Confronting government policy: yesterday, today and tomorrow.

Adherence to ideals, coupled with the ability to adapt, will help metalcasters battle oppressive bureaucracy.

It's been said that the most immediate and central political issue in capitalism - the issue that takes on an almost obsessive prominence in every capitalist nation - is the relationship between business and government.

Metalcasters have, throughout the history of our own nation, harbored a deep skepticism about government's ability to solve great economic and social problems. Our relationship with government today often feels like an exhausting battle against a mammoth regulatory state that seems arbitrary and unaccountable, that threatens to choke off our future.

You know this firsthand as you toil under the weight of endless reporting requirements; overlapping and duplicative regulations; costly and often wasteful mandates; the threat of fines, lawsuits, or even jail time for violations; and the constant presence of a government that presumes to know better than you how to manage your business.

Government as Ally

We have good reason to be skeptics. The fact remains, however, that government and the foundry industry have had a long, complex and often mutually beneficial relationship. If one considers the role that government has played in metalcasting, it is clear that government has not always been our chief nemesis. The prerogatives of foundries and government that today too often collide have at many points in the past been in concert. This is a provocative notion that challenges the belief that in every case, government has no business in our business - period.

We can't deny that there have been key eras in our nation's history when government has been an important driver of metalcasting success. The expansion of the western frontier and the building of railroads, both world wars, the development of our aerospace program and highway system, and cutting edge federal research and development efforts to serve both national defense and civilian needs - are just a handful of the many points of cooperation between the foundry industry and government. Some instances are obvious, others are not.

By the 1890s government regulation was playing an increasingly important role in the progress of the casting industry. There is no doubt that these early days of government regulation protected and stimulated the industry's growth - the Sherman Anti-Trust Act, new industry protections, the tariff on imported steel and government purchase orders that specified material of American manufacture. This last mandate benefited the steel casters especially as it applied to the construction of naval vessels. An 1893 law requiring automatic couplers on all passenger and freight trains ended up to be a bonanza to the steel casting industry.

As recently as the 1950s, the federal government initiated another program of dramatic significance to the foundry industry - the Interstate Highway System. This literally opened the way for another boom in the domestic automotive industry. Trucks and cars were rolling across the nation in record numbers. Even today, the automotive market for foundries draws 33% of the nation's total castings production.

And currently, as foundries compete against new materials and processes, the Department of Defense (DOD) is working with the industry to convert various metal component parts to castings, and to improve our technology. The success of this DOD program is expected to save the Pentagon money, and further expand casting markets.

Now, none of these are arguments for protection, handouts or favors from government. These are just a few reminders of converging interests - lest we forget the same government we may regard as enemy has and will continue to play a powerful role in our industry.

Government as Intruder 

At the same time, we cannot avoid the reality of coping with our own government as an impediment to progress. The general trend over the last 30 years is defined not by cooperation but by conflict in the intersection of interests between foundries and government.

The progressives in the early part of our century fundamentally changed the landscape of all American industry's relationship with government. They created the foundations of modem bureaucracy to respond to labor concerns, workplace conditions, and the dangers of the growing concentration of economic power. New regulatory commissions - given tremendous discretion by Congress - flourished.

In the 1930s and '40s, President Franklin Delano Roosevelt expanded both the size and power of the bureaucracy. In his first two years in office, FDR created 60 new agencies with 100,000 new jobs. Even more authority was granted to the bureaucracy in a way that laid the seeds for the regulatory state we have today.

The foundry industry, like the rest of manufacturing, tolerated the bureaucracy during WWII, because it was designed as a "temporary" response to the emergencies of war and the demand for castings was seemingly endless. By 1943, Roosevelt had asked for $152 billion in armaments, as well as 60,000 airplanes, 45,000 tanks, 20,000 antiaircraft guns, and 6 million deadweight tons of merchant ships - an all-out industry production effort. Rigid government control over foundry operations was simply part of the equation.

The war, of course, ended and with it many of the war agencies, commissions, and programs. What lingered, unfortunately, was the sense that when necessary the government can effectively "manage" and control not only the direction of the larger economy, but also the details of manufacturing.

President Dwight D. Eisenhower eased the reins on business in the 1950s. Congress, however, was moving in the opposite direction and passed the first federal air pollution control legislation.

The 1960s and '70s brought many changes in the link between government and industry. We saw government decisions driven by a rising chores of new voices and new interests clamoring for more activist government on behalf of consumers, public health and the environment. Lawmakers responded with an avalanche of prescriptive laws - OSHA, the Clean Water Act, Clean Air Act and others. Despite Nixon's abhorrence of all bureaucracy, the regulatory juggernaut continued on.

During the era of President Reagan, oddly enough, we did not successfully weaken regulatory control over manufacturing. Instead, we continued to elect liberal Congresses that gave us an even stronger, more inflexible, more intrusive web of law and agency rulemaking.

