also slow economic growth and cause unemployment. Creating a level playing field and then managing distribution of a bigger pie through taxes on individuals is the better sequence.
7. Big governments demand big taxation. The more informal the economy, the more legitimate and productive businesses are held back by such taxation. Western countries did not have this problem in the late 19th and early 20th centuries.
8. Salvation does not come from elites. Elites are responsible for big government and reward themselves richly. They are in the business of the un-level playing field.
9. Protectionism of national industries keeps highly productive companies out of a country. Poor countries have the ability to grow much faster than people think but subsidizing low productivity is self-defeating.
10. Production unlinked to consumer desire misunderstands the real nature of “value.” Production is only worth what people will pay. Only one force can stand up to producer special interests – consumer interests. Most poor countries are a long way from a consumption mindset and consumer rights. As a result, they are poor.

Again, I encourage anyone interested in the global economy and in evaluating how nations differ in their economic attitudes and success to read this book. It’s very well written, lucidly argued, and offers up some very useful information (and fascinating anecdotes) on the national economies discussed above. The chapter on India, particularly, is a sobering balance for those considering India’s role in the “Third Anglosphere.”

Anglosphere Implications

The Power of Productivity offers us yet another way of examining economies, both modern and historical. On the one hand, the Anglosphere economies enjoy a position of affluence on the global ranking of per capita GDP, yet that troubling 20-25% gap in productivity between the United States and virtually everyone else needs explaining and examination.

For myself, I think Lewis’ book is yet another strong argument for suggesting that America is a unique data point, even within the Anglosphere. To have reached such a size, and such an economic and demographic growth rate over the last hundred years is unprecedented. More importantly, since 1990, there is every indication that other industrialized nations have stalled in keeping up. Other Anglosphere nations suffer perhaps a little less than Japan or continental Europe, but still … there is something about Lewis’ point on consumer focus … and the broad competitiveness of the product markets (goods and services) that places the United States out by itself on the charts. It’s an outlier nation yet again, as it is on so many surveys and assessments. Neither fish nor fowl.

What is clear is that the remaining Big Five in the Anglosphere (UK, Canada, Australia, NZ, Eire) will struggle with their cultural predisposition to “fix” the product markets and penalize their overall economic productivity growth. The US market is huge and fiercely competitive … and manages to constantly find new areas where technology, technique and economies of scale can be applied. One look at eBay and Amazon.com confirms it. In many ways, the next largest economy (the UK) is very aware of these trends and routes to increased productivity but the political culture of Great Britain does not allow the nation’s government to extract itself from the product marketplace to the same degree.

As for India’s role in the Anglosphere, as mentioned above, I found Lewis’s book very sobering. India, short of some new kind of mathematics, simply cannot reach even middle-income per capita GDP within a century or two. Whether the intervening years bring a great exodus of Indian talent to the other Anglosphere countries … or some epidemiological catastrophe shrinks the population such that new economic rules can be instituted … it’s hard to read Lewis and come to the conclusion that India as we know it will fulfill any national role as broadly wealthy country in the near- or medium-term. Indian individuals and cohorts may be tremendously influential. The nation however, as it is currently organized, falls behind the rest of the Anglosphere (let alone the US) minute-by-minute.

It should be emphasized that Lewis himself is very cognizant of the importance of raising productivity levels around the world, if only from the perspective of global stability, while admitting that he was overwhelmed by the great practical divide that separates the Anglosphere, Europeans and Japan from the rest of the world. His research really suggests (as the ten points above indicate) that institutions such as the World Bank and IMF are still not grasping the cultural nettle in the developing world that inhibits productivity growth and therefore the accumulation of national per capita wealth.

As he notes, decades of international development efforts (let alone Christian missionary efforts) have created Third World cadres with explicit rationales for behaviour that intrinsically inhibits economic productivity. And we can see the same behaviour replicated across the Anglosphere itself to greater or lesser degrees. Have we reached a situation where nations are their own worst enemies? Big government and educated elites are hitting developing economies at the very point in time when they need the unusually high levels of productivity growth that can only come from unimpeded foreign direct participation in national economies. By and large, it ain’t going to happen. Which in turn suggests that some 22nd century William W. Lewis may well write a book on how little has changed on the per capita GDP curve during the 21st century. One hopes not, but the data in this book on 20th century progress is hard to deny.

