Roger Salquist may sell tomatoes and Henry Duignan may sell valves, but in reality they market the same product: information.
Salquist’s genetically engineered tomato is but one of a new generation of products spawned by the American biotechnology revolution. Duignan’s custom-made, computer-designed valves represent a departure from mass-produced rigidity in American manufacturing.
These simple little products have been transformed using years of accumulated scientific information and knowledge by people who consider themselves at the forefront of a new industrial revolution.
Information, in the form of new technology and new ways of making the things we buy, is the new frontier for a nation that often wonders whether it has a frontier anymore.
It is the raw material of emerging companies, industries and higher-paying jobs that President Clinton wants badly to create in order to make his administration a success. It is the basis for national economic advantage.
But this advantage could be severely compromised in the 21st Century. The process by which America pushes this knowledge and information into new products and into improving the skills of the work force lacks urgency and direction. Failure to do a better job could hurt the economy and rend the social and political fabric.
Interviews with scores of Americans in 10 cities over the last eight months reveals a U.S. economy in the midst of profound restructuring caused by modern technology, the new demands of the global marketplace and the end of the Cold War.
These three forces leave U.S. companies, workers and its various institutions with no choice but to accelerate the pace at which knowledge and information are employed for full economic benefit, in the way Salquist’s tomato and Duignan’s valves aim to do.
But the U.S. seems painfully slow in rising to the challenges of a new economic age. The nation tends to view the upheavals caused by corporate downsizing as nothing more than a gigantic commercial phenomenon that soon will pass away, as all business cycles do.
It will not pass away. The change that Americans have witnessed in the form of corporate downsizing is but a symptom of the continuous waves of global efficiency coldly sweeping ashore. In order to survive, U.S. firms have been forced to lop off hundreds of thousands of workers from their payrolls even as they learn the fast new game of information deployment.
This is no easy game, because the rules are different now. During the Cold War, corporations, government, labor and the educational system were accustomed to a slower pace of innovation. The simpler economic model of mass production by large companies did not allow for much manufacturing flexibility and product differentiation. Defense drove technological development, along with giant, monopolistic corporate laboratories. Manufacturing employed the semiskilled masses.
None of this is true anymore. But America still is caught up in a transition between an outdated, Cold War economic system and a speeded-up, flexible, international, low-cost, connected world where products often have life cycles of less than a year and where information and knowledge are the key ingredients for success.
“Manufacturing is becoming a services industry,” said Duignan, head of Ross Operating Valve of Troy, Mich. “For example, take a piece of steel that comes out of one of those mini-mills today. It’s got so much more information in it.”
Nothing will test American democracy more than this emerging economic challenge. The U.S. has shown it can adapt quickly when it comes to corporate change, as witnessed by the swiftness of downsizing, but simply being lean and mean does not address the broader issues of this fundamental restructuring.
Many analysts fear that the U.S. is hampered by a costly, cumbersome process of economic innovation that keeps too many good ideas locked up in its laboratories and corporations. “As a nation, we do a lousy job of turning ideas into products,” said Dorothy Baunach, director of Ohio’s Biotechnology Center in Cleveland.
But even more disquieting is that the demands of modern economics have rendered obsolete the skills of millions of American workers. Some analysts talk of an emerging technical elite that will hold the best jobs in the most innovative companies because they have the best education.
Safi Qureshy, chief executive officer of AST Research Inc. of Irvine, Calif., a fast-growing computer company, is but one of many who fear a two-tier wage structure is developing in the U.S.
During the 1980s the income gap between college graduates and non-college graduates widened from 30 percent to 60 percent, indicating that the semiskilled worker was in less demand.
But that was before the restructuring that began in the late ’80s and has continued. The latest wave of corporate restructuring has swept many college graduates out of white-collar positions or forced them to take lower-paying jobs.
The few high-wage career tracks appear to be those requiring highly technical training in growing high-technology and scientific fields, such as communications, computer software and biotechnology. The high-wage workplace of tomorrow likely will resemble the laboratories of Calgene Inc. in Davis, Calif., where Salquist serves as chief executive.
One of the main problems is these good-paying jobs are not developing fast enough to replace the high-wage jobs of yesterday, said Anthony Carnevale, director of the American Society for Training and Research.
“It’s the great dilemma,” he said. U.S. industry is caught in a transition between the old and the new, and developing new “signature” industries is a slow process. “That’s why the Clinton administration, with Vice President (Al) Gore in the lead, says you have got to push these new technologies faster.”
Clinton’s $16 billion technology policy is a multifacted effort to force technological change and bring on new industries faster. But there also is general recogniation that with these changes will come higher productivity and a further elimination of semiskilled labor.
“This country is not comfortable with a polarized, two-class society,” said Roger Brinner, economist for DRI/McGraw Hill in Lexington, Mass.
Clinton has yet to provide full details of his educational and training strategy, but his national service plan and a new apprenticeship program in high schools are two initiatives that recognize the emerging problem.
Yet many experts believe he should be bolder in calling for fundamental educational reform.
In many respects, the nation’s educational system seems totally out of step with the pace of change, said David Birch, head of Cognetics Inc. in Cambridge, Mass., an economic consulting firm.
Birch cited educational research in Philadelphia showing that it takes an average of 26 years for a new, clearly superior teaching idea to reach children in elementary and high schools.
