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McKinsey Backs Mead

Since the beginning of the recession in 2007, it has become a fashionable among intellectuals to predict a future of slow growth and gradual economic decline in America. Yet America has a way of confounding the predictions of the intellectuals, and there are many things going its way which may allow standards of living to rise in the 21st century just as they did in the 20th.

A new McKinsey Global Institute report maintains that America has many opportunities for growth and offers suggestions on how the U.S. can take advantage of them. These suggestions—which include increasing productivity in health and education, improving links between education and the job market, and creating a deregulated, innovation-friendly business climate—touch on many themes Via Meadia has been closely following. The suggestions are summarized at AEI’s Enterprise Blog:

Boost productivity in the U.S. healthcare and education system. MGI notes that public and regulated sectors such as health care and education represent more than 20% of the US economy, but has persistently low productivity growth. But if the US public sector could halve the estimated efficiency gap with similar private sector organizational functions, its productivity would be 5 to 15 percent higher and would generate annual savings of $100 billion to $300 billion. How to do it? MGI doesn’t offer a specific plan other than emphasize how crucial it is that there is a strong linkage between reward and results. And part of that means better information so consumers can make better choices. […]

Develop the U.S. talent pool. Think of this: MGI estimates that the U.S. may face a shortfall of almost two million technical and analytical workers and a shortage of several hundred thousand nurses and as many as 100,000 physicians over the next ten years. In aerospace, 60% of the workforce is aged over 45 years old compared with 40% in the overall economy. The United States should a) remove barriers to older workers staying in the workforce longer, improve incentives to technical and analytical training, for example through innovative funding mechanisms and direct links between jobs and educational institutions); and reduce barriers to the immigration of skilled workers.

These are just a couple of the report’s many interesting suggestions, but they may be the two most important. The way things stand right now, health care and education are becoming two of the largest burdens on our country’s finances—public and private. Both need significant restructuring to increase productivity—education especially. It is good to see prominent intellectuals devoting serious thought to these issues. We need more of it to keep America prosperous going forward.

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  • Anthony

    Making education and health care more affordable will certainly avail more opportunities for some Americans (the more self motivated) and if MGI provides guideposts toward remedy so much the better.

  • Jimmy J.

    For education – The Kahn Academies. They work! Use the model and use Kahn’s U-Tube lectures in schools to provide first class teaching.

    For health care – Tort reform, make purchase of individual health care policies tax free, more store front clinics, more use of skilled Physician Assistants, nationwide insurance exchanges, and Medicare/Medicaid reform. Get government and insurance companies out of the doctor – patient relationship.

  • Everyman

    Ah yes, just the ticket. More input from “prominent intellectuals devoting serious thought to these issues.” At the risk of seeming anti-intellectual, but given that it is the years of input from prominent intellectuals that have brought us to this challenge to our polity in the first instance, might we not consider how much better we might fare with less input from them rather than more?

  • Georgia MD

    Deregulate medicine. Medicine is one of the most heavily regulated industries that I am aware of. Innovation and productivity will sky rocket, I predict, when the government gets out of overseeing the healthcare market. And costs will fall.

  • Jim.

    The thing that baffles me about this whole arrangement is the fact that so many people serious thinkers simultaneously believe that we have both a severe shortage of skilled machinists, and a severe shortageof manufacturing jobs. How is it we have both?

    It is the simple truth that you can still make a good living turning a wrench in his country. You can still make a good living operating a lathe or a drill press. If you’re really good, you’re in high demand.

    We need to beef up voc ed opportunities in this country, no question about it. Destroying the profitability of distractions like TV would probably help too. 😉

  • Jacksonian Libertarian

    It’s the feedback of competition that forces continuous improvements in Quality, Service, and Price in the private sector. If there isn’t enough competition to drive some of the businesses in an industry out of business, then there won’t be any improvements in Quality, Service, or Price in that industry, and it will stagnate as Healthcare and Education have.

  • Luke Lea

    How come McKinsey is the only management consulting firm with a good reputation?

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