[IWAR] TECH computers, productivity

From: 7Pillars Partners (partnersat_private)
Date: Thu Apr 23 1998 - 22:24:26 PDT

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    Do Computers Boost Productivity?
    BY ANDREW LEONARD | In the church of the
     digital revolution, perhaps the most sacred tenet is
     the belief that computers increase productivity.
     Personal productivity, entrepreneurial
     productivity, Gross National Product productivity:
     You name it, computers are supposed to enhance
     it. Even better, once those computers are all linked
     together in a great big network, the sky's the limit.
     Computers and networks, we are told, have
     ushered in the era of the "new economy" -- an age
     of boundless wealth and prosperity. As Wired
     Magazine declared last summer in its
     self-described "radically optimistic" "The Long
     Boom" cover story, "We are watching the
     beginnings of a global economic boom on a scale
     never experienced before. We have entered a
     period of sustained growth that could eventually
     double the world's economy every dozen years
     and bring increasing prosperity for -- quite literally
     -- billions of people on the planet." 
     And we owe it all to computers. Or do we? The
     truth may be quite different. 
     In March, financial journalist Jeff Madrick, author
     of "The End of Affluence" and former finance
     editor at Business Week, painted a quite different
     picture in a lengthy New York Review of Books
     essay. Madrick is writing a book on productivity,
     and he's spent a lot of time crunching numbers.
     His article makes a compelling case that computer
     technology, at least so far, has yet to significantly
     increase productivity. On the contrary, he argues,
     computer technology may actually be slowing the
     rate at which productivity grows. Access to
     information, says Madrick, has so leveled the
     competitive playing field that people are more
     important than ever before. In the real "new
     economy," talent will be at a premium, just as it
     was in the pre-industrial revolution past, when
     individual artisans ruled the economic roost. 
     Madrick's essay is packed with a close review of
     productivity figures and statistics. Salon decided to
     cut to the chase and catch up with Madrick at his
     Manhattan office, where he alternates working on
     his new book (due out in 1999) with his job as
     editor of Challenge Magazine, a bimonthly journal
     devoted to economics and public policy. 
     When you discuss the "new economy" in your
     New York Review of Books essay, your
     argument could easily be taken as a direct
     rebuttal of Wired's "Long Boom" story. Were
     you familiar with that article? 
     I read it. It was quite fanciful. It's a profession of
     faith. It's not based on serious analysis. They are
     essentially talking about what may happen, and I
     keep asking the question, "Why hasn't it happened
     yet?" And I don't think they have a good answer
     for that, except for "These things take a long
     time." Well, that can't pass for intellectual
     analysis. It's conjecture. 
     Would you say the same is true for the whole
     concept of "the new economy"? That it's
     nothing but conjecture? 
     No, I think there is a new economy. What I don't
     think is that it's going to result in the same kind of
     productivity growth that the old economy
     generated. I don't deny that something significant
     has changed. What I disagree with, and what often
     upsets me, is the presumption that because
     something has changed, and because it is
     technologically exciting, it will therefore
     automatically produce rapid economic growth.
     That is simply not true. It may not produce rapid
     economic growth, and there is good reason to
     believe it will produce slower economic growth
     than the past. 
     Why is that? Are you saying that computer
     technology slows productivity gains? 
     I think that's true. In the '50s, '60s and early '70s,
     America grew because it was the champion of the
     standardized product. Everybody bought the same
     product. And in the age of mass production, you
     could increase productivity very quickly if you
     could sell more of that product through economies
     of scale and economies of distribution and size.
     But by the '70s, consumers were pretty satiated
     with the same product and they started to want
     variety. So corporations learned how to make a
     variety of products more inexpensively, to fill ever
     smaller market niches. 
     How do computers fit into this? 
     Computer technology really assisted in the
     creation of variety -- computerized inventory
     management and computer-driven manufacturing
     processes allow you to change very quickly, to
     very rapidly manufacture a different kind of
     product. But an economy that offers all kinds of
     products [as opposed to a mass production-based
     economy] emphasizes innovation, not only in
     terms of what kind of product you make, but also
     in the marketing of the product, the financing of
     the product and the delivery and distribution of the
    We've now become an economy that needs an
     enormous amount of innovation. And you cannot
     computerize innovation. The great irony is that
     computerization has made some kinds of tasks
     very productive, and has eliminated the need for
