Don't push that panic button, Mr. Clinton

ON EXCELLENCE

December 07, 1992|By TOM PETERS

In the few weeks since his election, Bill Clinton has made i clear that he plans to put the economy at the top of the new administration's agenda. An Economic Security Council will share equal billing with the National Security Council.

And to get the ball rolling, Clinton has called a "working" economic summit of business, labor, academic and government leaders.

I applaud Clinton's running start. A lot needs to be done to cope not only with the lingering recession, but also with the more important, long-range task of preparing to compete in the 21st century. But I do fear that Clinton and his activist advisers may reach for a panic button that need not be pushed.

The McKinsey Global Institute recently completed the most thoroughgoing study to date of world productivity. Led by Nobel laureate (and Democrat) Robert Solow of MIT, it gave us surprisingly good grades. McKinsey & Co. Managing Director Fred Gluck discussed the institute's findings:

* We've got a big lead, and we're holding it. Compared to the rest of the developed world, the United States has about a 20 percent lead in industrial productivity (as measured by 1990 output per full-time worker, adjusted for purchasing power). U.S. output per worker is $49,600, vs. $44,200 for Germany, $38,200 for Japan and $37,100 for Britain.

Moreover, as Germany and Japan have approached U.S. productivity levels, the rate at which the gap between "us" and "them" is closing has slowed. In the 1980s, only Japan edged up on us (and not by much); we actually added to our lead over Germany.

* A robust edge in manufacturing. It's true Japan does a better job with consumer electronics and autos, but the McKinsey report shows the United States leading Japan in total manufacturing productivity, including two-thirds of the major manufacturing categories (e.g. chemicals, petroleum, rubber and plastics products, textiles and apparels and food products).

Other studies suggest a significant U.S. productivity advantage over Japan in high-tech industries such as biotech, computers and software.

* A stunning lead in services. In the service sector (which employs 74 percent of Americans, 65 percent of Japanese and 55 percent of Germans) we excel overall, with a 2-to-1 edge over Japan in retail productivity and a 2-to-1 edge over Germany in telecommunications. (Our balance of trade in services, which, incredibly, is not included in conventional trade statistics, is running about $50 billion per year in our favor.)

The chief cause of American service sector domination is relatively less regulation by Washington than by Bonn and Tokyo -- and more competition among moderate-size firms. The latter surprised MIT's Solow, who told the New York Times, "Big enterprises ought to have an advantage over smaller enterprises . . . but overall, [size] is not important."

Gluck was clear about the implications: "Our economy is moving rapidly from the manufacture of material-intensive products to the production of intellectually intensive products and services. . . . We absolutely dominate the new service and 'soft manufacturing' sectors and we must take great care to understand the sources of our success."

* Creating businesses and jobs. Our job-creation record takes honors, too, no thanks to the Fortune 500, which shed 3 million employees in the 1980s and is continuing to shrink at a chilling pace. The jobs have come from smaller firms. (Headline, San Francisco Chronicle, summer 1992: "As big banks fire staff, small ones are hiring.")

From 1965 to 1989, Gluck reports, we created 45 million new jobs, compared to 14 million in Japan and 10 million in all of Europe. This is an area for Clinton's attention, since the U.S. job growth has stalled. But trying to hang on to jobs at big old firms, most of which are still far too fat, is not the answer -- I'm worried Clinton's top economic advisers don't get that message.

Energizing the skittish economy, building a 21st-century infrastructure and preparing the work force for tomorrow should keep the new administration busy. But Gluck concludes we're solidly ahead of Japan in economic areas that employ 94 percent of our citizens. William Lewis, director of the McKinsey Global Institute and a former assistant secretary of energy under Jimmy Carter adds, "It's not obvious that the U.S. should be copying a model elsewhere."

Clinton and company, take note.

(Tom Peters' column is distributed by the Tribune Media Services Inc., 720 N. Orange Ave., Orlando, Fla. 32801; [407] 839-5600.)

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