International comparisons are even more revealing. And Japan, the country that created so much anxiety for American business in the 1980 s, has not seen its industrial production increase at all since 1990. The flip side of the American success in the last decade is the abject failure of the Japanese system. There are two major factors that have led to the American success. The first is a strong pickup in the growth rate of worker productivity.
Productivity is the amount of output each worker generates.
This rapid growth is due to improvements in education and investments in modern equipment by businesses. But the biggest component is probably the revolution in information technology. ATM machines replace bank tellers, automated switching replaces phone operators, and huge amounts of labor are freed up to do something more valuable. New production techniques allow companies to run with very low inventories. Dell, the computer company, only makes a computer after it has been ordered by a customer.