--==--
Table of Contents

1 Findings: The Global Economic Landscape [1]

Part 1 Rich and Middle-Income Countries

2 Japan: A Dual Economy [23]
3 Europe: Falling Behind [50]
4 The United States: Consumer is King [80]
5 Korea: Following Japan’s Path [105]

Part 2 Poor Countries

6 Brazil: Big Government is a Big Problem [135]
7 Russia: Distorted Market Economy [166]
8 India: Bad Economic Management from a Democratic Government [197]

Part 3 Causes and Implications

9 Patterns: Clear and Strong [229]
10 Why Bad Economics Policy around the World? [257]
11 New Approaches [285]
12 So What? [312]

Posted by jmccormick at February 18, 2006 02:12 AM
Comments

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Posted by: Brock at February 18, 2006 08:42 AM

It's great to see another supporter of Lewis. The Power of Productivity is one of the most important books I've read about why some countries are richer than others.

Here's what I hope is the 5-second takeaway from Lewis: "Worry a lot less about education, and a lot more about competition."

Lewis's book provides yet another (indirect) piece of support for psychologist Richard Lynn and political economist Tatu Vanhanen's claim in their book "IQ and the Wealth of Nations."

Lynn and Vanhanen showed that the average IQ in a country differs widely around the world--highest in East Asia, lowest in sub-Saharan Africa--and that average IQ correlates strongly with the productivity of a country (about 0.8, in my recent estimation). Those IQ differences have lasted for decades--so East Asia's IQ scores were high even when those countries were dirt poor.

But then Lynn and Vanhanen do something interesting: They show that adding some measure of "degree of capitalism" or "market economy" to the analysis lets us explain the overwhelming majority of income differences across countries. So two big factors that let you predict how an economy is going to do are national average IQ and whether a country is market oriented.

In a paper that psychologist Joel Schneider and I have forthcoming in the Journal of Economic Growth, we show that once you include IQ in a statistical analysis of economic performance across countries, education essentially doesn't matter anymore.

That's another small piece of evidence that Lewis is right: The emphasis on education is likely misplaced. But if we can find a way to raise IQ's across countries, that would yield overwhelming benefits.

Lynn and Vanahanen have a lot of evidence in their corner: IQ and competitive markets seem to be the key determinants of cross-country income differences. Here's hoping that policymakers start to pay attention.


Posted by: Garett Jones at February 18, 2006 11:19 AM

GJ - IQ is about 60-40 DNA. (We used to think 80-20, but the number is steadily shrinking among developmental psychologists.) While there might be slight differences between populations on the heritable portions, most of the difference is likely in the environmental factors. Poor childhood nutrition -- as in very poor, not the excess-of-Pepsi version touted in the West -- is likely the major depressor of intellectual functioning. In second place would be removal from the enriched linguistic environment of a group, due to disease or isolation. Significantly, exposure to less than 8 adults during development figures more prominently in pulling down scores at the bottom, while exposure to less than a few dozen adults depresses the upper scores.

Posted by: Assistant Village Idiot at February 18, 2006 04:53 PM

An interesting review. Interesting enough that I may need to add this to my growing list of books to be read.

I have one question and one comment.

Question: You mention several times the Japanese lead in productivity in certain sectors, but you never mentioned how big a lead their gains in those sectors are.

Comment: I might be reading my own biases into what you wrote, but I thought I detected a bit of a, "Don't worry, China is not en economic threat," note in your review. If you didn't intend that message, my apologies. But, in either case, people interested in foreign policy might wonder if nations of population two or three or four times the size of the United States might, even at lower individual wealth and productivity levels, still might become economic threats by virtue of sheer size and depth.

Posted by: Marcus Vitruvius at February 18, 2006 08:45 PM

The Indians may not catch up economically (or, they may), but in the meantime they still love Wodehouse. Too bad that won't rack up any impressive GNP numbers.

Posted by: Lex at February 18, 2006 09:53 PM

Dear M. Vitruvius,

The Japanese productivity lead, by sector, according to the McKinsey research Lewis cites (Exhibit 2.1, p 25) (where the US level equals 100):

Steel 145
Auto Parts 125
Metalworking 120
Cars 115
Consumer Electronics 115
-------------
Computers 95%
etc.

