Hard Work and Vast U.S. Investment Begin to Pay Off
THE economic news of 1959 was that, in a year when the U.S. reached new heights of prosperity, the fruits of high production and resourceful salesmanship were at long last shared and enjoyed by a multitude of other nations.
In 1959, most of the world's industrialized nations reached new peaks of production and wealth, and less developed nations tasted the first fruits of free enterprise and asked confidently for more.
Throughout the year, the full extent of the free world's progress was often clouded by worry over the economic threat of the Communist nations. The Soviets and their satellites made fast progress. But the free world traveled faster. The record was plain in the soaring production statistics, the freeing of currencies from tight controls, and in the fact that the "economy of abundance," once a U.S. phrase and fact, was visible in other lands.
Despite the new riches, no one regarded the world through Utopian spectacles in 1959; desperate poverty was still a condition of life in many lands. Nevertheless, even the humblest of nations could at least look ahead to the 1960s with hope. There were two reasons for this. In their new wealth, the nations of the West were coming to recognize that the task of aiding the underdeveloped lands is not a burden that the U.S. alone should bear; it is a job to be shared. Secondly, most underdeveloped nations have modified or cast aside their once strongly held socialist notions, and now welcome Western capital as the real avenue of growth and development.
All over the world, there was clear and heartening evidence that the American conception of a modern, modified capitalism, in which benefits are shared by all, had been wholeheartedly adopted by the Old World, which once restricted the benefits to a comparative few. Anyone with eyes to see could find the symbols of this capitalism in 1959. It was a year when:
P: Western Europeans built more than double the number of housing units than the U.S., at a time when U.S. builders were hammering away at a near record 1,350,000 new homes.
P: Frenchmen took special pride in paying off $200 million on a debt to the International Monetary Fund ahead of schedule, piled up their first trade surplus with the U.S. in 60 years, and grew so confident that one Belgian banker remarked: "The French no longer have an inferiority complex growing out of their defeat in the war and their economic troubles. In fact, they have just the opposite."
P: Britons were learning the conveniences of two-car families, and economists predicted that their standard of living would double within the next 25 years.
P: Japanese had rebuilt their country so fast that they had been able to send $1.2 billion worth of investments overseas (including a Bank of Tokyo branch in Los Angeles), and had become a creditor instead of a debtor nation for the first time in history.
P: Australians got the first substantial electric power from their giant Snowy River hydroelectric project, an endeavor so vast that its $1 billion price tag is equal to 20% of the entire national product of ten years ago. Another signal of change: an upsurge in immigration has brought 1,500,000 hard-working "New Australians," mostly from Europe, to back the "Old Australians" in a forced-draft development of their U.S.-sized continent.
P: Africans saw automated telephone exchanges installed in booming Nigeria. Umtali, a small town in Southern Rhodesia, became a miniature Detroit as two big British auto companies moved in. A U.S. businessman named John Theodoracopulos broke ground for a $20 million textile mill in the Sudan that will employ 3,000, supply free medical care and incentive bonuses, plus a swimming pool.
As the world grew in power, the U.S. had to face some new economic facts. For the first time, the U.S. was running a real deficit in its balance of payments with the world, a deficit that reached $3.4 billion in 1958 and got even worse this year. The U.S. had gone unchallenged in world trade for so long that many U.S. citizens took its supremacy for granted. Thus the deficit of $4 billion in 1959 was almost as shocking as if their bank had closed its doors. For years the nation had sold so much more abroad than it bought that it could easily afford to spend billions in foreign aid and military assistance to its allies. Its gold stocks reached a record $24.6 billion in 1949, as gold from abroad poured into the U.S. to pay the deficits run up by foreign nations. But slowly the gold tide turned, and the U.S. lost $2.3 billion in 1958 and another $1 billion in 1959--causing cries to trim foreign aid and to erect new tariff barriers.
End of an Era. The plight of the U.S. was cause for concern--but not for alarm. The U.S. still exchanged something like 21% of the world's imports and exports. And exports, although declining, still exceeded imports. What created the deficit was $1.2 billion in foreign aid and a huge capital-investment program overseas by private business.
