Military Has Lesson for Rebuilding U.S.

Many and sweet are the uses of adversity. At a time when Americans are questioning their mettle after an embarrassing presidential trip to Asia, there are answers to be found in remembering this time last year.

The Gulf War, which began last Jan. 16, gave Americans a reassuring example of competence. It was not so much that the high-tech weapons worked--the Patriot missiles and Stealth fighters--but that the people did. The quiet competence of the men and women in the armed forces and of their commanders, Chairman of the Joint Chiefs Colin Powell, Gen. H. Norman Schwarzkopf and Defense Secretary Dick Cheney, spoke volumes to Americans and the world.

And that competence is the Gulf War’s most pertinent lesson for U.S. business today because it was born in adversity, in the disorder of Vietnam. Powell and Schwarzkopf, young officers in Vietnam, were outraged at the spectacle of the brass enjoying air conditioning and ice cubes in Saigon while the grunts died in the steaming jungle. They saw it as bad faith and bad management--and they vowed to reform the armed forces.

With discipline and training they succeeded, but there was no quick fix. The officer corps was reformed in the 1970s, to weed out deadwood and time servers. And over more than a decade, the volunteer army was built into a skilled and dignified force, confounding expectations that a non-draft military wouldn’t work.

But it did work. In the Gulf a year ago, ordinary Americans went about their tasks with determination--and with none of the braggadocio that characterized the business brass accompanying President Bush on his tour of Asia.

That Asian tour, in which the President traveled with automobile executives whose incompetence recalls the worst times in Vietnam, was an embarrassment to Americans, who winced to see their country sneered at.

And so like Vietnam, it may prove a wake-up call, a spark for reform of U.S. business and the American economy.

Reform won’t mean locking the U.S. market away from the rest of the world, making things cozy for uncompetitive corporate executives and unions.

But it could and should mean investment. Tax proposals that will be included in the economic recovery plans, to be introduced later this month by the President and Congress, may well support business and public investment, because both are seriously lagging. Business investment is at its lowest point in decades. Government investment in public works is down also--as witness potholes on interstate highways and rusty pipes in municipal water systems. The country appears to be getting poorer.

The reason is not the current recession but a lack of national savings resulting from a pattern of economic miscalculation that goes back to the great prosperity of the 1960s. In that limitless time, we made promises to ourselves. In public expenditure, we promised Medicare and indexed Social Security benefits. In the private sector, we promised high wages and unheard-of comfort levels. As one Detroit veteran describes the era, “a kid could go into an auto plant out of high school and within three years own a house, a boat and a cabin by the lake.”

Nothing wrong with that, but we didn’t come through with the production and growth to afford it all. And so we’ve been robbing Peter to pay Paul for decades, first through the illusion of inflation, and then through borrowing--as reflected in federal and state deficits, and corporate and individual debt.

“We’re facing deficits now because we’re not as rich as we thought we were going to be,” according to Harvard economist Martin Feldstein, a former chief economic adviser to the White House.

It’s a vicious spiral. Deficits reduce the rate of new investment, which lowers the chances of creating the new innovative product or process, and that lowers profits, which in turn means lower wages, leading to lower savings, which reduces the rate of new investment. . . .

To break that cycle, a lot of people have to face reality. This is no longer the 1960s--rising levels of income and benefits that were a natural expectation then are not realistic now. It will take hard work to rebuild U.S. prosperity--in a world less tolerant of American foibles.

Don’t be impatient. It took years to build the new U.S. military. In fact, it wasn’t until emphasis was put on education for ordinary recruits in the 1980s that the exemplary forces of Desert Storm emerged.

In the civilian economy, it will take time and dedication to educate young workers--no matter what neighborhood they come from. But the effort will succeed. Shareholders will prune the officer corps of business, and voters will weed the ranks of politicians.

But there is reason to be confident. A lot of U.S. companies, especially in manufacturing, have already been through the wringer of self-improvement. And the investment picture isn’t that bleak; Chrysler, for example, is betting billions of dollars on a new plant in Detroit, a new technical center and its own future.

Recall Vietnam and the Gulf War, and the words of Seneca, the Roman philosopher and statesman who said: “If we did not sometimes taste adversity, prosperity would not be so welcome.”