At the end of World War II, the United States was the economic leader of the world. Since our geographic territory had not suffered the ravages of war, we led the world in the production of goods and services. A devastated Europe and Japan eagerly accepted American products, not so much because they wanted them but because they needed them. American businessmen believed that their success was predominantly due to their management practices, which they considered “unquestionably superior” to any other.
Americans became complacent. As a result, they failed to listen to the words of people like W. Edwards Deming and Joseph Juran.
Most Americans have never heard of these two men. But the Japanese people have. They, along with such notable Japanese men as Genichi Taguchi and Kaoru Ishikawa, are considered by many to be the people primarily responsible for the Japanese revolution in quality that has taken place in the last thirty years. As you know, your emperor has honored Dr. Deming by awarding the “Deming Prize” to the company that each year demonstrates the highest standards of quality.
W. Edwards Deming
Time prevents me from fully exploring Deming’s philosophy of management. But suffice it to say that, unlike other management advisers, Deming did not offer gimmicks or tricks to ensure high standards of quality. In his book, Out of the Crisis, Deming sets forth an entirely new and revolutionary approach to management — a perspective that emphasized an understanding of statistical analysis, the concept of variation, the role of worker creativity and joy in work, the destructiveness of employee ratings, the misplaced reliance on mass inspection (by sorting good from bad) to ensure quality, and the importance of cooperation in the workplace.
Unfortunately, Americans refused to listen to Deming. But when he came and lectured in Japan after the war on the invitation of General Douglas MacArthur, Japanese businessmen listened. Deming told them that if they adopted his methods rather than those which the world had been using since the Industrial Revolution, they would soon lead the world in the quality of manufactured goods.
The result has been the Japanese revolution in quality in the manufacture and production of goods and services. Through Deming’s methods, the Japanese discovered that quality and high cost were not necessarily synonymous. In fact, they learned how to improve their operations so that improved quality and lower production costs were possible. At one point, the Japanese could produce, ship, and sell cars in America lower than American manufacturers could produce them. The quality was better and the price was less! Japanese products quickly gained market share. And it all began with two Americans in Japan — W. Edwards Deming and Joseph M. Juran!
American businessmen first tried to explain away what happened in Japan with such comments as “Their culture is different.” But when Japanese companies successfully maintained the same high standards of quality and lower production costs in their American plants, that argument soon fell by the wayside.
Then, American businessmen ran to our governmental officials exclaiming, “Please protect us from those horrible Japanese competitors who are making better products than we are. We don’t want to change our methods. We want to continue doing things the way we always have. We want Americans (and Japanese!) to be forced to buy our higher-cost goods. Please protect us from those big, bad bullies who are making such high-quality products and dumping them on our markets.”
And our government responded by enacting protectionist barriers all around the United States. And every year, the barrier has been built higher and higher to ensure that American businesses can continue to sell their higher-cost and sometimes lower-quality goods to their fellow Americans.
We were wrong to react in this way to the new world of quality that your nation began. As many of you know, Ford, General Motors, IBM, Xerox, Motorola, and hundreds of other firms are now studying and adopting the management principles set forth by Deming, Juran, Taguchi, and Ishikawa. We have a long way to go, but you have shown us the way to ever-improving standards of quality in the production of goods and services. For this, the American people owe Japan and these men a deep debt of gratitude.
Thus, a key to the future success of American business lies not in prohibiting Americans from purchasing Japan’s high-quality goods and not in forcing Japanese to purchase America’s higher-cost goods. Instead, the future for American business lies in following the lead of Japan in the area of managing for quality.
But it is necessary to go one major step further.
Ending the Welfare State
As I indicated earlier, America’s welfare state and managed economy have failed miserably in improving the economic well-being of the American people. Unfortunately, many public officials are looking to quality-management principles as a last-gasp effort to save this failed way of life. They want to “reinvent government.” These governmental officials believe that a “more efficient” government is the answer to America’s woes. Bureaucrats in the IRS, Department of Defense, Navy, Air Force, and numerous other agencies are endeavoring to adopt Deming’s philosophy in order to streamline their operations. I confess that I, too, recognized the benefits of Deming’s philosophy and pushed for total quality management for government. But I’m afraid that my hopes were misguided and misplaced. Let me explain.
