America's Rising Sun

The doomsayers ignore unique strengths that could spark a resurgence in our third century of independence.

Over the past year America has become a nation obsessed with forebodings of decline. A perceptible gloom grips the nation's political, corporate, and media elites. We have seen one bestseller, Paul Kennedy's Rise and Fall of the Great Powers, chart America's progress down the road to relative insignificance and another, Allan Bloom's Closing of the American Mind, paint America's future—its young people—as essentially anti-intellectual, Philistine, and in conflict with the basic values of our civilization.

Yet even as they point out serious deficiencies—the primacy of consumption over production and military spending over the generation of wealth—the apostles of decline are distorting the objective reality of America's actual situation in the world. In their passion to explode the Norman Rockwellesque mythology of Reaganism, the decliners ignore the assets that can help America reclaim its message to the world.

One common fallacy is to compare the United States to the fading empires of the past, most particularly Great Britain. But unlike Britain, or any of the other past empires, the United States remains a relatively young nation, still in the process of establishing its own identity. Even after the debacles of the last 15 years, including the disaster in Vietnam and widespread stagnation on the industrial front, this youthfulness gives us what Fuji Kamiya, a leading social commentator and professor at Tokyo's Keio University, describes as sokojikara—a resiliency and ability to recover in new and often unexpected ways.

America's sokojikara rests on three pillars—massive immigration, an entrepreneurial open economy, and vast natural resources. At a time when many critics suggest we refashion our national character to European or Japanese standards, we would be far better served by finding ways to build upon these unique advantages. In the process we can best find the strategy for America's resurgence in our third century of independence.

By changing the very core of America, its people and their racial identity, immigration has the potential to play the most revolutionary role in this resurgence. Since the 1970s the United States has accepted more legal immigrants than the rest of the world combined. Due largely to their presence, America by the 1990s will have a younger population than any of our rivals; in Japan, for instance, by the end of the century, the percentage of retirees will be nearly twice ours. In Europe, where anti-immigration sentiment has been growing, some national populations are already beginning to shrink, with Germany's expected to fall nearly 50 percent by the middle of the 21st century.

Perhaps more important than mere numbers, however, is the racial makeup of America's new immigrants, the vast majority of whom hail from Latin America and Asia. Due largely to their presence and to their higher birth rates, by the middle of the 21st century the majority of Americans will no longer trace their ancestry to Europe. We are moving from being a "melting pot" of Europeans to a "world nation" with links to virtually every part of the inhabited globe.

In a world where the economic center of gravity is rapidly shifting away from the Atlantic toward the Pacific Basin, the emergence of the American world nation provides a major advantage in adjusting to the new world reality. As a world nation, the United States can transcend its European identity and emerge as a multiracial role model in an increasingly nonwhite world economic order.

Some may see in this concept of the world nation a contradiction of the traditional America. Yet it rests solidly upon the basic ideological firmament of our republic. Never a racial or cultural motherland in the sense of La France or Dai Nippon, America at its best represents a universal idea, a conception of humanity that transcends narrow racial classifications.

This idea has its roots in the earliest days of the republic. Thomas Paine, writing in 1776, rejected the notion of America as a purely Anglo-Saxon nation. In revolutionary Pennsylvania, for instance, Germans represented a majority of the population and Englishmen less than a third. In 1790, before the final ratification of the Constitution, Anglo Saxons constituted slightly less than 50 percent of the population. Far from being merely an offshoot of English civilization, America, in the conception of revolutionaries such as Paine, was destined to be "an asylum for mankind."

Today, Paine's notion has expanded to include not only other Europeans but people of other races as well. The growing appreciation of nonwhite contributions—from the celebration of Martin Luther King's birthday to the academic study of Hispanic and Asian roles in developing the American West—effects the continuing development of the original revolutionary idea. Today we more fully embody what Walt Whitman wrote over a century ago: "America is the race of races."

