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Different economic systems: vast new opportunities for business economists.

Economic changes in major industrial nations create new opportunities for American industry and for business economists. But the U.S. must compete more effectively. We must understand that economic systems are different. The U.S. has a high cost of corporate capital, a low savings rate, high Treasury reliance on financial markets for debt financing, high corporate tax rates, and a short-term investment horizon. These factors permit a high consumption economy with low personal income-tax rates. To be successful overseas, U.S. corporations must understand the differences and play by their rules, not ours.

IN THEIR ADDRESSES to you, NABE Presidents over the years have discussed one of two subjects: either some macroeconomic problem or policy or bit of philosophy; or the profession of business economics. It's time to try to weave both themes together.

At the end of the 1970s, Frank Schott addressed us about the need for upgrading the quality of our credentials and analytical tools as economists. He warned that we risked the loss of our constituency -- our corporate bosses -- if we did not maintain high standards and high levels of credibility.(1)

Don Conlan led off early in this decade with his admonition that "business economists cannot forecast!," and directed us to get back to our basics -- or else. He clearly said that we cannot forecast, and he quite nicely anticipated the firestorms that the business economics profession would encounter during this past decade.(2)

Needless to say, the warnings were prescient. Our profession underwent a "restructuring," to put it mildly. Using total NABE membership as a very rough proxy of the health of our profession, we reached a peak of 3,950 in the early 1980s and declined to about 3,200 a couple of years ago. I'm happy to say that membership has bounced back to more than 3,700 and is rising vigorously.


Now, as we prepare to enter the decade of the 1990s, the advice of Frank Schott and Don Conlan remains highly relevant. We must maintain our standards. We should also do what we can to help standards of economic thought outside the field of business economics, and I shall say more about this during this paper. But, unlike the 1979 backdrop to Frank Schott's speech, there are many changes taking place within the family of industrialized countries. The long peacetime expansion of the 1980s has boosted the industrialized economies, although a retrenchment continues in the relative position of the U.S., with huge increases in Europe, Canada and, especially, Japan. Of more importance, let us hope, is the wonderful process of economic integration occurring in Europe, where the whole may turn out to be greater than the sum of the parts.

All these changes are creating major new opportunities for American industry -- our employers -- and these will lead to expanding opportunities for business economists. They should also lend to opportunities for NABE. With some luck, the decade of the 1990s will be much more rewarding for all of us than the difficult decade that we're now closing out.

But the improvement in the U.S. economy in the 1990s will not come automatically nor easily. In the 1990s, the United States will need to compete more effectively in world markets with the other two economic superpowers, the European Economic Community and Japan, if we are to remain an economic superpower. While U.S. industry has been very effective in establishing a very large beachhead of direct investment within Europe and competing within that marketplace, it is less than perfectly clear that the U.S. will be welcome to export to the EC in the future. With the exception of Canada, where the bilateral deficit with Canada has come down, the U.S. is slipping most everywhere else. We are losing the race with Japan. U.S. products are not even visible in Southeast Asia, a region that has effectively moved into an economic orbit around Japan. The same is happening in Latin America, which used to be a proprietary economic client of the U.S. In total, the U.S. current-account deficit this year will be more than $125 billion, slightly less bad than a couple of years ago, but the improvement has been brought about by slower growth of imports and the July revisions to the national accounts (which discovered a missing $20 billion of exports), rather than growth of U.S. exports,

Retention of superpower status requires that the United States improve its economic policy performance. The chief means of doing this will be American industry -- more investment and effective competition overseas by your employer and mine.


I believe your actions and results will be critical to this country's success. The reason, to use Don Conlan's description of business economists, is that we have been trained to think in circular ways. We are accustomed to think about feedback loops: What is the impact on B if A is changed, and do we then create a problem with C? Changing C will require changes to A. Circular logic. Most business executives, by contrast, are linear thinkers. The successful ones are very good, but the thought process is in straight lines. For example: Improving per share earnings will require a reduction in unit costs, and how can we restructure the company to get costs down? Many of us are very familiar with that process in more ways than one!


