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 3 of 3)

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 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 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.

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