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Strong in hard times

When I visited Toyota's Tsutsumi plant in Toyota City, Japan, last summer, it was as if I'd entered a bizarro auto world. Back then, America's carmakers were effectively wards of the state, technological laggards operating at a fraction of capacity. Yet here was a solvent, fully automated factory running three shifts, churning out Priuses — some equipped with solar panels in the roof. The welding shop looked like a scene from The Terminator.

But these icons of Japan's superior manufacturing practices have turned out to be clunkers. Toyota has recalled Priuses to fix malfunctioning brakes — just after an image-marring recall for faulty accelerators on other models.

In the past couple of years, Americans have been down on themselves for having failed at the practices they're supposed to be really good at: creating jobs, innovating, growing, getting things done.

But recent events suggest the cleat is on the other foot. Japan was supposed to have a huge competitive advantage in high-quality manufacturing. Well, not so much. The biggest beneficiary of the Prius debacle is likely to be Ford, the last truly independent U.S. automaker, which has already been taking market share from busted domestic rivals.

In the same vein, much of Prius-driving America believed Europe had a competitive advantage over the United States because of its greater social cohesion and careful coordination. Europe weathered the economic downturn without suffering the mass bankruptcies, foreclosures and rising hunger experienced in this country.

But now the bonds that tie Europe together are coming asunder because of the travails of its less economically robust members. As Greece struggles to cope with high debt and a dysfunctional political system, it is threatening to drive a stake into the heart of the European monetary union. In theory, Europe's modus operandi — a single monetary policy for the 16 European Union countries that use the euro — was supposed to help weaker members and allow for swift action in times of stress. But in practice, it's precisely the opposite.

And when the clouds over Europe turned dark, the response was tough love, not aid and comfort. Europe's central powers have essentially told member countries that they must slash budgets, cut wages, reduce pensions and generally stop sitting around in cafes watching soccer. Once again, the United States, having taken its medicine quickly, looks better by comparison.

There's more. London's goal of surpassing New York as a financial center crumbled in the fall of 2008; the UK's financial sector is arguably in worse shape than America's. Two years ago, Dubai was going to be the next Las Vegas, New York and Miami rolled into one, all because it was proving more adept at diversifying its economy from energy into tourism, services and financial services. Now it's looking like the next Scranton, Pa.

Meanwhile, despite all the hand-wringing over unemployment and Washington's pathetic inability to deal with health care, the U.S. economy grew at a 5.7 percent rate in the fourth quarter. In the same quarter, productivity grew at a 6.2 percent annual rate — about three times the historical average. These numbers show America still has a competitive advantage in the disciplines that matter most right now: restructuring, adapting and recovering.

Strong in hard times 02/14/10 [Last modified: Sunday, February 14, 2010 8:15pm]
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