American corporate executives, meeting here yesterday to discuss problems of declining productivity in the domestic economy, were given some shock treatment by their opening speaker.
Massachusetts Institute of Technology management professor and engineer Jay Forrester told the business that "only relatively minor gains can be achieved" at this time through improved productivity.
"Labor productivity can no longer run fast enough to keep ahead of rising social costs" in a society where as few as 10 percent of all workers actually are engaged in production, Forrester declared.
To suggest that improving productivity will lead to less inflation is nothing but "harmful," he added.
That was not exactly the message the business leaders expected at a two-day conference on manufacturing productivity solutions, sponsored by the Society of Manufacturing Engineers and the U.S. Chamber of Commerce.
Declining productivity is a pet topic wherever corporate leaders meet because of statistics showing a steady decline since 1965 in the annual growth of U.S. productivity. The Joint Economic Committee reported this year that Japan's productivity has grown four times faster than that of the United States in the past two decades. French, Italian and German productivity gains also have been higher than here.
The buzzword, productivity, actually refers to an economic concept of measuring output of goods or services per hour worked by a man or woman. Business and government leaders use productivity to measure the quality of society, as in how well peoples' talents are utilized. Gains in productivity supposedly lead to higher incomes.
In this vein, former Westinghouse Electric Corp. chairman Donald C. Burnham told the conference yesterday, "the only way that we can have more as individuals is to produce more." He also emphasized a statistic sometimes overlooked in worldwide comparisons -- productivity levels of Americans are still the highest in the world. But with gains overseas, there is "no question that we must advance our rate of productivity improvement," Burnham added.
Although MIT'S Forrester didn't take issue with Burnham, the business professor poured a lot of cold water on such an approach to productivity.
Forrester's thesis was that the economies of this country and industrialized nations around the globe have been moving into progressively deeper recessions since 1965, at the tail end of a normal 50-year business cycle that is headed into decline. He used the term "depression" matter-of-factly, stating that it is a natural business cycle process that "clears the state for rebuilding" as weaker businesses fail.
Seeking to improve productivity is of little help when U.S. productivity already is at the highest level in history, as is the inflation rate, in an environment where government keeps printing money and debts soar, said Forrester.
Instead of working on internal changes to create productivity gains or developing minor changes in products, Forrester advised the business leaders to look outside their corporations at growing economic, social and political turmoil.
For the next two decades the "threat to corporations" will be the possibility of economic and social "breakdown," he warned. New social and political experiments or innovations by the government are inevitable and "if done by desperation," without cooperation of the business community, such forces threaten the survival of industrial society, Forrester added.
Burnham subsequently asked a question that probably was on the minds of many in Forrester's audience at the Shoreham Americana Hotel, where the meeting concludes today. Should business go on with productivity efforts, "vital to keeping us in existence?" Bernham asked.
Forrester advised the business leaders that they must decide which products have a future and concentrate in those areas.
"There will be some products where productivity improvement won't save them," Forrester said. ". . .You should close them down and use proceeds and skills for new thecnology," new products that will emerge in the next wave of business expansion after the current economic downturn ends.
He criticized business leaders for taking a short-range view of the future, with such efforts as five-year plans. He also condemned the secrecy of business leaders in the way they do their own planning.