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Congress rethinks America's competitiveness
Congress Rethinks America's Competitiveness David A. H e e n a n
David A. Heenan is president and chief executive officer of Theo. H. Davies & Co. Ltd., Honolulu. The author wishes to acknowledge the contributions of U.S. Senator Spark M. Matsunaga, his staff, and especially Cherry Matano, Jerome C. Comcowich, Reginald G. Worthley, Steve Waldhorn, and Marie McCord. They assisted with the research on which this article is based.
Our nation's legislators overwhelmingly favor the current economic system as the best structure under which to restore U.S. competitiveness. But within that framework, the state level may be the place to get programs started. ith the elections over, both Republicans and Democrats are proposing various measures to restore America's competi-, tiveness. Their nostrums share a powerful c o m m o n belief: that America's economic well-being rests on the ability of U.S. business, government, and labor to forge a national consensus. Lacking a coherent vision of its economic future, the a r g u m e n t goes, the United States will soon be overtaken by hard-charging industrial p o w e r s from Europe and the Far East. This fear is widespread, and surveys in the 1970s and 1980s have revealed that between two-thirds and four-fifths of Americans believe that the tensions between business, government, and labor are at the heart of our "sickness." As a result of these concerns, virtually e v e r y proposal of today's 200-member bipartisan Congressional Caucus on Competitiveness contains some element of "cooperation" or "partnership." But are America's political leaders truly c o m m i t t e d to building an economic partnership? Are they p r e p a r e d to share their p o w e r with business and
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labor? Further, are the opinions of federal lawmakers in agreement with those of legislators in state government? Have politicians' attitudes on consensusbuilding changed over the decade? And w h a t are the implications for corporate America? VIEWS FROM CAPITOL HILL
o answer these questions, a survey was taken of over 300 members of Congress as well as their peers in several state legislatures. (See Table I for more information about the study.) The s u r v e y spelled out three possible scenarios of a socioeconomic future for the United States (see Table 2). Respondents were asked to identify which one they (1) preferred, (2) expected to dominate in the United States over the next 10 years, and (3) felt would be most effective in solving America's problems over the same time period. To recap briefly, Scenario I describes the regulated free-enterprise system or mixed e c o n o m y n o w in effect in the United States. It represents the status quo in which dealings be-
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Business Horizons / May-June1989
Table 1 The Research
12
The research on which this article is based began in April 1987 and ended 18 months later. Targeted as participants were 150 U.S. senators and congressmen, as well as 142 state legislators primarily from New York, California, Texas, Ohio, and Hawaii. Questionnaires were accompanied by a personalized cover letter from U.S. Senator Spark M. Matsunaga that highlighted the importance of the survey, encouraged full and frank responses, and insured confidentiality. Throughout the sampling process, I was careful to maintain a representative sample of influential members of U.S. and state government and to minimize response bias. Next, I compared these results with those obtained during the three-year period 1979 to 1981.* Included in my earlier survey were members of the Congress as well as elected officials from the same five states. I used various statistical techniques, ranging from standard chi-square analysis to multidimensional mapping, to highlight the similarities and differences between my previous and current research. Finally, I conducted follow-up interviews with more than 25 respected political leaders on the issue of America's competitiveness. My primary target was the Congressional Caucus on Competitiveness, including Senators Bill Bradley, John H. Chafee, Jeff Bingaman, John D. (Jay) Rockefeller IV, Max Baucus, and Daniel P. Moynihan, plus Congressmen Sam M. Gibbons, Buddy Mackay, and Robert T. Matsui and Congresswoman Claudine R. Schneider. *See David A. Heenan, The Re-United States of America (Reading, Mass: Addison-Wesley, 1983).