Let me illustrate why so much fertile ground is available for business economists to make a contribution to improved international competitiveness by the U.S. The focus here will be primarily upon the U.S. and Japan relationship, because Japan is a country and a market where I have spend a huge amount of time in the past several years. I have suggested the U.S. is losing the economic race with Japan. Successive Japanese governments have promised to open up the Japanese marketplace to American producers, but, with the passage of time, American producers have achieved only a modest share of the market in some Japanese industries. Why? Here's a familiar list, though I do not agree with many of these points:

1. Foreigners must "be patient an give the

Japanese more time to open up their markets."

In the cases of beef, citrus, and rice markets,

Americans have heard this one for a couple of

decades. American-raised beef is finally

arriving in Japan -- as U.S. cattle ranches

increasingly come under Japanese ownership. For

oranges and other produce, however, U.S.

growers find that other countries produce high

quality agricultural product at a lower cost.

U.S. pressure is succeeding in opening

agricultural markets in Japan -- to producers in

Australia, New Zealand, and Argentina.

2. The notoriously inefficient Japanese

distribution system in the wholesale and retail

trades gives scarce shelf space to traditional

suppliers, usually Japanese, of course -- and

new entrants, especially imports, have a very

difficult and slow time attempting to penetrate

markets. This system produces awesome

markups in Japan (by American standards) and

sky-high retail prices.

3. American products are not sufficiently

"Japanese." One of the strongly held beliefs in

Japan is that the Japanese people are unique.

Successful cigarettes in Japan are those that

have a "Japanese flavor" in the tobacco -- or

so I'm told. Up in the mountains in Hokkaido,

the snow crystals are said to have a uniquely

Japanese shape, and only Japanese-made skis

and waxes are adapted to the shape.

4. The Japanese insist upon protracted

negotiation at every step in the market-opening

process. I remember a conversation a year ago with

a top government official about American

entry into the Japanese distribution system. He

said, "Well, of course, most all sides in Japan

agree that the distributions system needs to be

opened up and modernized, but we won't do

it unless the U.S. and other governments

negotiate all the points."

5. The Japanese government changes laws and

regulations to help the export activities of

Japanese mercantilists. Japan reformed its tax

laws last year in an effort to lower corporate

and personal income taxes, get rid of its luxury

tax on automobiles (GATT said its luxury tax

could no longer be rebated to manufacturers

on vehicle exports), and to introduce a

European-style value-added tax, which is

rebatable on exports. For auto manufacturers, the

shift in tax systems is very important, enough

to offset a 7 to 10 percent appreciation in the


The list could go on and on. But this misses the point.


When we or our companies or our government ask, "Why can't Japan open its markets or take other actions to reduce its massive trade surpluses?," we are effectively trying to subject Japan to our set of economic rules. But there are different standards in the industrialized countries -- or, if you will, different economic systems. Forty years ago, when most of Europe and Japan were still rebuilding from the devastation of World War II and the U.S. was the only superpower around, it was acceptable for American rules to be the only standard. No longer. Today, it is "arrogant to think that Japan -- or any other country -- ought to run by our rules and standards."(4)

The economic systems that are in place are different -- not better or worse, just different. We are not about to get the EC or Japan to convert to the principles of our economic system, nor are we likely to change to theirs. If the United States wishes to deal with the EC or Japan, we need to understand how the different economic systems operate. Then we have a chance of investing and competing successfully. This is where your powers of circular thinking become especially relevant and important.

For NABE and our fellow business economists in Canada and Europe, one high priority should be to attract business economists in Japan into the International Federation of Associations of Business Economists (IFABE). At the IFABE meetings in Paris this past May, it was recognized that Japan was conspicuous by its absence from the organization. One of the tactical barriers to correcting this situation is that Japan does not have an organization of business economists. But we are working with officials in the Japanese government and economists in industry to see if this can be rectified.


