The New Economy

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production snafus and bottlenecks. In 1979 Dover Elevator Co. formed quality circles at its Horn Lake, Miss., plant. Says Robert Scott, Dover's quality-circle coordinator: "It has done so many good things you can't even count them. I suppose if it were to be put in dollar terms, we have had a $12 to $15 payback on each dollar invested in the program." One quality circle suggested a way to install elevators in shafts more economically; the improvement will save Dover $2.5 million over the next five years. Westinghouse Electric Corp., with more than 2,000 quality circles, estimates that they helped boost the company's productivity by 4.5% last year.

Organized labor, in turn, will have to be more flexible on wages and be willing to give up rigid work rules that lead to overmanning and inefficiency. The recession may have been a turning point for unions. After rancorous negotiations, workers in both the auto and steel industries agreed to an unprecedented combination of pay cuts, changes in work rules and givebacks of benefits. But wages are still comparatively high. In the U.S., autoworkers at the Big Three companies now average $21.50 an hour in wages and benefits, compared with $12.60 an hour in Japan. Now that the recession is over, the talk in union halls is of catch-up instead of giveback. If executives and labor forget the harsh lessons administered by the recession and foreign competition, their companies will continue to weaken.

Smokestack industries need not die in the New Economy, but they must be leaner, more productive and better managed. Workers will lose jobs and go through very hard times, but with the help of retraining, there can be second acts in American working lives. An eclectic and energetic band of U.S. entrepreneurs is likely to keep creating openings in fields now barely explored. One thing is certain: protectionism cannot stop or even slow the advance of technology. The U.S. can either continue to ride the crest of the New Economy wave or follow in the trough behind. —By Charles P. Alexander.

Reported by Gisela Bolte /Washington and Adam Zagorin/New York, with other bureaus