The drop in exports was sizable. Canada, which just a few years ago bought 73% of its imports from the U.S., bought only 63% in 1959. Liberia bought 93% of its imports from the U.S. six years ago, but cut it to less than 73%. The Philippines reduced its share of U.S. imports from 52% to 47.4% in a single year, enjoyed trading with Japan so much that more cuts are due in 1960. Most surprising of all, Latin America, a virtual U.S. preserve since World War II, turned away from North American products. U.S. exports to Argentina were down 30%, while Germany's, Austria's, Belgium's, Britain's and Japan's were up as much as 130%. The same holds true for Uruguay, down more than 35%; Bolivia, down some 40%; Colombia, down 12%. Said former White House Economic Adviser Gabriel Hauge: "The postwar era has ended, and a new trade era has begun. We have now discovered the meaning of a trade deficit for the first time."
The Greenback Road. The magnitude of the world's economic progress might surprise the U.S., but the fact of it should not. The road to world prosperity has been paved with U.S. greenbacks. All told, the U.S. has pumped out a staggering $72 billion in aid since 1945. With the dollars went U.S. industrial know-how, licensing arrangements and technical tie-ups--605 with Japan alone. Says Tomisaburo Hirai, director of Japan's big Yawata Iron & Steel Co., which is completing a $400 million expansion: "We are really grateful for your technical and financial help. Without it, Japan's steel program would have been delayed another ten years."
The change in Europe is one of the wonders of the postwar era. A wartime G.I. -- or even 1954's tourist -- would hardly recognize the place. Throughout West Germany, old military installations have become light industrial plants; along the middle Rhine, from Karlsruhe to the outskirts of the Ruhr district, new oil refineries and petrochemical plants are popping up like mushrooms. France's war-ravaged port city of Rouen has new docks, new bridges, new housing developments for 60,000 workers, who labor in refineries, operating with three times their prewar capacity, and in new plastics and textile plants. To the south, the land opposite Venice's drowsy lagoon has emerged as one of Italy's top four industrial centers, producing more than 90% of the nation's aluminum; at Anzio, south of Rome, the greatest excitement since the Allied landing is Colgate-Palmolive's new $10 million soap and cosmetics plant, turning out 120 different items on a semi-automated production line. "That plant," says one admiring competitor, "is a monument to private enterprise."
Monuments & Managers. The monuments are all the more impressive because they are new. One of the secrets of Europe's success is that the war forced the Europeans to build a new production base and incorporate the latest U.S. advances. West Germany's Daimler-Benz had to rebuild almost from scratch, estimates that 80%-90% of its mammoth complex (1959 production: better than 260,000 units) is new since World War II. France's booming aluminum industry boasts that its technology is second to none. Italy's Pirelli tire and rubber company claims the same. Led by Germany and France, the industrial nations of continental Europe have boosted their gross national product 100% (to $212 billion) in ten years, turn out 250 million tons of coal (17% of the world total), some 65 million tons of steel (20% of the total), 1,500,000 tons of copper, zinc and lead (16% of world total). Across the English Channel, Britain's economy this year alone grew some 8% to $68.8 billion.
One for All. As a result of its economic strength, many a European nation felt confident enough to lower some of its trade barriers and chop away red tape. The Common Market (West Germany, France, Italy, The Netherlands, Belgium and Luxembourg) in its first year was such a resounding success that Britain, Portugal, Switzerland, Austria, Norway, Sweden and Denmark formed their own Outer Seven trading area to enjoy the benefits of mass markets and freer trade. Said a Common Market official in Brussels: "At the start, the politicians were for European unity, and the businessmen were very skeptical. But now it is the businessmen who are enthusiastic about the Common Market, while the politicians are beginning to drag their feet. The businessmen will force their governments into a more liberal attitude."