I have identified some of the bothersome characteristics of the Japanese economy. Let me take a look at some of ours, starting rather far afield from the core of economics.

The Metric System

Everywhere else in the world, people would say that here in San Francisco it will be a very comfortable 21 or 22 degrees outside today. When we hear it is 21 or 22 degrees outside, we scramble for our overcoats or fur coats. The difference, of course, is that we use the Fahrenheit temperature system and everyone else uses Celsius. In foreign markets, goods are packaged in liters, they are weighed in kilograms, and machines are tooled in metric measurements. When American manufacturers try to export products into foreign markets, they have to produce or package or do their tooling on the metric system. In many American industries, especially in the scientific fields, of course, the metric system has been utilized for a long time. The automobile industry converted nearly a decade ago to the metric system, though millions of automotive parts still utilize the English system for measurement or tooling. For many industries, however, producing products for export on the metric system often means additional investment, effort, and cost. The United States started down the road to conversion to the metric system a few years ago, but before we got beyond the first milepost of change -- excuse me, I mean kilometer-post -- we decided it was too much bother. Now, the U.S. is the last industrialized country remaining on the Old English system of weights, measures, and distances. One direct cost of our antique system is some loss of exports for our manufacturing sector; an indirect cost is that we continue to train our children and our young workers in pounds, inches and gallons where everyone else is on a different system. Why do we handicap our own future -- the future of our children? This will get the U.S. into a peck of troubles -- er, I mean, a lot of troubles.

As an aside, whichever system of measures is learned by our children is part of the field of economic education, and this is very important. NABE can and does hit head-on the issue of continuing education for business economists. Dealing with the "economic education" for the public, though, is more difficult. Through our surveys, writeups and press releases, we try to disseminate general economic information. The NABE Board has also made modest grants in each of the past several years to a number of nonprofit organizations that work to educate the public in economics. The NABE Board seems to be finding higher priority uses for our scarce financial resources, but I do hope funding can continue for a few of the best providers in the field. Maybe our greatest contribution in the field of economic education will be what you and I personally do at home and in our schools, as George Bush has suggested. I remember the reaction to the proposed economic education grants of Ted Turner, the CNN Chairman who spoke at our Seattle meeting a few years ago. He said, "Well your grants may be fine but they won't reach too far. The impression the American people have of business practices, business executives, and government officials will be shaped much more by what people see on shows like the Dukes of Hazzard, and that's really frightening."

The Dollar Base

When gold and the pound sterling were both dethroned from their positions at the center of the financial universe, the yardstick -- I mean the standard reference point -- for currencies became the U.S. dollar. Everything was expressed in the number of yen or Deutschemarks or Hong Kong dollars per U.S. dollar (or the number of U.S. dollars per U.K. pound). Capital flows, international indebtedness, and Third World aid have been measured in U.S. dollars. Bank deposits outside the U.S. have been denominated in either the local currency or U.S. dollars. But now the dollar is being dethroned. Third World aid is now measured in trillions of yen. Japanese overseas capital flows increasingly are measured in yen, not dollars. The Federal Reserve has authorized banks to set up foreign-currency deposits within the U.S., something that has never before been necessary. Ten years from now, the yen and Ecu (the "European Currency Unit," or, in the future, a common European currency, if they can agree on one) will likely have coequal international status and use with the dollar.