tween business, government, and labor typically are either adversarial or remain at arm's length. Scenario II portrays "America, Inc." Consensual attitudes dominate regulations among business, government, and labor. Typically, their cooperation leads to an economic partnership such as that observed in Japan or West Germany. Scenario III can be summed up as "managed capitalism" or "modified socialism." Government holds the economic reins, and central planning abounds. (Sweden and Yugoslavia possess many of the elements of this option.) As summarized in the Figure and in Table 3, the most important findings are the following: • Almost three-fourths of the congressional members surveyed prefer the status quo (Scenario I). A little more than one-fifth think an "America, Inc." is best, while only 0.8 percent favor a centrally planned economy. • Slightly less than three out of every four politicians believe the present ideology will dominate during the next 10 years; roughly one-quarter of the respondents anticipate that an
influence respondents' ideological leani n g - t h e same result as in the earlier survey. Similarly, there are no regional differences in attitudes despite the uneven economic performance of various parts of the country. The same results hold for party affiliation. Congressional legislators have remained remarkably consistent in what they think is the proper course for the U.S. economy. These most recent opinions are virtually identical to those gathered in a study conducted from 1979 to 1981. However, state legislators today are significantly more supportive of Scenario II than were their colleagues at the beginning of the decade. These results, while interesting, are imprecise in assessing government's real interest in consensus-building. What follows is a deeper look at what our legislators think and an analysis of their choices. VOTES FOR THE STATUS QUO
merica's political leaders have delivered a clear verdict: the nation should not cast out its "America, Inc." will prevail; and about 1 percent expect to see the emergence adversarial system in favor of the more collaborative methods of Japan and of Scenario III. • When asked which scenario West Germany or the more directed would be most effective in solving economies of Northern and Eastern America's competitiveness problems, Europe. Most prefer our present ideoltwo-thirds of those polled named Sce- ogy, for all its shortcomings. Hence, nario I. Approximately 30 percent these results parallel those obtained in picked "America, Inc.," and a small a 1987 survey of Harvard Business Reminority (0.7 percent) chose "managed view readers. Politicians doubt that the United capitalism." • Opinions vary considerably be- States would be willing to adopt the tween federal and state legislators. cultural values and institutional reWashingtonians generally are more forms needed to build an "America, bullish on our mixed economy and its Inc." They argue that the Japanese or ability to withstand the test of time. German models, attractive as they are, Conversely, policymakers at the state cannot be assimilated by a nation with level are much more inclined to see the the values and traditions of the U.S.: merits of the partnership approach Yankee ingenuity, rugged individualism, egalitarianism, and independent, (Scenario II). • Neither age, business experience, competitive spirit. Supporters of regulated free entergeography, nor political party is a predictor of opinion. In technical jargon, prise also cite its superior effectiveness there are no statistically significant dif- in resolving competitiveness problems. ferences at the 5 percent level. Although Many express their concern over fura study conducted a decade ago found ther government encroachments in the younger lawmakers more disposed to economy; others single out the proven collaborative economic systems, that is track record of the mixed economy; still not the case today. Also, significant others are unconvinced that the U.S. experience in the private sector did not could assume the traits of a more or-
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Congress RethinksAmerica'sCompetitiveness i
Table 2 The Scenarios
I. Regulated Free Enterprise The United States elects to pursue its present ideology of regulated free enterprise. Privately controlled markets, subject to limited government regulation, are retained. Free market competition, profit incentives, technological change, and collective bargaining are essential elements of a system that has made the United States the world's most important economic power. This system, it is argued, must continue. Under this scenario, government maintains its watchdog role over business-providing necessary direction in such critical areas as trade, monetary, antitrust, and environmental matters. The business-government relationship is arms-length. Public ownership of the enterprise is rare, and dual careers in business and government are the exception. II. Guided Free Enterprise Following the lessons of Japan and the "second Japans," the United States elects to adopt a system of guided free enterprise. Government plays an increasingly important role in the direction of the American economy. An interdependence is created among business, government, and labor, and a strong coalition among the three emerges. Under this scenario, the adversary posture between business and government is replaced by a greater collaboration. Public opinion supports government's more visible hand in business. Dual careers in business and government begin to increase. III. Centrally Planned Economy The United States elects to move toward a centrally planned economy. Government acquires primary control over the economic system, and managed capitalism or modified socialism is the by-product. New regulatory and administrative agencies emerge. Widespread public ownership of enterprises takes place, and the distinction between what is a private or public company is blurred. Dual careers in the private and public sectors are commonplace, with government often recognized as the fast track. Note: Originally, I pretested seven scenarios ranging from lmssez-faire free enterprise to economzc totalitarzanism. Those recelving tess than 2 percent of the responses zoere eliminated from this study.
ganic society; and some associate Scenarios II and III with the potential loss of political liberties. No doubt the aftereffects of the presidential elections may have generated pressure to change our adversarial ways. An ideological overhaul, however, does not appear to be forthcoming. Any shifts that occur will be subtle ones. Congressmen admit they have not effectively articulated the competitiveness issue to grass-roots America--or at least that the opposition has failed to do so. "The Republicans don't have a point of view [on competitiveness]," claims Senator Bill Bradley, a New Jer-
sey Democrat. "It's consistently offering inconsistent and contradictory responses." His Democratic colleague, Senator Jeff Bingaman of New Mexico, concurs: "It's very difficult and confusing with the Republicans saying on the one hand we don't have a competitiveness problem and then on the other proposing a solution to it like antitrust reform." Several respondents fault the previous Administration for sending out mixed signals. One ranking Republican confessed: "The 'Great Communicator' had a great opportunity to inform the American people [about competitiveness]--and he blew it!"
