challenges of social change

7/28/2019 Challenges of Social Change

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The Challenge ofSocial ChangeEditorOrlando Fals Borda

SAG E Studies in International Sociology 32sponsored by the International Sociological Association/ISA


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~ ~TH E AMERICAN W A Y OFECONOMIC DEVELOPMENT >Amitai EtzioniGeorge Washington University. Washing[on, C

T HE NEED FO R A DOMESTIC MODELThere should be a sign: Dont Xerox ins titution s. Societies can learnfrom each oth er, but they should not try to copy each others insti-tutions. T he way a society can or cann ot transfer social patterns isan issue long familiar to those who live in or study developingnations: can India adopt the institutions of Western democracy?Does the Peoples Republic of China offer a model for economicdevelopment for, say, Indonesia? And, more recently, can ~Moslemcountries pick and choose which Western elements to accept whilemaintaining their religious heritage?Th e issue has now moved from the world of the developingnat ions to that of the superpowers of yesterday, todays under-developing countries, the United Kingdom and the United States.The se coun tries have found their economies stalled, if not in reversegear - i th little or no real economic growth - nd their self-confidence has been shaken. They actively seek ways to revitalizetheir economies, and debate fiercely how this can be done.Recently in the USA the question has taken the form, whosesuccess story are we to emulate? Japan easily wins the prize as thecountry most often cited as the role model. T her e is a fair measureof irony in the spate of self-denigrating news reports, essays andbooks which com bine self-criticism (how we have neglected saving,productivity, highways and so on) wi th adulation of Japan. Untilqui te recently th e traffic was quite the other way: the Japa nese wereswarming all over the W est to see how we d o it and what they oughtto emulate. Nor is the celebration of Jap an, and the call for the USto take heed, limited to econom ic achievements. H arvard soci-ologist Ezra Vogel ( 1979) , in his best-selling Japan A s N i m b e r O n e,admires and holds up a s a model Japane se education, crime contro l,equality of income distribution, environmentai protection andhealth.


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58 Th eChallenge of Sociul Chung,I focus here on the Japanese institutions most often acclaimed,

tho se which fashion its econ om ic an d industrial policy. TheJapanese are said to have found a way to pull together and worktogether. Their government co-ordinates the efforts of the variouscorporat ions , banks , expor ters and importers . S tr ikes , oncecommon, are now rare. Labour peace and the work ethic benefitfrom com panies commitment to life-long employment of many oftheir employees. The g overnme nt, especially through the M inistryof International Trade and Industry (MITI), is shepherding thedevelopment of an economic consensus. Specifically certainindustries are selected as promising and promoted by the infusion ofpublic ca pital or by ban ks that g rant l oan s in line with the evolvingconsensus. Export assistance and various indirect forms ofprotection from foreign competition are also extended to thoseindustries. Reduced compe tition allows Japanese producers of cars,for instance, to focu s on a few models. R &D is subsidized and n otencum bered with num erous regulations.No wonder the US has been told to M ITlsize. I t too, i t has beensaid time and again, would benefit from an industrial policy,form ed by business an d labour in collaboration with governm ent, toselect winning industries (h igh in added value, productivity, tech-nologies, exportability) to be showered with special benefits,whileloser industries are allowed, i f not encouraged, to sunset. Som eproponents of industrial policy have called for turning the USDepar tment of Commerce into the U S MI TI ; others fa vour settingup a new redevelopment agency with its own board and bank. Ineither case, the American MITI would have a desk for each ofvarious industries, from ball-bearings to indus tr ia l d iam onds . I twould analyse the industrys prospects and provide a da ta base fordecision-making. Tripartite committees (business, labour andgovernment), l ike those we had for the steel and car industriesdur ing the Car ter adminis trat ion, would w o r k out industry-specificplans. T he overall boar d, also to be tri-sectoral, w ould decide whichindustries to promote .

