THE TECHNOLOGY GAP

WESTERN Europe is gripped by a growing, almost obsessive fear that it is falling victim to American economic conquest. And that conquest, so the lament goes, is spearheaded by American technology. Armed with technological prowess that European firms cannot match, giant U.S. corporations are winning control over crucial industries. Many European leaders foresee the gloomy prospect of "an underdeveloped continent," dependent upon the U.S.

The technology gap has become a sensitive issue in world politics, with anti-American overtones. What to do about it was on the agenda of NATO's ministerial meeting last month. The Common Market will devote a special session to it in February. British Prime Minister Harold Wilson and former West German Chancellor Ludwig Erhard took it up in their last talks with Lyndon Johnson. During his recent visit to Paris, Soviet Premier Kosygin fanned the discontent. Warns West German Finance Minister Franz Josef Strauss: "Every year, the gap in the scientific and technological fields widens between the two world powers, the U.S. and U.S.S.R., on the one hand, and the European nations on the other."

The Shape of Tomorrow

What is the technology gap? How real is it? Commerce Secretary John Connor, an adept at soothing utterances, suggests that it could more accurately be called an "industrial disparity." Whatever the name, Europe shows real enough symptoms of the condition. Everywhere about him, the European sees American products and processes. When a Frankfurt businessman rises in the morning, he may well reach for a Gillette razor blade, Colgate toothpaste, and hair lotion that comes in a bottle made by an Owens-Illinois subsidiary. After he downs his Maxwell instant coffee with Libby condensed milk, his wife, trim in her Lycra stretch bra, kisses him goodbye, leaving only a trace of Revlon lipstick. In his Ford Taunus, or G.M. Opel, fueled with Esso gasoline, he drives to an office equipped with Remington typewriters, ITT telex machines and IBM computers. While his wife runs a Hoover vacuum cleaner, a Singer sewing machine and a Sunbeam iron, he confers with his American advertising agency and stops at a branch of First National City Bank of New York. If he sneezes in the wintry damp, he pulls out a Kleenex. If his boss needles him, he calms down with a Miltown. Relaxing in the evening, he puffs an R. J. Reynolds Reyno menthol cigarette, listens to RCA, Columbia or Capitol records. At bedtime, he fastens his door with a lock made by BKS, a Yale & Towne subsidiary that is the continent's largest lock producer.

U.S. domination is not really as sweeping as this picture might suggest. By the end of this year, direct U.S. business investment in European companies will amount to about $20 billion, which falls a long way short of hegemony. In no European country do U.S.-owned firms account for more than about 5% of total business. What upsets Europeans is that the American activity is concentrated in a few high-technology industries which powerfully shape today's economic life (such as oil, autos, chemicals) or promise to remold tomorrow's global environments (aerospace, electronics, computers). U.S. companies sell three-quarters of all computers in Europe. The oil industry is 40% U.S.-owned in Britain and Germany. U.S.-owned or -controlled companies account for a third of European auto sales, 35% of the British tire market, 40% of France's tractors and farm machinery, 70% of its sewing machines, 75% of its electrical and statistical machines, 90% of its synthetic rubber.

It was almost more than Charles de Gaulle could bear when he found that he could not sell France's famed Caravelle jetliners to Red China because they contain enough American electronics equipment to fall under the U.S. Battle Act against trading with the enemy. In the significant international balance-of-patent payments, the U.S. has a 5-to-l margin over Europe. At last count, the U.S. paid $45 million a year for European patents, but collected $251 million for U.S. patents. Theoretically, the Europeans could just sit back, manufacture under U.S. licenses and still make attractive profits (in fact, many firms do). But there is the matter of national pride and the fear of complete scientific and technical stagnation. The imbalance worries Washington because European resentment, whether justified or not, could lead to all sorts of international troubles.

