Re: Interesting Interview

Patricia writes:

What is your opinion on this article? I would have thought you agreed more
with the common wisdom than this viewpoint. I'd be very interested. Thanks
for the list.

Patricia Sterling


Patricia,

To my mind this merely shows those who wish to manage trade are still strong
and influential. Managed trade is oxymoronic...a few thousand bureaucrats
substituting their opinion for those of hundreds of millions of consumers is
inherently unstable. It is certainly fun to write a rule that destroys some
businesses and helps others thrive, and it is almost impossible for big
businesses who have the money to pay back the rules writers for favorable
legislation to avoid the game.

Since socialism and managed-trade are proven failures, those who wish to
manage trade simply call what they are doing "free-trade." It is not free
trade. NAFTA, the IMF, the WTO, euro unification are all about managing
trade and unifying tax rates to minimise the benefits of the free markets for
consumers, and to make life easier for crybaby millionaires who dont want
their lifestyle threatened by competition.

Fortunately, we small businesses are not without recourse when the rulemakers
cheat. The history of nthriving small businesses is they solved a problem
the heavy hitters didn't think needed to be solved.

John

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Interesting Interview

Folks,

a devoted listserver shares this interview with us...

John




Mon Sep 27, 1999 8:45 pm

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John,
Interesting interview. Thought I would send it your way.
Malcolm