Regarding China, McKinsey was not permitted to conduct a study there, and no one is quite sure how accurate the reported economic stats are. A little research uncovers the following:

GDP per capita per annum (PPP-adjusted) in US dollars (2005 est.)
===============
U.S. $41.8K for .3 billion
China $6.2K for 1.3 billion

so roughly 15% of the productivity overall across 4.3 times as many people

Incremental GDP annual growth (NOT adjusted for PPP) appears to be about US$500 per capita (8%) in China and $1500 per capita (3.5%) for the U.S. - accepting the nebulous nature of Chinese stats and the lack of PPP adjustment.

China's productivity boost, like that of post-WW2 Europe, Japan and Korea, appears to be largely driven by labour and capital inputs in select sectors, fuelled by foreign know-how. Such growth can continue for decades but at some point it reaches a socially-acceptable limit, when further productivity growth requires dramatic reduction of people in certain industries (e.g. agriculture, retailing, food processing). So the growth in productivity in China is likely to remain lop-sided in much the same way as Japan, Korea, and India are today.

I'm not qualified to know what this all means ... and your point about total wealth vs. per capita wealth is a good one. "Economic threats" mean different things to different people. However, it should be noted that the inherent flexibility of the American product marketplace, and the associated relative affluence and attitudes of the American public, suggest that the U.S. can continue whatever productivity improvements are possible in an industrialized nation, outpacing not only Europe and Japan, but its own Anglosphere cousins. It will be interesting to see what new areas of the economy will experience productivity changes. The Wal-Marting of America is really a one-time event.

China's birth policies, apparently begun in the 50s, severe in the 70s, and formally instituted as the "one-child policy" in 1979, have, it is estimated, removed 300 million from the population. In thirty years, the current workforce will be looking for younger workers to sponsor their retirement, and treat the diseases of old age or environment. Those workers won't be there in vast numbers. The impact of this event on GDP per capita growth will be interesting. As it will be everywhere in the G7, of course.

The other issue, of course, is that GDP is a current snapshot of potential productivity, according to Lewis. The US grew from moderately wealthy (by today's standards) to very wealthy over 100 years (without direct invasion). GDP per capita does not reflect a nation's infrastructure, environmental sustainability, available resources such as water, power, foodstuffs. The US is sitting on a huge pile of equity, extra valuable if only because it *is* in America. That may be why we continue to see the States draw international capital looking for a safe haven. The money is not only safe, it's productively so.

As for China, it not only has to be broadly productive (unlikely during the labour-capital infusion phase) but it has to put the infrastructure in place to sustain that productivity growth, and keep its people healthy and safe, long enough for its growth statistics to increase annual GDP per capita to a wealthy level.

A skillful economist would know better, but all these factors suggest to me, with an anthropology background, that China's ability to "catch up" (while trying to hit a *moving* target) must likely be measured in centuries. Pessimists would hold that the political and cultural system must change dramatically to make that at all possible.

India, with a smaller GDP per capita, and smaller economic growth rate, and smaller population (with a faster demographic growth rate), in comparison to China, must certainly consider the process one of centuries.

All this, of course, is only IMHO.

Thnx for your comment, M.V.

Posted by: James McCormick at February 19, 2006 11:14 AM

James,

Thanks for the lengthy response. I have more questions, but I don't think it's fair to pester you with them when I can probably get them just as well from the book, so you've probably nudged me that much closer to putting it on my Amazon wishlist.

Also, as a note, I don't subscribe to alarmism about China. They have the demographic timebomb you've noted sitting under them. I also don't believe their statistics (note that Lewis couldn't get statistics of his own!) and I don't think much of their macroeconomic model, which seems best described as, "Japanese, but bigger! Harder! Faster!"

I'm concerned (but not alarmed) for two reasons:

First, I suspect that the Japanese model has the ability to do damage to a competing western economy, but not destroy it. My suspicion is that that's part of what happened with Japan and the steel and auto industries. (Some blame is ours, in failing to adapt, and those are suspicions only because I'm not an economist.) So some concern is that China may do similar damage to other sectors of western economies on its long, slow rise.

Second, I'm concerned that in the hands of a more central economy, lower levels of wealth among larger populations might translate into different kinds of economic weapons. My suspicion is that it would let China wield a weapon that is at once heavy, slow, and precise; in comparison to the Western weapons which are lighter, numerous, swift, and precise in a different fashion.

