In the few weeks since his election, Bill Clinton has made it clear that he plans to put the economy at the top of the new administration's agenda. An Economic Security Council will share equal billing with the National Security Council. And to get the ball rolling, Clinton has called a "working" economic summit of business, labor, academic and government leaders.
I applaud Clinton's running start. A lot needs to be done to cope not only with the lingering recession, but also with the more important, long-range task of preparing to compete in the 21st century. But I do fear that Clinton and his activist advisers may reach for a panic button that need not be pushed.
The McKinsey Global Institute recently completed the most thoroughgoing study to date of world productivity. Led by Nobel laureate (and Democrat) Robert Solow of MIT, it gave us surprisingly good grades. McKinsey Co. Managing Director Fred Gluck discussed the institute's findings. A big lead, and holding our own.
Compared with the rest of the developed world, the United States has _ and is maintaining _ about a 20 percent lead in industrial productivity (as measured by 1990 output per full-time worker, adjusted for purchasing power). U.S. output per worker is $49,600 vs. $44,200 for Germany, $38,200 for Japan and $37,100 for Britain. Moreover, as Germany and Japan have approached U.S. productivity levels, the rate at which the gap between "us" and "them" is closing has slowed. In the 1980s, only Japan edged up on us (and not by much); we actually added to our lead over Germany. (Besides, as Gluck points out, this isn't football: "The successful growth of our trading partners is in our interest. Competition between national economies has never been a zero-sum game.") A robust edge in manufacturing.
It's true Japan does a better job with consumer electronics and autos; but the McKinsey report shows the United States leading Japan in total manufacturing productivity, including two-thirds of the major manufacturing categories (e.g., chemicals, petroleum, rubber and plastics products; textiles and apparels; food products). Other studies suggest a significant U.S. productivity advantage over Japan in high-tech industries such as biotech, computers and software. (In each of these areas, by the way, Japan has mounted highly publicized, organized _ and mostly fruitless _ catch-up efforts.) A stunning lead in services.
In the service sector (which employs 74 percent of Americans, 65 percent of Japanese and 55 percent of Germans) we excel overall, with a 2-to-1 edge over Japan in retail productivity and a 2-to-1 edge over Germany in telecommunications. (Our balance of trade in services, which, incredibly, is not included in conventional trade statistics, is running about $50 billion per year in our favor. …