McKinsey is turning on neoliberal orthodoxy by advocating
high employment, high wage, high demand policies.
“After a year-long analysis of seven
developed countries and six sectors,” global management consultancy company
McKinsey has “concluded that demand matters for productivity growth and that
increasing demand is key to restarting growth across advanced economies.” Which
means—surprise, surprise—higher wages for the workforce. The report
by James Manyika, Jaana Remes and Jan Mischke was published in the Harvard Business
Review. Their analysis marks a shift from the prevailing
paradigm of the past several years in which poor productivity growth was viewed
as largely a function of supply-side factors such as excessively “rigid” labor
markets (hence the call to make it easier to hire and fire workers, and reduce
unionization), insufficiently low tax rates (hence the drive to reduce
corporate tax rates), a largely unskilled labor force (hence the push for more
H1-B visas for Silicon Valley jobs), and too little global competition (hence
the need for more, not less free trade).
If deficient demand (and a concomitant commitment to full
employment) is not considered relevant as far as productivity goes, the policy
framework is very different. Fiscal policy is diminished because there is
little point in “wasting” limited financial resources on fiscal stimulus,
higher real wages, or a restructuring of the private debt overhang. And economic
inequality doesn’t even factor into the equation at all. Rising inequality,
growing polarization and the vanishing middle class have all been seen as
unfortunate, but inevitable byproducts of globalization, rather than drivers of
slow potential growth.
By contrast, the
McKinsey analysis leads to a very different policy outcome—one that places
demand management and full employment at the heart of macroeconomic
policy-making.https://www.nakedcapitalism.com/2018/03/even-mckinsey-gets-high-wages-improve-economic-performance.html
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