I suggest that the Am erican econo my cannot be MITIsized, andshould n ot be subject to industrial policy, because it is incomp atiblewith Ame rican traditions. values and institutions. Although it doesno t matter for this thesis whether or not industrial policy wo rks wellin Japa n orelsewhere, i t should be noted that most acc ounts of it aretoo gush ing . For instance, they tend to overlook instances when


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MITl locked Japan ese industry into the wrong products , as wheni t tried to force Japanese car makers to concentrate on a s inglemodel rather than the varied line they have marketed sosuccessfully; or when Japanese successes were achieved by firms,such a Honda and Mitsubishi, that rebelled against the policiesMlTl laid down.Why is industrial policy r i la M IT I (there are other versions)incompatible u i t h American insti tutions? The most im portantreason is that industrial policy is nothing but a polite term forgovernment planning. Uhile it is true that sectors other than thegovernment participate in the policy-formation process, in the endthe decision is governmental; the public funds used are taxpayersmonies; export assistance and the suspension of regulations areaccorded by the s tate; and so o n .The overwhelming majority of the American electorate andleadership has only recently begun to emerge thoroughly an d deeplydisenchanted from two decades of pobernrnent expansion. Thereasons are numerous. As a nation Sounded try people who escapedpolitical and religioub auth orities an d rebelled against a mon archy ,Americans have always been more individualistic and anti-government than the Japanese. In contrast the Japanese are anationalis tic, centr is t . highly homogeneous. island society; theyhave a high sense of national identity. togetherness andvulnerability to foreign powers. Just as the Japanese pull togetherwith relative ease, Americans are accustomed to following theirdivergent individual ways. And they believe firmly - oming aboutas close as Americans ever do I O having a shared creed - n theutil i tar ian/Adam Smith notion of generating the greatest happinessfor the greatest num ber by each providing for his or her own good.Recently ou r adversarial system has been given a bad nam e. A con-gressional delegation returning from Japan called for t h e US toemulate Japans tendency to collaborate; the US is said to be toolit igation-prone; and so on. Nevertheless, Americans still believethat the adversarial system - r competit ion - s what keeps thenation al juices flowing, and people free and enterprising.For Am erican s big government is incom patible not only withbasic beliefs but \vith recent experience. Over the last two decadesthe government has used its power to spawn literally hundreds ofprogrammes, very few of which worked, most of which werecostly,many of which entailed tight regulation of the private sector . Th ecountry is hence left with precious little desire for a great, new


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60 The ChallengeofSocial Change

government-guided thrust, with detailed intervention in privatedecision-making, especially in economic matters. President Carter,in his own inadequa te way, rode this theme as much as PresidentReagan galloped it . While there are now some regrets as thedismantling of some social programmes and regulations goes toofast and too far, even liberals do not wish to build on a more-governme nt platform. That is , industrial policy could not have beenproposed to America at a worse time.Beyond beliefs and experience, the institutions of Americangovernm ent are nothing like the Japanese, nor could they be mad e. to work like the Japanese system. The essence of the Americansystem is regional and state pluralism on which interest-group

pluralism is superimposed. American national decisions invariablyreflect this pluralism. For instance, decisions about the location ofmilitary bases, which to close and which to expand, ar e never m ademerely on the basis of a judgement of national security. Theyinvariably reflect also the need to accommodate many differentconstituencies, to divide among them the benefits involved.Similarly trade adjustment assistance and development loans a renot merely given to groups disadvantaged by foreign trade or tounderdeveloped areas , but are dished out - ike dams, roads an dcanals- o whoever ha s political clo ut, which in a pluralistic systemmeans sooner or later most constituencies. (By 1980, for instance,84.5 percent of the nations counties qualified for EconomicDevelopment Administration loans (Etzioni, 1984: 94).) I t is n 3 tthat all get an equal or proportional sh are, but that most get some ofwhatever is to be had - rom pages in the Senate to militaryacad emy fellowships, from research gra nts to subsidies. As a result,in the US most government allocations are congenitally highlywasteful and inefficient.

