The New Economy

(10 of 11)

projected to reach an intolerable $210 billion for the current fiscal year. The most important single thing that the Government can do to help industry prepare itself for the changes it must face in the New Economy would be to bring that deficit down so that long-term interest rates, now hovering around 12%, can fall. If rates do not drop, the recovery may stall. That puts Congress in a bind. To provide much needed funds for education and training, it will have to cut other spending or raise taxes or both.

Government can improve the climate for industrial growth, but the success or failure of individual firms will be determined in executive suites and on factory floors by managers and workers. To survive in the New Economy, companies will have to be flexible and efficient. Says William Thurston, president of GenRad, a Concord, Mass., electronics firm: "The first thing managers have to do is to take responsibility for their own destiny. They should stop complaining and get busy. They should keep up to date in technology and be responsive to the marketplace."

Every industrialized country is looking to high technology for its salvation. But competitiveness, high productivity, innovation — or their lack — will be even more decisive in the New Economy than in the old; an inefficient chip-maker will suffer just as much as an inefficient steelmaker. And the pitfalls will be just as deep for high-tech managers as for those in old-line industries. High tech is no passport to business success. Digital Equipment Corp. is a leader in the minicomputer business, but it is now having to run to catch up in micro computers. Xerox pioneered office copy machines, but it has had trouble finding a niche in the office automation market. Southern Biotech was a promising firm in the surging field of genetic engineering, but it filed for bankruptcy after three years in business and a failed research program.

American companies over whelmed by imports excuse their failures by blaming foreign industrial policies. In truth, U.S. managers are often outmanaged by foreign competitors. While RCA complained in 1979 that it did not have the $200 million needed to develop a videocassette recorder, it did scrape together $1.3 billion to buy a finance company. In the meantime, RCA ceded the highly lucrative video-cassette-recorder market to the Japanese. RCA has also suffered from revolving-door management: four chief executives in six years. Bureaucracy, territorial feuds and narrow careerism afflict many large U.S. corporations.

Japanese managers have often been much quicker to provide workers with the most advanced equipment. Moreover, the Japanese people have a tradition of discipline and an unsurpassed work ethic. As a result, worker productivity has gone up 80% in Japanese manufacturing since 1972, far more than the 15% gain recorded in the U.S. American quality contro has lagged along with productivity. A survey by Pollster Daniel Yankelovich found that 26% of U.S. manufacturing-workers are "ashamed" of the quality of the products they make.

American managers must cultivate a closer relationship with labor to replace the often antagonistic "we-they" approach. Many U.S. companies are successfully copying the Japanese practice of using so-called quality circles, which are teams of workers that meet regularly on company time to discuss