Acton Institute Powerblog

How managers can help save the world

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Why are some countries rich while other countries are poor? A primary reason, as economists have been pointing out for hundreds of years, is productivity—the efficient use of such resources as labor and capital.

Imagine that two companies have the same number of workers and use the same amount of materials to make identical widgets. Somehow company A is able to make 100 widgets in the time it takes company B to produce 50 widgets. Company A obviously has some “secret sauce” that is making them more productive. This productivity gap—the portion of the output (in this case, 50 extra widgets) not explained by the amount of inputs used in production—is called Total Factor Production (TFP).

Just as there are productivity gaps between companies, there are gaps between countries. For example, productivity in the U.S. is more than 30 times larger than some sub-Saharan African countries. As John Van Reenen, a professor of applied economics at MIT, says, “In practical terms, this means it would take a Liberian worker a month to produce what an American worker makes in a day, even if they had access to the same capital equipment and materials.”

What accounts for these large productivity gaps? A key answer is management practices.

Van Reenen was part of the team that conducted the World Management Survey, which began in 2002 to conduct a survey of 12,000 firms across 34 countries. The survey found, “The large, persistent gaps in basic managerial practices that we document are associated with large, persistent differences in firm performance. Better-managed firms are more productive, grow at a faster pace, and are less likely to die.”

“We found that management accounted for about 30% of the unexplained TFP differentials driving the large differences in the wealth of nations,” adds Van Reenen.

Managerial capabilities may be weak for a variety of reason, but a primary cause may be a simple lack of information. As Van Reenen says, “many firms in developing countries may not even realise how weak their management practices are. Or, even when they do they realise this, they may not know how to improve things.”

How can Christians in Western nations help close this productivity gap and improve the economic conditions of developing countries?

Every year approximately two million Americans participate in short-term missions trips. These trips often include service projects, such as painting buildings, that may not be as effective as we imagine. As Darren Carlson, founder and president of Training Leaders International, says, “I have seen with my own eyes or know of houses in Latin America that have been painted 20 times by 20 different short-term teams.” And writing in his book Toxic Charity, Robert Lupton says, “Contrary to popular belief, most missions trips and service projects do not: empower those being served, engender healthy cross-cultural relationships, improve quality of live, relieve poverty, change the lives of participants [or] increase support for long-term missions work.”

A potentially more productive short-term service project would be to use the time to help teach businesses in developing countries how to be more productive. Many of the millions of Americans who go on mission trips have some experience in management, or could at least be trained to teach basic management skills. In many countries the productive gap is so large that almost any knowledge we could pass along could be transformative.

Christians long ago recognized that for long-term spiritual success, missionaries had to train up pastors and teachers from within a country. Perhaps it’s time we applied that same thinking to improving the long-term material success of countries in need. By sharing our abundance of managerial knowledge, we could teach others how to be more productive—helping them create wealth for themselves and their neighbors.

Joe Carter

Joe Carter is a Senior Editor at the Acton Institute. Joe also serves as an editor at the The Gospel Coalition, a communications specialist for the Ethics and Religious Liberty Commission of the Southern Baptist Convention, and as an adjunct professor of journalism at Patrick Henry College. He is the editor of the NIV Lifehacks Bible and co-author of How to Argue like Jesus: Learning Persuasion from History's Greatest Communicator (Crossway).