No country, no company, no worker is isolated from the ruthless game of efficiency in today`s global economy.
The game is the scramble for markets and who gets them. Ultimately, markets bring jobs, income and power. They build our homes, make our cities livable, educate our children and care for us in old age.
The global marketplace is not only in Seoul, Hong Kong, Tokyo and Bonn, but here in Chicago, down in Peoria and up in Minneapolis. It is driven by communications, technology and the free movement of capital around the world.
Because of these realities, governments, companies and workers are behaving differently from the way they did a decade ago. Now they ”think”
global. They have no other choice. And they act accordingly.
This ruthless discipline is forcing each country and each company to strive to become the world`s lowest-cost producer for goods and services they sell in international markets.
This discipline is opening up Europe, which is now realizing that state control and a heavy bureaucratic hand on business contributed to its economic malaise in the 1980s.
It is shaking up American industry, the best of which has come to understand that trimming costly layers of bureaucracy and modernizing operations are essential for survival in the next century.
It is causing reassessment in Japan, which is realizing that a modern economy cannot sustain itself for the long term merely by doing a better job of turning American inventions into salable, high-quality products.
This discipline is the essence of competitive capitalism. The well-understood rules are that nothing wins like efficiency, and new technology does not long remain the exclusive domain of any one country. Products themselves have truly become global. So has capital, and so has labor.
The transformation has come so quickly that governments, firms and workers accustomed to more regulation, protection and stability of markets are still in the process of adjusting to its relentless imperatives.
The concept of a global economy is very abstract, but also very personal. The steelworker in Gary understands it, having seen its efficiencies at work early in the decade when much production was shut down. The same goes for the autoworker in Detroit.
Wage rates have been held down during much of the 1980s because workers realize that job security is more important than a fatter paycheck. Labor well understood it was competing with efficient manufacturers around the globe.
A decade ago, workers in Midwest manufacturing industries would not have had the slightest interest in the value of the dollar. Now they know that it is vital to their interests, because a cheap dollar makes the products they make less expensive in other countries. It preserves jobs by helping industry maintain vital markets.
With some justification, labor in the U.S. blames the global market`s efficiencies for current insecure worker attitudes. Many workers feel they are more of a faceless factor in production. That was why labor fought so hard for plant-closing legislation, which gave workers time to plan for another job.
From a worker`s standpoint, this is not a kinder, gentler economy, if kinder and gentler means the paternalistic kind of employment relationships that existed in the 1960s and 1970s. Paternalism is out; efficiency is in.
Workers can see how technology has changed things. Richard McKenzie, a professor of economics at Clemson University, points out how New York Life Insurance Co. ships tons of claims information to Kennedy International Airport, where it is flown to Ireland, where job-hungry workers type it into the firm`s computer system, linked by modern communications with New York.
”The Irish workers have become immigrants without leaving their turf,”
he said.
Such technical ability makes debates over the level of the U.S. minimum wage seem obsolete. Cheaper labor can be tapped for many types of information work by spanning long distances. Multinational corporations set up high-technology factories in low-wage countries around the globe, then ship the goods back to their home country.
Compared with the factories of two decades ago, the new plants are highly efficient, meaning that it takes fewer people, fewer plants and less time to saturate a market with a given product. Furthermore, companies are competing to build the most efficient factories, to get an edge.
In the old days, McKenzie said, American companies had a margin for error. They could make mistakes or be lax about work and still win the competition for markets. But that was before Japan and Europe recovered from World War II.
The smart strategy now is to look everywhere to cut costs, he said. Firms ought to bargain with federal, state and local governments for concessions, such as lower taxes or less regulation, then threaten to go to a lower-cost climate if they don`t get a good financial deal. They should also seek tax havens outside the U.S., build production facilities in other countries and even pit their internal bureaucracies against outside firms offering business services, he said.
In a word, he said, firms should get ruthless. And they are.
Rosabeth Moss Kanter, in a new book entitled ”When Giants Learn to Dance,” said the global economy is turning the business environment upside down and making it resemble the chaotic croquet game in ”Alice in
Wonderland” in which the rules constantly change.
”In that kind of game, every element is in motion-technology, suppliers, customers, employees, corporate structure, industry structure, government regulation-and none can be counted on to remain stable for very long,” she wrote.
Companies, employees and nations are locked in a corporate version of the Olympics, she said. They all must train and adapt, using technology more creatively and searching for new ways to get ahead of the competition.
It is no wonder that education has been pushed to the top of the nation`s agenda. Winning and retaining markets will demand lean, efficient organizations able to create and produce high-quality, low-cost, distinct products faster than the global competition.
It`s a great international speedup from which no one can escape. And there are enormous risks for all.
Steven Roach, an economist for Morgan Stanley & Co. in New York, said too many U.S. firms, responding diligently to the demands of the global economy, have actually slashed costs too much. Now, he said, many are running their businesses at full speed but are not investing for the 1990s.
He blames uncertainty caused by high interest rates and a volatile dollar, both of which he traces to the federal budget deficit.
Many U.S. firms are going to have to gain better control of their costs and learn to manage their financial risks, he said. This is actually good news for Chicago and its futures markets, which are designed to help firms with high risks minimize them.
It is no surprise that futures contracts in various currencies-from the dollar to the yen-are extremely active now. When currencies are volatile, multinational companies trying to keep their costs down regularly buy and sell currency futures contracts to lock in prices in an effort to assure some stability in an unstable world.
”Risk management is absolutely critical,” Roach said. ”Companies are being whipsawed by volatility. That`s the pitfall of the global economy.”
But how do individuals manage the risks to their jobs and lives? Many are working longer and harder. Some are obtaining new skills with additional education. In addition, some firms will learn-indeed have learned-that they must invest more in education and training of their workers, even if some of these workers may leave for another company one day.
As Kanter puts it, people are seeking employable security. This means
”offering people the chance to grow in skills and accomplishments so that their value to any employer is enhanced-the present one or a future one or themselves as independent entrepreneurs.”
The global economy is also forcing fundamental change on governments.
”In the past, governments undermined markets,” said Dwight Lee, a University of Georgia economics professor. ”Now markets are undermining governments.”
In the name of maintaining jobs and income in their countries, governments are merging their interests with business interests. They are cutting taxes and deregulating markets, or helping industries in other ways. Socialism is on the run in Europe, and communism is on the run in the Soviet Union and China.
Capitalism`s influence is spreading as the clout of governments is weakening. Government programs designed to distribute income from the wealthy to the poor, long a hallmark of U.S. society, are under attack. Ronald Reagan`s 1981 tax cut and 1986 tax reform bill significantly weakened this welfare aspect of the tax system.
No less an authority than Robert Heilbroner, economics professor at New York`s New School of Social Research, wonders whether this unfettered global capitalism is sustainable.
In a recent scholarly essay for the journal Ethics and International Affairs, Heilbroner said the richest core of nations in America, Europe and Japan will find their status and wealth challenged by the Hong Kongs, Singapores, South Koreas and other low-wage countries that learn the ruthless discipline of the game all too well.
The clearer this threat becomes, he said, the more the large industrial countries will be tempted to reassert their control over a world economy now dominated by an invisible hand. So far, though, the invisible hand appears to be firmly in charge.