Short-Term Focus

A little closer to the activities of our corporations, you're no doubt familiar with the complaint that U.S. companies are too short-term focused; decisions are too often made on the basis of their impact on current-quarter earnings. A recent study that was funded by the Japanese Ministry of International Trade and Industry (MITI) found the short-term focus is a major difference in international investment decisions of U.S. and Japanese companies. In Japan, almost 90 percent of the companies said they would move into a new field where there were no reasonable expectations of profits in the first three or four years but where profit margins would move up to (or above) the company's average profit margins in the long run. In the U.S., by contrast, about one-half the companies said they would move into a new field only when the business is estimated to start to turn a certain profit within the first three years.(5)

Eighty percent of a sample of corporate shareholders in the U.S. said their chief long-term objective was an increase in the value of their stock. In Japan, only 12 percent said their principal objective was a higher stock price. Fifty-seven percent said growth in the company was the first goal. Growth in the company, I suppose, might be synonymous with growth in stock prices, but there's a subtle difference on the primary goal of who is first: me or the company."

No Instant Results

The Japanese often say that American companies do not try hard enough to find and develop new export markets. Another way of putting this one is to say that American companies expect almost instant results, and, in order to penetrate markets in the Far East, it can easily take a decade or more. The American tobacco companies worked at getting into Japan for more than two decades. The CEO of the Japanese subsidiary of a U.S. tobacco company told me in Tokyo that, if the firm had known at the outset how long it would take and how expensive it would be, the company never would have entered Japan.


American quality is "below standard" (i.e., the Japanese standard). The deficient quality of U.S. semiconductors was described to me in insistent terms (to overcome my skepticism) by several top executives in Japanese electronics companies, who said U.S. semiconductors flunk the durability test. The American semiconductors that reach Japan tend to be the ones owned by Japanese companies, who increasingly own the various stages of production of chips, from the silicon-slicing machines to the chip-making machinery itself.

Negotiating Skills

Japanese government officials say their American counterparts are not up to negotiating speed. (The Japanese government attracts the cream of the crop from top-rated Tokyo University, and a career in the government is at the pinnacle of Japanese society, followed by a lucrative second career as an advisor or consultant to industry.) The Japanese tell me that their American counterparts tend to be ideologues, who'd prefer to tell the Japanese what their system should look like, rather than negotiate trade disputes or market-opening initiatives on the merits. American government officials are overworked, underprepared, undertrained, (I'd add: underpaid(7)) and have tough deadlines that are all too well known to the Japanese. In one case, the U.S. multinational engineering and construction contractors sought entry into the closed Japanese construction market for years. The U.S. government drew the line over the multibillion Kansai International Airport project in Osaka, insisting that U.S. firms be able to partake in the construction work. The Japanese finally relented, permitting U.S. construction companies to bid. But the U.S. side got it wrong. The initial agreement reached with the Japanese government would have permitted U.S. companies to bid for the right to pour cement, that is, to bid on the actual construction work. This is not where U.S. companies have the technological edge; American firms cannot ship cement across the Pacific at a profit. Rather, our expertise lies in architectural design and engineering. The American negotiators finally got the message straight and the design work on the Kansai project was opened up to foreign companies. However, the main contracts have been awarded to European firms.

Savings Rate

The U.S. doesn't save enough. The personal savings rate in Japan is about three times the (comparably defined) U.S. figure. Net corporate savings in the U.S. are two-thirds of the comparable Japanese share of GNP. We all know the U.S. government dissaves to the tune of about 3 1/2 percent of GNP. The U.S. has gone through a decade of being told by Washington that fiscal deficits just don't matter. We're big enough and wealthy enough so we can run large fiscal deficits. Well, the Japanese don't accept this ideology. They think the deficits matter. So do I. The bottom line of the grand total of American dissaving is the deficit on the current account. The quote the late Sir John Glubb, our "Age of Affluence silences the voice of duty," and this neglect for taking the necessary and proper policy actions starts the beginning of the end of empires.(8) The great Glubb Pasha and, in our own time, Paul Kennedy (in his The Rise and Fall of the Great Powers) both warn us that it is we who are sowing the seeds for our own downfall. So it may still be Ronald Reagan's "morning in America," but there is a darkening in the skies, and it is caused by a gradual eclipse of the U.S. by other countries.

