Green without envy

Nov. 2, 2009
About 20 years ago, while most U.S. business and consumers were enjoying economic growth, the manufacturers that I covered were almost uniformly gloomy about their prospects. The more specific anxiety over globalization was still a few years ...

About 20 years ago, while most U.S. business and consumers were enjoying economic growth, the manufacturers that I covered were almost uniformly gloomy about their prospects. The more specific anxiety over globalization was still a few years away, but many of those producers were already convinced that they couldn’t beat the stronger foreign competitors.

The sense of inferiority wasn’t confined to manufacturing. In the 1980s and early ’90s, economists held up the Japanese system as the global standard. Japanese companies were more efficient, more consistently profitable, more adept at R&D, more judicious in long-term planning, more benevolent to their workers, and more constructive in their dealings with government. Japanese investors were richer and smarter than ours, too. When Rockefeller Center and the Pebble Beach golf course passed to Japanese buyers, we were told the U.S. economy had been eclipsed.

Make no mistake: numerous U.S. manufacturers were doing well and several of them continued to do so, but there was reflexive anxiety about Japan. Japanese automakers had overtaken the economy segment of domestic auto sales and were aiming for the mid-size and luxury car markets. Some had begun manufacturing here. Japanese component manufacturers were entering domestic supply chains. Domestic producers’ inability to compete was typically explained as unfair trade perpetrated by Japanese businessmen and their government accomplices.

Within a few years the world fell into recession, and we learned the Japanese economy had some serious, institutional inefficiencies. Some industries and business classes earned more government protection than they deserved. Companies had lumbered along with incompetent managers because custom demanded as much, and bureaucrats in business and government protected themselves.

While Japan was thriving, we saw only its strengths. We envied their prosperity, and didn’t recognize their mistakes — like overpaying for U.S. real estate. We admired their ability to save, and overlooked the fact that a weak, export-sustaining currency also fueled inflation, forcing consumers to hold on to their earnings.

We rarely appreciate our own advantages, then or now. And, once the 1990-91 recession popped Japan’s bubble we stopped fretting about that global threat. Domestic companies that had been not been competitive before the recession generally continued to decline. But, many of the advantages formerly attributed to Japanese business (efficiency, quality, product innovation) became the bases for better or newer companies to distinguish themselves as the economy expanded. These weren’t Japanese tactics, just smart policies. Of course, the force driving the expansion was consumer demand.

Now it’s happening again, but the object of our envy is China. In our frustration we see only China’s rate of growth, and none of its vulnerabilities. We don’t appreciate that a decade of weak-currency policy has supported its export-driven growth. We overlook how their economy’s expansion is the result of rigid government policies, not real market demand. Nor do we recognize the cost of these policies to China’s workers and citizens.

Worse, our envy of China’s expansion has convinced many of us that we have to accept its standards in place of our own. Now, we’re told that centralized industrial policies, government ownership of industries, protectionist trade polices, and various other bureaucratic and autocratic measures will stimulate a Chinese growth rate for us.

We’re failing again to recognize that China, like Japan in the 1980s, is vulnerable. Its economic growth, like Japan’s before, rests on U.S. consumer spending. Their growth depends on our strength. With U.S. consumers holding back because they are overstretched, over-taxed and over-regulated, the implications for China’s economy are dire.

It’s important to acknowledge that the strength of any economy is not found in policies but in principles. Our principles are demonstrated best by individual consumers and investors driving economic growth, and our economic advantage would come sooner if those principles were restored to our policies.

About the Author

Robert Brooks | Content Director

Robert Brooks has been a business-to-business reporter, writer, editor, and columnist for more than 20 years, specializing in the primary metal and basic manufacturing industries. His work has covered a wide range of topics, including process technology, resource development, material selection, product design, workforce development, and industrial market strategies, among others. Currently, he specializes in subjects related to metal component and product design, development, and manufacturing — including castings, forgings, machined parts, and fabrications.

Brooks is a graduate of Kenyon College (B.A. English, Political Science) and Emory University (M.A. English.)