Category Archives: Henry Mintzberg

How Productivity Killed American Enterprise

by Henry Mintzberg

Looking back on the great depression that began in 2008, economists have their ready explanations. The American trade imbalance had been disastrous for years; the Bush administration was piling up massive budget deficits; Americans were not saving—indeed many were re-mortgaging their homes to maintain spending—while investors from abroad, particularly the government of China, were being relied upon to cover the shortfalls. It couldn’t last, the economists agreed in retrospect, and in 2008 the tipping point was reached.

One thing, however, continues to puzzle these economists. The American economy looked so good back then: corporate profits were robust, and American business seemed amazingly efficient. “Productivity rises in the U.S.,” ran a headline in the International Herald Tribune in December of 2005, with the subhead, “Labor costs decrease as output increases.” It sounded so encouraging. How could this have happened?

Productivity Gains as Losses
The answer lies beneath the statistics of those macroeconomists, indeed beneath the theories of the microeconomists, who have always seen the corporation as an individual, whether the founding entrepreneur or some subsequent chief executive who maximized “Shareholder Value.” Underneath its chiefs, beyond its productivity, much of American business was rotting from within.  Productivity was destroying not only America’s great enterprises, but also its legendary enterprise.

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