For our friends outside our profession, I know the almost incessant drumbeat from business economists about the fiscal deficit wears thin (more likely, it wore thin ten or fifteen years ago). Some people are all too willing to leap to the conclusion that, because of the world hasn't come to a cataclysmic end as a result of the government's deficits, our concern over the deficits is therefore wrong. In particular, many in the media and the financial markets lose patience -- expecting instant and highly visible results -- and grow bored with the lines they have heard too many times. They may be willing to listen to someone with a new view, especially if the message suggests the country doesn't really need to take the bitter medicine after all. These ideologues, like the snake-oil peddlers in the Old West, can be charming, vocal, persuasive -- and usually wrong. Happily, there are few ideologues within our profession, although enough to be nettlesome.

Several of my predecessors have argued for an expanded NABE role on public policy issues, but your Board of Directors has waded into these waters very cautiously. For a couple of reasons, NABE cannot develop and promulgate an official NABE position on economic policy issues. But we can and do survey our members on issues, and NABE should try to get more mileage -- or kilometers -- out of the very valuable polling that we do. It does not bother me and it should not bother the press that 100 percent of us do not line up for or against various issues; there will always be some differences of viewpoint, especially on tough policy problems. I remember an exchange between former Senator William Proxmire, then Chairman of the Joint Economic Committee, and the late Arthur Burns, then Chairman of the Federal Reserve Board. Senator Proxmire verbally accosted Chairman Burns for the Fed's forecast errors and the inability to reach agreement on the outlook. Burns retorted, "I don't find it so surprising that economists cannot agree on the future; after all, historians don't agree on the past."

High Cost of Capital

Almost everyone is aware of the quantitative differences in the relative performance of the U.S. on personal savings, corporate earnings, and so forth. We might ask, "Why does this result occur?" One difference, in my view, is the different cost of corporate capital in the U.S., Japan, and Europe. Work done by the American Council for Capital Formation(9) suggests the current cost of corporate capital in the U.S. is nearly 6 percent, compared with about 2.75 percent in Japan, 3.5 percent in the U.K., and 4.4 percent in West Germany. For some kinds of capital equipment in the U.S., the cost is far higher, maybe more than 20 percent on a user-cost basis, thanks to four rounds of tax-law change and reforms in the 1980s.(10) Expressing it slightly differently, what is your company's "hurdle-rate-of-return" on new investment proposals? Fifteen percent, maybe? That is at least twice or even three times Japanese standards. With Wall Street pricing companies on the basis of 15 percent returns, and the Japanese comfortable with 5 or 7 percent, you know who will win in a fight for corporate control. The Japanese can bid far more for your company than you can reasonably afford to do in a merger fight or leveraged buyout.

The Tax System

The U.S. tax system penalizes the competitiveness of U.S. corporations. This year, Japan and Canada have introduced value-added tax systems, or are in the process of doing so, although Japan's system is so full of loopholes for some politically favored sectors (e.g., small "papa-momma shops") that it helped bring down the Takeshita government and might be thrown out in the weeks to come. But, assuming the Japanese repair the VAT, rather than throw it out, the United States is the only industrialized country in the Group of Seven that does not have a VAT. We rely upon income taxes (and debt) to fuel the U.S. Treasury.

During the past ten years, successive tax law changes have raised the effective tax burden for most American corporations, especially those that are multinationals. How is that tax reform in the U.S. can increase the effective tax burden of corporations, when, in Japan, last year's tax reform sought to reduce the burden of the express purpose of restoring some international competitiveness to Japanese industry that was hard hit by the appreciating yen? I've heard of populism, and I certainly recall that the 1986 Tax Reform Act was geared to reducing personal income tax rates and simplifying the tax system. But I must confess to my continued amazement that the U.S. could raise effective tax rates on corporations, whose growth generates jobs, and employed people vote! In my view, there was too little discussion in the right places in 1986 of the negative impact of tax reform on business investment and long-term economic growth -- let alone on the international competitiveness of U.S. industry. Happily, the Bush Administration and some in the Congress have finally begun to consider a few changes in the tax code that would shift the dials slightly in the direction of savings and investment, rather than personal tax relief and higher consumption.