Interlocking Causes

What causes the gap? Not a lack of continental brainpower. Europe's mastery of theoretical science and engineering remains impressive. Its scientists gave the world penicillin, autogiros, jet engines and radar. Most postwar advances in steelmaking originated in Europe. The British remain foremost in Hovercraft and vertical takeoff planes. Du Pont first produced Dacron under a license from Britain's Imperial Chemical Industries. But Europe flounders when it comes to 1) translating its laboratory discoveries into sophisticated hardware, and 2) organizing and marketing its achievements. Again and again U.S. companies, in addition to their own prodigious inventiveness, reap what Europe has sown. Britain boasted the world's first nuclear power stations, but in recent years it sold only two abroad, while General Electric and Westinghouse sold 15. The swing-wing principle of General Dynamics' F-111 fighter-bomber and the Boeing SST design were devised by a British aircraft engineer. In many ways, what Europe faces is not a technology gap but a management and money gap. Its interlocking causes run deep in European history, culture and institutions, but they can be summarized under several headings.

sb Markets are too small. The U.S. market, the world's biggest, is more than six times as large as that of any one European country. With that base for mass production and sales, U.S. corporations dwarf most of their European competitors. With few exceptions, European companies are still chopped up into national units. Despite the Common Market, their managers have so far been unable to overcome disparate systems of law and taxation to merge into multinational European companies--such as a scarcely dreamed-of Fiat-Volkswagen-Citroen combine.

sb Europe is too stingy about research and development. The U.S. spends about ten times more per capita on R. & D. and four times as much altogether as Europe ($23.3 billion last year). While European regimes give research only modest financial support, the U.S. Government last year poured $16 billion into such efforts. Most of that went into defense, aerospace, aircraft and electronics. From these fields, U.S. firms are learning to master staggering complexities on technology's frontiers, and to apply the techniques in other areas. With their vast capital and huge home market, U.S. companies routinely risk fortunes beyond Europe's visions to launch promising ventures. RCA gambled $130 million on color television before it began to pay off. Europe is still split over whether to use the French or West German color TV system--and the two are electronically incompatible.

Rather than risk $140 million on a product that might not warrant it, the Dutch electronics giant Philips decided last fall to give up developing big computers, concentrate instead on little ones. Battling to survive against U.S. competitors, British producers have been forced to sacrifice innovation to cut costs. In bringing out its 1900-series computer three years ago, International Computers & Tabulators kept the development bill down to a mere $20 million by using such existing innards as transistors and printed circuits instead of the more sophisticated integrated microcircuits offered by its U.S. rival. Even so, the effort almost wiped out I.C.T. profits for more than a year. When European firms are willing or able to invest heavily in research, they often get excellent results. But risk capital is lacking in Europe. "In 40 years," says Sir John Baker, head of Cambridge University's engineering department, "I have never been approached by a British banker interested in discovering new technological ideas. When I'm in America, the bankers corner me and try to find out what's happening."

sb Managerial skills are lacking. "Here we have brilliant individuals and almost never brilliant organizations," says Italian Physicist Massimo Bernardini. U.S.-style teamwork between research, production and financial men remains the exception--and Europeans still have a lot to learn about advertising and marketing too. Anthony Wedgwood Benn, Britain's Minister of Technology, lists "seven new deadly sins" afflicting the British economy, among them "industrial amateurism" and "status hunting." Habitually, corporations pick top managers and directors not for ambition, skill or diligence but for their social qualifications. This sin of amateurism is certainly not confined to Britain.

sb Snobbery denigrates the technician and inventor. Though England and the Continent gave the world the Industrial Revolution, Europe developed nothing resembling the American tradition of inspired tinkerers. Partly this was due to an aristocratic contempt for anyone who works with his hands --an attitude that persists among European businessmen--partly to the fact that economics did not demand inventiveness. After 1850, labor shortages and resulting high wages spurred the U.S. to lead the world in mechanizing both its farms and factories, while in Europe, until recently, the labor surplus helped keep wage levels comparatively low even as it kept tiny markets profitable. Europe came to exalt its scientists, with the exception of engineers. For a long time, they were regarded as too lowly in Britain even to take lunch with top-crust executives. Says Novelist C. P. Snow: "For some reason, it is not quite U to be an engineer."

Thousands of British and German technicians accept U.S. jobs each year, lured partly by higher status and pay (often double) or driven out by the lack of scope they find for their talent at home. Britain is alarmed at "the brain drain," but its wage freeze and rising unemployment have only increased the itch to leave the land of disincentives, where a $5,500-a-year "young executive" can be in the 44% income tax bracket.

sb Education is inadequate. Much European scientific and technical schooling remains excellent, though it is difficult to generalize. Whatever the quality of European education, it lags disastrously in quantity. First-rate education still reaches only a handful of the elite. Europe generally separates prize pupils from the herd at the ages of ten to 14. With some variations, the chosen few thereupon receive superb training (including university degrees) at state expense; the rest are consigned to mere trade schools or to work. Europe not only overlooks educating the second cut among its students, but also provides no opportunity for late bloomers. Thus it turns out too few scientists, technologists and managers to keep up with its industrial expansion. In Germany, only 8% of college-age youths actually enter universities, as against nearly 40% in the U.S. England has 120,000 college students--about the enrollment of City University of New York. "Universities," says Lord Bowden, until recently Minister of State, Department of Education and Science, "still behave like successors to medieval monasteries."