The power of this new identity can already be seen in the growing hegemony of multiracial American culture—epitomized by nonwhite stars such as Eddie Murphy and Michael Jackson—throughout various nations of the world. Already the second-largest source of American exports, our entertainment industry dominates virtually every market in which it is allowed to operate. But it is more than movies and music. It is the appeal of our individualist lifestyle that is leading to "the Californianization of the free world," in Japanese consultant Kenichi Ohmae's phrase.

The emergence of the American world nation also has profound ideological implications. The American message— stressing individual rights and private initiative—is gradually becoming universal and less linked to "white" ideology. Nowhere is this clearer than in China, where American cultural and political influence has a powerful appeal, particularly among the young. When 50,000 Chinese students demonstrated in Shanghai's People's Square in December 1986, they waved banners depicting the Statue of Liberty and a dragon bound in chains. Emblazoned on the banners were calls for such American-style values as democracy, human rights, and freedom.

None of this means to suggest that these foreign movements identify with the defense or foreign policy positions of U.S. administrations. But it does suggest that our cultural forms and ideals, if not our policies, still possess a revolutionary appeal to those non-Europeans who constitute the overwhelming majority of the planet's inhabitants.

But we do not have to look abroad for the positive impact of immigration. Hispanic influence has transformed Miami into the banking capital of Latin America, while on a smaller scale boosting San Antonio and San Diego into business centers for rapidly industrializing northern Mexico. Asian immigrants have turned Los Angeles and San Francisco into dynamic centers of Oriental capitalism.

Indeed, wherever they have clustered, immigrants have injected new dynamism into local economies. In the Santa Clara Valley near San Francisco, for instance, nearly 70 companies have been formed by Chinese-Americans. And, notes Robert Kelley, president of the Southern California Technology Executives Network, an association of 170 local technology firms, "Without the movement of Asians, particularly Vietnamese, there would not have been the sort of explosion you had in Orange County."

An example of that explosive growth is AST Research, a leading personal computer firm. It was founded in 1980 by a typical group of new American entrepreneurs: Tom Yuen and Albert Wong hailed from the crowded tenements of Hong Kong; Safi Qureshey was the son of a Pakistani foreign service officer, raised in Karachi. Although they had been brought up in the backwaters of Asia's colonial past, their aspirations were American. "My school was British, but it seemed foreign to me," says Wong, who emigrated in 1970. "But America was different. It was our culture; the movies, TV, and Pepsi were everywhere. The Gemini program, Apollo—they were what we talked about back home."

When AST's sales broke $400,000 in 1982, the young company resorted to traditional Chinese methods. Albert Wong called in members of his sprawling family, who in turn recruited their friends. When the production runs got larger than the family could handle, the, recruited hundreds of Vietnamese, Chinese, and Latinos who had begun to concentrate in the poorer sections of the county Today, AST, with sales in excess of $206 million, stands as the world's leading independent producer of add-on boards for personal computers. With sparkling new plants in Hong Kong and Irvine, California, it makes over one-quarter of its sales overseas, mostly in Europe and Asia.

Similarly, Hispanic immigrants play a crucial role in the garment, leather, textile, furniture, and lumber industries in Southern California. During the 1970s, all these California businesses grew by more than 5 percent, while the same industries declined in the rest of the country. Rather than taking jobs from "native" Americans, note Rand Corp. researchers Kevin P. McCarthy and R. Burciaga Valdez, the massive influx of Mexicans into California has actually boosted employment. As Richard Rothstein, former manager of the Amalgamated Clothing and Textile Workers Union in Los Angeles puts it: "Prohibiting employment of immigrants, the only workers willing to labor in minimum and near minimum garment jobs, will only accelerate the destruction of domestic industry."

The economic contribution by our immigrants reflects a greater source of American strength—the openness of our economic system. This flexibility, allowing for the birth and death of companies on a massive scale, has produced in the past decade a resurgence of entrepreneurial enterprise admired around the world. As Peter Drucker has noted "America shares equally in the crisis that afflicts all developed countries. But in entrepreneurship—in creating the different and the new—the United States is way out in front."