“That is roughly an entire generation of teachers,” he said. “But what if knowledge changes in 5 1/2 years, as it does now? In a knowledge-based economy, the knowledge of the work force is the only resource you have.”
President Clinton emphasizes that Americans now must prepare themselves for a lifetime of education and training and be ready to change jobs several times during their careers because of economic restructuring.
But existing training and retraining mechanisms that would work either are too costly or not formally institutionalized by most American corporations.
American firms generally understand the power of knowledge and information in making them more profitable. But this is good in theory. Turning it into practice is difficult.
It is not so much the risk. It is that risk is frequently punished in the U.S. marketplace. Large corporations underinvest in new technologies because large, institutional owners like pension funds and insurance companies force them into a play-it-safe attitude.
A National Science Board panel of experts said in a report last August that federal and corporate spending on industrial research and development rose only 0.4 percent a year from 1985 to 1991 after surging by 7.5 percent a year in the previous five years.
A more alarming finding was that the U.S. “faces an emerging risk of losing its traditional strength in pioneering discoveries and inventions” performed in corporate laboratories and research universities.
The science board panel pointed to the short-term time horizons of American industry that has caused management to try to please Wall Street. It also blamed the problem on the risk and expense associated with untested new technologies and on the splintering of large industrial laboratories into smaller units, part of the decentralization movement sweeping U.S. firms.
But new companies with a promising idea often have a difficult time making it in today’s harsh climate. The explosion of debt in the 1980s for corporate takeovers and questionable real estate projects have made American bankers extremely skeptical about any idea with the slightest amount of risk.
Salquist’s Calgene started as many biotechnology firms do, with venture capital. He joined the company in 1983 to help raise money for a group of researchers experimenting with plant biology. The firm did not have a sound financial footing.
In 1985, it almost went out of business. “We had $1.5 million in bank debt and 50 people on the payroll. On a Thursday afternoon, some guy came in and asked for a $50 check to pay a bill for the postage stamp machine, and I said, `We can’t cover it,’ a payroll was due the next day.”
That night a venture capital loan came through.
Salquist went back to beef up his presentation on genetically engineered plants, especially the tomato, and within a few months, he had all the financing he needed. “You have to sell them both on you as a leader who is going to be successful and on the bottom line,” he said.
His company currently has 300 employees in various locations, including Evanston, where it will market the “Flavr Savr” tomato. Thomas Churchwell, the division chief, said the firm will add 50 to 60 jobs on Chicago’s South Side to distribute the tomato after it has been approved by the Food and Drug Administration, expected this fall. The tomato will be grown in California, Florida and Mexico.
The tomato, and other genetically engineered plant products being hatched at the Davis labs, represents a huge investment of other people’s money. So far, said Salquist, the company has sunk $90 million into research alone.
This is information and knowledge at the high end. But the other side of the industrial revolution sweeping the U.S. does not present a high-wage picture. In fact, quite the opposite.
In Mansfield, Ohio, one can see the contrasts.
Near the heart of town, an old Westinghouse plant hums to the quieter rhythms of post-industrial America. A unionized toaster plant no more, its 1.7 million square feet of space now houses three dozen small, young companies where people labor quietly in front of computer screens. Ironically, one is a temporary employment agency.
An investment firm bought the plant and turned it into an office building. For $100 a month, an entrepreneur can start a business at the plant, said Herman Stine, director of what is now called the Mansfield Commerce Center.
About 700 people work at the plant, and the center gets a tax break because it is in an enterprise zone.
Stine said he would like to attract firms hiring low-wage information workers.
“They will come here for the relatively inexpensive labor and for our plentiful and relatively inexpensive space,” he said. “We’re looking for heavily telephone-dependent kinds of firms, like back-office operations and catalog-order operations, telemarketing operations. The building is still ugly as sin, but we have all the infrastructure in place to take advantage of those kinds of operations.”
Are these the jobs of the future, or at least the jobs of the future for Mansfield?
“We’re a for-profit operation looking for opportunities,” Stine said. “These are the kinds of operations we can attract. Through a series of unfortunate circumstances, there has been a lot of unskilled labor available in the work force.”
Indeed, Mansfield has gone through one industrial revolution and is about to go through another. When many old factories were shut down, its uenmployment rate reached 16 percent in the early 1980s. Now, it is half that, but many of the new jobs are in retail or in services.
Anita Crooks, 27, a quick-witted waitress at a diner owned by Greek immigrant brothers, missed out on the good-paying jobs of Mansfield’s industrial past and now works for less than the minimum wage. A single mother of two, Crooks lives with her mother because she can’t afford her own place.
“I can’t go out anytime I want,” she said. “I’d like to go to school at the Ohio State University branch here. I was going to college, but I decided to wait a while, and I got pregnant.”
She receives child support and medical insurance for her children through their father, but isn’t insured herself. Her mother, who also was a waitress before retiring, watches Anita’s children while Anita works six days a week. Her father died when he was 24.
Crooks said that while she might be able to go on welfare, “I don’t want to.”
“There’s nothing wrong with me,” she said. “I can work. I have more respect for myself. My mom worked hard for years, bought a home and a car, and didn’t go on welfare. I think the government should wipe it out, because people abuse it.
“I always say it couldn’t get any tougher, but some days it seems tougher. I can handle it. I’ve done without a lot of things. I’m used to that. When I get my kids taken care of, I’ll get what I want.”
Back to school, she means, to join an information revolution that left her behind-and many more like her.