Nevertheless, Capitol Hill is equally mindful of the positive lessons of the Reagan legacy. Despite the staggering trade and budget deficits, lawmakers do not want to reassert Washington's stake in the economy, and they expect this hands-off policy to continue into the 1990s. "We're prepared to play this hand out," says Representative Robert Matsui, a California Democrat. "We simply won't turn the clock back." Institutionalizing U.S. businessgovernment partnerships is also difficult. Consider the ill-fated attempt in 1987 to link the independent, nonprofit Council on Competitiveness with the federally supported Congressional Caucus on Competitiveness. Since both organizations are committed to the restoration of America's competitiveness, it seemed only natural to put their talents in tandem. The business-backed Council had the staff and financial resources to support the congressional group. The bipartisan Caucus, in turn, served as an ideal forum in which to debate the serious issues surrounding competitiveness. But the coalition floundered on a technicality. Congressional rules prohibit lawmakers from joining with groups that have the potential for self-interest, no matter how slight. "We would have been indicted if we proceeded," said former Representative Buddy MacKay of Florida, one of the chairmen of the Congressional Caucus. "The fossilized attitudes of the 1960s prevented us from being allied with anything like the Council where there might be the slightest taint of lobbying." As a result, Washington's first stab at a business-government partnership--a partnership to breed further partnerships--stumbled over America's antiquated rule book. (At the time of this writing, both groups remain at arm's length, although informal communications between them are good.) W A S H I N G T O N ' S ROLE
he central issue surrounding America's competitiveness is the role of government in the process. Most lawmakers surveyed agree with Representative Sam M. Gibbons of Florida: "Government's proper
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Business Horizons / May-June1989 Figure Results of the U.S. Business-Government Survey
80
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[] Scenario 1 [] Scenario 2 [] Scenario 3 60
14
40
20
J
Prefer
role is as a rulemaker or umpire--but not as a partner." Besides, its "safetynet mentality," as Gibbons calls it, runs counter to the entrepreneurial spirit of American industry. Although not all congressmen concur with this analysis, they largely agree that any economic partnership will be dominated by business. Still, many lawmakers look for more, not less, cooperation between the public and private sectors. They approve of closer linkages between U.S. business, universities, and government research laboratories. A favorite example: the National Science Foundation's establishment of engineering-research centers at 21 universities, 45 industry-university cooperative centers, and 12 materials-research centers--at a total cost to the taxpayers of about $115 million annually. At least 10 NSF-supported science and technology centers were targeted for completion last year as part of a nationwide effort to promote research capable of
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improving the country's competitiveness. "Let's not underestimate the impact of these centers," says Republican Representative Claudine Schneider of Rhode Island. "Eventually, we could have 10 such centers--in effect, 10 MITIs [for Japan's Ministry of International Trade and Industry]." Even at full maturity, such business-government coalitions fall short of what is needed to enhance competitiveness. Some legislators believe, therefore, that government's best point of attack may be at the state, not federal, level. States as Stars "When business and government cooperate at the state level, it's conceived to be an effective partnership," says exCongressman MacKay. "But when Washington attempts the same approach, it's 'meddling' or 'intervention'--the very worst kind of federalism." His solution? "Perhaps we should
Effective
treat our diversity as a strength. Let's admit that 'cooperation' should be decentralized to state governments." Many colleagues echo MacKay's remarks. "The Feds may just have to step out of the w a y on this one," says Representative Schneider. Indeed, the complexity of the competitiveness issue seems to make it more amenable to customized intervention at the state level than the general, broadscale provisions fashioned by the Feds. What's more, the caliber of leadership in state capitols may outshine that in Washington. "Who are today's stars?" asks Congressman Matsui. "They're the governors--go-getters like Bill Clinton [Arkansas], George Deukmejian [California], Mario Cuomo [New York[, James Blanchard [Michigan], and, before them, Charles Robb [Virginia] and Bruce Babbitt [Arizona], among others." Besides, a governor "must take action," he adds. "By the very nature of the job, there's nowhere to hide." The imperative for action is per-
Congress RethinksAmerica'sCompetltlveness i
Small business development.
Table 3 Comparison of 1979-81 Survey to 1987-88 Survey Congress 1979-81
1987-88
State Legislators 1979-81 1987-88
Which scenario do you prefer? Scenario I Scenario II Scenario III
74.9 24.2 0.9
76.3 22.9 0.8
71.6 21.9 6.5
60.6 37.2 2.2
52.2 35.8 12.0
65.6 30.6 3.8
60.7 31.3 8.0
55.4 43.0 1.5
Which scenario will be dominant in the U.S.? Scenario I Scenario II Scenario III
73.6 22.2 4.2
72.0 27.2 0.8
Which scenario will be the most effective? Scenario I Scenario II Scenario III
67.9 28.8 3.3
68.9 30.4 0.7
suasively articulated by the National Governors' Association (NGA), the policy development arm of state governors. "While we have learned the hard way that we in government cannot solve these problems alone, we have also learned we can't leave them alone," the NGA noted in a task force report (Jobs, Growth & Competitiveness 1987). "Partnerships with the private sector.., are essential here, but governors must take the initiative." Asserts Michigan Governor Blanchard: The states are "the only place to field test, or reality test, these ideas" (Skrzycki 1987). In contrast to the fitful frustrations of business-government collaborations at the federal level, the record at the state level is already studded with successes. Here are a few examples: Technology development. Pennsylvania's Ben Franklin Partnership offers a wide range of programs to accelerate the development and commercialization of technology. The coalition is managed by a 15-member board consisting of representatives from the private sector, education, labor, and the state legislature. Since 1982, the Partnership's $76.6 million in state funds has attracted $281 million in pri-
m
vate support. More than 2,500 businesses have joined the group; an estimated 4,530 new jobs have been created; 369 new firms have been launched; and 304 existing businesses have been helped to expand. Financial assistance. The Michigan Strategic Fund (MSF), a state agency guided by a private-sector majority board, offers seed capital to budding entrepreneurs. Four privately managed capital funds, with up to $6 million in private equity and $8 million in MSF funds, will invest in approximately 80 Michigan start-ups over the next three to four years. Launched by Blanchard three years ago, MSF also oversees a $43 million fund to support outstanding research centers.