I t follows that i f industrial policy wereintroduce d in to the US, thebeneficiaries of loan guarantees, subsidies, tax concessions orwhatnot would not be a few industries that consensus-building orindependent analysis had chosen as the cuttin g edge for the future.They would include a wide array of groups with clout - rom sugargrowers to conservationists of the redwoods, from silver miners(strategic material) to shipbuilders. Indeed in view of the fact thatold industries are politically well entrenched and new ones, bydefin ition, not nearly so well placed , i t is very likely that most of t hebenefits would flow to what industrial policy experts define asobsolescent industries or losers, especially steel and cars, not to


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winners such as computers. I t might be worth noting that theindustry most industrial policy advocates list as a clear winner forthe future , the computer indus try, tends to reject government a id.Typically a spokesman for the American Electronics AssociationW . J . Lanouette, testified against a bill designed to help its membersby directing government R & D money to young, high-technologycompanies. He cited more than eighty separate socioeconomicprograms, special interest set-asides, preferences, enforcementresponsibilities and other miscellaneous good ideas thatCongress has passed over the years which, taken together, accountfora horrendo us paperwork muddle (Lanouette, 1982: 293). As thequote suggests, the fact that, aside from being highly political,American government assistance brings with i t a variety of strings,militates against i t . So is the fact that i t comes and goes - t cannotbe relied upon - s administrations change and political fashionsrun their course.All this has not been lost on the advocates of industrial policy.Som e have suggested in response that we need to insulate industrialpolicy from politics by setting up an independent authority,somewhat like the Federal Reserve Board. Such segregation wouldgo a long way towards allowing the policy to work. I t raises twoquestions though: first, in view of the indep endent course followedby the Federal Reserve Board. will Congress and the President beinclined t o turn over the form ation an d implementation o f anothermajor economic policy to an insulated body, however incompletethe insulation? Second, how would economic policy work i f t w omain par ts of it - oneta ry and industrial policy- ere free to gotheir ow n ways and to ignore fiscal policy? Dont we have enoughtroubIe dovetailing ou r insulated mo netary policy with o ur politicalfiscal policy? I t seems unlikely that American pluralism will againbe held at bay. A solution more compa tible with i t than that offeredby industrial policy is called for.Th is is not tos ugges t that industrial policy is otherwise home free,wise, or easy to implement. Its technical requirements may wellout strip the knowledge available. T he industries that will succeedten years hence need to be identified, takin g into account the futu reactions of other countries, technological development, level ofeconomic activity and so on . It suffices to recall h o w w r o n gpredictions about the price of oil and the fa te of OPEC have beensince 1973, to give one very considerable pause.Before an alternative can be suggested, 1 need to indicate my


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62 Th e Challenge of ocial Change

diagnosis of the problem that underlies US econo mic difficulties. I tis based on a theory of econo mic development and on the lessons ofthe history of industrialization of Am erica.

A T H E O R Y O F EC OS OM IC DEVE1 ,OPMKNTEconomic development is akin to a housing development. I tproceeds in three stages. First the ground is readied: water mains,roads, electricity lines, rough grading. This is the infrastructurestage. Next, heavy investments are made in buildings, the analogueof investments in capital or producer goods (plants. equipment),which are needed to make consumer goods but not consumablethemselves. Only in the third stage is the project open to rentapartments, the analogue of mass consumption of consumer goodsand services. Of cours e historically the stages are mixed; so me con-sumption takes place in the first stage, and the infrastructure stillrequire s investment i n the third st age , but ther e is a discernible shiftof emphasis. I include six elements in the infrastructure of a moderneconomy: transportat ion, communication, power, innovativecapacity, human resources, and financial and legal institutions.(Other students of development provide somewhat different ,mainly structural, lists but these differences need not detain ushere.) T he second stage brings in a seventh element: capital goods.In American history the infrastruct ural and capital goo ds sectorswere largely developed between the 1820s and 1920s. They idled inpart d uring the Depression. T heir first use after that was to serve thesecond u or ld w ar. Only after the war did we have twenty-five years ofthe third stage, the golden age of consum ption (an d of social andpublic services).