A more liberal attitude toward the U.S. specifically was overdue. U.S. imports are still restricted by quotas and high tariffs; e.g., Britain's tariffs and purchase taxes are so high that only 200 U.S. cars were imported last year. But the climate is changing. Says Common Market President Walter Hallstein: "We do not forget that the U.S. tolerated discrimination against its trade as a way of helping European recovery. Now that Europe has recovered, we certainly are not going to discriminate against the U.S."
A new U.S.-style managerial class is rising so fast that Britain's Institute of Directors lists 25,000 members; a decade ago there were only 400. Also spreading is the U.S. style of low-markup, high-volume operation. Germany's Mail-Order Magnate Joseph Neckerman has grown into a sort of Teutonic Sears, Roebuck in fewer than ten years. He sells a list of 5,500 items through 22 mail-order stores, 48 special-appliance stores, and by undercutting the competition as much as 25%, tots up sales of $125 million annually. Says Neckerman, expounding a U.S. philosophy: "The consumer is king."
In France, the De Gaulle government's equivalent of the Small Business Administration works hard to modernize the small shops, sweep away the prejudices against middle-sized and big entrepreneurs. Says France's Economic Planner Jacques Rueff: "I want to open the windows and let in some air." Even the bankers are loosening up: medium-term credits for business are on the rise, consumer credit is climbing fast. Britain removed its credit restrictions in late 1958 and watched consumer debt jump 50% in 1959; France had no credit to speak of ten years ago, now counts more than $400 million. Another symbol of the changing approach to banking: Belgium's Bank of Brussels installed a drive-in window for depositors.
As industrialization called forth new skills, the French workingman's average pay jumped 60% (to $80 monthly) in a decade; Danes and Norwegians average 84-c- an hour, v. 42-c- ten years ago, while Swedes get a minimum $1.16 an hour, v. 50-c- an hour in 1948. The British secretary who once considered herself lucky to draw $1,100 annually can command better than $2,800 in 1959. The sums may not be princely by U.S. standards, but they are enough to open up a new way of life.
Soda Pop & Slocks. "The poor working class no longer exists in England today," says Donald Tyerman, editor of London's Economist. The so-called proletariat that was the bulwark of socialism and Communism is giving way to an immensely enlarged middle class, intent on acquiring all the trappings of affluence. One excellent measure is autos. U.S. Businessman Arthur Watson, boss of IBM World Trade Corp., found the change astounding. Eleven years ago the manager of IBM's big plant at Essonnes, France asked Watson for permission to build a shed to house the workers' bicycles; two years later he said he needed to enlarge the shed to accommodate all the motorcycles. "Next time I was there," says Watson, "our manager explained that they were having to put blacktop on one of the fields; we needed the space for the workers' cars."
As for those familiar national caricatures, says John Treasure, managing director of British Market Research Bureau Ltd., "the stereotype of the typical Englishman is changing; the 'new Englishman' lives in a home with central heating, drinks canned beer or soda pop while watching television (having just eaten a wimpyburger), has corn flakes for breakfast, washes with Lux soap, dries his hands on a paper towel and has an ice-cream bar for a snack."
Not only are workingmen acquiring the benefits of capitalism; some are becoming capitalists themselves. To the dismay of Marxists, people are indeed taking over the means of production--by buying shares in their burgeoning industries. Wall Street's bull market continued to rise in 1959, reached an alltime high of 678.10 on the Dow-Jones industrial average before it eased the least bit, went into the year's final sessions at 676.75, a gain of 15%. But the climb was overshadowed by the fantastic performance of stocks on the London, Amsterdam, Tokyo and Frankfurt exchanges, where prices skyrocketed and stock volume was up as much as 500%. The number of shareholders was still far below the 12.5 million in the U.S., but the pattern was set.