By the time President Bill Clinton took the White House, the number of pages of regulations in the Federal Register every year had grown from less than 10,000 in 1950 to more than 60,000 a year. Since 1989 alone, the government burden on small business, including taxes and regulatory costs, has increased from around $4000 to more than $5500 a year per employee.

Even with the new Republican Congress, we face the tremendous burden of making sense out of, and turning back, the powerful waves of environmental and social legislation passed under the 12 years when Republicans occupied the White House.

I lay out this chronology to illustrate the depth of a problem that has been decades in the making, and the cumulative effects that have become increasingly unbearable for our industry and our nation.

In the environmental area especially, government has reached a point of diminishing marginal returns in regulatory programs geared toward foundries and other manufacturers. In 1955, there were no overarching federal environmental laws that seriously impacted manufacturing. By 1994, there were more than ten major federal environmental statutes on the books, as well as thousands of regulations.

Our nation now spends billions of dollars every year on the federal Superfund toxic cleanup program. And even though EPA's own scientists have determined that toxic dumps are one of the lowest risks on the totem pole of threats facing Americans, the feds spent $8.5 billion last year on Superfund. This amount is double the sum total of all federal dollars dedicated to research on heart and lung disease and AIDS in this country.

Researchers have now determined that for every $1 business spends on environmental compliance costs, $3 - 4 are lost forever for productive uses. The foundry industry will spend millions of dollars simply to fill out paperwork and comply with permitting requirements of the 1990 Clean Air Act - without removing from the atmosphere one molecule of pollution.

These are just the beginning of the litany of challenges we face in our current regulatory environment, even while we have more allies than ever on Capitol Hill.

Lessons to Guide Us

Where do we go from here? What are the most important things we need to remember as we move forward?

Today's message is not really about the issues in all their complexity. It's about a few simple but enduring lessons that might guide us into the future as we confront the challenges of government and function as successful participants in our nation's political life.

During the course of my career in business and government, I have gained insights and learned many lessons about both institutions. I have had the good fortune to work under two now legendary figures in our nation's history: former President Reagan and U.S. Senator Strom Thurmond of South Carolina.

The most important lessons I've learned are not about hardball politics or legislative strategy or who is calling the shots in Washington.

Three of those lessons stand out as profound for me whether I am in Washington or Kalamazoo; whether I'm working an issue in Congress or advising my children on their future. I want to share these three simple lessons with you.

Principles Withstand Time

First, whatever the challenge, certain bedrock principles and commitments never change, but instead guide us, encourage us and empower us to act boldly to accomplish a grand purpose.

For me, Reagan's presidency embodied this lesson. He exemplified the notion of unflagging devotion to the ideals of individual freedom, the dignity of work, and a restrained government that relies on the raw will and innovative spirit of the people of this nation to achieve and progress.

Through all the demands of a modern presidency, he adhered to these uncomplicated tenets. They defined him as a president. Agree with him or not, we knew exactly what he stood for - regardless of which way the political wind was blowing.

Metalcasters have for centuries committed themselves to certain principles in advancing the industry: technological ingenuity, integrity in the way you do business, a strong work ethic, and unwavering pride in the industry. These principles have remained constant even as the industry has adapted to changing markets and government demands.

Excellence and concrete progress in the foundry industry are not driven by wizards and wands; they are not driven by accidents. They emanate from people driven by commitment. People who are innovators. People who are proud of the work they do and the industry they've built.

Almost 100 years ago, when Francis Schumann accepted the nomination to be the first president of the American Foundrymen's Society, he challenged those who had come together to advance the interests of the industry:

"Gentlemen," Schumann said, "I will accept the nomination provided you will agree to make up your minds right now that you will do all you can to be proud of being foundrymen."

I have worked closely over the last five years with leaders of the foundry industry, and have gained a deep appreciation for the manner in which they conduct themselves and their businesses, how they approach their tasks as managers, engineers, thinkers and citizens involved in the affairs of the industry and increasingly in the affairs of the nation.

You represent what someone once said about a certain breed of business leader. This breed is "oftentimes more interested in increasing production, and thereby serving humanity, than in making money for money's sake...such men are in some ways the hope of America and the world."

Francis Schumann would be gratified to see that you remain a principle-driven industry and that you are, indeed, proud of being foundrymen.

Perspectives Must Adapt

So our core principles must remain steadfast. At the same time, our belief systems are never static, but must flex and adapt to changing times. This is the second lesson I've learned. Like the world around us, our perspectives are enriched and evolve overtime. We cannot hope to progress or offer the world anything of value if we cannot adapt to a world that is constantly changing.

Senator Thurmond's life embodies this lesson. Born in 1902, he has served in the U.S. Senate for 40 years and under nine presidents. Throughout his public service his deepest principles have been undiminished. Yet his perspective on some of the most divisive issues of our time has evolved, and he has drawn new conclusions about the potential of all individuals and about what is required to keep our nation together.

