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Definition

The efficiency with which a product is produced. Prodcutivity is a key metric in any economy because it determines that country's ability to compete with other countries on world markets. For example, Australia which used to manufacture motor vehicles has found that it cannot compete with motor manufacture in other countries and now has closed all its vehicle manufacturing and imports its vehicle requirements. Essentially, a country should only produce those products where it has a production advantage. South Africa exports millions of tons of raw materials to other countries.  The finished products, which those raw materials are used to manufacture, are then imported into South Africa.  This is because other countries are mostly better at manufacturing than we are. For example, South Africa has considerable cement manufacturing ability and yet Pakistan can produce and transport cement to South Africa at prices which compete very effectively in our market. Cement is a high bulk, low value product so we should be able to produce it locally far more cheaply than Pakistan can make it and get it here - but the local cement industry is always trying to get the government to apply tariffs on imported cement.

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