Gentlemen of Japan. If Europe's growing wealth was not matched by the rest of the world in 1959, the world was hurrying to catch up. Japan's drive for industrial self-sufficiency has powered the greatest boom in that small, overpopulated nation's history. In a single short decade, Japan's gross national product has gone up from $12.3 billion to better than $29.9 billion, its per capita income from $113 annually to an estimated $267. Among the fast-growing industries is petrochemicals. To day, on the shores of the Inland Sea, Mitsui has built a $42 million petrochemical plant so highly automated that 800 workers turn out 140,000 tons of products annually, and there are twelve other such firms operating around the country. By 1965 Japan expects to have all the petrochemicals it needs, and plans to start exporting then. The gentlemen of Japan are so confident of their ability to compete that they want all restrictions on imports lifted. Says Economist Ryokichi Minobe: "Japan is like a sick plant nursed to health in a hothouse. It is time it was taken out to be buffeted by the winds so that it will be truly strong."
Even proud, poor Greece could see the beginnings of a second golden age. With a new power-plant development to supply power and irrigate the arid land, with a $14 million shipyard and a $21.4 million refinery, the nation's G.N.P. was up to $3.1 billion annually. Even in small hamlets there was a difference. The village of Aghios Loukas (St. Luke--pop. 1,500), on the island of Euboea, has 300 men working in the lignite mines of Greece's Public Power Corp. Almost everyone has running water; every house has an electric range instead of a charcoal stove, and people buy meat twice weekly. "This village is not America yet," says Loukas Tzannis, 76, "but we live well."
Some other rapidly developing lands:
MEXICO, whose gross national product is up from $4 billion to $9 billion in barely ten years, and whose Papaloapam River basin, near Veracruz, hums with new industry: hydroelectric power and irrigation schemes, new roads that boosted agricultural production 300%, a newsprint mill that supplies 50% of the nation's needs, plus an aluminum-fabricating plant and plans for a steel mill.
BRAZIL, whose industrial production jumped 100% in a decade, to the point where it exports appliances, autos, railway cars.
UGANDA, the Federation of Rhodesia and Nyasaland, where production and wages have shown 40% to 100% jumps in a decade, with new oil exploration, rubber plantations, iron and copper mines, ceramic, rubber and meat industries.
BURMA and MALAYA, which have shaken off their fears of capitalism, and are watching the climb of statistics (which they did not even keep a few years ago). Burma's G.N.P. is up 7% to $1.1 billion in five years, Malaya's up 60% to approximately $2.2 billion.
Up from the Depths. The progress is impressive, but so much of the world is still so poor that the advances of the 19505 only serve to point up the enormity of the need. While the U.S. could count on $2,743 per capita income in 1959, Syria, Jordan and Egypt average less than $130 annually; in Viet Nam, Laos and Cambodia, it is counted at less than $60.*
Africa, where wages are 20-c- a day in some spots, is even poorer, has an average $10 per capita per year.
The magnitude of the problem can be seen from Belgium's efforts to lift the Belgian Congo from the depths. Over the years Belgium has poured some $3.4 billion into the country, yet per capita income is still only $42.10 annually. Investment and jobs must increase just to keep ahead of a birth rate that will double population to 26 million in 30 years.
For Asia the problems are almost as bad. India, after years of hesitation between capitalism and socialism, has finally spread the welcome mat for private capital. But the flow is still small, the need still great for plants to form an industrial base. Indonesia, where unstable politics, a constant financial crisis and threats of nationalization have throttled economic development, is still sick, untouched by the new winds of free enterprise blowing through Southeast Asia. By contrast, tiny Thailand last year offered foreign businessmen tax holidays, guarantees against nationalization, provision for remittance of profits. Result: Thailand is getting $20 million worth of investment.
How to Hustle. Into the growing new markets hustled salesmen from Europe and Japan. Not only did they match the U.S. businessman in quality but often outdid him in price, service and plain ordinary salesmanship. Had the U.S. businessman grown fat and lazy after all the years of easy selling abroad? Burroughs Corp. President Ray Eppert answered with a clipped yes.
Foreign salesmen quoted prices for machines as much as 40% below U.S. levels, sold steel for $20 less per ton, set up entire auto plants for less than U.S. estimates. The merest hint of business brought a deluge of missionaries in businessman's blue. The Federation of Rhodesia and Nyasaland played host to trade missions from Japan, Czechoslovakia, India, Australia, New Zealand and China this year; belatedly, a U.S. mission is scheduled to arrive some time in 1960. Europeans also use their diplomats abroad as supersalesmen. Said one foreign consular official in Lebanon: "It's getting so that I spend all my time lining up deals for our businessmen."
