Critical issues in vocational education: an industrialist's view

American Education, Oct, 1984 by Peter J. Elliman

Industrial and economic policy in the United States today is affected by many international forces and factors. Today, America stands as a beacon to the entire industrialized world as the finest country in which to live, work, and locate a manufacturing plant. It is the most advanced and industrialized nation in the world, but American industry is competing in a world economy. Today, it is not just South Carolina competing against Ohio for a particular industrial plant, but rather Ohio competing against Korea, South Carolina against India, or Michigan against Japan.

I am a vice-president and general manager for Lucas Industries, headquartered in Birmingham, England. Lucas is an international conglomerate that owns or controls 350 companies in 35 countries around the world. We trade in every country in the world except two--Albania and North Korea. My own particular responsibilities lie in North and South America where Lucas has some 32 companies that manufacture goods and products in the diesel, aerospace, and industrial sectors. As an industrialist, my responsibility is to maximize my resources and to return a profit to my board of directors and stockholders. Like most U.S. managers, a large portion of my salary is governed by the profitability of the companies for which I am responsible.

When Lucas evaluates a country for the potential location of a new plant, it examines such important elements as labor unions and labor costs, trade regulations, taxes, inflation, the strength of the currency over time, the availability and quality of technical schools and universities, the skill and productivity levels of the work force, attitudes toward work, the standard of living, and the cultural environment. The overall climate within a given country is the climate on which they must base their decisions. We can influence certain factors, such as the skill level and attitude of the work force that we employ, through training, quality circles, and other such innovations; but most factors are so embedded in a country's economic policies that we must expect to operate within them to make a profit.

For example, inflation in our Brazilian plant is running at about 110 percent annually (as of 1982), and this has become the most crucial factor to weigh in any decision regarding that plant or others in Brazil. One of the tasks that the comptroller of the Brazilian operation is evaluated for is his ability to obtain an eight percent per month yield on the company's investments.

The overall productivity of the work force is a most important factor. America's productivity rose at an average annual rate of 3.0 percent from 1950 to 1966, but since then its growth has continued to slow from 2.3 percent between 1966 and 1973 to less than 1 percent in 1980. Today, the American media are concerned about reported annual productivity gains of 8 percent in Japan, compared to 1 percent in the United States. The implication is that the Japanese are eight times better than Americans as workers. However, consider that in the same set of statistics showing annual gains, Vietnam improved its productivity by 53 percent. Obviously, this does not mean that Vietnam is now fifty-three times more productive than the United States. It simply means that from where the Vietnamese started, they have made significant progress, but no other comparison is implied.

If you were to compare the overall cost of manufacturing a certain product in various free world countries, you would find that the most expensive country today is West Germany. Let's say it will cost one hundred cents to produce a product in West Germany--the top of the scale. As you come down the scale, it will cost ninety-two cents to manufacture that same product in France, eighty-eight cents in England, eighty-seven cents in Japan, but only seventy-two cents to make it in the United States. So today, even though the U.S. productivity gains are less from year to year than in certain other countries, it is still, on an overall basis, the cheapest free world country in which to produce goods.

Although it is important to be proud of these facts as Americans, we must remember that when Japanese workers increase their productivity growth by 8 percent annually and we increase ours by only 1 percent, they may be doing some things better than we are. Some countries have economic advantages that American business does not have. Some of the advantages are voluntary; others are government aided. Japan, for instance, does not operate within the context of total free trade. In the past, they have limited our imports into their country, while we have placed no restrictions on theirs.

Recently an industrialist from India told me that he had borrowed all the money he wanted from the World Bank at 6 percent and what would Lucas like his company to manufacture for us. America contributes the majority of the entire World Bank's resources to developing countries. This man's corporation had access to our money to pay India's workers twenty-five cents an hour to make whatever we would like them to make. That is our competition, and we must not ignore it.