Has America’s Economic Engine Run Out of Steam?

James Manyika, Director of the Mckinsey Global Institute and Lenny Mendonca, Director of McKinsey & Company, joined with the Economic Growth Program at the New America Foundation to present the findings of their recent report, Growth and Renewal in the United States: Retooling America’s Economic Engine. They were joined by Aneesh Chopra, Chief Technology Officer and Associate Director for Technology in the Office of Science & Tech Policy, Executive Office of the President, who spoke about the President’s initiatives to use technological innovation to increase productivity and achieve long-term economic growth.

According to the McKinsey report, sustainable growth and economic competitiveness will only be possible if America takes the necessary actions to foster wider productivity gains in both the public and private sectors. In the past, labor force growth has constituted a large portion of US economic growth. With the retirement of the baby boomers, America needs to match these productivity gains through other avenues. In order to match the GDP growth of the past two decades, the US will need to increase labor productivity by 1.7 to 2.3 percent, representing a 34% acceleration in productivity. McKinsey explains that this acceleration must come both from efficiency gains and from increasing the volume and value of outputs for any given input.

The Institute identifies areas of the economy that hold potential productivity gains. Even under current regulation, McKinsey has found that businesses can achieve three-quarters of the necessary productivity growth acceleration. For example, three-quarters of this growth can be achieved by adopting best practices in the private sector and implementing emerging business and technological innovations.  These innovations include enhanced supply chain integration, greater responsiveness to evolving customer preferences and behavior, and innovating in what, and how, goods and services are provided to customers.

The public sector must also play its part. To obtain the last one-quarter of the acceleration government needs to act on economy-wide barriers that limit productivity growth. The report identifies seven imperatives:

1. Drive productivity gains in the public and regulated sectors.
2. Reinvigorate the innovation economy.
3. Develop the US talent pool to match the economy of the future and harness the full capabilities of the US population.
4. Build 21st century infrastructure.
5. Enhance the competitiveness of the US regulatory and business environment.
6. Embrace the energy productivity challenge.       
7. Harness regional and local capacities to boost overall US growth and productivity.

According to Aneesh Chopra, the federal government is making strides in the area of technological innovation and productivity gains. From health care to pot-hole repairs, local, state and federal institutions are adopting new programs and platforms that have enabled them to better deliver public services at lower costs and with increased transparency. This movement in the public sector bodes well for national growth prospects, perhaps setting the stage for productivity gains that will even exceed the projections of the McKinsey report.

You can read the full report here.
 

Participants

Featured Speakers
Aneesh Chopra
Chief Technology Officer & Associate Director for Technology
Office of Science & Tech Policy, Executive Office of the President

James Manyika
Director
McKinsey Global Institute

Lenny Mendonca
Director
McKinsey & Company

Sherle Schwenninger
Director, Economic Growth Program
New America Foundation

Michael Lind
Policy Director, Economic Growth Program
New America Foundation