"Get Me a Steel Mill." Not all businessmen were fat and lazy. Many of them hustled abroad to build new plants and compete on the spot. All told, some $29.2 billion worth of U.S. capital went overseas. The Middle and Far East got $195 million, Latin America another $575 million. As more than 100 U.S. firms crowded into Western Europe, the standard gag in Germany was about the U.S. industrialist who storms into his Bonn office shouting: "Get me a German steel mill. I'll pay whatever it costs." Says a U.S. embassy official in Paris: "There are so many U.S. businesses looking for French partners that my only worry is, will there be enough French partners to go around?"
New England's electronics industry crossed the ocean to benefit from high technology combined with lower wages. Raytheon is going overseas because it figures it can produce a $1,000 microwave tube in Italy for 30% less than in the U.S. Some critics complained that businessmen were exporting jobs from the U.S., that it would hurt U.S. employment. But the debate was academic. Says Bradley Fisk, Deputy Assistant Commerce Secretary: "If a U.S. firm sees the market coming, it is just plain silly not to build a plant to serve it. The production is going to be put up there anyway."
How big the markets are becoming is evident from the profit sheets. Ten years ago U.S. firms overseas grossed about $12 billion in sales. In 1959 their sales topped $30 billion. The foreign plants of National Cash Register, says Chairman Stanley C. Allyn, last year produced 40% of the corporate profits. Paradoxically, it is this same overseas drive that will eventually reverse the balance-of-payments deficit so worrisome to the U.S. in 1959. When the profits start flowing back home, they will count as a big plus on the balance-of-payments ledger. Europeans are well aware of the long-term situation, even if many Americans are not. Says West Germany's Minister of Economic Affairs Ludwig Erhard: "You Americans are so excitable. I think these balance-of-payments difficulties are short run. But Europe must do its part. We must help you carry the load."
Since the U.S. is the world's No. 1 economic leader, it must expect a few strains on its bank account. Summed up a London banker: "For years England has been the banker for a third of the world's trade, with currency reserves no greater than the resources of the Ford Foundation. But now you are the leading financial power in the world. If you want to continue playing that role, you must get accustomed to these ups and downs."
Compacts & Complaints. No one reacted better to foreign competition than Detroit's auto manufacturers. After years of watching the rise of small foreign cars, the Big Three brought out their own compact models. Ford's Falcon, Chevrolet's Corvair and Chrysler's Valiant cost the industry something like $350 million for tooling. At year's end, U.S. compact cars (including American Motors' Rambler and Studebaker's Lark) had already passed European imports 658,000 to 575,000.
But there were too few examples of such competition. For every businessman who went after world markets, two others sat home and griped. Oilmen, cattlemen, textile makers complained that they were being undercut at home and abroad by foreign competition. They demanded stiff tariff protection. Yet, as one Atlanta textileman stood before an audience pleading his particular woe--children's cheap knitted clothes from Japan--a housewife rose with a question: "Please, sir, can you tell me where I can buy some of these shirts?" The incident should have told the businessman that protectionism is no solution.
The No. 1 Problem. The problem of foreign competition, both in the U.S. and abroad, was put in focus by the No. 1 economic event of the year--the longest and most damaging industry-wide steel strike in U.S. history. The U.S. paid a high price for the strike: $1.6 billion in lost taxes, $1.25 billion in lost wages and $1.5 billion in lost profits. Much of this was not a permanent loss; it would be made up in the future. But whatever the price, it was one that many a U.S. businessman, along with European economists, thought might not be too expensive in the long run if it restored the balance between wage increases and productivity. To European businessmen, along with those in the U.S., this was the No. 1 domestic problem for the U.S. Said Dr. Alfred Schaefer, chief general manager of Zurich's Union Bank of Switzerland: "In the U.S. the workers take wage increases before productivity has gone up enough to pay for them. They are in too much of a hurry. American enterprise is not master in its own house."