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T H E S E V E N E L E M E NT S :A h ASALYTIC AND HISTOHICALFLASI1 B A C KTransporta t ion of G o o d sA modern economy requires expeditious large-scale movement ofraw materials, parts and finished products. Material and productsin transit, like goods in inventory, a dd to cos ts, not to product ion .


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In early fa rming A merica, roads were narrow, dusty in s u mmer ,often impassably muddy in wet weather. Most simply connectedfarm s and local mar kets. Th e few built for longer distance travelwere crude, making transport s low and unpredictable. Watertransportation was better and cheaper, but reliance on naturalwaterways limited the routes and the direction of travel.Init iation of industrialization was associated with thedevelopment of canals . By 1860 a network of canals linked EastCoast ports an d the developing areas of the Great Lakes region a ndthe O hio Valley. Except durin g the winter freeze, canals could carryfreight in larger volume, faster and more reliably than roads, andthey brought much lower transportation costs. Before the ErieCa nal was built, freight fro m Albany t o Buffalo is reported to havecost $ 8 5 to $100a ton ; between 1830 and 1850, freight on th e canalcost on the ave rage less than $8 a ton .Even as th e canals were built , railroads began to overtake them .Railroads could be built where steep terrain or uncertain watersupply made canals impractical; and they could provide anintegrated nationwide transportation system. Moreover. trainscould run all winter and travel faster than mule-drawn canal boats.By 1920over 250,000 miles of track crirs-crossed the contine nt, andfour-f if ths of intercity freight moved by rail.

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Communication S yste m sCommunication systems move symbols that contain informationand con trol signals, as well as expressions of sentiments and values.Information is an important input for productive decision-making,and exped itious movement of signals is vital for large-scaleorganizations - ational corporations, financial institutions andmarkets . T he communicat ion of values and sentiments is asimpo rtant. They help broade n peoples horizons and loyalties fromthe village to the nation; they also allow public policy-makers 10gauge what th e populace will sup port, tolerate or resist.American colonists were chiefly identified with Virginia or NewYork or Massachuset ts . I t took a century or more after federationfo r a strong sense of national identity to evolve, one which couldcompete with and supersede local loyalties.Imp roved com mu nicatio n technologies played an essential part inthe process of nation-building, as well as in the transmission of


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inform ation and control signals. Early communication depe nded onslow surface transp ort. Th e Overland Mail in the 1850s pared downthe mail-coach trip fr om th e Mississippi to San Francisco, but it stillrequired twenty-two days. A de cade later a message could travel thesame distance by telegraphy in a m atter of minutes. Tow ards the endof the century, the telephone still further advanced com munication .By 1900 almost two million miles of telephone lines interlaced theent ire country .

P o w e r '\Mass production requires massive, routinely available, reliable,easy to stockpile, highly concentrated sources of energy. Thesequalities suggest heavy and growing reliance on extra-human andextra-animal sources.Early American factories depended primarily on water power,available at a limited number of sites. Afte r 1840 the use of steamincreased rapidly, fuelled by increasing production of coal; byabo ut 1860 steam surpassed water as the chief source of powe r. Themechanical power available in manufacturing plants grew from 2.3million horsepowe r in 1869 to 5.9 million in 1889 an d 18.1 million in1909.Through the 1870s, electricity was used primarily for communic-ation - or the telegraph, for example; steam and water powercontinued t o be the dominan t power sources for industry. With theintroduction of central ge nerating station s in the 1880s, electricitygained importance in transportation and industry. By 1902production of electricity was 6 billion kilowatt hours, and from thenon i t rose rapidly, reaching almost 57 billion kilowatt ho urs in 1920.

