Revolution in Agriculture

US$ per farm 3000 -

1950 60 70 1981/82 ...increased mechanization

kg

by hectare

1950 60 70 1981/82 ...fewer workers

bushels 30-

RESULT:

1950 60 70 1981/82 ...fewer farms

bushels 100 -

50 -

1950 60 70 1981/82 ...increased agricultural acreage per farm

1950 60 70 1981/82 ...more fertilizers

1950 60 70 1981/82 ...higher performance

Example: coin bushel per labor hour 1 bushel = 35.3 litres

1950 60 70 1982/82 ...and higher yields

Example: corn bushel per hectare

CRISIS OF THE SMALL FARM

The high efficiency and productivity of American agriculture has its negative side. Farming has become too productive to be profitable to many American farmers. Low crop prices, which have resulted from overproduction, often do not bring farmers enough income to live on. Another difficulty the American farmer faces is the decline of agricultural exports. Farmers depend heavily on exports; one third of the crop land in the United States is planted in crops destined for export. But the market for these export crops is shrinking as the markets of the European community expand.

Increased mechanization of American farming is threatening the existence of the small farmer. Farmers have had to increase their debts to afford expensive farm equipment, and high interest rates make it difficult for many farmers to keep up payments on loans and mortgages. Small farmers are unable to compete with large agribusiness firms that usually have the capital needed to sustain themselves through periods marked by low crop prices and high interest rates. With as many as 200 farmers having to declare bankruptcy every day, many farmers insist on emergency aid from the government. A variety of

agribusiness: farming engaged in as big business, including the production, processing and distribution of farm products.

64 AMERICA IN CLOSE-UP

CORPORATIONS

governmental and private programs, including crop insurance, loan guarantees, and price supports, have been set up to assist farmers. The problems of the American farm economy are not unique. Farmers in the European Economic Community are facing many of the same problems.

The trend in modern agriculture towards large-scale enterprise conforms to the overall pattern in American business. Giant corporations dominate. Small corporations are being consumed by larger ones and large corporations become even larger through mergers.

NUMBER OF рЯ CORPORATIONS E____ 1 ^4 JAPAN Ц0.6
NUMBER OF EMPLOYEES	USA. |	|56
	JAPAN |	J30
INDUSTRY RETURNS
U.S.A. 1:;;:;:■
	JAPAN |

The Dominance of the Large Corporations

Percentage o' corporations with more than 250 employees around 1980

ENTREPRENEURS

SUCCESS

YUPPIES

Large corporations were once run by individuals with high public profiles. Henry Ford of the automobile industry and Andrew Carnegie of the steel industry are well-known magnates of the early part of this century. Modern corporations, on the other hand, are often run by nearly anonymous career executives who rarely own more than a fraction of one percent of the corporation's stock.

While giant corporations determine much of the nation's economic behavior, entrepreneurs also have a significant impact on the American economy. In 1984, 700,000 small businesses were started in the United States. Since the 1970s such businesses started by entrepreneurs have provided more new employment than larger corporations.

The high-tech era has produced a new generation of entrepreneurs. One example from the 1970s is that of two young men who worked together to design a new and better computer. They gathered money needed to pay for large-scale production, and in 1977 Apple Computer Corporation was started. By the end of 1984, that company, started by two business-minded entre­preneurs, was one of the largest computer makers in the United States.

This success story is similar to others in American history. The Coca-Cola company began when an American pharmacist mixed together the first Coca-Cola drink and began selling it in Atlanta, Georgia, in the 1890s. The famous Heinz food company, which specializes in mustard, pickles, and ketchup, began when a teenager started to sell various food items on the street. While most people who start businesses do not become millionaires, Americans do believe in the potential for individual success that exists within their free enterprise system.

Americans are known for being highly success-oriented and dedicated to hard work. Today's baby boom generation has acquired a reputation for its

baby boom generation: people born in the 1950s and 1960s when birthrates were extremely high.

THE U.S. ECONOMY 65

LABOR UNIONS

AFL-CIO

DECLINING MEMBERSHIP

relentless drive for material success. The term "yuppie," meaning young upwardly-mobile professional, has been coined to describe those people be­tween the ages of 25 and 45 who, according to the stereotype, devote them­selves to careers and status.

Whereas the drive for success is firmly entrenched in American ideology, what is curiously absent is focused ideological support for America's labor unions. Although a legal framework for worker representation and collective bargaining was established by legislation in the 1930s, labor unions in America do not have the power or political direction of their counterparts in Europe.

Achievements of European labor, such as worker participation in corporate strategy in West Germany and nationalization of industries in Great Britain seem radical compared with the achievements of American workers. Some significant gains American labor unions have won for their members include benefits such as increases in overtime pay, paid vacations, premium pay for night work, and employer subsidized health insurance plans. Although Amer­ican workers are now beginning to focus their demands more on job security than benefits, few employees can aspire to the job security won by unions in continental Europe. In America, lay-offs of blue-collar workers in industries such as automobiles, aerospace, and shipbuilding are routine. In Europe, corporations are deterred from laying off workers. Laws require companies to make costly redundancy payment to workers who are dismissed.