My money (literally, as well as figuratively) is on the Western model, but it pays to pay attention to the opposition.

Posted by: Marcus Vitruvius at February 19, 2006 09:18 PM

Absolutely fascinating, thanks.

Does Lewis say anything about the retail price of energy in each country? To me it seems important enough to warrant discussing, one way or another.

Posted by: JohnH at February 20, 2006 06:07 AM

Dear JohnH,

Lewis doesn't mention retail price of energy per se, that I recall, because that is a factor that shows up in adjusting the purchasing power parity (PPP) ... and, of couse, it is one of the inputs that is calculated to determine productivity. It's *how much you do* with what you've got ... not *how much you've got*, that generates those productivity stats and, apparently, those GDP per capita figures. Thus Japan and Korea (and now China) can use increased labour and capital inputs to grow initially, but then must apply productivity, sector-by-sector, irrespective of the social resistance, to get G7 (or US) levels of productivity. At least, that seems to be the conclusion one can draw from Lewis' data. I'm sure there are arguments to be made against.

Posted by: James McCormick at February 20, 2006 11:32 AM

In an article forthcoming in the George Mason Law Review, Akinori Uesugi, Secretary-General of Japan’s Fair Trade Commission, writes the following:

“It is very clear that one of the fundamental problems with the Japanese economy is its dual nature. Namely, about 10% of the Japanese economy consists of export-oriented, highly productive industries such as automobiles and electronics. The rest consists of inefficient domestic-oriented industries and public sector organizations. The latter industries lag far behind in productivity and, naturally, should be responsible for the high cost structure of the Japanese economy. It is impossible for the efficient industries, comprising only 10% of the economy, to sustain the remaining 90% that are so far behind in productivity. As of the year 2000, the efficient sectors enjoyed 20% higher productivity on average compared with their counterparts in the United States. However, the inefficient sectors of the Japanese economy show 37% lower productivity on average compared with their U.S. counterparts. As a result, average productivity is 31% lower in Japan than in the United States.”

Akinori Uesugi, How Japan Is Tackling Enforcement Activities Against Cartels, 13 GEO. MASON L. REV. 350-51 (2005).

At least, it seems that some nations recognize the necessity of increasing competition. Whether they will be successful remains to be seen.

If anyone would like a copy of the article, which deals with competitive culture and anti-trust enforcement, just let me know.

Posted by: Robert at February 20, 2006 12:24 PM

How valid are the Irish GDP figures? Aren't they inflated by multinationals playing accounting games to take their profits in Ireland for tax purposes?

Posted by: Steve Sailer at February 20, 2006 09:56 PM

Dear Mr. Sailer,

You'd have to touch bases with the CIA on the Irish GDP/PPP per capita figures. The chart is necessarily an illustration for Lewis' overall argument rather than a justification of each nation's numbers.

Posted by: James McCormick at February 21, 2006 11:49 AM

James, thanks to your recommendation I've just read Lewis's book. What an eye-opener! Anyone who cares about the future of our little planet needs to read it. I was especially struck by the the fact that the Anglosphere essentially does not appear in his analysis -- the U.K. is no different from France and Germany along the dimensions Lewis measures. The great outlier, over and over, is America (though he and his team did not specifically study Canada and Australia, so it's hard to tell). Why? The reasons are legion, but they lead me back to the notion of American exceptionalism as opposed to a strict Anglospheric exceptionalism. (Interestingly, though, 3 of the 4 countries he calls out as having cut the size of government in the last quarter-century are Anglospherean: New Zealand, Canada, and Ireland.)

Posted by: Peter Saint-Andre at February 26, 2006 09:09 PM

I would suggest using the Economist Intelligence Unit's figures for GDP as they are considered more accurate than the CIA's. These can be found cheaply by purchasing The Economist's World in 2006 gazetteer. Its chief drawback is that it does not have figures for all the countries of the world. The CIA has had great difficulty in estimating the GDP of state-run economies, namely the Soviet Union, in the past, and is probably making the same mistakes with China.

The publication also has a brief article entitled The World in 2026 which compares the probable sizes of the largest economies by PPP and market rates.

http://www.economist.com/theworldin/

Posted by: Philip Cassini at March 22, 2006 11:42 AM
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