Innovat ive Capaci tyEconomic growth is propelled not merely by larger 'inputs',increases in the available amounts of the productive elements, butalso by com bining them in new, more efficient manners. Hence therole of innovation, which in t u r n is fed by research anddevelopm ent, is central.Several innova tions, oft en listed as crucial 10American industrialdevelopm ent, include the internal comb ustion engine, the vacuum


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tube , the electrical transform er. The cotto n gin, the power loom andthe sewing machine contributed to the development of the NewEngland textile industry, a fully developed factory system before thecivil war. The steamboat opened up the Great Lakes region, and anadaptation of the steam engine was the base of the railroads. Theprocess developed by Henry Bessemer in England and, independ-ently, by William Kelly in the United States, made large-scale steelproduction possible. A rough measure of Americas growth ininnovative capacity is the number of patents issued for inventions:54 4 in 1830, 883 in 1850, 12,137 in 1870, and 25,313 in 1890.

Financial and Legal InstitutionsEach of the elements of industrialization examined so far is affectedby the encomp assing society within which i t is nestled. Key amo ng thefactors that shape this setting are financial and legal institution s, suchas those that make i t possible to amass large amounts of capital orregulate th e amount o f money in circulation; those that can promo teor retard the development of corporations, which are legal entitieschartered by the state; and so on. The more society is divided intoseparate political, cultural and territorial entities, the more difficult itis t o evolve the financial and legal framework required by higheconomic g row th, because th e division limits economies of scale andrational division of labour. Typically at least a measure of nation-building and unification precedes or accompanies industrialization.I n nineteenth-century America, the national financial systemdeveloped with great difficulty due to the low level of nation-building. Until savings were no longer dispersed in thousands ofbanks, for example, specialists such as Pierpont Morgan, EdwardHarriman and Jacob Schiff had to improvise the linkages to secureenough capital for large projects.For twenty years prior to the civil war, bank notes were issued bylocal banks operating under diverse state laws. From 1863 on, as thenation sought to resolve the divisions accompanying th e war and theeconomic crises following i t , a greater degree of uniformity andnational collaboration gradually evolved. I n I913 Congressestablished the Federal Reterve System, which provided a basis fornational co-ordination of banking activities.While the majority o f the financial and l rpa l developments betweenthe 1860s and the 19205were basically favourable to industrialization,


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not all pointed in this direction. I n sizable segments of the Am ericanpublic, concentration of wealth and economic power tended toevoke fears, sometimes leading to regulations of benefit to allconcerned, sometimes to irrational interventions in the economicprocess.

Human ResourcesIndustrialization requires a labour force motivated, educated andtrained to staff the new factories, offices, financial institutions andlaboratories. In the US, unlike many other developing co untrie s, thevery availability of persons was a maj or problem. Industrializationwas not largely propelled by surplus farm labour; the large majorityof the industrial millions were immigrants.Farm hands and immigrants were educated. acculturated andtrained r athe r effectively. By 1900, for instance, 90 percent of whiteadults are reported to have been literate. Expenditures o n educationgrew from 0.6 percent of G N P in 1830 to 1.7 percent in 1900; sinceG N P was climbing rapidly, actual expenditures increased thirty-fold. By 1920 83 percent of Americans aged 5 to 17 were in schoolfor at least some part of the year, and a lthough only about o ne in sixgraduated from high school, that proportion was increasing.

Capital GoodsThe infrastructural elements are in a sense prerequisites.Industrialization itself requires the acc umulation of producer assets- he plants and equipment. the manufacturing industries.While before 1860 much of the American industrial effort waspiggybacked on the produce of field and forest, in the era thatfollowed, new sources of power and im portant innovation s in ironand steel production were major factors in making industry lessdependent o n growing things, m ore dependent o n minerals and oncapi tal goods .While steel can be used t o ma ke both capital (p rodu cer) andconsumer goods, early in industrialization much of i t is typicallyused for capital go od s, and the capacity t o mak e steel reflects a risein capital goods. Hence the amouiit of steel produced is often usedas a gross measure of the potential of the capital goods sector. In