America's Postindustrial Nightmare?
>
>
> A conversation with Eamonn Fingleton
>
> Just when everything seems to be going right in the American economy,
> Eamonn Fingleton steps to the plate. In Praise of Hard Industries is
> Fingleton's warning that America's foundation in key manufacturing
> industries is crumbling because of its focus on postindustrial activities
> such as finance, computer software, and Internet services. Currently
based
> in Tokyo, Fingleton is a former editor at The Financial Times and Forbes.
> Amazon.com recently spoke with Fingleton about the loss of manufacturing
in
> the U.S. and the real strength of the Japanese economy.
>
> Amazon.com: What's the biggest reason that American business has let
> manufacturing slip overseas? Is it the pressure from Wall Street for
> short-term profits, which discourages the kind of investment necessary to
> promote a manufacturing base, or government policy?
>
> Eamonn Fingleton: It is ideology--the belief that if everything is left
to
> free markets, things will work out fine. That philosophy was sound in the
> 18th century and it still is today in many areas of economic policymaking
> where the matters at issue are purely domestic. But, given that we now
must
> contend with a highly globalized market in advanced manufactured goods, a
> complacent laissez-faire approach is a recipe for allowing foreign
> governments the right by default to shape America's future economic
> destiny. Other nations have identified key advanced manufacturing
> industries as pillars of their future prosperity. The immediate result is
> that margins come under severe pressure in such industries. Obeying the
> laws of the market, American players cut back on investment and begin
> sourcing more and more from abroad, to the point where today many of them
> are little more than design and marketing operations. I won't mention any
> names, but anyone who analyzes U.S. trade figures can easily see that
most
> of America's formerly world-beating high-tech manufacturers are now
> hollowed-out hulks that depend heavily on higher-wage nations for their
> most sophisticated manufactured inputs. The most obvious such nation is
> Japan. Despite everything you have heard about Japan's financial
> difficulties in recent years, Japanese wages are 20 to 40 percent higher
> than American levels. Yet Japan is the principal source of the components
> and materials and entire finished products that make up such a big part
of
> America's supposed manufacturing output these days.
>
> Amazon.com: Is globalization an excuse for American business to focus on
> short-term profits?
>
> Fingleton: In globalized conditions, American corporations often stand to
> gain handsomely from sourcing abroad even as they lay off thousands of
> American workers. In the electronics industry, for instance, the big
> American players have increasingly been sourcing from the Japanese. The
> result is that they have moved from what was a bitter competitive
> relationship to a cozy cooperative one. In effect there is a global
> division of labor here in which the Americans come up with designs and do
> the marketing and the Japanese do all the heavy lifting in terms of
> devising ways to mass-produce the products to high-quality standards and
> competitive prices. The net effect has been a powerful boost for the
> Americans' profit margins. But you don't create a rich nation merely
> because your big corporations make fat margins. Just ask the Mexicans.
What
> is being forgotten here is that the United States is falling rapidly down
> the wage league. I don't blame the corporations, because they are
> preprogrammed to maximize their profits. But the media, which should look
> out for society's overall welfare, should be pointing out that, at
current
> exchange rates, the United States now lags behind several
> manufacturing-oriented nations in wages. Not just Japan and Germany but
> countries such as Singapore and Denmark.
>
> Amazon.com: The picture of Japan that most Americans see is that of a
very
> sick economy. Typical of this view would be Lester Thurow's when he
writes,
> "Japan is the sickest country on the Pacific Rim. Japan's crash occurred
in
> 1990, yet eight years later it has made no progress toward recovery"
(from
> Building Wealth). Your picture of the Japanese economy is much different.
> What gives?
>
> Fingleton: What gives is that I have been in Tokyo since 1985 and,
> therefore, have a big advantage over Lester Thurow. Although I have the
> greatest respect for him, in writing about Japan, he is a victim of what
he
> reads in his morning paper. The American press has imagined that because
> Japanese stocks staged a 1929-style crash, the Japanese economy should
> follow the American script of the 1930s. This logic does not apply at
all,
> because the Japanese economy is so different. I was one of the few
> commentators who predicted the crashes in both Japanese real estate and
> stocks and I can therefore claim to understand what has been going on
> better than most. The truth is that although a tiny, if highly visible,
> minority of previously plutocratic Japanese citizens has been
impoverished
> by the financial turmoil, the vast bulk of Japanese people have never had
> it so good. Just look at the quality of the cars on the roads in Japan
> these days. Look at how many more Japanese citizens are taking foreign
> vacations these days. The numbers are up nearly 70 percent since the
1980s.
> The American press ignores all the real numbers on Japan. As the Economic
> Policy Institute economists John Schmitt and Lawrence Mishel have pointed
> out, in the first eight years of the 1990s, per-capita gross domestic
> product actually grew faster in Japan than in the supposedly booming
United
> States.
>
> Amazon.com: The subtitle of your last book, Blindside, was "Why Japan Is
> Still on Track to Overtake the U.S. by the Year 2000." Do you stand
behind
> this prediction, and, if so, in what ways will Japan overtake the U.S.?
>
> Fingleton: As conventionally defined, an economy's size is its total
output
> converted at current exchange rates. Thus, on a conventional view, the
> dollar would have to fall to around 70 yen for my prediction to be
> fulfilled. Although I am strongly bearish about the dollar over the
longer
> term, I doubt we will see a move on this scale so quickly. That said, on
> several other measures of economic clout, many of them more important
than
> this conventional yardstick, Japan has indeed passed the United States.