Labor-management cooperation. West Virginia's Labor Management Council was created 11 years ago to promote harmony between industry, labor, education, and government. Directly reporting to the governor, the Council assists businesses in improving their work environment by upgrading product quality, productivity, and job conditions. It also helps local communities establish their own labor-management committees.
Ohio's Small Business Enterprise Center (SBEC) coordinates support for emerging businesses from local companies, chambers of commerce, universities, and vocational institutes. Resources include managerial and technical know-how, legal help, incubator programs, procurements expertise, and export-trade counseling. To date, 31 SBEC units exist. Global assistance. The Corporation for Indiana's International Future, begun in 1987, is comprised of business, education, labor, and government officials, many with international business experience. The corporation identifies and promotes local industries with export potential. In addition, it improves relations with prospective foreign investors, identifies language training needs, and strengthens ties with important educational and cultural groups. The states can be expected to continue taking the lead in forging economic partnerships. Their efforts, in turn, could stimulate the Bush Administration to join hands with U.S. business.
EDUCATIONAL PARTNERSHIPS he critical role of education, the fuel that drives the engine of economic growth and job creation, is not lost on the governors. At their 1987 conference, the governors again demonstrated their leadership by pledging to use educational facilities more effectively to promote competitiveness. Targeted for special attention were programs to make workers "internationally aware, computer literate, adept in languages and mathematics, and, above all, versatile" (Jobs, Growth & Competitiveness 1987). Business leaders--long critical of the poor products of America's schools--have begun to define their role in educational reform. "Education is a bigger factor in productivity growth than increased capital, economies of scale, or better allocation of resources," declares David T. Kearns, chairman of Xerox Corporation ("A Shallow . . ." 1987). Rather than pontificating about why Johnny can't read or add, Kearns
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Business Horizons / May-June1989
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and other activist CEOs are doing something about it. Many models exist of successful business-led interventions in public education. For example: • The Minnesota Business Partnership is helping improve the cost-effectiveness of kindergarten through twelfth-grade education in that state. Among the many business initiatives enacted into law was a modified choice (or voucher) option that, on a selective basis, allows students to pick the public school of their choice. • A South Carolina program, drafted in 1984 with the help of the private sector, led to a sales-tax-financed 30 percent increase in the school budget. Since the reforms were enacted, the average SAT score in the state has risen 128 points. Many other examples could be cited. Whether through participation on local school boards or support for higher funding levels, business--in partnership with government---can and must argue the case for better public education. NEW CLOTHES FOR LABOR
apitol Hill is divided over organized labor's role in reshaping the economy. Many in Congress are deeply suspicious of unions as economic partners. "They're strictly interested in the status q u o - preserving memberships and dues, or shortening the work week," says Representative Gibbons. "I don't believe labor makes for a good partner," comments another congressman. "It is the least likely of the troika [business-government-labor] to accept sacrifice." Other lawmakers, however, are
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adamant that unions be an integral part of the competitiveness debate. Among them is N e w Jersey Senator Bill Bradley. "Organized labor has many bright people who think and care about the health of this country and who can be enormously constructive in delivering [reform] at the workplace," he contends. "It's simply good democracy to include them." Besides, there is a danger in excluding unions from economic policy-making. "We could very well splinter our society and force labor to adopt the extremist features of unions in Great Britain and other countries," Bradley warns. American executives are no strangers to micropartnerships. In fact, quality of work-life programs, quality circles, employee involvement, and participative management arrangements are already in place in more than half of our companies. But they must be improved, intensified, and extended to every element of our economy, including the public sector. ith the presidential elections behind them, America's lawmakers fear that the decline of U.S. influence around the world and of living standards at home could continue unless forceful steps are taken. But they do not recommend that the U.S. abandon its fundamental commitment to the individual, Japanize its industrial system, diminish the role of business, or replace private institutions with public ones. Congress is genuinely eager to tilt this nation gradually toward a new spirit of cooperation. However, d e e d s - not words that blindly beg for partnerships--will be the answer. For the next decade, economic collaboration will
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take place primarily between business and state and local government on the one hand, and labor and management on the other. Many years ago, Walt Whitman rejected the notion that America was a fragmented, special-interest society: O I see flashing that this America is only you and me, Its power, weapons, testimony, are you and me, Its crimes, lies, thefts, defections, are you and me, Its Congress is you and me, the officers, capitols, armies, ships, are you and me . . . . The principle of indivisibility is deeply ingrained in the American psyche. But we must put our talents in tandem in ways consistent with our culture. Only then will the competitiveness challenge be resolved and new dreams realized. O References
"A Shallow Labor Pool Spurs Businesses to Act to Bolster Education," The Wall Street Journal, September 28, 1987, p. 1. "Competitiveness Survey: HBR Readers Respond," Harvard Business Review, September-October 1987, pp. 8-12. Jobs, Growth & Competitiveness (Washington, D.C.: National Governors' Association, 1987), p. VIII.
Cindy Skrzycki, "Competitiveness: The 'C' Word," The Washington Post National Weekly Edition, September 7, 1987, p. 20.
