The Frontiers of Management. Peter F. Drucker

sales. But even in a year of poor export sales such as 1982, the world market was the largest single customer of American factory labor.

      Under these conditions the traditional separation between American domestic policy and concern for the U.S. competitive position in the export markets for manufactured goods can no longer be justified.

      There are three ways of building concern for our foreign trade into the policy-making process. The first—it might be called the internationalist one—is to make sure that the impact of any decision is carefully considered. This is essentially what the West Germans do, and today they are the closest to genuine free traders in industrial goods. It is one of the main jobs of the West German ministry of economics to work out an economic impact statement describing the foreign-trade consequences of proposed government policies. This doesn't guarantee, of course, that other considerations are subordinated. I would guess, for instance, that the Reagan administration would have gone ahead with both its high-interest strategy and the ban on supplies to the Siberian pipeline even if it had considered an economic impact statement on each. But at least the “internationalist” position ensures that international competitiveness won't be sacrificed or damaged unthinkably and by default.

      The second way to build concern for competitive strength into policy-making might be called the nationalist position. It holds that a political decision shouldn't weaken competitive economic strength in the world market; on the contrary, whenever possible, it should strengthen it. This is essentially the line General De Gaulle took when he ran France. Like all believers in realpolitik from Richelieu to Henry Kissinger, the general didn't put a high priority on economics. “Money,” the realpolitiker has always believed, “grows out of the barrel of a gun.” Yet in every major decision De Gaulle carefully searched for the solution that would enhance France's competitive position in the world economy or at least not damage it.

      Third, there is the mercantilist position: strengthening the competitive position of the country's manufacturing in the world market is the first priority in public policy, to which other considerations are normally to be subordinated. De Gaulle's conservative successors, Pompidou and Giscard d'Estaing, held this view: it has been the traditional French position since the seventeenth century. But the real pros today are the Japanese.

      Clearly these positions overlap. No country has ever followed one of the three exclusively. Also not every one is equally accessible to every country at all times. The mercantilist stance, for instance, is almost incompatible with great-power ambitions, which is why De Gaulle, with all his respect for French traditions, did not embrace it. And only the first, internationalist one fits easily with a free-market economy and fits United States needs and political realities. Even that policy would be a radical break with American political traditions; it would require substantial changes in the policy-making process and in our institutional arrangements, such as congressional committees.

      However, we shall have to realize that safeguarding competitive economic strength is a legitimate concern of the policy-maker and needs to be built into the policy-making process. With a fourth or a fifth of all manufacturing workers dependent on exports of manufactured goods for their livelihood, protectionism no longer protects. It only aggravates industrial decline and creates unemployment. But if a major country like the United States loses competitive strength in the world market, it is almost bound to become increasingly protectionist, however counterproductive this may be. It is high time that, breaking the habits, rhetoric, and traditions of 150 years, we build concern for our foreign position in manufactured goods into our policy-making process.

       (1983)

      CHAPTER SEVEN

      Europe's High-Tech Ambitions

      HIGH-TECH ENTREPRENEURSHIP IS ALL the rage in Europe these days. The French have established a high-powered ministry that will make the encouragement of high-tech entrepreneurship a top government priority. The West Germans are starting up venture-capital firms on the United States model and are talking of having their own Silicon Tal, or valley. They have even coined a new word—Unternehmer-Kultur (entrepreneurial culture)—and are busy writing learned papers and holding symposia on it. Even the British are proposing government aid to new high-tech enterprises in fields such as semiconductors, biotechnology, or telecommunications.

      The Europeans are right, of course, to be concerned about the widening high-tech gap between themselves and their U.S. and Japanese competitors. Without indigenous high-tech capacity and production, no country can expect to be a leader anymore. And yet, the European belief that high-tech entrepreneurs can flourish, all by themselves and without being embedded in an entrepreneurial economy, is a total misunderstanding.

      One reason is politics. High tech by itself is the maker of tomorrow's jobs rather than today's. To provide the new jobs needed to employ a growing work force a country needs “low-tech” or “no-tech” entrepreneurs in large numbers—and the Europeans do not want these. In the United States, employment in the Fortune 1,000 companies and in government agencies has fallen by 5 million people in the last fifteen to twenty years. Total employment, however, has risen to 106 million now from 71 million in 1965. Yet high tech during this period has provided only about 5 million new jobs: that is, no more than smokestack industry and government have lost. All the additional jobs in the U.S. economy—35 millions of them—have been provided by middle-tech, low-tech, and no-tech entrepreneurs: by makers of surgical instruments, of exercise equipment for use in the home, of running shoes; by financial-service firms and toy makers; by “ethnic” restaurants and low-fare airlines.

      If entrepreneurial activity is confined to high tech—and this is what the Europeans are trying to do—unemployment will continue to go up as smokestack industries either cut back production or automate. No government, and certainly no democratic one, could then possibly continue to subordinate the ailing giants of yesteryear to an uncertain high-tech tomorrow. Soon, very soon, it would be forced by political realities to abandon the support of high tech and to put all its resources on defending, subsidizing, and bailing out existing employers and especially the heavily unionized smokestack companies. The pressures to do that are already building fast.

      In France, the Communists pulled out of the government over this issue in 1983. President François Mitterrand's own Socialist Party, especially its powerful and vocal left wing, is also increasingly unhappy with his high-tech policies. They are also increasingly unpopular, moreover, with large employers. Indeed the French Right, in its attempt to regain a majority in the 1986 parliamentary elections, made a reversal of Mr. Mitterrand's industrial policy its main plank and demanded that France give priority to employment in existing industries and scuttle high-tech entrepreneurship.

      In West Germany, demands to shore up old businesses to maintain employment and to deny access to credit and capital to new entrepreneurs are growing steadily. Banks are already under some pressure from their main clients, the existing businesses, which expect them not to provide financing to any conceivable competitor, and in West Germany the banks are the main channel for capital and credit, if not the only one. Even in Britain, there is growing pressure on Prime Minister Margaret Thatcher—especially from back-benchers in her own Conservative Party fearful of their fate in the next election—to forget all the big plans for encouraging high-tech entrepreneurship and concentrate instead on bolstering the ailing old industries.

      There is a subtler but perhaps more important reason why high-tech entrepreneurship won't work except in a much broader entrepreneurial economy. The necessary social support is lacking. High-tech entrepreneurship is the mountaintop. It must rest on a massive mountain: middle-tech, low-tech, no-tech entrepreneurship pervading the economy and society.

      In the United States, 600,000 businesses are now being founded each year, about seven times as many as in the booming 1950s and 1960s. But no more than 1.5 percent of these—about 10,000 a year—are high-tech companies. The remaining 590,000 new ventures each year range from no tech—the new ethnic restaurant or a garbage pickup and disposal service—to such middle-tech