While one of the issues in the steel strike was wages, it was not the most important one; both sides tacitly agreed that wages could be settled, and some steelmen privately admitted that most, if not all, of a modest wage rise could be absorbed by the companies without a price rise. The deadlock was over the local work rules, which would have a big effect on future productivity and price rises. Management argued that without drastic changes it could not hold the price level at home or compete with foreign producers.
Foreign steel imports had risen 330% in two years, while U.S. exports had dropped 68%. The United Steelworkers argued that the work rules had not hampered improved efficiency; at year's end the mills were operating at better than 96% of capacity with about 25,000 fewer workers than ten years ago. While there was justice on both sides, the mulish refusal of both labor and management to work out a reasonable settlement might well bring new restrictions on collective bargaining in 1960 that neither will like.
No matter what the final settlement, plain facts were that U.S. industry did not get its costs into line in 1959, except by raising prices. The cost of living rose some 2% for the year by year's end, approached 126 on the Department of Labor's index (1947-49 equals 100). The rise would have been considerably more except for the easing in food prices, a drop that cut farmers' income by $1.9 billion.
Despite the rising prices and the steel strike, there was no check to consumer buying. Retail sales for the year were up 10% to $216.8 billion. Consumer credit was also up--to a record $49.9 billion--despite the tight-money policy of the Federal Reserve Board that helped edge interest rates to the highest levels in 30 years.
While the steel strike cut production in many another industry, it also showed the astounding strength of the U.S. economy. It got along so well on stored-up stocks of steel that gross national product slipped only 1.2%. When the flow of steel was resumed, the upsurge in production was so great that it reached 151 on the FRB index in December, and a record yearly average of 149, up 15 points. The gross national product totaled $480 billion for the year--up $39.3 billion--also a new record. Net profits of U.S. industry reached a record $24 billion, up $5.1 billion from 1958. At year's end many an economist found a wry satisfaction in the strike. By cutting production temporarily, it had stretched out the boom, postponed the time when the U.S. will pause for a breather to consolidate the gains.
The Future. Thus, barring a resumption of the strike, the first six months of 1960 should be the greatest in history. The economists are all in agreement, so much so that Federal Reserve Board Chairman William McChesney Martin Jr. says that he is just a bit dubious at finding himself in step with the herd. The crystal-ball gazers predict that the national product will jump to a $500 billion rate in the first quarter, race on to $525 billion or better before leveling off at $510 billion and the first half-trillion economy the world has ever known.
With production high and unemployment low (4% of the work force), the forecasters see good business ahead. Tight credit may cause the housing industry to slip slightly to a rate of 1,200,000 homes. But Detroit's automakers have visions of a 7,000,000-car year in 1960, with 18%-20% of the market in the compacts. Steelmen forecast a total of 125 million tons of steel next year, up nearly 35 million tons. Borg-Warner's Norge Division President Judson Sayre expects big increases in the appliance industry--8% for clothes dryers, 10% for refrigerators. Moreover, plant and equipment expenditures will rise from $34 billion in 1959 to a rate of $40 billion in the fourth quarter of 1960. With all the booming good business, the Government hopes for good news on the budget debt: a surplus of $2 billion in the fiscal year starting July 1.
As they gaze into the decade of the 19605, the economists see a population growth for the U.S. that will push the number of Americans past the 200 million mark by 1970, a population so much in need of homes, clothes, autos and all the other things that Americans expect as their birthright that the U.S. will be ripe for a $700 billion economy in ten years.
World by the Tail? Whether the U.S. achieves that goal and goes on to serve all the many millions around the rapidly developing world depends on whether the businessman competes to the fullest of his impressive abilities. One of the great debates of 1959 that is bound to continue on into the 19605 is the economic competition between the U.S. and Soviet Russia. In the statistical numbers game, the experts point in alarm to the fact that Russia has grown to rank as the world's second greatest economic power in the space of 30 years. They cite a Russian annual-growth rate twice as fast as that of the U.S., a Russian gross national product that is around 45% of the U.S. figure, with estimates that the Reds will reach 55% within ten years. The bald figures are impressive, but they must be read in the context of what economists know about growth: that nations taking off from a low base inevitably grow much faster in percentage than those already at a high level; that the Russians, who now concentrate on heavy industry, will find it difficult to match their advances as the pressure for consumer goods mounts.
