One of America’s Most Valuable Exports: Business Consultants

(Bloomberg Opinion) -- The latest institution to take a big whack from the media, with its well-known negative bias, is McKinsey & Co. A recent article in The New York Times shows how much the consulting company has worked for authoritarian and autocratic countries, including China, Saudi Arabia and Russia.

I would instead frame this story in a broader and far more positive reality: One of the biggest, most positive (and most neglected) global trends over the last 30 years has been the spread of managerial and technocratic expertise to what used to be called “third world governments.” In most countries, the central banks, the public health authorities, the treasuries and many other public-sector institutions now collect good data, hire Western-educated advisers, and try to implement good solutions. This is true in both the democracies and most of the autocracies, with North Korea a notable exception.

Although there is still a long way to go, this spread of technocracy has helped bring amazing increases in life expectancy and declines in child poverty, while making the world far wealthier and freer. And while wealth is no guarantee of either democracy or respect for human rights, on net the richer countries do have a better track record.

To be sure, it is difficult to discern how much of these developments should be attributed to McKinsey, which after all is only one company. Still, these developments are what McKinsey stands for and has tried to accomplish, and any highlighting of the negative should be counterbalanced by this positive trend.

To be clear, I am not a fan of the general McKinsey approach, at least not for the U.S. A lot of consulting work seems like churn to me (regardless of the consultant), and often the consultants are validating what people inside the company already know but for a high fee. I also believe the MBA degree should (and will) become less important in American business.

That said, when I meet entrepreneurs in poorer parts of the world, I am often struck by the fact that they are highly intelligent and conscientious, but they don’t always understand all of the cultural codes of good management. Advice that might appear stupid or trivial to more experienced observers may actually help to build new cultures of business excellence and economic growth.

In Saudi Arabia, McKinsey has worked on health care, education and development, and says 30 percent of its employees are women.

What about China? Isn’t it rounding up Uighurs into coercive reeducation camps? Yes, but I myself don’t wish to stop visiting China and spending my money there, or for that matter encouraging others to do the same. To provide a simple analogy: If this were the 19th century, and the U.S. was still rounding up, pushing out and killing Native Americans, or enslaving blacks, I would not boycott this country, either. Nor would I have wanted the Europeans (who had their own problems) to give up on America. China remains one of the world’s two most important countries, and the cliché that engagement is better than isolation remains true.

It is striking me to how selective the criticisms are. It is easy to go after McKinsey as a representative of big business, and perhaps as a caricature of a particular bureaucratic consulting mindset. The same critics do not target the numerous American economists who have advised China, including James Tobin, Milton Friedman and Joseph Stiglitz. I welcome such activity, even if I might disagree with some of the recommendations. I’d still much rather have a China that listens to Nobel laureates in economics than not.

If you are going to start pointing fingers, how about the American consumers whose spending leads to a yearly trade deficit with China worth about $500 billion? Surely that helps build the Chinese surveillance state far more than any McKinsey consulting contract.

McKinsey is a large global company, and no doubt it has committed numerous mistakes. But the fiduciary responsibilities of private companies do not always intersect with what is just, or socially best.

It just goes to show that framing is everything. If you see a negative article about anything — whether business, politics or even sports — ask yourself two simple questions: Does this article present some rough approximation of a cost-benefit analysis? (A throwaway line or two about possible benefits does not count.) And if the article criticizes an affiliation or cooperative working arrangement, does it show an awareness of just how widespread such affiliations are, and how difficult and probably injurious they would be to avoid?

At the margin, the world as a whole still needs more managerial expertise. I, for one, am grateful to those who provide it.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “The Complacent Class: The Self-Defeating Quest for the American Dream.”

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