David A. Heenan is president and chief executive officer of Theo. H. Davies & Co. Ltd., Honolulu. The author wishes to acknowledge the contributions of U.S. Senator Spark M. Matsunaga, his staff, and especially Cherry Matano, Jerome C. Comcowich, Reginald G. Worthley, Steve Waldhorn, and Marie McCord. They assisted with the research on which this article is based.
Our nation's legislators overwhelmingly favor the current economic system as the best structure under which to restore U.S. competitiveness. But within that framework, the state level may be the place to get programs started. ith the elections over, both Republicans and Democrats are proposing various measures to restore America's competi-, tiveness. Their nostrums share a powerful c o m m o n belief: that America's economic well-being rests on the ability of U.S. business, government, and labor to forge a national consensus. Lacking a coherent vision of its economic future, the a r g u m e n t goes, the United States will soon be overtaken by hard-charging industrial p o w e r s from Europe and the Far East. This fear is widespread, and surveys in the 1970s and 1980s have revealed that between two-thirds and four-fifths of Americans believe that the tensions between business, government, and labor are at the heart of our "sickness." As a result of these concerns, virtually e v e r y proposal of today's 200-member bipartisan Congressional Caucus on Competitiveness contains some element of "cooperation" or "partnership." But are America's political leaders truly c o m m i t t e d to building an economic partnership? Are they p r e p a r e d to share their p o w e r with business and
W
labor? Further, are the opinions of federal lawmakers in agreement with those of legislators in state government? Have politicians' attitudes on consensusbuilding changed over the decade? And w h a t are the implications for corporate America? VIEWS FROM CAPITOL HILL
o answer these questions, a survey was taken of over 300 members of Congress as well as their peers in several state legislatures. (See Table I for more information about the study.) The s u r v e y spelled out three possible scenarios of a socioeconomic future for the United States (see Table 2). Respondents were asked to identify which one they (1) preferred, (2) expected to dominate in the United States over the next 10 years, and (3) felt would be most effective in solving America's problems over the same time period. To recap briefly, Scenario I describes the regulated free-enterprise system or mixed e c o n o m y n o w in effect in the United States. It represents the status quo in which dealings be-
T
Business Horizons / May-June1989
Table 1 The Research
12
The research on which this article is based began in April 1987 and ended 18 months later. Targeted as participants were 150 U.S. senators and congressmen, as well as 142 state legislators primarily from New York, California, Texas, Ohio, and Hawaii. Questionnaires were accompanied by a personalized cover letter from U.S. Senator Spark M. Matsunaga that highlighted the importance of the survey, encouraged full and frank responses, and insured confidentiality. Throughout the sampling process, I was careful to maintain a representative sample of influential members of U.S. and state government and to minimize response bias. Next, I compared these results with those obtained during the three-year period 1979 to 1981.* Included in my earlier survey were members of the Congress as well as elected officials from the same five states. I used various statistical techniques, ranging from standard chi-square analysis to multidimensional mapping, to highlight the similarities and differences between my previous and current research. Finally, I conducted follow-up interviews with more than 25 respected political leaders on the issue of America's competitiveness. My primary target was the Congressional Caucus on Competitiveness, including Senators Bill Bradley, John H. Chafee, Jeff Bingaman, John D. (Jay) Rockefeller IV, Max Baucus, and Daniel P. Moynihan, plus Congressmen Sam M. Gibbons, Buddy Mackay, and Robert T. Matsui and Congresswoman Claudine R. Schneider. *See David A. Heenan, The Re-United States of America (Reading, Mass: Addison-Wesley, 1983).
