Productivity is King

Productivity 512

When I was young a doctor or lawyer was materially poorer than a lifetime, dependency culture chooser is today. We take devices like washing machines, televisions and fridges for granted. The growth in what our society has been able to manufacture each year has been incredible. As has the reduction in the cost of making everything. And it is all down to productivity.

Earlier I wrote about the Maersk Triple E ships that move around 100,000 tons of cargo round the world and requires a crew of 22 people. The Cutty Sark sailing schooner of 1869 carried just 1,400 tons of cargo with a crew of 35. A productivity increase of over 100 fold.

In 1909 it took 303 man hours to manufacture one car, by 1929 the time had been reduced to 92 man hours, now the Nissan plant in Sunderland assembles a Qashqai in 8 man hours.

The Douglas DC3 airliner of 1935 carried 32 passengers a maximum of 1,500 miles. The Airbus A380 of 2005 carries 853 people for 8,500 miles.

The reasons behind these immense improvements is quite simple. Capitalism. Businesses only succeed by looking after their customers and they have to compete against other businesses to do so. Increasing productivity is one of the best ways to do this because it allows a given product to be sold for a lower price, or for a better product to be sold for the same price. So a Ford Mondeo of today is a vastly better and more sophisticated car than the Ford Zephyr of 1951, yet it takes around half the number of average working months to pay for the newer car.

Within a given business it is necessary to always increase productivity just to keep up with the competition. And the only way to earn more money, so as to pay workers more, is to increase productivity even more. So it is in the interests of every single employee to always seek to produce more, using fewer man hours. Or produce the same, with fewer employees. If a business doesn’t increase productivity to keep up with its competitors then it will fail and everyone loses their jobs. We have seen this very many times in Great Britain. British trade unions are nearly always against improved productivity, so they have cost millions of jobs.

Through the 1970s and 1980s British jobs were lost to competitors in Germany and Japan, who were always striving to increase productivity. So the world bought Honda or BMW motorcycles instead of BSAs or Nortons. Toyota or Volkswagen cars instead of Austins or Morrises. Sony or Panasonic Televisions instead of Bush 0r Decca. Then, gradually, Japan lost their productivity advantage, firstly to Korea and then to China, so their economy stagnated. Germany continues to be competitive in manufacturing and is by far the most successful country in Europe at it.

It is the same in services as it is in manufactured goods, as we have seen above in shipping and as we saw in the large scale offshoring of call centres and back office tasks to India.

Of course state owned businesses such as health and education have no incentive to become more productive. They do not enjoy the competition to force them to look after customers better that is an immense imperative to the private sector. So anything run by the government is massively inefficient. Which means that the less that the state does and the more that capitalism does the better it is for everybody.

If the British trade unions really served the best interests of their members then their mantra would be productivity, productivity, productivity. But mostly they champion the exact opposite, which is why so many unionised businesses have failed and why the public sector is so abysmally useless.



  1. In 1909 it took 303 man hours to manufacture one car, by 1929 the time had been reduced to 92 man hours, now the Nissan plant in Sunderland assembles a Qashqai in 8 man hours.

    It is not, in my opinion, at all clever to compare manufacturing time in 1909 with assembly time now. To compare sensibly, the manufacturing time of the Qashqai’s sub assemblies and other individual components must be accounted for, and added to the assembly time, only then can anything like a serious comparison be made.


  2. Great article! I would add that productivity defines a country. Poor countries have low productivity, in other words a poor country cant transform its labor into enougth products and services to maintain a fair living standard.
    Not conviced? Make a list of all products and services needed in country in a year. I guess that it is evident that the population have to some how to produce that amount of products and services. In a year time! hint productivity.


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