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68 The Cha l lengeofSociol ChangePower reflects the adaptation lag, especially since 1973. Aboveall, the expected con tinuing high cost o f oil and its British Therm alUnit (BTU) equivalents, compared to the pre-1973 era, requiresheavy investments, not merely in this sector but up and down theeco n o my , to mak e i t more energy-efficient and less oil-dependent.This has been achieved only in small measure.lnnovar ive cupaciry has been declining. A widely used measure isthe propor t ion of G N P dedicated to R & D. As a percent of G N P ,to ta l R &D expen ditures fell from 3 percent in 1964 to 2.3 percent in

1979. A Commerce Department economist found one majortechnological development in the US during the 1970s: themicroprocessor, or silicon chip. Between the fate 1930s and the latei 940s. by contrast. he counted at least six, including the transistor,nuclear power and synthetic fibres. Other R & D-related problemsreported range from growing scientific illiteracy among schoolpupils to a shortage of engineers and computer programmers.In th e golden age of consumption and social services, legof andfinancial insfiturions gave less support t o production and w ere moreinclined to impose non-economic priorities on private marketdecision-making. The num ber of regulatory agencies grew fromabo ut a dozen before 1930 to fifty-eight by 1979. By th e late 1970s,complet ing the m ore than 4,000 different fo rm s required to complywith federal regulations was said to be eating up over 140 millionh o u r s of executive and clerical effort each year.

I t is widely agreed that in the last decade budget deficits andexpansionist monetary policies contributed to rising inflation,which in turn undermined the sources of investment (byundermining the motivation to save, the bond and s tock markets ,and public confidence in the governments ability I O curb inflation,an d by encouraging extensive credit use by consum ers). But it doesno t necessarily follow that between 1820 an d 1920 either [hebanking system o r Congress and the Presidents o f [h e t ime followedwiser economic policies. lndeed severe bouts of inflation andrecession were far from unknown. That over the century theeconomy d id so well is probably more because the interestscommit ted to industrialization had a freer hand in those days thanafter the second world w a r , and because the government, beingmuch smaller in size, scope and powers, caused less damage evenwhen its econo mic policies were no tviser.

As to the grad ual changes between 1950and 1980 in the financialand legal framework of the American economy, they seem to have


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turned less accommodating, either because increasingly theypromoted values other than economic growth and efficiency, orbecause the government grew bigger, more bureaucratic and morerestrictive.Th ere is no general agreement that the quality of human resoitrceswas lower at the end of the post-war generation than i t was at the endof the first century of industrialization, but there are some signs ofweakening since the second world war. The labour forces prepar-ation - s measured by capacity to read, write and com pute- eemsto have weakened in th e 1960s and especially in th e 1970s. Data aboutthe motivation to work are divided between data that show deterior-ation an d those that suggest a change in the natur e of the m otivation.Motivation now is said to call for more op en , sensitive, participatorymanagement, a style that had not been widely adopted by 1980.

Major segments of th e cupifal goods sector were seriously under-maintained during the period of high consum ption. Plants, machineryand equipment in several key industries grew in obsolescence. Thisseems to be the case in such major American industries as cars andsteel, as well as in rub ber , textiles and shipbuilding.It might be said that the decline of some industries and the rise ofothers is part of the adaptat ion of the economy to changingconditions. For instance, in a world of rising oil costs it might servewell to reduce capacity in car manufacturing and to build up energyservices. At issue is not drawing up a master plan but accepting themarkets way of adjusting to changed circumstances. There iscertainly a measure of truth in this argument. At the same time, it isclear that on balance the fora/ American capital goods sector did notfar e well. Its share of the investment ploughed back into the econom ydeclined, while the sh are channelled into residential housing, actuallya consumer good, rose. And a growing segment of investment incapital goods was dedicated to safety and pollution abatement ratherthan production.