tween business, government, and labor typically are either adversarial or remain at arm's length. Scenario II portrays "America, Inc." Consensual attitudes dominate regulations among business, government, and labor. Typically, their cooperation leads to an economic partnership such as that observed in Japan or West Germany. Scenario III can be summed up as "managed capitalism" or "modified socialism." Government holds the economic reins, and central planning abounds. (Sweden and Yugoslavia possess many of the elements of this option.) As summarized in the Figure and in Table 3, the most important findings are the following: • Almost three-fourths of the congressional members surveyed prefer the status quo (Scenario I). A little more than one-fifth think an "America, Inc." is best, while only 0.8 percent favor a centrally planned economy. • Slightly less than three out of every four politicians believe the present ideology will dominate during the next 10 years; roughly one-quarter of the respondents anticipate that an
influence respondents' ideological leani n g - t h e same result as in the earlier survey. Similarly, there are no regional differences in attitudes despite the uneven economic performance of various parts of the country. The same results hold for party affiliation. Congressional legislators have remained remarkably consistent in what they think is the proper course for the U.S. economy. These most recent opinions are virtually identical to those gathered in a study conducted from 1979 to 1981. However, state legislators today are significantly more supportive of Scenario II than were their colleagues at the beginning of the decade. These results, while interesting, are imprecise in assessing government's real interest in consensus-building. What follows is a deeper look at what our legislators think and an analysis of their choices. VOTES FOR THE STATUS QUO
merica's political leaders have delivered a clear verdict: the nation should not cast out its "America, Inc." will prevail; and about 1 percent expect to see the emergence adversarial system in favor of the more collaborative methods of Japan and of Scenario III. • When asked which scenario West Germany or the more directed would be most effective in solving economies of Northern and Eastern America's competitiveness problems, Europe. Most prefer our present ideoltwo-thirds of those polled named Sce- ogy, for all its shortcomings. Hence, nario I. Approximately 30 percent these results parallel those obtained in picked "America, Inc.," and a small a 1987 survey of Harvard Business Reminority (0.7 percent) chose "managed view readers. Politicians doubt that the United capitalism." • Opinions vary considerably be- States would be willing to adopt the tween federal and state legislators. cultural values and institutional reWashingtonians generally are more forms needed to build an "America, bullish on our mixed economy and its Inc." They argue that the Japanese or ability to withstand the test of time. German models, attractive as they are, Conversely, policymakers at the state cannot be assimilated by a nation with level are much more inclined to see the the values and traditions of the U.S.: merits of the partnership approach Yankee ingenuity, rugged individualism, egalitarianism, and independent, (Scenario II). • Neither age, business experience, competitive spirit. Supporters of regulated free entergeography, nor political party is a predictor of opinion. In technical jargon, prise also cite its superior effectiveness there are no statistically significant dif- in resolving competitiveness problems. ferences at the 5 percent level. Although Many express their concern over fura study conducted a decade ago found ther government encroachments in the younger lawmakers more disposed to economy; others single out the proven collaborative economic systems, that is track record of the mixed economy; still not the case today. Also, significant others are unconvinced that the U.S. experience in the private sector did not could assume the traits of a more or-
A
Congress RethinksAmerica'sCompetitiveness i
Table 2 The Scenarios
I. Regulated Free Enterprise The United States elects to pursue its present ideology of regulated free enterprise. Privately controlled markets, subject to limited government regulation, are retained. Free market competition, profit incentives, technological change, and collective bargaining are essential elements of a system that has made the United States the world's most important economic power. This system, it is argued, must continue. Under this scenario, government maintains its watchdog role over business-providing necessary direction in such critical areas as trade, monetary, antitrust, and environmental matters. The business-government relationship is arms-length. Public ownership of the enterprise is rare, and dual careers in business and government are the exception. II. Guided Free Enterprise Following the lessons of Japan and the "second Japans," the United States elects to adopt a system of guided free enterprise. Government plays an increasingly important role in the direction of the American economy. An interdependence is created among business, government, and labor, and a strong coalition among the three emerges. Under this scenario, the adversary posture between business and government is replaced by a greater collaboration. Public opinion supports government's more visible hand in business. Dual careers in business and government begin to increase. III. Centrally Planned Economy The United States elects to move toward a centrally planned economy. Government acquires primary control over the economic system, and managed capitalism or modified socialism is the by-product. New regulatory and administrative agencies emerge. Widespread public ownership of enterprises takes place, and the distinction between what is a private or public company is blurred. Dual careers in the private and public sectors are commonplace, with government often recognized as the fast track. Note: Originally, I pretested seven scenarios ranging from lmssez-faire free enterprise to economzc totalitarzanism. Those recelving tess than 2 percent of the responses zoere eliminated from this study.
ganic society; and some associate Scenarios II and III with the potential loss of political liberties. No doubt the aftereffects of the presidential elections may have generated pressure to change our adversarial ways. An ideological overhaul, however, does not appear to be forthcoming. Any shifts that occur will be subtle ones. Congressmen admit they have not effectively articulated the competitiveness issue to grass-roots America--or at least that the opposition has failed to do so. "The Republicans don't have a point of view [on competitiveness]," claims Senator Bill Bradley, a New Jer-
sey Democrat. "It's consistently offering inconsistent and contradictory responses." His Democratic colleague, Senator Jeff Bingaman of New Mexico, concurs: "It's very difficult and confusing with the Republicans saying on the one hand we don't have a competitiveness problem and then on the other proposing a solution to it like antitrust reform." Several respondents fault the previous Administration for sending out mixed signals. One ranking Republican confessed: "The 'Great Communicator' had a great opportunity to inform the American people [about competitiveness]--and he blew it!"