The Shareholder Mix

A guiding principal in today's LBO and merger and acquisition mania in the U.S. is maximizing the value for shareholders. In practice, there generally is a short time-horizon applied to the arithmetic. In Japan, the system doesn't work this way. Giving the shareholders, their pound of flesh is important -- I mean, half-kilogram of flesh -- but it is their interest in a long-term context of, maybe, fifty years. Also, the interests of customers, suppliers, and employees usually rank higher than that of shareholders, if there is some conflict among the goals, and there is a shorter time horizon applied for these other groups. T. Boone Pickens is attempting to impose U.S. principles as he proceeds with his takeover attempts of Koito Manufacturing, a Toyota group company. His efforts to maximize shareholder value while bidding for a controlling interest are perceived in Japan as being detrimental to the company's suppliers and customers.

The mix of shareholders in the two countries is very different. In the U.S., about 70 percent of corporate shareholders are (unaffiliated) institutional investors. In Japan, they comprise only about 12 percent. Instead, the dominant shareholders are close business associates: 36 percent of all shareholders are financial institutions that have a client or affiliated relationship with the company, another 10 percent are nonfinancial, and 36 percent are the parent company, founding family, or other subsidiary companies in the same group (keiretsu in Japanese). In total, 82 percent of shareholders are part of the keiretsu or are close business associates.(11) These investors are there for the long haul; it is considered poor form to sell one's shareholdings in an associate. As an outsider, whether Japanese or not, try cracking into the market with this kind of ownership arrangement.

Consumption vs. Investment

Finally, at the very core of your professional training, we all learned from Adam Smith that the ideal capitalist economic model works on the basis of competitive markets, a laissez faire relationship with the government, and utilizes the principle of comparative advantage in international trade. In practice, the U.S. has chipped the corners of this classical model just a bit; for example, about 40 percent of all imports into the U.S. from Japan are now subjected to some form of quotas or semi-"voluntary" import restraints. In Japan, classical thinking may be at the center of economic thought, but, after the policymakers finish with their work, the bottom line looks very much different than in the U.S. For example, per capita personal consumption spending is much lower than in the U.S. The Japanese people spend billions of yen to squeeze into their tiny "rabbit hutch" houses. Classical economic theory says that the country's import barriers and subsidies paid to their inefficient rice, beef and citrus farmers amount to a "tax" on the consumer that forces the Japanese to live at a lower standard of living. Many in Japan don't see it that way. They argue that the system has been retuned so that, in the short run, business investment has received the lion's share of scarce economic resources. Exports have been maximized, and, now, overseas investment is being encouraged by government policy -- and last year's high level of the yen. All this has helped the Japanese economy run very close to full employment. The fabulous wealth piled up by Japanese corporations and institutions is being transformed into a focus on the domestic Japanese economy, which, along with rezoning and tax changes that permit a paving over of rice paddies for redevelopment and suburban sprawl, are offering the Japanese consumer a vast array of better housing and top-quality goods. In the end, living standards in Japan are finally coming up to speed, but only after Japanese industry has conquered the business world. Ten years from now, current economic trends will produce a world economy where Japanese living standards exceed those in the U.S. and ownership of the Fortune 500 will be dominated by Japanese investors. If I understand the story line and if Japanese planning can deliver the end result (which seems to be on course), then who really has the clearer understanding of the classical economic model?


I'd suggest that a key to the loss of the race with Japan is that the American people don't understand that we're in a race. The same is true for many U.S. companies. Japan and the U.S. are playing by different rules. The Japanese understand this, even young school children. It's all taken very seriously. The U.S. is, at once, both the country that Japanese respect and dislike. The "dislike" can be scary. A survey of school children in Japan found that, if Japan fought in a future war, the most likely opponent would be the United States.

