The reckoning. - book reviews

Washington Monthly, April, 1987 by James Fallows

The U.S. doesn't have these advantages. Therestraining forces we have--religion, fellow-feeling, a sense of honor and community--are important but can often be overwhelmed, as they seem to have been in the eighties. Moreover, the basic logic of our culture promotes greed in a way the Japanese culture does not.

When there's such good money in investmentbanking, how can we expect talented people to resist? When nursing or child-care pay so badly, how can we expect any but saints to devote their lives? When entrepreneurs can make a fortune by taking their companies public, how can we tell them not to? When stock-holders invest for maximum return, how can we keep companies from concentrating on the next quarter's results? The Japanese have answers to these questions. There, individuals will, within reason, sacrifice for the good of all. The Japanese even refuse to buy high-quality, low-cost rice from overseas, because that would disrupt their own precious farmers. Americans buy high-priced domestic sugar, but that's because the sugar lobby forces us to do so though import quotas. Most Japanese, by contrast, seem grateful to be sheltered from foreign rice.

So should we just recognize our limitations,give up the fight with the Japanese, and enjoy the cheap imports while our dollars are still worth enough to buy them? Even on the basis of Halberstam's account, there's reason to hope. Ford, after all, began to pull itself toward prosperity last year, when Nissan suffered its first loss in years. From what I have seen during the last year in Asia, America can recover--and prevail--in competition against Japan, but only if we understand clearly what our cultural strengths and weaknesses are.

Changing a culture is never easy, but I thinktwo adjustments are possible--and indispensable to our recovery as a sound, healthy society. One is to rein in the greed that is always a part of human nature but that has been totally unleashed in the last few years. In some cases, we can constrict the operation of greed by changing laws and rules. Without child labor laws, companies would be telling us it was their "duty" to hire nine-year-olds to work in the mills, otherwise they'd be letting the stockholders down. With child-labor laws--and anti-pollution laws, and product safety laws--companies are forced to behave differently from what pure profit-maximization would require. This is why the crackdown on insider-trading is so encouraging. It helps us remember that some activities that are sanctioned by the market but harmful to society can be stopped, or at least outlawed. The SEC could also put tighter limits on "golden parachute" deals that protect the privileged at the expense of everyone else.

Other rule-changes could make a healthy difference. (Themost important change would be to spend less money on defense, so there's more available for commercial investment, but that's a different subject.) Does the tyranny of quarterly reports distort American management? Why not change SEC rules so that companies report financial data one time a year, instead of four? For years, this magazine has been recommending that "capital gains" tax breaks be given only for new productive investment, not just for asset-shuffling or speculation.