What Happened To US Business?

[Darryl G. Thomas]

Was our business elite really that good or were we just lucky (until now)?

The Rise of American Incompetence
We used to be the world's most skillful entrepreneurs and managers. Now we're laughingstocks. What happened?
By Daniel Gross
Posted Saturday, March 15, 2008, at 7:12 AM ET

The dollar plunged to new lows against foreign currencies this week. There are plenty of reasons for its plunge, but at the most basic level, the dollar's weakness reflects the world's collective, two-thumbs-down verdict about the ability of the United States—businesses, individuals, the government, the Federal Reserve—to manage the global financial system and the world's largest economy. Countries that outsourced their monetary policy by pegging domestic currencies to the dollar are having second thoughts. Kuwait last year detached the dinar from the dollar, and Qatar government officials last week said they were considering doing the same with their currency. International financiers are unnerved by the toxic combination of "misplaced assumptions about housing, a lack of necessary regulation and irresponsible use of debt with sophisticated financial instruments," said Ashraf Laidi, currency strategist at CMC Markets.

Dissing American financial management is an affront to national pride tantamount to standing in Rome and asking, loudly, if Italians are able to make pasta. The United States invented the concept and practice of running large, complex systems. Along with baseball and deep-frying, management is one of our great national pastimes. The world's first MBAs were awarded by pioneering yuppie factories such as the Wharton School at the University of Pennsylvania. (Wharton's founding in 1881 was quickly followed by the world's first time-share summer houses in the Hamptons.) Henry Ford's revolutionary assembly line was the gold standard in global manufacturing for decades. Contemporary American institutions stand for excellence in managing everything from supply chains (Wal-Mart) to delivery services (Federal Express and UPS).

Americans' ability to manage complex systems has been the ultimate competitive advantage. It has allowed the United States to enjoy high growth and low inflation—a record we haven't hesitated to lord over our foreign friends. The shelves in the business section of a bookstore in a mall in Johannesburg, South Africa, are stocked with the same volumes you'll find in a Barnes & Noble in Pittsburgh, Pa.: memoirs by cornfed paragons of capitalism like Jack Welch, wealth-building advice from American money managers, large tomes on how Andrew Carnegie and John D. Rockefeller built global businesses from scratch.

But now, thanks to widespread incompetence, American management is on its way to becoming an international laughingstock. Faith in American financial sobriety has been widely undermined by the subprime mess. The very mention of the strong-dollar policy now elicits raucous bouts of knee-slapping in even the most sober Swiss banks. (How do you say schadenfreude in German?) Earlier this month, as oil hovered near $100 a barrel, President Bush complained to OPEC about high oil prices. OPEC President Chakib Khelil responded acidly that crude's remarkable run had nothing to do with the reluctance of Persian Gulf nations to pump oil, and everything to do with the "mismanagement of the U.S. economy." Since Bush's plea, oil has gushed to $110 per barrel. (How do you say schadenfreude in Arabic?)

Americans abroad are constantly taunted by perceived failings of American management. America's aviation system is now the butt of jokes because 9-year-olds have become accustomed to removing their Heelys before boarding a plane. As my family and I passed through the snaking security line in Cancún, Mexico's airport last month, we were harangued by a security guard who encouraged tourists to sing along with him: "Please. Do not. Remove. Your shoes."

The concern extends beyond airlines to America's industrial complex. Doubtful of the ability of provincial American executives, with their limited language skills, to negotiate today's global business environment, the boards of massive U.S. firms like Coca-Cola, Pepsi-Cola, Alcoa, and insurer AIG have hired foreign-born CEOs. Carl Icahn, the 1980s corporate raider, has reinvented himself as a borscht-belt comedian/activist investor, who delights conferences and reporters with jokes at CEOs' expense. On a recent 60 Minutes, Icahn complained to Lesley Stahl about the incompetence of American management. "I see our country going off a cliff, and I feel bad about it."

Icahn is moping all the way to the bank. The market's recognition of management failures gives him the opportunities to acquire companies on the cheap. But those of us who aren't billionaire corporate raiders—which is to say pretty much all of us—must manage through this management crisis on our own.

[rollhead]

Our business leaders are committed to outsourcing/selling the American economy in exchange for short term, selfish monetary gain. It was pioneered by people who wrote those best-selling management books. Guys like Neutron Jack Welch. It's the "American Way."

[rollhead]

Darryl:

If it is any consolation, exports of U.S. garbage have been rising for several years.

January 14, 2005
FLOYD NORRIS
U.S. Tech Exports Slide, but Trash Sales Are Up

HO says the United States cannot compete? Trade statistics may indicate the country is slipping in technology, but we're still tops in trash.

In the late 1990's, those who counseled Americans not to be worried about the growing trade deficit pointed to "advanced technology products" - a category tracked by the government that reflects what it calls leading-edge technologies. The United States was running a sizable trade surplus in that area, and shipments of those products were rising much more rapidly than other exports.

All that has changed. In November, the United States had a record trade deficit of $5.8 billion in advanced technology products. For the most recent 12 months, the deficit was $36.9 billion, also a record.

And where is the strength? The trade surplus in what the government calls "scrap and waste" is rising. The 12-month total of $8.4 billion in such exports is up 31 percent from a year earlier.

"What is effectively rubbish," said John Lonski, the chief economist of Moody's, "serves as one of the U.S.'s fastest-growing export categories."

Compare the annual levels of exports in those two areas with those of 1999, and you get a stark picture.

Exports of advanced technology products are down 21 percent, while those of scrap and waste are up 135 percent. To some extent the technology decline reflects the bursting of the bubble, but imports of technology products are up 28 percent, indicating that it's not just the bubble at work.

[Pete C]

When I was working in IT for financial services companies I was amazed at the waste and bureaucracy. Over a 20 year career I must have worked on at least three multi-million dollar ill-conceived projects that had the plug pulled after months (sometimes years) of work. I wondered how great the economy would have been doing if things were actually done efficiently.

[Monte Smith]

Originally Posted by Pete C

I wondered how great the economy would have been doing if things were actually done efficiently.

How do you make money? By figuring out how to do a thing efficiently and doing it perfectly, or by doing hundreds of things badly and letting your losses tell you what is efficient? A genius company can do the former; an economy can only do the latter.

[Gary Sisco]

They could try, uh, making things. Capitalism is a system of production.

All they've been doing for years is finding ways to finesse the bottom line, mainly by shedding workers and selling each other loans and paper back and forth (actually electrons). Our mortgage has been held by at least five corporations in ten years, one of them more than once. The personal profits taken by these activities are real enough but the corporate profits are shams. This should have been learned after the 90s. But, no ...

Make things that people need (not want -- need) and people will buy them.