Drucker's observation, of course, flies in the face of many of the leading economic gurus, such as Harvard's Robert Reich, who reject the entrepreneurial model for the more closed and controlled corporatist system common in Europe and, to a lesser extent, some Far Eastern nations. It also contradicts the notion advanced by Reich that our addiction to "individualism" and "the myth of the self-made man" lies at the heart of America's economic problems.

In reality, it is precisely this individualism, as expressed in entrepreneurial activity, that provides the economic basis for America's resurgence. Due almost totally to small and mid-sized firms, the United States in the 1980s has created nearly 15 times as many jobs as the more closed and controlled systems of Europe.

In fact, the European model—with its much-ballyhooed stress on cooperation among government, labor, and business—has proved almost totally incapable of meeting the economic challenges of the 1980s. Unemployment rates in these countries, once far lower than in the United States, are now as much as two to three times the U.S. level—despite stagnant or even decreasing populations. Even as the economic gurus urge us to adopt the corporatist model, many European leaders, from Margaret Thatcher to members of France's Socialist Party, are seeking ways to emulate the American model.

Equally important, entrepreneurs are emerging as key players in the reindustrialization of the United States. Falsely linked by such pundits as John Naisbitt with the rise of a "post-industrial" society, entrepreneurs are manning the manufacturing battlements all too often abandoned by our large corporations.

While large firms shed nearly 1.4 million factory jobs between 1974 and 1984, nearly 41,000 new industrial companies have offset almost all this loss. As a result, companies employing fewer than 250 employees have increased their share of American manufacturing employment to 46 percent, up from 42 percent a decade ago. If this trend continues, small firms could employ 50 percent of our industrial workforce by the 1990s.

The success of these firms springs from superior execution. For instance, Nucor Corp., based in Charlotte, North Carolina, now produces twice as much steel per hour as its giant U.S. counterparts. From its new Pilgrim, Utah, plant, Nucor is also penetrating the West Coast markets dominated by the Japanese and other Asian steelmakers. In 1986, the company began an assault on the steel-fastener market, at present 90 percent dominated by foreign firms, and in the following year started construction of a technically advanced plant outside Indianapolis to produce flat rolled steel, thus threatening one of the last bastions of the big steel companies.

Nucor president Ken Iverson, who took over the company in its infancy back in 1965, believes in economic sokojikara, even in one of the world's most overbuilt, fiercely competitive industries. Convinced that free competition can lead to renewal, he opposes protectionist measures. "Unless you're under intense competitive pressure and it becomes a question of the survival of the business to do it, you're just going to lapse back into your old ways," Iverson says. "There's no other answer. But out of all this will come a lot of things that are beneficial: more of an orientation toward technology, greater productivity, certainly a lot of changes in management structure." Such manufacturing companies, with their internal flexibility and emphasis on niche markets, will become increasingly crucial in America's struggle to regain international competitiveness.

This leads to the most important challenge of all, meeting the competition from Japan and other rising economic powers in Asia. Of course, here again the economic gurus have their European guidebook ready, urging an industrial policy based on close cooperation among organized labor, government bureaucrats, and, most particularly, the Fortune 500 corporations—the very forces that have led us to the current abyss.

Fortunately, there are signs that some large U. S. companies— notably Xerox, IBM, and Cummins Engine—are recommitting themselves to the "blocking and tackling" of the production process. Product-oriented executives, such as Ford's Don Peterson and IBM Executive Vice President Jack Kuehler, are emerging as the new corporate role models, replacing the discredited green eyeshade managers typified by David Roderick of USX and Roger Smith of GM.

