Written by Bob Meyer, Editor of BarterNews

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Wal-Mart's Low Tech Innovations Responsible For Efficiency Gains, Rather Than Massive Technology Investments

Conventional wisdom and many respected economists cite the massive investment in technology and telecommunications during the decade of the 1990s as the cause of productivity’s rise.

But according to William Lewis, author of The Power of Productivity, which is based on the 12-years of research for the McKinsey Global Institute, the efficiency gains we’ve seen recently owe much more to the low-tech innovations of Wal-Mart.

Lewis says the retailing powerhouse was the pioneer in the “big-box” store model, as well as shaking up the cozy world of wholesaling by setting up its own distribution centers. (Together these changes can be credited with half of the 2.5% annual productivity growth of 1995-99.)

The study also pointed out that one thing matters above all else—competition. And the argument is put forth that industrializing economies could grow quickly, with the available inputs of labor and capital, if they would just embrace competition and small government.

Other points in the study:

• Capital inflows are no guarantee of success, as the Asian financial crisis demonstrated. In fact, foreign direct investment in local enterprises is more helpful, since it intensifies competition and introduces global-best practices. (But few governments can resist the pressure from domestic businesses to shut out global competitors by means of regulatory barriers.)

• Education is not as critical as everyone seems to think. Case in point: After Japanese car makers opened factories in the U.S., they were able to achieve 95% of home-country productivity simply by doing a better job of organizing the labor force.
  
  Illegal immigrants have even less formal education, but they can be brought up to American levels of productivity, too. The lesson revealed is that on-the-job training is just as important as what workers learned in school.

• Competition is unlikely to flourish in poor countries until the scourge of big government is brought under control. Lewis notes that governments in Brazil, Russia, and India spend more than 30% of GDP, while the U.S. and European countries, at a similar stage of development, spent less than 10%. High tax rates lead to a large informal (or underground) economy, which means than an even heavier burden falls on legitimate businesses.

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From Our Files...

Michael Jordan Made Millions By "Trading" On His Popularity

Eight years ago a memorable merchandising bonanza hit the market...it was based on the live-action animated movie Space Jam, staring sports icon Michael Jordan along with Bugs Bunny, Wile E. Coyote, Porky Pig, and other Looney Tune characters.

As a result, over one billion dollars of Warner Brothers toys were sold. For Jordan, who traded his “presence” in the movie for 10% of the merchandise wholesale revenue, this translated into a $50 million payday!

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Barter Fairs & Holiday Expo's. . .

October:
2nd Annual BXI San Diego Fall Trade Fair. Saturday, October 23 at Party Pals, 10427 Roselle Street, from 10 a.m. to 4 p.m. For directions call (619) 472-2929.

November:
BXI Ventura-Santa Barbara & BXI West Valley Holiday Trade Fair. Sunday, November 7 at the Oxnard Courtyard by Marriott, 600 East Esplanade Drive, from 10 a.m. to 4 p.m. For more information call (804) 376-9466 or (818) 758-2929.

December:
TradeAmericanCard 2004 Barter & Business Expo. Sunday, December 12 at The Grove of Anaheim, 2200 E. Katella Avenue, from 3 p.m. to 9 p.m. For more information call (714) 532-1610.

(Barter companies: Send your holiday trade fair information to: bmeyer@barternews.com.)

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Here & There...

• Bill Gross, manager of Pimco Total Return, the nation’s largest bond fund based in Newport Beach (CA), told the Financial Times in August that the global economy is uncertain. “Too much debt, geopolitical risk, and several bubbles have created a very unstable environment, which can turn any minute. More than any point in the past 20 or 30 years, there’s potential for a reversal.”

  Among his concerns were consumer and government debt and a bubble in commodity prices. Gross said the U.S. dollar is overvalued by 20%, propped up by an inflow of foreign capital.

• A new kind of residential development, called “forest reserve” communities, is taking place in the U.S. It’s being carved out of former industrial timberlands around major cities of the Pacific Northwest and Florida’s Panhandle.

  Twenty-acre forested lots are being sold by timber giants like the Weyerhaeuser Co. Buyers can build their dream home on the land, and then manage the property in the surrounding woods as a small tree farm. (Owners are free to leave the property untouched or to cut down trees to sell them.)

  The timber companies say selling their land in this manner (at prices of $140,000 to $250,000 per lot) is faster then going through the lengthy process of gaining regulatory permits for a traditional development.

• The newest edition of Franchise Opportunities Guide, from the International Franchise Association, lists more than 900 franchises. The Washington, DC-based, trade group represents companies in 75 different industries in more than 100 countries. Franchises in the U.S. have revenues of $1.15 trillion and 14 million employees. The guide costs $23 and is available at www.franchise.org or call (800) 543-1038.

• The number of credit-card solicitations in the U.S. grew to 4.29 billion in 2003 from 1.52 billion a decade earlier, according to Chicago research-firm Synovate. And Federal Reserve data revealed revolving consumer debt last year was at more than $734.1 billion, compared with $238.6 billion in 1990.

• For the past 25 years China’s economy has grown an average of 9.4% annually, making it the world’s sixth-largest economy. Over the same period, per capita income—both in cities and rural areas—has multiplied more than five times. And the average wage has doubled in just the last ten years. Because of this fast economic growth, China has lifted 400 million people out of absolute poverty since 1981.

• Have you signed up to receive a summary via e-mail of the Tuesday Report every week? If not, go to the top of this issue (right hand corner) and sign up!

• Cast-off electronic equipment totaled 1.5 billion pounds in 2002, five times the amount recycled in 1998, reported the International Association of Electronics Recyclers.

• If Sam Walton were alive today and had not dispersed shares to descendants, his stake in Wal-Mart stock would be worth over $100 billion!