dollars more in goods from abroad than it sold abroad.nWhy did this happen? First, other countries blockednUnited States entry into their markets and dumped many ofntheir goods at subsidized rates on the American marketplace.nIn a marketplace that was really not free, even the genius ofnthe American free enterprise system could not competenwith large subsidies.nSecond, the United States did not adequately invest innnew plants and equipment. Back in the 1970’s and 80’s, thencrucial turning time of the trade imbalance, Japan investedn10 percent of its gross national product in new plants andnequipment while America was inveshng 3 percent. By thenearly 1980’s, the United States had the highest percentagenof obsolete plants, lowest percentage of capital investment,nand lowest growth in savings of any major industrializedncountry. The nations with new plants and new machines,nthose that maintained high productivity and high quality,ndominated both the new and old markets. This inevitablynundercut the United States’ ability to adequately fund itsnfuture needs.nNext, America got a reputation for shoddy goods. Withnan irony that defies description, the United States and Japan,nin 40 years, traded reputations. Japan’s reputation used to benan international joke. But by the 1980’s, American rentalncompanies reported that cars made in the United Statesnrequired two or three times more servicing than comparablenJapanese cars. A Harvard Business School study showed thatnan average of 70 defects showed up on American assemblynline products for every one on a Japanese assembly line.nIn Japan the issuance of new patents during the crucialn1970’s and 80’s rose more than 350 percent; meanwhile, innthe United States, it fell by 10 percent.nAmericans ceased to be hard-minded Yankee traders.nJapan and other countries had been taking economicnadvantage of the United States for years. Japanese nontariffnbarriers cheated America, and Japanese custom proceduresnhad been outrageously time-consuming. For example, thenUnited States inspected Japanese cars by the fleet, while thenJapanese inspected American cars one at a time.nAmerica’s top ten exports in 1985 contained only onenmanufacturing item — airplane engines.nAmerica’s top ten imports were all high value-addednmanufacturing items — all from Japan or Germany.nForty short years after winning World War 11, the UnitednStates was in many ways subservient to Japan — serving as itsnnatural resource colony.nWe became equally inefficient in other ways. The legalnsystem clearly contributed to the United States’nuncompetitiveness. While Japan trained engineers andnscientists, the United States trained lawyers and accountants.nOne in 400 Americans were lawyers, while one in 10,000nJapanese were lawyers. Japan trained 1,000 engineers fornevery 100 lawyers. The United States trained 1,000 lawyersnfor every 100 engineers. Forty percent of American Rhodesnscholars went to law school. It should surprise no one whatnhappened. The US became the most litigious nation onnearth; and by 1985 an insurance crisis of unbelievablenproportions affected everyone from the owners of neighborhoodnpubs, to physicians, to local and state governments.nThe United States didn’t invest its educational resources anynbetter than it invested its industrial resources.nNow Available from the Heritage FoundationnMandate for Leadership III: Poky Strategies for the I990cnedited by Charles L. Heatherly and Burton Yale PinesnA bold blueprint for meeting the challenges of thenpost-Reagan era, this book is a sequel to the 1981nWashington Post bestseller that National Reviewncalled “an Owner’s Manual for the Federal Government.n” Its 37 chapters offer the most comprehensivenand sophisticated analysis available of thenpolicy options and challenges confronting the nextnadministration.nMandate for Leadership III calls on the expertisenof some 400 scholars, Capitol Hill legislative specialists,nand former government officials—doers,nnot just thinkers. In addition to hundreds of specificnpolicy recommendations, it includes chapters onnpersonnel management, budget-making, congressionalnrelations, and coalition-building—the pragmaticntools policymakers must employ to move thenpolicy agenda forward.nMandate III offers an authoritative public policynagenda for economic growth at home and expandednAmerican influence around the world. Its 62 authorsnand 400 contributors do not pull their punches innaddressing the tough policy choices the new Presidentnand Congress will face.niiA detailed guide to governing Washington, asnopposed to letting Washington govern you. 99n—Paul A. Gigot, Wall Street JournalnComments on Mandate I and Mandate II:nii. . . a sweeping study, ff—Timen66. . . one of the hottest tickets in town.ffn— The New York Timesn66. . . the bible of the Reagan transition, ffn— The Washington Postn954 pages $15.95 paper $29.95 clothnMake checks payable tonUniversity Press of AmericanHERITAGE FOUNDATION Order Dept. • 4720 Boston Way • Lanham, MD 20706 • (301) 459-3366nnnFEBRUARY 1989/17n