Virginia Postrel looks at William Lewis’s The Power of Productivity and international productivity differences:
Poorer countries are hampered mostly by government policies, especially high taxes that drive businesses underground, rather than by the inherent problems of poverty, Mr. Lewis argues. If they could solve their policy problems, they would attract foreign investment. Businesses could train workers on the job, achieving competitive productivity.”If illiterate Mexican immigrants can reach world-class productivity building apartment houses in Houston,” he writes, ”there is no reason why illiterate Brazilian agricultural workers cannot achieve the same in Sao Paulo.”
When highly productive multinationals enter previously protected markets, their business practices come with them.
Consider what happened in India after 1983, when Suzuki was allowed to build auto plants as part of a joint venture called Murati. ”Suzuki with Indian labor and Indian inputs was able to achieve roughly 50 percent of the productivity of the advanced auto industry in their home country,” Mr. Lewis said in an interview. ”That’s compared to maybe 10 percent for the rest of the Indian industry.”
In the 1990′s, the Indian government opened the auto business to other foreign investment, with similar results.