The Magic Mobility

In Britain and Italy, but more so in Germany, lone professors usually run academic departments or institutes with Napoleonic power and lifetime tenure. In total control of curriculums and funds, they are accountable to no one, usually cooperate with no one, and brook only the presence of underlings to help teach. "Germany," says former Harvard President James Bryant Conant, "has the best university system in the world--for the 19th century."

Much of Western Europe has been seized by a fervor to expand higher education and to reform it along U.S. lines--interdisciplinary cooperation, more full professors, rotating departmental command. Italy's current five-year plan calls for a reorganization of universities, now beset with frequent strikes by students and teaching assistants. Many Europeans hope to emulate what a Common Market Eurocrat calls "the magic American mobility between campus, government and industry."

The same reform spirit is spreading to other areas. The Netherlands has raised its scientific-research budget by 45% over the past two years. British industry has just rented a "brain train" to tour university cities and woo reluctant engineering and science graduates. There is serious talk about untangling Europe's thicket of loosely drawn patent laws and providing new incentives for formation of Europe-wide companies. Prime Minister Wilson recently suggested the creation of a European Technological Community to pool the products of its science and laboratories. But Europe's postwar record at this type of cooperation is dismal. Only CERN, the atomic-research laboratory at Geneva, shows much accomplishment.

Faced with such frustrations, Europeans are always ready to raise the specter of protectionism. London's Financial Times last week advocated "a policy to control American investment," something France already tries to do, but not too successfully. Carried far enough, a policy of straitjacketing American companies would not only invite reprisals but would also tend to stagnate Europe's standard of living. Protectionist moves no longer succeed in Europe as they once did. With easing tariff barriers inside Europe, American firms escape unwelcome restrictions by shifting planned plants a few miles across a border. After several U.S. companies put factories in Germany or Belgium instead of France, De Gaulle's government took down its keep-out signs.

The Real Solution

Some Europeans feel that it is up to the U.S. to help close the technology gap, but they are not sure how. In response to the clamor abroad, President Johnson recently appointed a committee headed by his science adviser, former Princeton Chemistry Professor Donald Hornig, to consider what the U.S. might do. That, fumes Basil de Ferranti, managing director of Britain's I.C.T., was merely "a clever public relations gimmick." Italian Foreign Minister Amintore Fanfani proposed a ten-year "Technological Marshall Plan," but he has not yet spelled it out. Short of U.S. companies giving away their trade secrets, it is hard to see how the U.S. could provide much effective help. It could assist in small ways, such as training executives, sponsoring joint research projects, and encouraging direct European investment in the U.S. (apart from Europeans' already vast U.S. stockholdings). French industry is now counter-invading America on a modest scale; aluminum-making Pechiney, for instance, teamed up with American Metal Climax to build an aluminum-reduction plant in the state of Washington.

But all these are palliatives. The problem always returns to the question of European national economic boundaries. Hendrik Casimir, research director of The Netherlands' N.V. Philips' Lamp, says ironically: "If America really wants to do something, let it start introducing different currencies in all the 50 states and impose serious boundaries between them. If this experiment were tried, ten or 15 years from now we might well bridge the gap."

The real solution to Europe's largely self-inflicted technology gap is up to the Europeans. It is to mesh the Continent's money, manpower and management by tearing down the old nationalistic walls that divide its markets, restrict competition and protect inefficiency. That prescription is already obvious to almost everybody in the Atlantic Community--except, of course, De Gaulle. "We must become modern in our heads, not only in our gadgets," says Olivetti Managing Director Aurelio Peccei. "It is inconceivable that we in Europe are still bound by the nation-state concept. If we can get rid of these barriers, I see a tremendous upsurge--intellectual and psychological."

In the meantime, the only course for the U.S. seems to be to help narrow the gap in what limited ways it can, but keep up the competitive heat. Real progress often grows out of crises.

This file is automatically generated by a robot program, so reader's discretion is required.