Magazine article Newsweek

'The Single Most Important Company': Lenny Mendonca of McKinsey Global Institute Says Productivity Gains Will Help Lift the Economy

Magazine article Newsweek

'The Single Most Important Company': Lenny Mendonca of McKinsey Global Institute Says Productivity Gains Will Help Lift the Economy

Article excerpt

Economists love a good debate. And as the recession eases, they're studying why the economy grew so quickly during the '90s boom--and whether those halcyon days will return. Lenny Mendonca, chairman of McKinsey Global Institute and a consultant for nearly 20 years, talked to NEWSWEEK's Daniel McGinn about reasons for optimism. Excerpts:

MCGINN: The debate over what drove the long boom seems to focus on productivity. Why?

MENDONCA: We define productivity as output per person employed. It's important because in the end, how much is produced by each person employed translates pretty directly into the wealth of the country. The difference between 1.5 and 2.5 percent productivity growth is the difference between the standard of living doubling in one generation or two generations. It has huge implications.

How much of the '90s boom was driven by technology?

Technology is very important for what happened in the last half of the1990s. But it's not the Internet, narrowly defined, nor is it just technology companies. It's much more about how the broad economy used technology to become more competitive, and how that competition made every business stronger. Technology is a piece of the story, but it's not the whole story. In fact, the retail sector and Wal-Mart in particular are a bigger part of the story.

Why Wal-Mart?

It's a big player that competes in a lot of categories and geographies, and Wal-Mart forces everyone--their suppliers, other retailers--to be better. They may be the single most important company that improved the U.S. economy in the last five years. They're an extraordinarily well-run company, and the piece of it you see in the store is only part of it--they also have one of the most efficient supply chains in the industry. Wal-Mart is like Michael Jordan, in that they force everybody else to play up to their level. …

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