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Detroit's problems have come to symbolize the ills of U.S. business in general. The saga of American cars in the past three years resembles the story of too many industries during the past decade. Television, textiles, steel, calculators, ship-building—American companies once dominated all those markets. But then U.S. executives watched almost helplessly as their customers were snatched away by industrious Japanese competitors selling better products at lower prices.
The arguments of those who favor trade restrictions have varied little since 1791, when Alexander Hamilton, the first Secretary of the Treasury, wrote his Report on Manufactures. Hamilton advocated high tariffs as the way to protect new American industries. Reagan Cabinet members such as Drew Lewis and Commerce Secretary Malcolm Baldrige and the heads of American auto companies now argue that the domestic auto industry has been thrown into a temporary upheaval because of consumer demand for fuel-efficient cars. They maintain that if Japanese imports were reduced for a three-year "breathing spell," the U.S. firms would be able to rebuild and begin producing the kind of cars that consumers obviously demand.
The case for free trade is by far the more compelling. It has also changed little since it was set forth in 1776 by Adam Smith in The Wealth of Nations. Treasury Secretary Donald Regan, David Stockman and Chief Economist Murray Weidenbaum argue today that import restrictions would, among other things, penalize consumers by enabling U.S. automakers to raise prices without fear of being undercut by competition from Japan. Protection in the U.S. could also lead to a dangerous escalating trade war around the world. Such a war would have serious consequences for U.S. foreign and defense policy.
Both the advocates and the opponents of import restrictions admit that the ultimate solution for the troubles of the auto industry is for Detroit to build products that are better and cheaper than anything Japan has to offer. The question, in a word, is how.
Searching for answers to that query has become a growth industry. From Harvard Sociologist Ezra F. Vogel's 1979 treatise Japan as Number One: Lessons for America, to U.C.L.A. Management Professor William Ouchi's new Theory Z: How American Business Can Meet the Japanese Challenge, academics are telling the U.S. that the most dutiful student of its management practices is now the teacher.
Businessmen are getting the message. After years of smiling while armies of Japanese executives trooped through their offices to learn the secrets of U.S. industry, Americans are seeking a tip or two for themselves. Like pilgrims to the temple of success, they are traveling to an ancient land they can scarcely understand to learn how Japan does it. With a mixture of curiosity and envy they are asking: How has an overpopulated island country with less land than California leaped in only three decades from wartime defeat and the status of industrial sweatshop to that of high-technology dynamo? How has a country that imports 100% of its aluminum, 99.8% of its oil, 98.4% of its iron ore and 66.4% of its wood and lumber become a world economic