As the brilliant economist Ludwig von Mises pointed out, in an unhampered market economy, the consumer is king. By his buying and abstention from buying, he guides the businessmen’s decisions as to which goods and services to produce. If the businessman fails to provide a product which consumers desire, the consumers will go elsewhere. Thus, capital is constantly allocated and reallocated in the marketplace according to the demands and wishes of the consumers.
Dr. Deming affirms the importance of the consumer in his philosophy of management. He says that management must reorient itself tofocus constantly on each customer in the production process — not only the ultimate customer but “customers” within the firm, as well.
Both Mises and Deming emphasize the major guiding principle of the unhampered market economy and the private firm: the element of voluntarism that characterizes the entire process. At no time can the producer force the consumer to purchase his goods or services. He must produce the quality of product that the consumer voluntarily wishes to purchase. Thus, the consumer remains the sovereign. If a firm continually fails to satisfy the consumer, it fails to make a profit and ultimately goes out of business.
The state operates on entirely different principles. It relies not on voluntarism but on force. Behind every governmental rule, regulation, prohibition, and tax are the state’s constabularies, jails, and fines. What guides the state are not prices in the marketplace — and not profits resulting from consumer satisfaction — but rather strict obedience to the rules and regulations of the state. When dealing with the state, the “consumer” must either obey or be punished.
Therefore, Deming’s principles of management cannot be used to save America’s welfare state and managed economy. For consumer sovereignty to prevail, the consumer must be free to say “no” without the threat of punishment.
More fundamentally, the last thing that Americans need are well-oiled, finely tuned governmental bureaucracies more efficiently plundering their fortunes and interfering with their lives.
There is another important point that needs to be made about America’s welfare state.
The American people have lost faith and confidence in themselves. They are scared of competition not only from you — the Japanese people — but also from Mexicans, Canadians, Germans, and others from around the world. There is only one way to recapture the strong sense of self-confidence, self-reliance, and self-esteem that were once hallmarks of the American people: to end, not reform, America’s welfare-state way of life.
The American people have become too dependent on the state for their well-being. And this has meant a tremendous increase in governmental power in the last fifty years. Ironically, however, a strong government has resulted in a weak people. It saddens me when I hear my fellow Americans exclaim, “How would we survive without Social Security, welfare, subsidies, food stamps, and grants?” A once-proud people now cringe in fear at the thought of losing their dole.
Some consider it cruel when the mother bird throws her young out of the nest, but it is not. It is a law of nature — the bird will fly and soar when it must.
While many will consider this to be cruel, it is high time to throw the American people out of their welfare-state nest. It is time to end, not reform, America’s governmental dole. It is time for the American people to regain the sense of pride and self-confidence that characterized their ancestors.
Therefore, upon my return to Washington, I am proposing the following amendment to our Constitution: “Neither the Congress nor the states shall have the power to grant any subsidy, welfare, or other special privilege to anyone, regardless of race, class, creed, or economic status.” I want to throw the American people out of their governmental nest and see them soar as eagles!
A Dramatic Shift in Thinking
All of my life, I have believed in and supported the socialist notion of the welfare state and the managed economy. Thus, some of you are probably wondering how I have come to these dramatically different views about the role of the state in economic affairs. For this, I shall be eternally grateful to my beautiful wife, Hillary. Every night for the past several months, she has been making me read the works of Frederic Bastiat, Ludwig von Mises, Leonard Read, Friedrich Hayek, Henry Hazlitt, Milton Friedman, Ayn Rand, and many other free-market thinkers. Hillary has shown me the way — the way to freedom for the American people, the way to peace in the world, the way to prosperity and harmony for all.
Prior to my election, I called for major change. Now it is time to enact it.
Well, I suppose I have been rather long-winded tonight, which, as many of my political opponents in America will tell you, is nothing new for me. But I believed that my message of friendship and freedom was so important that you would forgive my lengthy address.
The American people extend their arms in friendship. We have much to learn from you, and perhaps we can be of much assistance to you. Thank you for the courtesy and hospitality that you have shown us. Good night.