But the most significant challenge to the Japanese will likely come not from the renewal of large companies but from a new breed of American industrialists. These executives, hardened by the humiliations of the past 15 years, represent something of a "post-Vietnam" generation. Unlike the prototypical managers of the 1960s and 1970s, they have gained the wisdom not to assume American supremacy. At the same time, these executives—many only in their 20s and 30s—have no desire to hand the keys of the future to Asian competitors.

This post-Vietnam mentality can be seen at work in companies all across the spectrum of American industry. Steel minimills, such as Nucor, now represent over one-fifth of the nation's steel production, winning market share not only from U.S. giants but also from Japanese and Korean steelmakers. And while Japan's vertically integrated electronics houses have "taken over" the high-volume, low-margin dRAM market, smaller American firms—such as LSI Logic, Cypress Semiconductor, and Linear Technologies—have continued to dominate many of the cutting-edge, high-margin parts of the chip business.

But perhaps the most interesting example of the post-Vietnam managers can be seen in the microcomputer field. Several years ago, many analysts predicted that only giant firms, such as IBM and AT&T, would be able to withstand the onslaught of the Japanese and Korean conglomerates. Yet since 1986 the gainers in market share and profitability have been the new breed of entrepreneurial industrial firms— such as Compaq, AST Research, Everex, and Dell Computers— all of whom started within the past decade.

The failure of Japanese companies to win in the personal computer business reflects a growing problem for the island nation. While the Japanese have done well in projecting themselves into already established industries, often with the assistance of their brain-dead American competitors, they have had little success in creating the new growth companies—the modern day equivalents of the Hondas and Sonys of the 1950s—who tend to provide leadership in cutting-edge industries.

Such trends, of course, rarely impress our politicians, corporate lobbyists, and economic gurus, but the Japanese themselves are profoundly aware of these problems. Although currently buoyed by low oil prices and an orgy of domestic spending, Japan's rate of economic growth, once among the highest in the world, has in recent years been roughly even with that of the United States and below that of such places as California.

Equally important, the current endaka, or yen shock, has sent Japan, the prototypical industrial superpower, speeding toward a more service-based and financially driven economy. Over the past few years, new investment in plant and equipment has generally slowed, and the largest source of profits for many Japanese firms last year was not products but zaitech, money made through financial and real estate transactions. While American MBAs are rethinking their commitment to Wall Street, Japanese financial institutions, now the world's largest, are becoming "hot" among that nation's top college graduates. And without a pool of immigrants to take up the slack, Japanese industry is having problems finding young motivated workers to man its assembly lines.

If these patterns seem familiar to Americans, they should be—the United States has undergone a similar process in the past 25 years. But Japan's transition from an industrial to a financial paradigm is likely to be more lasting. This is because Japan lacks that third pillar of sokojikara, a large continental landmass.

Growing up in a huge country, we Americans often forget the advantages of our natural endowment. Our prime industrial competitors—Japan, the newly industrializing nations of Asia, and Western Europe—are fundamentally land and resource poor. Many of these nations, notably Japan and Germany, spent much of the first half of this century attempting to achieve what the Japanese call tairiku or continental power, ultimately failing at terrible cost.

Rather than some dark conspiracy to "take over" an America beset with a weak currency, the recent upsurge in foreign investment reflects foreigners' often greater appreciation of our natural advantages, as well as U.S. demographic and entrepreneurial vitality. A poll of Western European executives in 1984—at the height of the strong dollar—found that 45 percent preferred the United States as their first choice for expansion. Similarly, the majority of all capital exported from the cash-rich Chinese diaspora, notably Taiwan and Hong Kong, is flowing toward the United States.

But in the long run, no nation more appreciates American tairiku power than Japan. Within its borders the United States possesses 30 times Japan's arable land, 1,300 times its oil reserves, and 327 times its coal deposits. Viewed from the Japanese perspective, the United States simply represents what Max Weber once called "the area of optimal economic opportunities."

