Beware The Forces of Reaction
Just seven days ago, I marveled in this column that practitioners and observers alike were quickly reaching consensus on a new set of management practices. Flexibility, constant niche-market creation, smaller unit (or firm) size, and wholesale employee involvement now are considered a necessity for competitive survival in any industry you can name.
To be sure, execution is variable in speed, and in some
industries progress is desultory indeed. However, even General Motors is by and large singing from the right hymnal, even though its bureaucracy may still be far too cumbersome to stave off further market share erosion.
But the battle is far from over. The forces of reaction are chalking up impressive—and for me demoralizing—victories.
For example, I was shaken by the dramatic reversal of Congressman Dick Gephardt's fortunes in the Iowa presidential caucus. After an early lead there, he stumbled out of sight. Then in early January he began to come on like gangbusters. His tactic was a potent mix of questionable and inflammatory facts and business-executive and foreigner bashing; sadly this "blame the other fellow" posture won widespread voter approval.
Our far too numerous farmers must be kept in business at all costs, he tells us. Reagan's six-fold increase in farm support, in a futile effort to keep the Senate in Republican hands in 1986, was not enough for Gephardt. Moreover, he topped the seemingly untoppable "Iacocca Scale" on foreigner lambasting with advertisements, such as the one about the five-fold price disadvantage that an American car would face if exported to Korea. Most experts agree that his figures are simply wrong—by a country mile. Regardless, his example is clearly extremist, as offensive as the worst of Reagan's "welfare queen" doozers. Oddly, Gephardt, Mr. anti-Japan, apparently couldn't find an extreme Japanese case worth televising.
He claims his platform will protect workers (and farmers) and give a deserved comeuppance to the corpocracy, our bloated executive ranks. Ironically, Gephardt's policies will protect executives. It's the workers who will get clobbered. Their standard of living will tumble, as protected company managements continue to ship jobs off-shore, while evading the wrenching changes necessary to become world-class competitors.
Gephardt's success was no worse than the other, domestic protectionist victory, scored in Delaware. By an astonishing unanimous vote, the state Assembly passed a very strong antihostile-takeover bill. CATO Institute's Doug Bandow, writing in the New York Times, described it as "... exempt[ing] half of American business [those firms incorporated in Delaware] from the operation of the market ... [and] granting businessmen de facto tenure..." Delaware's anti-competitiveness stance quickly emboldened others. With The Dart Group breathing down the back of convenience-store chain Stop & Shop, the hometown (Massachusetts) legislators introduced bills to insulate all local firms from out-of-state marauders.
Whether you are for or against them, raiders unquestionably provide a much needed spur to the urgent implementation of the new management practices. We simply must put slow-moving managements' toes to the fire at every opportunity. (Incidentally, though the fear their threat induces is widespread, hostile takeovers represent less than two percent of all merger activity.)
The only hope is the likely reversal by the efforts of the U.S. Supreme Court of Delaware, et. al., in order to uphold constitutionally protected free interstate commerce. Challenges have already been mounted.
I am gravely concerned by the implication of the above. That is, just as we are finally beginning to agree on what we need to do to compete (e.g., see last week's column), these populist backlashes are rising in unprecedented unison. Name-calling and isolationism are the time-honored ploys of losers. As a nation, we are taking our lumps to be sure. So it might well feel consoling to hear some pandering national politicians, like Gephardt, tell us that the losing streak is not our fault at all, and that the other guy is a no-good cheater. Likewise, pandering local politicians will grasp at any straw to keep a competent, or incompetent, business headquartered on its sacred soil, particularly when all it takes is bashing gun-slinging outsiders. And the "Big Pander," the next round of discussion on the special interest-encrusted Omnibus Trade Act, is close at hand.
What we need is more heat, more competition, and speedier change, to prod more flexible organizational shapes into being. Concomitant worker dislocation (a short-term likelihood) must in turn be ameliorated by sweeping, big-ticket worker retraining programs and bold increases to government adjustment assistance.
Politicians who are avowed enemies of the corpocracy and long-time friends of the worker must learn history's repeated lesson: that protection from reality at a time of structural change—whether global trade restriction, demagogic leadership by blaming the other guy, anti-takeover bills, or excessive capital-market restrictions—is the one sure way to give current blameworthy top management an undeserved free ride.
Let's begin by taking a long, hard look at Mr. Gephardt as he emerges as a viable national candidate. Then just say no!
(c) 1988 TPG Communications.
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