The shrinking stature of American management skill
THE omnibus trade legislation signed by President Reagan last August has not stopped the slippage of the American dollar against the Japanese yen. Cries are again being heard to protect American labor and industry by drastic tax increases on imports. It is even suggested that American products be subsidized so they could compete more effectively with Japan in the world marketplace. These measures, however, are not connected to basic causes. The main reason Japanese goods are attracting so many customers, both outside and inside the United States, has to do with the intrinsic appeal of the products. For example, Mitsubishi led the way in this country with large-screen television sets. American TV manufacturers have yet to catch up. Japanese electronics continue to excel. Nissan got the jump in the production of sports cars that also served family purposes. The Japanese are even demonstrating abilities no one thought they had in designing women's clothing.
It is nonsense to say that the Japanese have an advantage because of low labor costs. Wages are now comparable. If we are serious in facing up to actual problems, we have to look in the one place that we have always assumed represented America's supremacy - management skills.
Hajime Karatsu, director of the Institute of Research and Development of Tokai University, may have put his finger on the real problem when he wrote recently that the kingpins of American industry have been concentrating on corporate acquisition instead of on production. Takeovers and mergers have supplanted the requirements of the marketplace. Brainpower that ought to be going into competitive thinking has been going into stock market strategies, bank arrangements, and corporate restructuring.
The heads of many large US corporations today, Mr. Karatsu says, know more about leveraging and manipulation than about products. Industry is being run increasingly by financial wizards rather than by industrial experts. He cites the US machine-tool industry as a prime example. Until 1981, US machine-tool manufacturers ranked No. 1 in the world. Today, they are in fourth place. This decline, he writes, is the direct result of corporate speculators and raiders - a species primarily interested in pyramiding capital. He cites a large number of machine-tool companies that were skeletonized financially and in no position to survive an economic downturn. He points to the 1971 recession, when a large number of machine-tool companies were dumped by their conglomerate owners.
Failure to innovate is also cited by Karatsu as a reason for the US's competitive decline. He points to the field of semiconductors as a prime example. At a time when US companies, many of them run by conglomerates, were standing pat with their 64K chips, Japan was moving ahead with the demonstrably superior 256K chip. The Japanese manufacturers did this by upgrading their facilities, creating ever-higher levels of state-of-the-art products, increasing productivity, and lowering their prices.
Karatsu is nothing if not blunt. The plain fact, he says, is that the US lost the chip war because ``US managers were shortsighted.'' Instead of facing up to their own inadequacies, they put pressure on the government to bail them out.
The competitive difficulties of the US in the world markets, of course, cannot be separated from massive military spending. Habits of waste, inefficiency, shoddy merchandise, lax supervision, and absence of competitive pressure have not only been tolerated and sustained by government but have infected too large a part of America's corporate life. We have become slow-footed, overfed by government capital and undernourished in terms of ingenuity.
The President of the US, who has complained about food-stamp abuses, has been the nation's leading advocate of increased military spending without reference to the fact that permissive government policies have fostered welfarism of industry at the expense of true national security and national economic health. The stark fact of the matter is that the American people have not been getting their money's worth for military expenditures. Instead, we have been underwriting policies and practices that have weakened American capitalism, produced a titanic national debt, and indentured future generations. Americans may cherish many prospects, but becoming a second-rate economic power in the world is not one of them.