US industry is not competitive because US management is not competitive; the same is happening to US political management. Direct democracy will fix both.

I ended my last post saying that the American government, pressed by US auto industry executives, US business experts and the unions, threatened the Japanese manufacturers with tariffs if they did not manufacture cars in the US.

You might recall from my previous posts that the reasoning to pressure the Japanese was; “the Japanese are killing is because they have cheap labour, docile unions and diligent workers, once we force them to set up car factories here they will lose those advantages, and we will kill them because we have the better managers, trained in the best business schools in the World”.

So the Japanese did what they had to do and manufactured cars in the US.

But cars were not the only US industry defeated by the Japanese, earlier, the Japanese TV fellows did the same thing  to the US TV industry. American TV manufacturers did not receive as much attention, because in terms of jobs and economic value the car industry is much bigger.

Let us go back to the car industry.

The indisputable proof of the superiority of Japanese management over US management is what Toyota did, and still does.

In the 80s, pressured to make cars in the US, Toyota took over an existing car plant GM owned, in Freemont, California.

Toyota did that, instead of building a new car plant, because at the time they were not sure their management practices were superior to American practices. To minimise the costs and the risk, they figured it was better to speak to an American car manufacturer and reopen one of the many American car plants shut down because they could not compete with the Japanese factories.

GM agreed to let Toyota take over the Freemont car plant. This factory was one of the worse factories GM had; it was bad in quality, in productivity, in worker absenteeism, in labour relations and work days lost to strikes. Some say GM let Toyota take it over so that Toyota would fail.

In my next post I will tell you how Toyota, with the same workers, the same unions, the same wages, the same machinery, turned around this terrible factory and its “terrible workers” (according to GM executives), in the best car plant in all of North America, not just among GM plants, in terms of quality, productivity, low absenteeism and harmonious labour relations.

This showed that US management had fallen behind, and not just a little.

But not only US manufacturing management has fallen behind; remember that even the, also Harvard-trained executives of US banks, ran them into the ground in 2008. This is even worse than tha car plants; the banks did all by themselves, without serious competition from Japan or anywhere else.

Sure, the US still has some outstanding business, many related to computer software, and area in which the US, still has the lead in innovation. I do not know it that lead is shrinking but if their top aim is also to maximise profits; not the workers, not quality, not R&D, not the shareholders, not the communities in which they operate, not even the environment (although many talk a good environmental game) the Googles, the Facebooks, the Twitters, may go the way of GM. GM as you know, had to be rescued by the US government; this, in “free enterprise America”.

The US still has other important US manufacturers, like in pharmaceuticals, etc. What I do not know is if their lead is because of the lead the US has had in university research for decades, not related to management. This means that as the lead the US has in research shrinks, even these industries will suffer.

There is also another factor that helps mask the weakness in US management; many US companies have shifted their manufacturing to low cost countries. Instead of competing in quality and features, US companies compete with factories in low wage countries because they are unable to compete from the US. “Surprisingly”, German and Japanese manufacturers continue to be competitive with products manufactured in Germany and Japan. They do it often with higher wages than the US because they produce better products, more advanced products. But to do that you need better management able to produce better-trained employees, better R&D and, also better trained managers.

Yes, better trained managers; the Japanese and the Germans companies show, time and again, that their in-house management training is superior to US business school training. It has to be, the most German and Japanese companies do not believe an MBA degree qualifies people to manage anything, it is just another university degree, mostly concepts and theory, not about real world management skills. As long as American companies do not train their managers in-house they will continue to lose markets.

It seems US politicians also share the idea of short term “profits”, in this case “benefits now” for all US citizens means more social benefits, “free” schools, unlimited military, higher minimum wages and on and on, without regard for the real resources of the country.

Now it is the Democrats doing it, but the Republican government under Trump did essentially the same thing, even before “the virus” arrived; “let us live (beyond our means), lets us print money”. Most other representatives democracies do much the same because the voters do not feel responsible at all for the fate of their countries. For the voters, it is always the politicians fault. I reality, it the fault of the voters who tolerate such system.

In representative democracies, the politicians never tell the people the hard truth; “as a nation, for decades, we have been spending money we do not have”. The politicians can not tell the truth because they have been buying the votes of the people with the people’s money and, in a representative democracy, the people never feel responsible for the fate of their country. In their eyes, “it is all the fault of the politicians”.

It is time for voters to stop “protecting” themselves from the hard facts. It is time the voters be and feel responsible for major decisions, it is time for direct democracy.

If the US does not change its ways, there will be no “rescuer” for the US in the way that GM and the US banks were rescued by the US government. The American people need to wake up, or will perish while asleep, and they will take many other democracies down too in their wake.

Victor Lopez

 

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