Thurmond dramatically showed his commitment to principle while adapting to change, when in 1964 he left the Democratic Party to become a Republican. He said, "I can only say that I fully realize the political risk involved in this step and that my chances for reelection might go down into oblivion. But in the final analysis, I can only follow the course which in my heart and conscience, I believe to be in the best interest of the state, our country, and the freedom of our people." That was 31 years ago and he is still serving the nation today.

Likewise, the rich history of this industry illustrates the ability to adapt to the demands of changing markets, global competition and government mandates.

Economist Joseph Schumpeter has observed that capitalism is at odds with equilibrium. By its very nature, capitalism foments change. The key to survival of capitalism, according to Schumpeter, is the creative destruction and constant replacement of established social structures, industries and technologies with new ones.

The foundry industry has experienced this phenomenon in the harshest way. In the 1800s foundries were small and dependent upon the supply of local resources, fuel, flux and ore. They actually became self-eliminating through their own by-products. The steam locomotives, and later automobiles and airplanes provided better, easier and less expensive transportation. Therefore, the markets for cast metal changed and often moved away.

These prime new users of castings had a direct effect on the industry. Foundries consolidated into larger and fewer units, and smaller, less efficient, less capitalized foundries were weakened until rough business cycles finished them off.

But the ability to adapt to change does not necessarily correspond to size and strength. One of the venerable giants of the industry, Baldwin Locomotive Co., founded in 1831, with peak sales in 1952, disappeared in the mid-'50s. Shortly before it closed, its president insisted that the diesel locomotive would never replace steam.

In our nation's politics, we have successfully adapted. The foundry industry has moved far beyond simply reacting to legislative and regulatory mandates once they hit the shop floor. AFS and the larger industry are building strong working relationships in Washington, educating national policymakers, and influencing the process before the seeds of regulation have begun to germinate.

Ideas Have Consequences

The third and final lesson I've learned is that ideas have consequences. We all possess beliefs and principles about how the world works. We carry ideas our whole lives about what is right and wrong in the world, about what is and what ought to be - about possibilities for the future and the role of individuals and organizations in shaping it.

The things we believe in have the power to change our destiny. The seven foundrymen who signed the Declaration of Independence fully understood this. The ideas of countless entrepreneurs, scientists, engineers, managers and those on the shop floor have been responsible for the tremendous success and staying power of this industry.

As we move toward the centennial celebration of the formation of AFS, we recognize the enduring power of the idea of the AFS founders, "that the interests of the foundry business should be furthered by a closer association...among foundrymen."

Today, AFS is advancing the interests of the industry in a way probably never envisioned by those gentlemen in Philadelphia in 1896. AFS is providing a unified voice and is moving the industry into a lead role in many key policy debates in Washington.

Challenges

Each of the lessons I've touched upon has sustained application to us as individuals, as an industry and as a society. As we consider the past, as well as the enormous task ahead, we are not at a loss for guidance on how to proceed.

The chief question we must ask ourselves now as we confront policy makers and regulators is not whether we need government, but whether government needs us.

The answer is emphatically YES! Our government desperately needs us. It needs the wisdom of metalcasters - your insights, your skills, your knowledge, your experience in dealing with today's problems.

We have the ability - and the obligation - to work with our lawmakers to reinforce those principles upon which our nation was built, to move our government to adapt to a changing world, and to challenge our government to understand that the ideas they act upon today have powerful consequences for our industry tomorrow.

Many metalcasters have rightly become frustrated with government. The danger is that frustration breeds a cynicism that tempts us to avoid participating in the political life of our nation. As responsible corporate citizens, we know that this "head-in-the-sand" view is useless. Government is part of our lives and very much a part of our work.

Our challenge then, is to work with the institutions that exist, to point out where they've faltered and failed us, and make them work for us. Those in the industry who are now involved in government affairs can attest to the fact that this is not simply an elusive mirage that's impossible to reach. We are making reform a reality.

As a single industry, we can not solve all problems and we aren't trying to. But foundries have already built a record of accomplishment in the past several years and, with the right focus, energy, commitment and strategy, we will continue to see signs of success.

AS we move toward the centennial celebration of the formation of AFS, the time is right to look back on our own robust history, to renew our commitments, and reinvigorate the ideals that have propelled the industry forward. It's time to stretch ourselves and apply our wisdom to the decisions of those who are crafting the solutions for tomorrow. Our contribution to this nation's future is indispensable, and is now more necessary than ever.

Diana L. Waterman, head of the AFS Washington Office since 1993, delivers this year's Hoyt Memorial Lecture. The first woman to be given that honor, Waterman is a graduate of Univ. of Wisconsin-Milwaukee and the Univ. of Wisconsin-Madison Law School. She has served in the U.S. Dept. of Justice, the U.S. Senate Committee on the Judiciary, and is a partner in the government relations firm of Waterman & Associates.