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Productivity is the key
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| McKinsey Classics | March 2022 |
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| In 2014, to celebrate McKinsey Quarterly’s 50th anniversary, the McKinsey Global Institute (MGI) examined the future prospects for economic growth throughout the world. Economic growth depends on two things: population and output per worker, or productivity. From 1950 to the mid-1980s—the golden years following World War II—population rose strongly, and output per worker rose even more strongly. Productivity, therefore, generated an ever-rising proportion of an ever-rising global GDP. |
| But by 2014, population growth had slowed or ended in most countries outside Africa. Rates of economic growth seemed poised to falter. MGI, however, pointed out that economies and industries could still raise their GDP growth by raising their labor productivity. The chief opportunities to do so all involve encouraging competition: regulatory changes to promote it; reduced barriers to global trade and foreign direct investment, which have the same effect; and innovative private-sector companies that force their industries to change. |
| Will the world economy make good on these opportunities? That depends on the ingenuity of managers and engineers and on the willingness of policy makers to undertake reforms, particularly in countries and sectors with big productivity gaps. Read “A productivity perspective on the future of growth.”
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| — Roger Draper, editor, New York |
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| As a classic article put it in 2015, “Scenario planning can broaden the mind but can fall prey to the mind’s inner workings.” Learn how to control them: read “Overcoming obstacles to effective scenario planning.”
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