Don't worry, the optimists tell us, America is just in a period of industrial transition -- from smokestack to high technology. The changeover, as painful as it may be, will soon bring the country back to prosperity.

That is a nice high-tech dream, but an increasing accumulation of evidence suggests that it won't come true. To understand why, it helps to appreciate the full meaning of the economic and technical decay affecting many U.S. industries.

Look, for example, at the proportion of the goods recently consumed by Americans that was supplied from abroad. The numbers in the accompanying chart (see page 14) -- from a sampling of important industries -- reflect not only money flow, but also the approximate decline in U.S. employment in these and related industries: more than 2 million jobs lost, permanently. Against this loss we should consider estimates by the Bureau of Labor Statistics that computer and computer-related industries will, by 1990, generate only 500,000 new jobs. Note the 1.5-million difference.

Even if high technology could create more new jobs, heavy demands from the military impose a major constraint on the continued expansion of electronics-based industries. Indeed, in 1982, the trade magazine Electronics judged that "The nation's electronics industries do not have the technological skills and experience to meet military requirements and at the same time cope successfully with competition from corporations in West Europe and Japan -- allies all -- in the burgeoning consumer, computer, telecommunications, and test equipment markets."

It is alarming that high-tech industries are already showing the familiar signs of decay -- the same pattern of decline that we saw in American smokestack industries. Large and small U.S. electronics companies are:

* subcontracting component production abroad; or

* investing, either by themselves or in partnership with foreign companies, in overseas plants to manufacture complete products designed and marketed in the United States; or even

* moving all design, engineering, and manufacturing operations overseas.

Consider, for example, the IBM Personal Computer. Its cathode ray tube assemblies are made in Taiwan and Korea. Its circuit boards are also assembled outside the United States, and recently IBM Corp. announced it would subcontract the disk drive in Hong Kong. Last year, IBM arranged for Matsushita to produce a complete PC in Japan for sale in the Middle East and some European markets. While these schemes yield short-term cost advantages, and conveniently bypass production problems, they also produce fewer job opportunities in the United States.

Finally, the extraordinary attention given to computers and allied equipment in the business press tends to obscure the fact that computers are essentially control and communications devices -- production aids. By themselves they produce nothing, and having more computers benefits us little if the industrial production they are intended to modernize has all moved abroad.

Part and parcel of American industrial decay has been a change in the culture of American managers. Before World War II, the U.S. style of industrial management celebrated cost-minimizing, manufacturing competence, long-term investments, and a growing U.S. production base. After the war, a transformation occurred. Cost-minimizing was replaced by cost-maximizing, particularly in the network of 37,000 companies oriented to military production. Long-term planning and investing were replaced by short-term calculations and financial operations.

Managers' academic training in recent years has emphasized moneymaking -- giving stockholders the largest possible short-term return -- above all. The result, unintended and unanticipated, has none-theless been disastrous, for in the pursuit of higher profits, managers have down-graded the importance of making goods. They have found other ways to make money, and they have lost interest in -- and the capability for -- organizing work.

In effect, managers have unwittingly broken the social contract that for more than a century accorded them decision-making power and generous rewards in exchange for their organization of work -- organization that benefited not only their employees but the wider community as well. By placing money above goods, by moving production outside the United States, American managers have sponsored the nation's industrial decay.

Today the overreaching problems of the American economy are not those of market demand or of adequate investment capital. Instead, America's capability to produce is now at issue. For the first time in more than a century of American industrialism, the rate of productivity growth has been too small to offset the rise of various costs. Until 1975, U.S. industry paid the world's highest wages. But high wages didn't impede economic and technical competitiveness, because production-oriented managers once knew how to make productivity grow, and how to use productivity growth as a powerful economic tool. By 1980, the United States ranked about tenth in worker wages.

The long-enduring military economy of the United States has played a leading role in depressing the rate of productivity growth. Every year our military economy absorbs more capital than the combined net profits of all U.S. corporations. It is the largest employer of American engineering and scientific talent, yet it produces no products that have ordinary economic usefulness, either for consumption or for further production.

Has American industry passed the point of no return? Has our capacity to manage the production process deteriorated so far that we couldn't regain industrial competence even if we tried?

I don't know. People in the producing occupations -- blue-collar workers, engineers, technicians, and production managers -- have a major stake in ensuring that we have not passed that point. They alone retain a central interest in and capability for organizing industrial work. And they, among all social and economic groups, should be exercising the decision-influencing power they inherently possess. But so long as they and the rest of us fail to recognize the true causes and real depth of what we dismiss as a temporary industrial transition, our sustained economic decline is inevitable.

U.S. Consumption

Produced Abroad, 1979-80

Product %

Automobiles 27

Machine tools * 25

Steel mill products 15

Hand-held calculators 47

Desktop calculators 39

Microwave ovens 22

Communications systems & equipment 16

Integrated circuits 34

X-ray and other irradiation equipment 24

Movie cameras (1977) 74

Black & white televisions 87

Sewing machines (1978) 51

Office dictating machines 100

Bicycles 22

Apparel 20

Leather gloves 37

Footwear 45

Flatware 50

* By 1982 this figure had risen to 42%.

Published on: Aug 1, 1984