Nevertheless, Capitol Hill is equally mindful of the positive lessons of the Reagan legacy. Despite the staggering trade and budget deficits, lawmakers do not want to reassert Washington's stake in the economy, and they expect this hands-off policy to continue into the 1990s. "We're prepared to play this hand out," says Representative Robert Matsui, a California Democrat. "We simply won't turn the clock back." Institutionalizing U.S. businessgovernment partnerships is also difficult. Consider the ill-fated attempt in 1987 to link the independent, nonprofit Council on Competitiveness with the federally supported Congressional Caucus on Competitiveness. Since both organizations are committed to the restoration of America's competitiveness, it seemed only natural to put their talents in tandem. The business-backed Council had the staff and financial resources to support the congressional group. The bipartisan Caucus, in turn, served as an ideal forum in which to debate the serious issues surrounding competitiveness. But the coalition floundered on a technicality. Congressional rules prohibit lawmakers from joining with groups that have the potential for self-interest, no matter how slight. "We would have been indicted if we proceeded," said former Representative Buddy MacKay of Florida, one of the chairmen of the Congressional Caucus. "The fossilized attitudes of the 1960s prevented us from being allied with anything like the Council where there might be the slightest taint of lobbying." As a result, Washington's first stab at a business-government partnership--a partnership to breed further partnerships--stumbled over America's antiquated rule book. (At the time of this writing, both groups remain at arm's length, although informal communications between them are good.) W A S H I N G T O N ' S ROLE
he central issue surrounding America's competitiveness is the role of government in the process. Most lawmakers surveyed agree with Representative Sam M. Gibbons of Florida: "Government's proper
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Business Horizons / May-June1989 Figure Results of the U.S. Business-Government Survey
80
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[] Scenario 1 [] Scenario 2 [] Scenario 3 60
14
40
20
J
Prefer
role is as a rulemaker or umpire--but not as a partner." Besides, its "safetynet mentality," as Gibbons calls it, runs counter to the entrepreneurial spirit of American industry. Although not all congressmen concur with this analysis, they largely agree that any economic partnership will be dominated by business. Still, many lawmakers look for more, not less, cooperation between the public and private sectors. They approve of closer linkages between U.S. business, universities, and government research laboratories. A favorite example: the National Science Foundation's establishment of engineering-research centers at 21 universities, 45 industry-university cooperative centers, and 12 materials-research centers--at a total cost to the taxpayers of about $115 million annually. At least 10 NSF-supported science and technology centers were targeted for completion last year as part of a nationwide effort to promote research capable of
Dominate
improving the country's competitiveness. "Let's not underestimate the impact of these centers," says Republican Representative Claudine Schneider of Rhode Island. "Eventually, we could have 10 such centers--in effect, 10 MITIs [for Japan's Ministry of International Trade and Industry]." Even at full maturity, such business-government coalitions fall short of what is needed to enhance competitiveness. Some legislators believe, therefore, that government's best point of attack may be at the state, not federal, level. States as Stars "When business and government cooperate at the state level, it's conceived to be an effective partnership," says exCongressman MacKay. "But when Washington attempts the same approach, it's 'meddling' or 'intervention'--the very worst kind of federalism." His solution? "Perhaps we should
Effective
treat our diversity as a strength. Let's admit that 'cooperation' should be decentralized to state governments." Many colleagues echo MacKay's remarks. "The Feds may just have to step out of the w a y on this one," says Representative Schneider. Indeed, the complexity of the competitiveness issue seems to make it more amenable to customized intervention at the state level than the general, broadscale provisions fashioned by the Feds. What's more, the caliber of leadership in state capitols may outshine that in Washington. "Who are today's stars?" asks Congressman Matsui. "They're the governors--go-getters like Bill Clinton [Arkansas], George Deukmejian [California], Mario Cuomo [New York[, James Blanchard [Michigan], and, before them, Charles Robb [Virginia] and Bruce Babbitt [Arizona], among others." Besides, a governor "must take action," he adds. "By the very nature of the job, there's nowhere to hide." The imperative for action is per-
Congress RethinksAmerica'sCompetltlveness i
Small business development.
Table 3 Comparison of 1979-81 Survey to 1987-88 Survey Congress 1979-81
1987-88
State Legislators 1979-81 1987-88
Which scenario do you prefer? Scenario I Scenario II Scenario III
74.9 24.2 0.9
76.3 22.9 0.8
71.6 21.9 6.5
60.6 37.2 2.2
52.2 35.8 12.0
65.6 30.6 3.8
60.7 31.3 8.0
55.4 43.0 1.5
Which scenario will be dominant in the U.S.? Scenario I Scenario II Scenario III
73.6 22.2 4.2
72.0 27.2 0.8
Which scenario will be the most effective? Scenario I Scenario II Scenario III
67.9 28.8 3.3
68.9 30.4 0.7
suasively articulated by the National Governors' Association (NGA), the policy development arm of state governors. "While we have learned the hard way that we in government cannot solve these problems alone, we have also learned we can't leave them alone," the NGA noted in a task force report (Jobs, Growth & Competitiveness 1987). "Partnerships with the private sector.., are essential here, but governors must take the initiative." Asserts Michigan Governor Blanchard: The states are "the only place to field test, or reality test, these ideas" (Skrzycki 1987). In contrast to the fitful frustrations of business-government collaborations at the federal level, the record at the state level is already studded with successes. Here are a few examples: Technology development. Pennsylvania's Ben Franklin Partnership offers a wide range of programs to accelerate the development and commercialization of technology. The coalition is managed by a 15-member board consisting of representatives from the private sector, education, labor, and the state legislature. Since 1982, the Partnership's $76.6 million in state funds has attracted $281 million in pri-
m
vate support. More than 2,500 businesses have joined the group; an estimated 4,530 new jobs have been created; 369 new firms have been launched; and 304 existing businesses have been helped to expand. Financial assistance. The Michigan Strategic Fund (MSF), a state agency guided by a private-sector majority board, offers seed capital to budding entrepreneurs. Four privately managed capital funds, with up to $6 million in private equity and $8 million in MSF funds, will invest in approximately 80 Michigan start-ups over the next three to four years. Launched by Blanchard three years ago, MSF also oversees a $43 million fund to support outstanding research centers.