     people in production lines -- but in the process
     computers have made it so efficient to reach the
     consumer with new products that the consumer
     then demands a level of constant innovation that
     can only be supplied by people. 
     But wouldn't the moguls of Silicon Valley turn
     around and say, that's why the age of the
     network is so great -- because it facilitates the
     process of taking a new idea or innovation and
     transforming it into a marketable product?
     The more people who connect to the network,
     the better it is for everyone. 
     I think that is true. I'm not arguing that the
     computer hasn't made things more efficient. It has
     made things much more efficient. The best way I
     can put it is that when information is so available
     to people, it becomes less valuable. What becomes
     more valuable is what you do with that
     information. Computerization has made access to
     information extraordinarily available. But what
     matters, what makes money, is what you do with
     that information, what kind of product you come
     up with, how you innovate. And that increasingly
     requires people. In the past just having
     information gave you a competitive advantage.
     Now having the information no longer gives you a
     competitive advantage. The only competitive
     advantage is creative input. 
     And creative input is expensive. In your
     Review essay you write that "the modern
     economy, I would argue, may be returning to a
     high-technology version of a crafts economy,
     based on worker skills, thinking, and
     inventiveness, rather than on the muscle of
     large scale factories and distribution
     networks." Is that what you mean when you
     talk about "creative input" as "the only
     competitive advantage"? 
     I think one has to understand how extraordinary
     mass production once was. It created an
     enormous amount of productivity with relatively
     little creative input. It did not need people. You
     needed people on the assembly line, but you didn't
     need much creative input. What you needed was
     this massive organization and huge size. It created
     enormous productivity. Now you need engineers
     and consultants and designers -- that's where the
     value added is, and that's costly. The point is not
     that we are less productive now than we were
     then. We are much more productive than we were
     in 1929, or 1950. But our productivity is not
     advancing as rapidly as it once did. And, in my
     view, a big reason for this is that the economy
     now requires creativity, and you can't computerize
     What are the implications of this? 
     Well, if we're balancing things out, on the one
     hand we have more interesting jobs, and more
     interesting products, more fulfilling jobs and more
     fulfilling products. But we have slower growing
     income, and the nation has to learn to deal with
     slower growing income, and that is very hard to
     do. America was built on fast-growing income --
     the American society, our ideology and social and
     political institutions, were built on fast-growing
     And that's not true anymore? 
     I think there's an illusion in Silicon Valley and
     Wall Street and Washington that people are doing
     great. But incomes have not risen for most people,
     or if they have, they've risen very slowly, and
     families only get by because the spouse now
     works. Medical costs have risen way faster than
     average income, and the cost of private education
     and higher education has also risen way faster. 
     Are there enough educated, talented people to
     satisfy the demand that this kind of "new
     economy" has? 
     Do I think there are enough creative people?
     Undoubtedly. I think the long history of
     civilization shows that there has only been one
     problem. It is not lack of ability, it is lack of
     opportunity for the ability that exists. Obviously
     genius and talent is always scarce, because you
     can always use more of it -- there is never a
     sufficient amount of it. But there is an awful
     amount of talent in America that has gone
     untapped, I assure you. We have to do something
     about enabling disadvantaged people to have
     access to decent education. 
     How do we tap that talent? Is this a job for
     government or for the free market? 
     My predilection is strongly in favor of government
     action, because it will equalize benefits. A market
     approach will make it more of a two-tier approach
     than it already is. There are some benefits to a
     market approach, I will grant, but I think overall it
     is the government's province to do this. 
     I'm not that optimistic that we will do what's
     necessary, however. I'm only saying that
     something can be done. But I'm not so sure that it
     is in the American character to do it. We've
     always had abundance and rapid economic
     growth, so we didn't have to think about it very
     much. We could support our educational
     requirements and our social programs because
     people's incomes kept going up. Now incomes are
     not going up, or they are going up rather slowly,
     except for a selected number of people. We may
     not have the will or the vision to do what is
     necessary. I would say in fact that the odds are
     against it. 
     SALON | April 24, 1998

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