America's Rising Sun

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

Joel Kotkin from the January 1989 issue

(Page 2 of 3)

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 a the world’s leading independent producer of add-on boards for personal computers. With sparkling new plants in Hong Kong and Irvine, California, it make over one-quarter of its sales over seas, 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 job from "native" Americans, not Rand Corp. researchers Kevin P. McCarthy and R. Burciaga Valdez, the massive influx of Mexicans into California has actually boosted employment. A 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 IMMIGRANT 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 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 man of the leading economic gurus, such as Harvard’s Robe 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 "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.

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