I've implied there is something other than Adam Smith's "invisible hand" at work in Japan creating the country's economic success story. But I don't really believe that. Not even the MITI, with its awesome power and influence, would be capable of generating such a successful set of results in the long-term. Indeed, Karel van Wolferen, the Dutch-born author who has lived in Japan for the past twenty years, and who, together with two of our speakers on this program, is one of the new, pragmatic critics of Japan, suggests that Japan's "power centers" in industry and government have conspired to minimize competitive pressures in the home market, keep out the foreign competition and to expand abroad.(12) Maybe, but I just don't believe there is anything so sinister at work. One doesn't need to find a conspiracy to explain Japan's successes and America's loss of ground.

Japan certainly has utilized "Industrial Policy" with the active involvement and support of MITI, the Ministry of Finance, the Ministry of Posts and Telecommunications, and others, but this still doesn't add up to van Wolferen's grand conspiracy.


Instead, it seems to me that the basic economic and financial conditions have been put into place in the U.S. and Japan that, over time, permit highly competitive, aggressive Japanese manufacturers to overcome most foreign competitors in world markets.

Our high cost of corporate capital, low savings rates, high Treasury reliance upon the financial markets for debt financing, high and rising effective corporate income-tax rates, and short time horizon for payback on corporate investments are all interrelated. They permit our high-consumption economy, low personal income-tax rates, and a populist political machine. All this comprises the rules in an economic system, a system that is very different than the Japanese system. Not better, not worse, just different.

To participate in the European system or the Japanese system, your company needs to play by their rules. This can be extraordinarily difficult, if for no other reason than your company's headquarters still have to be part of the U.S. system. For your company's success in other economic systems, I can think of no one who can be more help than you, the business economist. Go to it!


(1)Francis H. Schott, "Continuing Education in Business Economics -- Toward a More Systematic Approach," Business Economics, January 1979, pp. 5-9. (2)Don R. Conlan, "In the Autumn of Our Discontent, A World to the Wise; Otherwise . . .," Business Economics, January 1983, pp. 10-14. (3)"Framework for a New United States Trade Policy," Proposal of the Industry Sector Advisory Committee on Transportation, Construction and Agricultural Equipment for Trade-Policy Matters, August 1989. (4)Katsusada Hirose, "Corporate Thinking in Japan and the U.S.," Journal of Japanese Trade & Industry, July-August 1989, Japan Economic Foundation, Tokyo, pp. 40-43. (5)Ibid., p. 42 for all data. (6)In one way, it is comforting to see the median salary for business economists approaching the top $99,500 federal pay-scale for Executives, but, viewed differently, the salaries of the Secretary of the Treasury, Chairman of the Federal Reserve and others are woefully short of the compensation received by top business executives. It remains an honor to be asked to serve the country in a federal post, but federal service now also involves an enormous financial sacrifice. This must deprive the government of the service of many qualified individuals who would otherwise be willing to work in Washington, and the shortage of able talent is precisely part of the government's problem. (7)Sir John Glubb, "The Fate of Empires," Blackwood Magazine, December 1976, p. 493. (8)B. Douglas Bernheim and John B. Shoven, "Taxation and the Cost of Capital: An International Comparison," in Charls E. Walker and Mark A. Bloomfield, eds, The Consumption Tax: A Better Alternative? (Cambridge, Mass., Ballinger Publishing Co., 1987). (9)Congressional Research Service, Library of Congress, "Effects of Alternative Tax Regimes on the Cost of Capital for Selected Types of Equipment," February 1989 (unpublished). (10)Hirose, Op. cit., p. 42. (11)Karel van Wolferen, The Enigma of Japanese Power, Alfred A. Knopt, New York, 1989.

Jay N. Woodwarth is Vice President and Senior Domestic Economist, Bankers Trust Co., New York, NY.
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Title Annotation:NABE Presidential Address
Author:Woodworth, Jay N.
Publication:Business Economics
Date:Jan 1, 1990
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