For the first time since World War II, Japan last year spent more money than the United States in adding new factories and equipment to make its industries more productive, the Council on Competitiveness said in a study this week.
The report on the council's third annual "competitiveness index" fuels arguments that America is failing to keep pace with other industrialized nations. It showed that the United States lags behind other industrial nations in investing in new plants and spending for nonmilitary research and development.
As a result, the report said, the standard of living in the United States has increased at a slower rate than it has in other industrialized countries.
"America is looking like an aging athlete -- still on top but trying to ignore all the younger talent that is breaking into the lineup," said Kent Hughes, president of the council.
The council was founded four years ago by a group of business leaders, union officials and academics who were concerned that the Reagan administration was ignoring signs that America's once dominant position in the world was eroding.
While President Bush sounded the competitiveness theme in his State of the Union message this year, his administration has been split over how to tackle the problem.
"For years, the United States has had the luxury of relying on its big post-World War II lead and the strength that came from a continental economy to sustain its competitive advantage. Now the big lead is gone and the competition is more intense," said Hughes.
The "competitiveness index" compares the United States in six key areas with six other industrialized nations: Canada, France, Britain, Italy, Japan and West Germany.
The index noted that the rate of U.S. investment in plant and equipment has lagged behind other industrialized nations. Japan, for instance, has spent an average of 17 percent of its gross domestic product on plant and equipment every year since 1972, while the United States spent 12 percent. The others -- all participants in next month's economic summit in Houston -- have spent 14 percent.
For last year, Japanese investment jumped to a record 23.6 percent of its gross domestic product and its actual dollar spending exceeded U.S. investment by $36 billion despite the fact that the U.S. economy is twice as large as Japan's.
"The end result of Japan's concentrated spending is an industrial base that is one of the most modern, efficient and competitive in the world," the report said.
Furthermore, the report said that U.S. spending on roads, railways, airports and bridges -- the infrastructure of an efficient transportation system that is crucial for a continent-wide economy -- has been more than halved between 1965 and 1985.
While the United States leads in total spending for research and development, its principal economic competitors, Japan and West Germany, each spent 50 percent more on non-defense research. The council said that figure is a better indicator of future commercial competitiveness, especially in the post-Cold War era in which economic concerns are expected to be more important than the tanks, missiles and military bases that have symbolized power since the end of World War II.
Other "troubling trends" mentioned in the report:
Because its productivity growth rates have sagged in 1972, the United States "has squandered" a once-commanding lead over the rest of the world. U.S. productivity is now just 30 percent greater than other industrialized nations compared to an 87 percent lead 18 years ago. In Japan, the average worker has more than doubled his productivity since 1972 and that country is quickly closing the gap with the United States.
Wages of U.S. manufacturing workers have remained stagnant over the past 20 years while the wages of its major competitors have increased. The average salary and benefits for an American worker have gone up by little more than $1,000 since 1972 while manufacturing employees in West Germany earned $7,500 more and Japanese workers $5,000 more.