MINDING AMERICA'S BUSINESS: The Decline and Rise of the American Economy

Probably the most broadly based and broadly useful of the new what-are-we-doing-wrong books: Magaziner is a corporate consultant and co-author of (surprise) Japanese Industrial Policy, Reich is on the faculty of the Kennedy School of Government, and together they touch upon virtually every concern broached in a business weekly--only, more forthrightly; more in the public interest. The thesis is simple (in truth, ""a developing consensus""): the US economic slump is chiefly attributable to ""our increasing integration into the world economy and our failure to maintain international competitiveness""--most seriously and needlessly in the ""complex cost-factor"" industries (i.e., not dependent on raw-materials or low-wage advantages). Before addressing the specifics of this ""decline in relative productivity,"" the authors document--damningly--the attendant relative decline in the American standard of living (and the increasingly inequitable distribution of income). They also briefly review the failure of fiscal and monetary policies in the 1970s (stimulating demand is useless now--unless competitive US goods exist) and briefly but effectively rebut such common explanations for the productivity decline as government regulation and deficits, the level of capital formation, energy prices, and worker performance. All these theories, the authors conclude, ignore living-standard improvements and overemphasize aggregate levels of inputs (and here they write off the current administration's control-inflation/cut-taxation/stimulate-investment package). The heart of the book then deals with specific business strategies to achieve competitive productivity improvements and specific government policies to facilitate the necessary structural adjustments. The business material is rich, complex, and clearly set forth--with concrete examples re investing, managing costs, pricing, and worker-management relations. (Thus, many US companies have mistakenly given up, as unprofitable, the higher-volume, ""cheap"" ends of their product lines--enabling their Japanese competitors to establish a foothold at the lower end of the line and move right up. The culprit: ""averaging costs"" of overhead.) Equally valuable--and of wide interest--are the separate studies of three threatened industries: steel, color television, and major electrical (systems) equipment. Discussing the government role, the authors focus separately on policy toward declining and growing industries--with detailed attention to policies abroad and careful consideration of the social factor. (See, for instance, the argument for maintaining the competitive standing of key ""linkage"" industries--like steel--or for arresting regional decline.) A demonstration, in sum, of why the success of US business is now everybody's business--structured in mutually independent sections for maximum utilization.