> Take savings. In 1997, the latest year available to us, Japan accounted
for
> more than one-third of the OECD area's savings. By contrast, the United
> States accounted for less than one-quarter. Japan has now also passed the
> United States in net exports, that is, exports netted for imported
content.
> Perhaps the most stunning way in which the United States has lost ground
to
> Japan in recent years has been in the ability to project economic power
> abroad. On the IMF's figures, Japan increased its net overseas assets
from
> $294 billion to $891 billion in the first seven years of the 1990s. The
> story for the United States was very different. The United States, of
> course, no longer has net foreign assets but rather net foreign
> liabilities. And these ballooned from $71 billion to $831 billion in the
> first seven years of the 1990s. These figures are of profound historic
> importance, yet, as far as I know, not a single American media
organization
> has noticed them.
>
> Amazon.com: You view the software industry as the quintessential
> postindustrial business and yet find its growth prospects in this country
> vastly overrated. Why?
>
> Fingleton: There is no doubt software has grown enormously in recent
> decades. What concerns me is the industry's ability to export. American
> software exports are quite disappointing, given the industry's size. The
> industry's export prowess has been seriously impaired by foreign piracy,
> among several other things. Another reservation I have concerns the
> long-term outlook for American software wages. Software is a very
> labor-intensive industry, and with the plummeting of international
> telecommunications costs in recent years, American software companies are
> beginning to shift jobs to low-wage countries such as India, Russia, and
> even China. It is notable that Japan has made little effort to develop
its
> software industry in recent years, and the reason is that the Japanese
> realize that a high-wage economy has a much better chance of retaining
and
> enhancing its international competitiveness if it emphasizes
manufacturing
> rather than postindustrial businesses. The reason is that manufacturing,
at
> least the sort of manufacturing the Japanese do, is highly
> capital-intensive, and in capital-intensive industries, a high-wage
economy
> can enjoy huge productivity advantages that enable it to pay ultra-high
> wages and still dominate world markets.
>
> Amazon.com: You're not very kind to the financial-services industry in
this
> country. You call it the cuckoo in the economy's nest.
>
> Fingleton: In a previous life, I worked on Wall Street, so I know that
the
> vast majority of Wall Street people are decent and well-intentioned. But
> Wall Street is one of the key ideological mainsprings of the complacency
> that has persuaded the United States to acquiesce in the wasting away of
> its once world-beating manufacturing prowess. I am also critical of Wall
> Street for the explosion in financial activity that has followed
> deregulation. Take the many new financial instruments that have been
> invented in recent years. As Warren Buffett has pointed out, their main
> effect is to tempt people to speculate, and, therefore, in general they
> serve little or no purpose other than to line Wall Street's pockets.
>
> Amazon.com: What about the valuations in the U.S. market. Do you see a
big
> shakeout coming?
>
> Fingleton: U.S. stock market valuations are very high. Although I would
not
> rule out at least one more upward leg to the boom, anyone investing at
> these levels will be disappointed with the performance over the longer
> term. That said, I am not among those who are predicting a Tokyo-style
> crash for Wall Street. My guess is that any landing will be a soft one
and
> there is still plenty to go for, among certain small-cap stocks.
>
> Amazon.com: Is it time for Americans to invest abroad--Japan, in
> particular?
>
> Fingleton: I turned publicly bullish about Japanese stocks in October of
> last year after nearly a decade of bearishness. With the market up 30
> percent since then, that seems to have been a well-timed call, but I
would
> not be surprised to see a serious pullback soon. I would also caution
that
> Japanese stocks are difficult to analyze and pay at best tiny dividends.
> Nevertheless, I am bullish long-term. But the really smart American money
> these days is bypassing Japanese stocks for Tokyo real estate, where
solid
> rental yields of 5 percent and higher are available.
>
> Amazon.com: What will change the perception about the importance of
> manufacturing?
>
> Fingleton: That is a good question, and I'm afraid I don't have an
answer.
> It will take a major shock. A devastating crash on Wall Street might do
it,
> or a sharp rise in American unemployment. But I don't think shocks on
this
> scale are in the cards in the foreseeable future. By the time the
American
> media and the intellectual community wake up, I think, it will probably
be
> too late.
>
> Amazon.com: What do you like to read?
>
> Fingleton: I spend much of my time keeping up with my own field of global
> economics, which I find completely engrossing. I am an admirer of J.K.
> Galbraith and recently began rereading his great early work American
> Capitalism. Among the younger generation of economic commentators, I
> particularly like the work of James Fallows, Robert Kuttner, Jeff
Madrick,
> Lester Thurow, George Soros, and the British management commentator
Robert
> Heller. On Japanese issues, I like the work of Pat Choate, Ivan Hall,
Brian
> McVeigh, Clyde Prestowitz, and Iris Chang.
>
> In my spare time recently, I have been reading biographies. I
particularly
> liked Ron Chernow's recent biography of John D. Rockefeller and Robert
> Skidelsky's two-part biography of John Maynard Keynes. I am currently
> reading Robert Kanigel's biography of Frederick Winslow Taylor.
>
> Featured Titles
> In Praise of Hard Industries: Why Manufacturing, Not the Information
> Economy, Is the key to Future Prosperity by Eamonn Fingleton
> Our Price: $18.20 You Save: $7.80 (30%)
> Blindside : Why Japan Is Still on Track to Overtake the U.S. by the Year
> 2000 by Eamonn Fingleton
> Our Price: $27.50
> Building Wealth: The New Rules for Individuals, Companies and Nations by
> Lester C. Thurow
> Our Price: $19.25 You Save: $8.25 (30%)
>
>
>
> Lorraine Nelson
> Lewiston Morning Tribune
> lnelson@lmtribune.com
> P.O. Box 957
> Lewiston, ID 83501
> 208-743-9411 ext. 261

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