Mitt Romney last Fall: “‘Our productivity equals our income.”
Barack Obama in response on Wednesday: “… the notion was that somehow the reason people can’t pay their bills is because they’re not working hard enough. If they got more productive, suddenly their incomes would go up.” He went on to say, “Those of us who’ve spent time in the real world know that the problem isn’t that the American people aren’t productive enough – you’ve been working harder than ever.”
Romney is right when we slams Obama for blatant economic ignorance: “I’m amazed he doesn’t understand what productivity means.” He says, “Gosh, this is quite a revelation if you have the president of the United States that doesn’t understand the productivity is a measure of output per person in the nation as a whole.”
It gets at the whole idea of value adding and non-value adding. A central debate between liberals and conservatives is the size of the government. In the USA one fourth of us work for the government, which means one fourth of us create no value. So if there are 300 million Americans, and 200 million of them are working adults, and 50 million of them work for the government creating no wealth (value) then the quality of American life equals the output of 150 million people divided by 300 million people sharing it.
In this grossly over-simplified example there are two ways to increase overall productivity and the quality of life: Get the 150 million people to work harder and create more wealth for the 300 million; or keep the 150 million working at the same pace, cut the 50 million not adding value in the government to 25 million and have the rest add to the value adding bunch, then the 300 million enjoy the fruits of 175 million people’s wealth creation.
Lest anyone think this is just another anti-Obama, anti-liberal, anti-big government rant, please bear with me. Of course Obama is an economic idiot if he is surrounded by a bloated government full of bureaucrats, paper pushers, policy setters, regulation creators and auditors; but can’t see how productivity can be elevated by any means other than leaving them intact and pounding the actual value creating folks to work harder.
But it is hard to see how he is any more of an economic lightweight than Mitt Romney and the vaunted private sector executives who are supposed to be such greater authorities on the subject. Here is a photo of Staples corporate headquarters – the crown jewel of Romney’s Bain Capital escapades. Just how many bureaucrats, paper pushers, policy setters, regulation creators and auditors do you suppose it takes to fill up a building like this one? And like the government, how much of their rule, regulation and policy output does little more than interfere with the value adding work the people on the front lines are doing?
In fact, it strikes me as more than a coincidence that about 25% of working Americans are government employees – a 3:1 ratio. My experience in the manufacturing world is that a 3:1 direct to indirect ratio is about the norm. One out of every four not adding any value.
It is also my experience that just about every private sector exec is tunnel visioned on productivity, yet he walks into an office building full of non-value ceating folks every morning, blindly assuming they are somehow necessary, and spends his day figuring out how to beat on, automate or outsource the value creators – Obama’s “they’re not working hard enough” mentality.
Romney is right – greater productivity is the key and working smarter is the idea, rather than working harder. Working smarter means having a lot less people wasting their day doing work that does not create wealth and value.
He ought to apply that same principle to himself and his old cronies in American corporate leadership.