Complacency and US competitiveness. Determining the roots of diminishing industry

`COMPETITIVENESS'' has become the buzzword connected with our horrendous trade deficits of these last few years. But our shrinking competitive position is not something that happened suddenly. The origins go back to World War II and are rooted in complacency and education. When that war ended in 1945 the US had a position of unique military and industrial strength. It was not only militarily invulnerable with its monopoly of the atomic weapon but also the only industrial superpower.

Europe and Japan had been bombed out.

There were then none of today's fiercely competitive NICs (newly industrialized countries) in Asia.

Not only had undamaged US industry thrived during the war but when it ended the US still had within its borders ample energy and most raw materials to meet our industrial demand.

The US also had control or influence over much of the industrial and financial resources required for world reconstruction.

So for about ten years US industry had no real competition. Although this was obviously only a temporary situation, the US grew complacent. While Europe and Japan were saving and investing in new highly productive industrial facilities, the US continued production in aging factories, giving foreign competitors with also lower labor costs a double longer-term advantage.

QUALITY, an important component of competitiveness, meant little. I recall contacting a Ford executive in the 1950s about buying a new car. ``Fine,'' he said, ``we'll give you a `Wednesday' car.'' ``What in the world is a Wednesday car,'' I asked. He explained assembly line workers often took Mondays and Fridays off so less experienced people manned the assembly lines. Therefore senior executives got Tuesday, Wednesday or Thursday cars ``but Wednesday's are the best!'' So much for quality when there's little competition.

Management was often complacent about industrial design. I was surprised in 1957 when visiting the Toyota auto factory in Japan (modeled after one in Detroit) that several stations on the line had been eliminated by combining two or three components into a single part thus reducing personnel and speeding output.

Product development was another area where the US was complacent. In the early 1960s, before the import flood of small Japanese cars, I expressed to the chairman of General Motors concern that small car imports, already exceeding 300,000, would reach a million a year by 1970. What were we doing to meet the challenge? He assured me that Americans wanted big cars; that small car imports would soon peak; and that since profits on small cars were less it was hardly worthwhile without an annual production run of 500,000.

However, not just management was complacent. American labor and government and Congress must share the blame - labor because of exaggerated wage demands, and government and Congress for political expediency. An example - in the 1960s I met with George Meany, American Federation of Labor president, whom I had known since the late 1940s when I worked with his people in Paris to support trade unionists seeking to form a noncommunist union after communists took control of France's largest union. I said I feared excessive US union wage demands would price some of our products out of foreign and domestic markets.

He replied that left-wingers were trying to capture control of our unions by championing much higher wages; that while 75 percent of US labor were hard workers, about 25 percent wanted to do just enough to get by.

This 25 percent would always support exaggerated wage demands as would some others. ``If government and Congress feel high wage demands harm the national interest, let them come out and say so and we will respond.'' ``But,'' he added, ``the White House and the Congress never say a word, they want us union leaders to hold the can for saying no!''

So complacency of management, labor and government when we had little competition all contributed to the US's present predicament. But let's also not forget bankers, encouraging an endless flow of credit card debt on a ``buy now, pay later basis,'' and the Reagan administration's huge budget deficits that have increased the long-term damage.

Another major factor in ``competitiveness'' is education. I recall my surprise on arrival in Japan in 1957 to learn that US illiteracy ran about 10 percent whereas Japan's was under 1 percent. Even more surprising, US industry and our Defense Department were financing several thousand contracts for basic scientific research by young Japanese scholars. Why?

Because, as contrasted with Japan, relatively few young Americans were majoring in science and then going on to postgraduate work, many preferring law, business administration, or medicine as the quickest way to the top.

RESULT: The US didn't have enough young scientists, and those available were understandably assigned to the most promising projects with potential early returns rather than to basic research with its occasional but revolutionary breakthroughs. Japan had enough for both and it is underscored by the saying: ``Invented in America, developed and marketed by Japan.''

The indispensable foundation of education is, of course, the primary and secondary school system. While US systems could be improved, there is one essential external component to good school performance - the family influence on the student. School children need encouragement and help with their homework but above all discipline during the school week. How many parents help their children, hear their lessons, and insist on no TV until their homework is done?

But back to ``competitiveness''! Where does the US stand now?

Happily both industry and labor recognize that those temporary days of little foreign competition are gone forever. Industry is modernizing, sloughing off waste and emphasizing quality. Labor is recognizing that unreasonable wage demands will end in fewer jobs since we won't be price competitive.

Happily more emphasis is being placed on responsibility of the family in education.

One immense danger looms - protectionism. Let us never forget that the worldwide depression of the 1930s was triggered by the protectionist Smoot-Hawley tariff. Today protectionism threatens again, nurtured by some less competitive industries and their labor unions and consequently ardently supported by members of Congress in their over-riding pursuit of reelection. To foster protectionism as the easiest means of reducing our huge trade deficit is folly. However, to use measured retaliation against clearly documented cases of foreign discrimination against US products is another matter; indeed, it is the most effective way to discourage the spread of such discrimination.

The upshot? We face not a temporary problem of competitiveness but an endless struggle for the indefinite future.

It will challenge the very best in America to meet it successfully.

Douglas MacArthur II has held six presidential appointments, including ambassadorships in Japan and Europe, and was assistant secretary of state.