One explanation for this difference between labor unions in Europe and America is that American workers have traditionally valued self-reliance and individualism. Furthermore, the lack of rigid class distinctions has given many workers the feeling that they are not permanently destined to a working-class existence. The lack of class consciousness and the belief that one can rise to a higher station in life through individual effort help explain why socialism has not gained mass appeal as a unifying ideology among American workers.

Today the largest American labor union is the joint AFL-CIO, the American Federation of Labor and Congress of Industrial Organizations. The AFL-CIO is active in the world labor movement. It is an affiliate of the International confederation of Free Trade Unions (ICFTU) which has members in 95 countries and territories.

American labor unions today are losing members and influence. In 1950, as many as 1 in 3 wage earners were union members. Now that percentage has dropped to 18 percent and shows signs of shrinking further. The AFL-CIO has also been troubled by a sharp decline in membership. Between 1975 and 1985, membership dropped from 14 million to 11 million workers.

The decline in labor membership is related to the changing trends in the economy as a whole. Foreign competition has depressed many U.S. industries and left many workers unemployed. The decline in manufacturing industries, once a stronghold of unionism, and the rise in service and high-tech industries, which employ fewer blue-collar workers, has contributed to the decline of America's labor unions. Another explanation for the unions' loss of member­ship is the movement of many industries to the South, where right-to-work laws hinder union organizers.

Automation and other technological innovations in industrial production have displaced many blue-collar workers. The transition to a post-industrial economy presents challenges not only to labor unions, but to all sectors of the U.S. economy.

part в Texts

The New Entrepreneurs

Peter Drucker on Entrepreneur

From U.S. News & World Report

Peter Drucker is probably the most widely respected corporate management expert in the United States. Beginning in 1939 with The End of Economic Man, he has written more than 20 books on economics, corporations and management, including most recently The Changing World of the Executive. In this interview with the editors «/U.S. News & World Report, Drucker, a professor of social science at Claremont Graduate School in California, discusses America's new wave of entrepreneurs.

Is it still possible to start new companies today and succeed?

It's more than just possible. We have on our hands an en­trepreneurial boom the like of which we have not seen in a century. The most important economic event of the last few years, in fact, is the emergence of this entrepreneurial trend.

In the past decade, the United States has created 20 mil­lion new jobs—the largest number ever created anywhere in such a short period. At the same time, large, established companies have lost several million jobs. Government has not grown, either. Most of these 20 million additional jobs are in small, new enterprises. They absorbed all the post-World War II babies, and they absorbed the millions of women who entered the job market.

Would you characterize these as high-tech businesses?

No. The high-tech people are traditional entrepreneurs, which means nine of every 10 of them will lose their busi­ness within two years. They talk profit, and in a new busi­ness it's not profit that matters but cash flow, and they don't know how to make a cash-flow forecast. Too many high-tech people can't build teams or train people, either. Their enterprises tend to resemble entrepreneurships of years ago—a game in which all the cards are marked and you don't know what anyone has up his sleeve.

// not in high technology, where are these millions of jobs being created?

I'll give you an example. The fastest growing and most profitable new business I know is a chain of barbershops founded by two young men, neither of whom had ever had a pair of scissors in his hand. Rather than eke out an exis­tence like most barbershops, theirs are earning 30 to 40 per­cent returns on investment.

Reprinted from U.S. News if World Report, March 26, 1984, published at Washington, D.C. © 1984 US News Sc World Report, Inc.

They did nothing more than apply elementary manage­ment. They asked, "What are the key factors?" The answers are location, traffic and the number of people you can cut in a day without anyone's having to wait. They knew how to build their team and how to train their people.

These barbershop fellows understand cash flow, too. One of them told me: "I started another business once, and after nine months I was in a cash bind and had to give away 40 percent of the business to the next batch of investors. With these barbershops, I make sure of the money six months before I need it." That's the whole secret of finan­cial management: know when you'll need money and make sure of it before you need it.

The new entrepreneurs, then, don't go near glamour, and they don't bet on new technology but on something far more predictable: demographics, population trends and things of that sort.

How do they get started?

Most come out of big companies or institutions. Typical­ly, after eight or 10 years of being trainees and young man­agers, they realize their next promotion is a ways off. So they get an idea and start off on their own. By that time, they know a lot about what we call upper management and orga­nization.

These are a stable group of people who look systematical­ly for opportunities, and the casualty rate of their businesses is quite low. Few of them have any illusion that they're going to build thousand million-dollar companies. A good many, once their businesses get to 10 or 15 million dollars in sales, set out to start something new again.

Aren't these small businesses vulnerable to competition from giant companies?

There is no longer a premium on big size in many indus­tries. Companies pay a price for size; they are not very agile. Elephants can't turn on a dime, and neither can huge orga­nizations with all their layers of management.

Politically, they are too visible in a world in which business is damned if it does and damned if it doesn't. The smart business executive knows the advantages of anonymity. But if you run one of the world's great banks, don't expect to have it.

Are you implying that the day of the big company is over?

I'm not saying we won't have large companies but that we
no longer need them in many instances. For 30 years the
trend was toward the large unit because it was the one we
knew how to manage—or thought we did. That is over. We
are deinstitutionalizing. You see it in hospitals, where clinics
now perform outpatient surgery. You see it in education,
where the huge consolidated secondary school is being
judged a failure. And you see it in business, where the spot­
light is shifting toward the smaller unit. ♦

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