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REINDUSTRIALIZATION: -\A N AMERICAS hlO D ELEarlier and recent American history suggest, i f the preceding analysisis roughly correct, [liar a strong economy requires that the sevenelements listed above be in good condition, and that by 1980 six ofthem had deteriorated at least to some extent. This analysis thus


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very consid erable liberalization of the rules concerning IndividualRetirement Accounts ( I R A s ) and Keogh Retirement Plans, and theaccelerated depreciation allowance. These items ar e remarka ble inthat, with th e exception of the capital gains tax reduc tion, they notonly spu r investment, but also limit i t largely to produ ctive assets,excluding collectables (such as gold, antiques. art objects). At thesame time, they do tiot favour the stocks or bonds or machinery ofone industry (or corporation) over another. Thc incentives set awide context, and allow the market to make decisions within thatContext. I t is useful to refer to this approach as semi-targeted, incontrast to non-targeted measures (such as granting each taxpayerthe same prop ortiona l tax cut), and targeted on es (such as industrialpolicys selection of winning industries).A second element of a policy that favours reindustrialization b ypromoting a whole sector - ithout tak ing sides within it - s newsupport for R & D. T o s p u r growth in innovation. the 1981 tax billgives corporations a 2 5 percent ta s credit for research an dexperimentation costs, to the extent that current or futureexpen ditures esceed previous investments in the field. Th e base forcalcula!ing this amount is the average expenditure over the threeprevious years. In addition corporations giving new scientificequipment to colleges and universities can claim a charitablecontribution equal to their investment in the equipment plus 50percent of the gain that could have been realized had i t been sold atmarket value.This too is a context-setting measure, in that i t rewards thosecorporations that increase their expenditures but does not preferone line of research to another. I t contrasts sharply, for instance,with the suggestion that $20 billion of federal funds beco rnm itted tofusion research, based on a 1980 congression al decision th at thisspecific research project was more deserving of funds thannumerous others. Indeed in the past most public funds for R & Dwere allocated on the basis of project-by-project reviews.The effects of these measures - avouring capital formation andR & D - annot yet be assessed, because they were introduced in aperiod of severe clash between m onetary and fiscal policy, resultingin a prolonged recession and very high interest rates, which largelynegated these tas incentives.The other elemerits of reindustrialization have not fared as welland still need attentio n. U S energy policy currently calls mainly fordecontrol , an d for elimination of the Department of Energy, which


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72 The Challenge of Social Changemeans that the market is to provide the only guidance. A tariff onimported oil should be instituted and its revenue used to spur develop-ment of all energy resources without discrimination. Similarly allconservation efforts should continue to be encouraged, fo r instance,by extending the right to write off conservation expenditures.Similarly there is n o transportation policy, and abo ve all, no labourpolicy. In transportation, deregulation is to be applied to railroadsa nd , to a lesser extent, to trucking. Returning publicly held railroadsto the private sector - r closing them do wn - as been suggested,in line with the non-targeted approa ch. However, if only to make u pfor decades of neglect, transportation systems need some semi-targeted help, even some infusion of public funds, above and beyondreliance o n th e private sector alone, to rehabilitate and m aintain themand to introduce innovations.A criterion not of ten relied upon in the past should be pivotal in thefuture: th e degree to which various transportation systems and m ixesare capital-intensive. Capital will continue to be scarce, and henceexpensive. and much is needed for reindustrialization. This will bereflected in higher interest rates throughout the 1980s than in thepreceding decades. As a result, the market context created by thepolity should favour less capital-intensive transportation systems. Inthe movement of people, this might mean buses over rapid transitsystems. Which systems are least capital-intensive for the movem entof goods requires extensive study, which has yet to be undertaken.For the Same reason, and via the same mechanisms, transportationsystems dealing with freight should take priority over those thattransp ort m ainly people, such as airlines.Regarding labour policy and human capital, no effective schemeshave been advan ced so fa r to allow w orkers to participate in prod uct-ivity gains. T his is an essential element i f workers are to become morestrongly motivated to contribute to economic reconstruction, and ifthe Am erican indu strial system is gradually to shift fr om reliance oncost-of-living allowances to a productivity-based reward system.Possibly not much more can be do ne by the governm ent. Preciselybecause we deal here with the hum an element, with values, sentiments,perceptions and motivations, the government is a particularlyunsu ited age nt, certainly for close and detailed interven tion as distinctfrom broad-gau ged economic incentives. Much m ore must com e fromthe private sector. The recent interest of corporate management inquality-of-worklife (QWL) programmes bodes well from that

