Much of the declinist view of the U.S. (championed by the populist left and right) centers around the cost to individuals and communities that lose out as a result of economic change. I am broadly sympathetic to those costs and yet we cannot avoid the necessary other side of the coin that this is a large part of the progress of humanity. We’re glad that factories replaced blacksmiths now, but I’m quite certain that many of that era lamented the fact. The late 1800s, for example, saw a dramatic erosion of the number of people that were involved in agriculture as mechanization enabled significant gains in agricultural productivity. But that released people into the factory jobs that were emerging, and led to much higher standards of living. Increases in productivity are the only way to increase real wages.

Most recently McKinsey and Company studied productivity growth for the U.S., U.K. and Germany from 2011-2019 and found that that high growth standout companies contributed almost half of the productivity growth in the U.S. during that time period:

As the chart above shows, of the 2.1% per annum productivity growth for the year (much higher than U.K. and Germany thanks to U.S. more open markets), .9% of that was from firms that attracted workers and capital from other lagging firms. As James Pethokoukis of the American Enterprise Institute notes:

McKinsey’s research undermines that zero-sum narrative: Firms with the highest productivity growth also had the strongest profit and wage growth. Rather than exploiting workers,  employees and customers are typically the biggest and most immediate beneficiaries of productivity growth. McKinsey: “Productivity growth is a win-win for all.

The lesson is clear–free trade and free enterprise, which allows movement for capital and labor, leads to better economic performance and Makes America Richer Again.