Labor-management cooperation. West Virginia's Labor Management Council was created 11 years ago to promote harmony between industry, labor, education, and government. Directly reporting to the governor, the Council assists businesses in improving their work environment by upgrading product quality, productivity, and job conditions. It also helps local communities establish their own labor-management committees.
Ohio's Small Business Enterprise Center (SBEC) coordinates support for emerging businesses from local companies, chambers of commerce, universities, and vocational institutes. Resources include managerial and technical know-how, legal help, incubator programs, procurements expertise, and export-trade counseling. To date, 31 SBEC units exist. Global assistance. The Corporation for Indiana's International Future, begun in 1987, is comprised of business, education, labor, and government officials, many with international business experience. The corporation identifies and promotes local industries with export potential. In addition, it improves relations with prospective foreign investors, identifies language training needs, and strengthens ties with important educational and cultural groups. The states can be expected to continue taking the lead in forging economic partnerships. Their efforts, in turn, could stimulate the Bush Administration to join hands with U.S. business.
EDUCATIONAL PARTNERSHIPS he critical role of education, the fuel that drives the engine of economic growth and job creation, is not lost on the governors. At their 1987 conference, the governors again demonstrated their leadership by pledging to use educational facilities more effectively to promote competitiveness. Targeted for special attention were programs to make workers "internationally aware, computer literate, adept in languages and mathematics, and, above all, versatile" (Jobs, Growth & Competitiveness 1987). Business leaders--long critical of the poor products of America's schools--have begun to define their role in educational reform. "Education is a bigger factor in productivity growth than increased capital, economies of scale, or better allocation of resources," declares David T. Kearns, chairman of Xerox Corporation ("A Shallow . . ." 1987). Rather than pontificating about why Johnny can't read or add, Kearns
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and other activist CEOs are doing something about it. Many models exist of successful business-led interventions in public education. For example: • The Minnesota Business Partnership is helping improve the cost-effectiveness of kindergarten through twelfth-grade education in that state. Among the many business initiatives enacted into law was a modified choice (or voucher) option that, on a selective basis, allows students to pick the public school of their choice. • A South Carolina program, drafted in 1984 with the help of the private sector, led to a sales-tax-financed 30 percent increase in the school budget. Since the reforms were enacted, the average SAT score in the state has risen 128 points. Many other examples could be cited. Whether through participation on local school boards or support for higher funding levels, business--in partnership with government---can and must argue the case for better public education. NEW CLOTHES FOR LABOR
apitol Hill is divided over organized labor's role in reshaping the economy. Many in Congress are deeply suspicious of unions as economic partners. "They're strictly interested in the status q u o - preserving memberships and dues, or shortening the work week," says Representative Gibbons. "I don't believe labor makes for a good partner," comments another congressman. "It is the least likely of the troika [business-government-labor] to accept sacrifice." Other lawmakers, however, are
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adamant that unions be an integral part of the competitiveness debate. Among them is N e w Jersey Senator Bill Bradley. "Organized labor has many bright people who think and care about the health of this country and who can be enormously constructive in delivering [reform] at the workplace," he contends. "It's simply good democracy to include them." Besides, there is a danger in excluding unions from economic policy-making. "We could very well splinter our society and force labor to adopt the extremist features of unions in Great Britain and other countries," Bradley warns. American executives are no strangers to micropartnerships. In fact, quality of work-life programs, quality circles, employee involvement, and participative management arrangements are already in place in more than half of our companies. But they must be improved, intensified, and extended to every element of our economy, including the public sector. ith the presidential elections behind them, America's lawmakers fear that the decline of U.S. influence around the world and of living standards at home could continue unless forceful steps are taken. But they do not recommend that the U.S. abandon its fundamental commitment to the individual, Japanize its industrial system, diminish the role of business, or replace private institutions with public ones. Congress is genuinely eager to tilt this nation gradually toward a new spirit of cooperation. However, d e e d s - not words that blindly beg for partnerships--will be the answer. For the next decade, economic collaboration will
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take place primarily between business and state and local government on the one hand, and labor and management on the other. Many years ago, Walt Whitman rejected the notion that America was a fragmented, special-interest society: O I see flashing that this America is only you and me, Its power, weapons, testimony, are you and me, Its crimes, lies, thefts, defections, are you and me, Its Congress is you and me, the officers, capitols, armies, ships, are you and me . . . . The principle of indivisibility is deeply ingrained in the American psyche. But we must put our talents in tandem in ways consistent with our culture. Only then will the competitiveness challenge be resolved and new dreams realized. O References
"A Shallow Labor Pool Spurs Businesses to Act to Bolster Education," The Wall Street Journal, September 28, 1987, p. 1. "Competitiveness Survey: HBR Readers Respond," Harvard Business Review, September-October 1987, pp. 8-12. Jobs, Growth & Competitiveness (Washington, D.C.: National Governors' Association, 1987), p. VIII.
Cindy Skrzycki, "Competitiveness: The 'C' Word," The Washington Post National Weekly Edition, September 7, 1987, p. 20.