Vastly more important than the statistical competition is the competition of ideas: capitalism v. Communism, free enterprise v. state control. And here in 1959, the true strength of the U.S. was in the spread of its ideas through deeds and example around the globe. More and more nations demonstrated that they are not interested in Russian borsch or communal Chinese gruel. Having tasted free enterprise, they are determined to sit down to the entire meal. The position of the U.S. was never stronger. But it would have to keep on exercising its leadership. FRB's Martin puts it flatly: "The U.S. faces the '60s with the world by the tail, with every opportunity to be a leader, provided that it is willing to engage in sound practices. But if it is unwilling to practice what it has been preaching, then it will find that the world has it by the tail."
These sound practices are as well known abroad as they are in Washington. With a budget in balance, the U.S., says British Economist Graham Hutton. must take normal corrective measures to get its balance of payments in order. Button's prescription is for the U.S. to reduce foreign commitments, get overseas allies to carry more of the load, get internal costs under control. "If you don't stabilize your wage costs," says he, "you will lose export orders, lose gold and get unemployment. It is as simple as that. You have the strongest economy in the world, the highest productivity in the world. There will be no need to devalue the dollar as long as you keep your wages geared to productivity."
One encouraging sign at year's end was that U.S. exports were already on the rise again after their slowdown. Wage costs in foreign nations were also on the rise, narrowing the foreign advantage over the U.S. Now that the alarm has been raised, many a businessman is not only revising his ideas about world trade; he is also doing something about costs. Cleveland's National Acme Co. brought out a new cam-finishing machine that does the job in 20 sec., v. 1 min. 15 sec. "What's just as important," says Acme's President T. L. Strimple, "we're being extra good in courting business in Europe and Asia. We give customers service, quick deliveries, parts, anything they ask for, just as if they were in Cleveland."
Nor is Motorola President Robert Calvin afraid of losing the U.S. lead in electronics. "The foreign competitor who has finally found out how to make a TV set will no longer find a market here, because we've already found out how-to hang one on a wall," says Galvin, whose sales are $260 million, best ever. Another sign that quality can be sold: Paris' George V Hotel stocks a claret that bears the label, "Beaulieu Vineyard, Napa Valley, Calif."
The Test of Vigor. More and more research is needed. Although industry spent $10 billion on research this year, it will have to spend still more. "The company that stints on research these days," says General Telephone & Electronics President Don Mitchell, "will give some short-term gain to its profit-and-loss statement, but it won't have any profit statement to worry about by 1970." Mitchell knows from experience that research pays off at a prodigious rate. "That means that $100 spent on research will bring back anywhere from $2,500 to $5,000 over a 25-year period. Keep the research going and those other fellows will copy." In General Telephone & Electronics' future: electro-luminescent wall panels, a single telephone-radio-TV communications system for the home, machines that translate foreign languages.
The challenge from the world is plain, and so is the solution. "If one thing is clear," says Standard Oil (N.J.) Chairman Eugene Holman. "it is that we cannot go back. Weary slogans, old patterns of thought will not be too useful in the 1960s." As Holman and many another U.S. businessman knows, the growth of the U.S. was not accomplished by old patterns of thought. It was accomplished by new ideas and experimentation, by resourcefulness and eagerness to put the ideas into effect. Competition is nothing new to the U.S.; it built the nation. In the same way, it can help to further strengthen the free economies of the world. The U.S. should welcome competition -- and the challenge of the '60s --see what needs to be done, and have the courage to do it.
* But the statistics exaggerate the difference in living standards. In underdeveloped nations, costs are much lower. For this reason, they could have an adequate standard of living while per capita income is far less than in the U.S.
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