Beware the Power of Negative Thinking

“In America, there is now a sort of non-competitive, stop-the-world-I-want-to-get-off sentiment that you have to get rid of. Because you can’t get off.” The speaker is Lee Hsien Loong, son and heir apparent of Singapore Prime Minister Lee Kuan Yew, in an interview with the American authors of “The Four Little Dragons,” a new book about Asia’s newly industrialized economies.

The authors, Washington journalist Brian Kelly and attorney Mark London, toured Korea, Taiwan, Hong Kong, Singapore and Thailand to learn about the region’s growing economies and what they mean for the United States. As expected, they found hard working, ambitious people. But unexpectedly they also found changed attitudes toward the United States--concern over its economic laxity now mingling with traditional admiration for its democracy. Even friends, like Korea’s Kim Dae Jung, had sharp words: “In Korea, we work for the future; you work for the weekend,” said the activist for greater Korean democracy.

The belief is widespread in Asia that Japan is winning the economic contest with the United States--and winning by default. “Sure the Japanese are cheating on import restrictions and finding ways to cut you out of markets,” Singapore’s Lee told the authors. “But they have done that for a long time and it did not previously stop the Americans from succeeding. What has changed? Your attitude?”

The fear is that America has lost its zest for battle and is retreating into self-delusion or defeatism--either telling itself that free-spending consumers will make Japan less competitive in the 1990s or concluding that competition is futile and that the only hope lies in the United States negotiating individual trade-limiting treaties with Asian countries.

But treaties won’t help create the advanced products or achieve the low production costs that will be needed for the United States or any other country to hold its own in growing world commerce. And the idea that Japan will spend itself weak is just silly.

“The Japanese are addressing the fundamentals,” says a U.S. official involved in relations between the two nations. The Japanese savings rate is rising, not falling, and is now 3 1/2 times the U.S. savings rate. Japanese industry is investing more than it ever has--capital spending is now greater in Japan than in the United States, even though the American economy is larger.

Simply put, Japanese companies want to become world leaders in advanced products and other Asian nations are following their lead. Korean and Taiwanese steel producers are moving up to automobiles and electronics, as living standards rise and new producer countries of the 1990s--Malaysia, India, perhaps China--promise to undercut them on costs. The blunt message is that the next decade will be even more competitive than this one.

But can America cope? Can U.S. companies even hope to compete with $2-an-hour labor in developing countries? The answer is that with brains and determination they can compete quite well--and there are many companies that do. Just to take one example, consider Chaparral Steel of Midlothian, Tex.

Chaparral decided long ago, President Gordon E. Forward told a recent conference on manufacturing at USC, “That we must be the low-cost producer in competition with the Third World.” He didn’t mean by paying starvation wages, but by producing a ton of steel so efficiently that Chaparral’s labor cost is below the per-ton shipping cost from Korea. And Chaparral does just that--paying $16 to $18 an hour, including benefits, and yet staying competitive with steel produced anywhere in the world.

Chaparral is a small company, to be sure--$450 million in sales, 1.4 million tons of production, compared to 15 million for U.S. Steel. But the principles of its operation apply to any business. Profit is shared, staff is kept small--935 employees--personal responsibility is spread throughout the company. A foreman on the line can make changes in the software that will make production more economical. Chaparral makes a profit, invests 70% of it back into the business and also pays a dividend. It’s a good company to keep in mind the next time somebody says U.S. industry can’t compete.

And there are other, grander reasons for positive thinking, too. We should not forget that today’s vigorous, competitive world is, in large measure, one that America made. At the end of World War II, U.S. policy was to encourage economic development and political democracy everywhere, including among its recent enemies. The alternative policy was to suppress former enemies--as well as allies.

The results today can be seen in the rise of living standards, but also the rush of industrial challengers, in the West--and by contrast in the backwardness and longing for democracy in the East. Clearly, competition is to be embraced, not feared.