I was thinking of sending newly confirmed Secretary of Commerce C.
William Verity a copy of my latest book, ``Thriving On Chaos,''
after reading a report that he was going to devote the next year to
jawboning corporate chieftains for better American product quality.
I've changed my mind, after reading excerpts from a recent speech he
gave the U.S. Chamber of Commerce.
Instead, I think I'll send him a copy of the latest edition of
economist Paul Samuelson's classic economics text.
In his talk, Verity criticized Japan's refusal to match the
dollar's devaluation with an equal rate of price increases. He said
that this failure to jack up prices amounts to an official act of
``dumping.'' Such a suggestion is another mindless escalation of
our trade battle with the Japanese, which, as usual, seeks to shift
the blame for questionable performance from ``us'' to ``them.''
Japan's economic and social systems are different than ours.
- Its corporate strategists, not under the influence of Wall
Street's sharp-penciled analysts, emphasize market share over
- Japan's leading firms, after spending decades gaining a
foothold in America's giant and lucrative markets, are not about to
frivilously toss it all away to keep short-term profit margins
- As usual, cultural differences are involved, too. Overall
lower profits of Japanese corporations are due in part to their
assuming a major share of the national welfare bill. Government
provides the majority of human service benefits in the United States;
corporations shoulder a large share of the load in Japan.
Verity also brushes over the fact that Japan's firms have
responded to the new reality. Bellwether Honda, for instance, has
implemented eight price increases, amounting to an almost 30 percent
overall price hike, since late 1985. That's especially noteworthy,
considering that almost half the cars Honda sells to Americans are
made in the United States. Moreover, Japan's firms overall have
swiftly moved to slash costs by almost 25 percent in the last two
years, abetted by their very flexible wage structure.
However, the real ``profit problem'' is ours, not Japan's. A
reporter challenged me recently, ``If things are as bad as you say
they are, how come U.S. profits are high?'' Part of the answer is
that American firms have responded to the beneficence of the
plummeting dollar by raising prices.
Faced with Wall Street's opprobrium and the fidgety raiders, as
soon as the magnitude of the dollar's fall forced the Japanese to
act, many of our firms matched their price increases to be sure.
This resulted in a sweeter bottom line.
But in the first week of any Economics 101 course, students
learn that this was, instead, the time to hold the line on price in
order to grab some market share back and to cause further agony for
Japanese and other market opponents. …