Invisible weights on US competitiveness
THE United States must ask of itself not only how we build competitive industries, but also how we build a competitive society. The international marketplace already has forced us to recognize that management and unions must be more efficient in order to produce a competitive product. American business is taking steps to improve. But there's more to it than that.
Have we fully considered how the inefficiencies of other systems affect the cost of our products and, thus, our status among international competitors? The future belongs to competitive societies -- those who are able to reform all their institutions.
In a world of international competition, we must be concerned that the US has two-thirds of all attorneys in the world. We are the most litigious of all. In an international economy, new significance is given to the fact that there are three times as many lawyers graduated in the US each year as there are lawyers in all of Japan. ``Legalflation'' affects competitiveness as surely as labor costs.
As armor against the onslaught of lawsuits, US firms buy insurance at a cost unequaled in the world. In a continental market, this fact had little relevance; however, in an international economy, it can mean the difference between success and failure.
Similarly, we can't ignore the cost of health care in our products and services. Health care costs have been rising at three times the rate of inflation. For each car that Chrysler sells, about $550 is added to cover company health care costs -- an amount 400 percent higher than the Japanese Mitsubishi Motor Corporation. The US spends up to eight times more on health care than many of our international competitors and yet has among the lowest health outcomes. In actual take-home pay, US auto workers don't make that much more than their Japanese counterparts. But add the cost of fringe benefits and suddenly US workers make $8.50 an hour more. Health care insurance now costs our corporations about $125 billion a year, slightly more than 50 percent of pre-tax profits. Let's not forget to add the costs of health care when tallying how competitively we can offer our goods in the international market.
And so it goes with other institutions and systems. The US has the lowest sav-ings rate of any industrialized country. We are a nation of consumers, not savers. Thus, it costs up to three times more for US firms to borrow capital than it costs firms in competing nations. If it costs US companies more to gain access to essential capital, they will not remain economically competitive in the long term.
As the number of criminals burgeons in our most violent society in the world, so does the public tab for jails, prisons, and judicial processing. Our corporations have had to hire 602,000 new security officers in the last five years to protect themselves. These public and private costs silently but definitively add to the cost of doing business.
So does our political system. Political contests often become bidding wars a-mong vested interests -- and the cost of bidding often finds its way into the cost of the final product, whatever it may be. The average candidate for the US Senate must raise and spend $3 million in an election bid; for candidates for the House, the average cost of election is $200,000 -- although some spend four times that sum. This part of the economic fabric does not enhance national security; it weakens it.
The lack of reform in other systems, although it does not directly add to the cost of products, exacts a tangible toll nevertheless. Education is a prime example. The nation that is second-best educationally will be second-best economically. This is why we should worry when many of our industrial competitors send their children to school an average of 240 days per year, six to eight hours a day, while our children attend school an average of 180 days a year, five hours a day. The US has the largest number of functional illiterates of any industrialized nation; it is estimated that 1 of 5 American workers is not able to read or write well enough to carry out everyday tasks in our society. Our children cannot expect to creatively compete with others worldwide if they haven't done their homework.
Actual time spent learning isn't the only problem in education; so is quality and effectiveness. The academic achievement of American children lags behind that of schoolchildren in Japan and Taiwan virtually from the day they enter school. The average eighth grader in Japan knows more mathematics than the average master of business administration in the US. After 12 years of schooling, students in other advanced countries may have the equivalent of four full years more of learning in a more demanding curriculum than American high school graduates. Only 75 percent of our children graduate from high school -- a rate that pales compared with many other industrial nations.
It is clear that industrial competitiveness is much more than work rules or quality circles or ``just in time'' inventory systems. The question facing our nation is not simply how businesses and industries can be made more competitive; although improvements in this area alone boost our overall international standing, they aren't enough to carry this country into the marketplace of the next century.
The real challenge as we approach the 200th birthday anniversary of our Constitution is how to streamline all of society's institutions. Absent the ability to recognize the broader elements in our struggle to be competitive, our nation surely won't be.
Richard D. Lamm is governor of Colorado.