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Competitiveness, Take Two

In the late 1980s, I was part of the great debate about Japan and its inroads into the U.S. That …

In the late 1980s, I was part of the great debate about Japan and its inroads into the U.S. That debate about U.S. competitiveness helped create a tangible response to Japan. The key was unleashing technology€¦quot;the 1990s produced phenomenal innovation, the Internet being just one piece of it.

Today, I think it’s time to revive the C-word. This new competitiveness debate has to be somewhat different from its predecessor, of course. I’ve just finished a 10-day journey through China and Japan and am pleased that we are able to offer you a Special Report on how CEOs are approaching the mainland. Although China faces some challenges, its manufacturing clout is going to continue gaining for years.

While we’re just waking up to that, we as a society have fallen asleep to Japan. Incredibly, the three major business magazines no longer have full-time bureaus in Tokyo. But flying from China to Japan is like rocketing from one world to another more advanced planet. Japan is still 15 years ahead of China in its overall economic level.

So the “Japan doesn’t matter” mantra in some quarters is just insane. Ask Rick Wagoner or Bill Ford how they feel about the fact that the Mitsubishi keiretsu, or industrial group, is about to give a $5 billion bailout to Mitsubishi Motors on top of an earlier $5 billion infusion. If Mitsubishi Motors were allowed to fail, as it should because it makes bad cars, Detroit might have a chance to catch its breath.

Elsewhere, we see that South Korea’s Samsung Electronics has just passed the $10 billion mark in terms of annual profits. And, of course, the Indians are coming on strong, ironically thanks to the Internet, which we created.

This broad, multifaceted wave of competition is far more intense than anything we’ve witnessed certainly since World War II. We shouldn’t have just a “Japan debate” or a “China debate.” It must be a debate about how the overall U.S. system must respond if we are to retain the high ground.

The reason the word “competitiveness” is useful is that it is comprehensive enough to include issues that political leaders fail to recognize as being important to the economy. One of them is the legal and regulatory environment. (See cover story, page 20.) One CEO told us recently, “At the very time that my foreign competitors are getting more aggressive, my own board is more conservative and I’m spending more of my time with lawyers and auditors.” It’s pretty clear that Sarbanes-Oxley and other regulatory and legal issues, such as tort reform and health care, are issues of “competitiveness.” Linking so-called domestic issues with the competitive challenge puts them in an entirely new light.

Most CEOs travel extensively and probably agree with some part of what I’m saying. You can see what’s coming, but the message isn’t getting through. There is a gap between what CEOs can see and what the broader body politic is grasping. That’s why it’s time for CEOs to exert genuine intellectual leadership.


William J. Holstein

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