Japan's could be a crucial role—in terms both of capital and of technology—in rebuilding our nation's industrial plant. Increasingly, for instance, many of our imports from Japan are in the form, not of consumer products such as cars and VCRs, but of capital goods, such as machine tools and textile-making machinery, that are used to make products here at home. Sometimes these goods find their way into Japanese-financed industrial expansions—from the car plants in Ohio to cotton mills in California.

Indeed, so great is Japan's role in refinancing America—accounting for roughly 45 percent of that nation's worldwide direct foreign investment in 1986— that some Japanese are afraid it might eventually threaten Japan's own economic position. Capital-rich nations have tended to lay "the secret foundations," in Karl Marx's words, for the next economic ascendancy. As Venice financed Holland, and Holland Great Britain, and Great Britain America, some Japanese fear the new outflows of capital and producer goods could in the long term hand the keys to future ascendancy to its great competitor.

"United States society is very strong, with all your immigration from other countries. You have the scale and the resources that we simply will never possess," Hiroshi Takeuchi, chief economist for the Long Term Credit Bank of Japan, says resignedly. "The Japanese role will be to assist the United States by exporting our money to rebuild your economy. This is the evidence that our economy is fundamentally weak. The money goes to America because you are fundamentally strong."

"The empires of the future," wrote Winston Churchill, "are the empires of the mind." In this context, American greatness does not mean attempting to recreate the artificial, war-induced hegemony of 1945. Nor does it mean bankrupting ourselves for our competitors' sake, most lavishly in the case of Europe, in order to achieve military control of the planet. And most importantly of all, the American empire cannot preserve itself—as Gore Vidal among others has advocated—by lining up with the other white powers, including the Soviet Union, to defend European civilization against the rising forces of Asia.

To retain its preeminence, America must instead hasten its transition into a world nation. Rather than submitting to the great angst of the Atlantic world, we must begin to identify ourselves more with the Asians, Latins, and Africans, who every day become a greater part of America. They, together with Americans of European descent, are the true sources of our nation's unparalleled technological, cultural, and economic dynamism—the human basis for our "empire of the mind." Similarly, in our foreign affairs, we must turn from our historical obsession with Europe and shift our prime attention to the Pacific that is our future and to a Latin America with which we share growing economic, cultural, linguistic, and ethnic ties.

Pacific and North American countries now represent our largest markets, while Europe's share of U.S. trade has fallen from 36 percent to 22 percent over the past decade. Today our three leading trading partners and export markets are Canada, Japan, and Mexico. Our fastest-growing export markets are Taiwan and the People's Republic of China. Today we already sell more products in Taiwan than we do in Italy; by the beginning of the 1990s it is likely that Taiwan and South Korea will become bigger markets for U.S. products than France, perhaps even larger than West Germany and the United Kingdom.

But more than economic necessity drives us to the Pacific. It is indeed our national destiny. Some such as Allan Bloom see the embrace of a post-European reality as a denial of our fundamental values. But by extending the nation's mission beyond the confines of the narrowly defined "West," the United States, for the first time, could begin to fulfill the aspirations of the 18th and 19th-century visionaries who saw our destiny as something greater than the western expansion of European history. "We are the heirs of all mankind," wrote Herman Melville, "and with all people we share our inheritance."

We should never forget that America's revolutionary message—its promise of an open economic and political system based on individuals freely associating—remains as relevant and powerful as in any epoch. In Asia, in Latin America, even the Soviet Union, millions seek those very liberties that Paine, Jefferson, and Adams created from revolution two centuries ago.

For in the end, the greatness of America depends not so much on its force of arms, or even the opulence of its economy, but upon the power of its message to the world. Lacking a sense of mission, the nation will likely continue to flounder, unsure even of its true identity. Only by rediscovering our revolutionary charter and applying it to the realities of the post-European world can the United States in its third century enjoy a renaissance equal to the great vision of its founders and the uniqueness of its people.

Joel Kotkin is West Coast editor of Inc. magazine and coauthor, with Yoriko Kishimoto, of the new book The Third Century: America's Resurgence in the Asian Era (Crown).