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Eirioni 73Nevertheless, public policy does have some limited roles here. I tcan provide a model for such plans by Q W L circles in governmentagencies, call attention to successful efforts in the private sector, andin some situations provide tax benefits, as it does in effect for th eKeiso Employee Stock Option Plan (ESOP) plan. However, quitesuitably in a new era of semi-targeted incentive, much of the actualmodification of work patterns must be done by the corporationsthemselves and their workers.More important are the relations between labour and theadministration in the public arena itself. The basic question iswhether co-operation is sought and achieved or an implicitassumption is made that economic reconstruction can be undertakenwithout labours support. The first road leads to consultation with

labour leaders, to an American reindustrialization board or itsequivalent, to policies that reduce the pain of adjustment totechnological changes (f or example, sup port for retrainingprogrammes and for enhanced labour mobility from declining areasto rising ones), a nd so on . The opposite approach assumes that risingmarket pressures, high unemploym ent, and decline in public s,upportfor labour unions will suffice for the adm inistration to have its way,whether the workers and their representatives like i t or no t . TheAmerican tradition of adversarial relations among the main sectors- business, labour and government - promotes the secondapproach. However, in view of the sizable pain a majorreindustrialization drive is likely to entail, in a period wheregivebacks are needed to keep up with international competitionwhere once hefty raises were the rule, i t seems that a policy ofcollaboration and attem pts to gain a social contract are called for.These omissions pale in comparison to the difficulty resulting fromactive attem pts to pursue two other policy goals- earmament anddeflation- imultaneousl) with attempts to shore up the economicfoundations and secure a higher level of economic grow th. T he steepdefence build u p - rhatever its virtues - bviously com petes withreindustrialization i n using very large amounts of resources. I t mightwell have some beneficial side effects, but basically it competes anddoes not complement reindustrialiration in the near future. When theeconomy was more vigorous, i1 seems, i t was possible to dedicatemore resources both to defence build ups and to the consumereconomy; th e period of the Korean \var is an example. However, witha deteriorated capaciry, some sa y an agcing economy, a full-throttleapproach to two major goals scems impractical. A slower defence


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74 The Chal lengeof Social Change

build up until economic revitalization takes place may be inevitable.(The opposite trade-off - eferring economic recovery until defencebuild up is advanced - ould gen erate an even greater strain betweenthe tw o goals.)The drive against inflation has fallen largely on the monetaryauthorities (as a result of large budget deficits, the work of the fiscalauthoritie s). This led the federal reserve in effect to keep interest ratesvery high fo r long periods, causing a prolonged recession, directlyantithetical to economic growth. In the longer run, lower inflationma y well serve saving, investment and w holesome growth . Me anwhilehigh interest rates largely nullify the reindustrialization drive.In the context of th e present environmen t. it is difficult to judge theeffectiveness of the semi-targeted reindustrialization tools. Aplausible case can be ma de that they would work in a more favourablecontext, and a compelling case can be made that they are needed ifAmerica is to find its own way of economic reconstruction. Toreiterate, it is clear that the found ation s of .the economy, theinfrast ructu re and capital goods sectors (made up of seven elements)need to be shored up . A typically American way to proceed would beto provide context-setting incentives and allow the market to renderspecific, allocative decisions.

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REFERENCES

Etzioni. Amitai (1984)Capiial Corrupimn: The h k * 9 A ~ c u c kn American Dem0croc.v.Lanouette. William J . (1982) 'Don't Do U s Any Fabors'. h b r t o n u l Journa l 14 (17):Vogel, Ezra (1979) upun as 4Vur t?krOrw. Canibridge: Ha\ard Univer\iry Press.

N e w York: Harcourr, Brace. J ovanovich .293.

challenges of social change

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