NORTH CAROLINA STATE UNIVERSITY

EMERGING ISSUES FORUM

H. Ross Perot

A Centennial Conference

WINNING IN THE GLOBAL ECONOMY

Table of Contents

Page 4

Conference Highlights

Page 6

llIn a free society, the individual is the most precious thingwe havef’

Ross Perot

Page 8

”Building fiscal strength...is only the first step in therebuilding of the state economyf’

Michael Dukakis

PagelO

llThe primary industry in the age of information is educationf’

lewis Branscomb

Page ll

llOur ability to compete...is going to rest on a very substan-tial improvement in our productivity.”

B. R. Inman

Page12

”We will remain dependent on foreigners and borrowingfrom them...until we...get the federal deficit downf’

Alice Rivlin

PageIS

Question and Answer Session

Pagelb

Words Worth Remembering

Chairs NCSU EmergingIssues Forum

Attorney -

Governor ofNorth Carolina fromI977 to 1985

EstablishedNorth Carolina Schoolof Science andMathematics and theMicroelectronics Centerof North Carolina(MCNC)

Chaired the NationalTask Force on Educationfor Economic Growth

Chairs the Carnegieplanning group toestablish a nationalstandards board forteachers

A Statement from the Chairman

Chancellor Bruce R. Poulton gave us our missionwhen he created the Emerging issues Forum in October1985: to provide a catalyst for the discussion and actionneeded to move America forward in the world economy.He told us there was no better place for this agenda-setting discussion than North Carolina State University. Webelieve he was right. NCSU is not just a center of learn—ing, nor is it just a center for research in science, technol—ogy, and agriculture. It is also a land—grant university,founded 100 years ago to reach out to people who needhelp and literally to help us become what we're capableof being. That also is what the forum is about-helpingAmerica become what it is capable of being.

As part of our effort to fulfill this mission, we con-duct an annual conference that brings together business,education, and government leaders to hear some of thenation’s most progressive thinkers on topics of nationalconcern. Our second conference,”Winning in the GlobalEconomy," drew 1,500 people to the McKimmon Centeron Feb. Ti, 1987. We had to turn away hundreds more.We were grateful for the response and regretted thatwe could not accommodate all who wanted to attend.

This publication is designed to stimulate more discus-sion. For those unable to attend, it summarizes the manythought—provoking speeches made throughout the day.For those who attended, we hope it will refresh thememory and provide a handy reference. We also planto make available texts of the maior speeches and videoand audio recordings of the proceedings.

We thank the chancellor for his vision in establishingthis forum. We also appreciate the support and encour—agement of CD. Spangler, Jr., the president of the Univer-sity of North Carolina system of which this institution isa part, and of Gov. James G. Martin, who helped makethe forum a success. We thank Lt. Gov. Robert B. Jordan”I and House Speaker Liston B. Ramsey for being with usand enabling our state legislators to attend the afternoonsession. And we especially thank those national leadersof business, education, government, and journalismwho took the time to be a part of this important proceed—ing: H. Ross Perot, Michael S. Dukakis, Lewis M. Branscomb,Bobby R. Inman, Alice M. Rivlin, David S. Broder, andVern E. Smith.

Now the rest of us must get to work. Leading thecharge to regain America's competitive edge is not some-thing we can leave up to others, no matter how importantthey are. All of us must think about what we can do.In North Carolina, we can do a lot. Thirty years ago, weastounded the world when we established the ResearchTriangle Park. We had no precedent to follow, onlyvision. Today, let us be equally bold regarding the pos-sibilities for North Carolina and our goals for ourselves.Let us resolVe that the return to a stronger worldwideeconomic leadership for America will be empoweredin large part by what we do right here in this state.

,4

Jim Hunt

EMERGING ISSUES FORUM

Winning In The Global Econom

A North Carolina State UniversityCentennial Conference

Wednesday, February ll, I987The McKimmon CenterNorth Carolina State UniversityWestern Boulevard at Gorman StreetRaleigh, North Carolina

8:30 am.

9:30 am.

70:30 am.

Registration/CoffeeLobby, The McKimmon Center

First General SessionRoom 2James B. Hunt, Jr., PresidingChairman, Emerging Issues Forum

Presentation of ColorsNCSU Naval Reserve Officers Training CorpsThomas Womble, Color Guard Commander

National AnthemSotello V. LongAssistant Director of Admissions, NCSU

Welcoming Remarks

BRUCE R. POULTONChancellor, North Carolina State University

(3 A R Y M A U N E YPresident, NCSU Student Body

Conference Overview

JAMES B. HUNT, JR.

Keynote Address

H. ROSS PEROTFounder, Electronic Data Systems, Inc.and nationally recognized business leader

”Winning in the Global Economy:Commitment, Leadership, Act/on”

Break/Press AvailabilityLobby, The McKimmon Center

70:50 am.

77:45 am.

Second General Session

Room 2James B. Hunt, Jr., Presiding

Panel Presentations by

LEW/S BRANSCOMBJFK School of Government,Harvard University”The Switch to Brain Power”

ADMIRAL B. R. /NMAN,USN, (Retired)Chairman & CEO, Westmark Systems, Inc.”New Economic Frontiers:High Risk, High Reward ”

ALICE RIVLINDirector, Economic Studies Program,Brookings Institution”The Currencies of Competition”

Response from the National Media

DAV/D BRODERNational political correspondentand columnistThe Washington Post

VERN SMITHAtlanta Bureau ChiefNewsweek

7:00 p.m.

2:45 p.m.

Third General SessionLuncheonRoom IChancellor Bruce R. Poulton, Presiding

InvocationClarence E. Lightner,Member, NCSU Board of Trustees

Remarks

JAMES G. MART/NGovernor of North Carolina

Luncheon Address

MICHAEL DUKAK/SGovernor of Massachusetts”State Strategies for Successin the World Economy”

Remarks

ROBERT B. JORDAN //l

Lt. Governor of North Carolina

C. D. SPANGLER, JR.President, The University of North Carolina

Closing remarks

JAMES B. HUNT, JR.

AdjournmentTHE CHANCELLOR’S RECEPTIONLobby, The McKimmon Center

”It is unacceptablethat we are at thebottom of the educa-tional ladder amongindustrialized nations!’H. Ross Perot

lack of leadership hascaused the current crisisin American industry,according to Perot.

”We have to face theprospect of change andmake it work for us.”Dukakis.

”...North CarolinaState University canbecome a leader indeveloping publicpolicy..f’ ChancellorPouhon.

We must make thenecessary investmentsand face the futurewithout fear, accordingto lt. Governor Jordan.

”America can regain itscompetitive edge, notwith cheap labor, butwith brain power-developing newtechnologies, newproducts of high value.”Jim Hunt

Conference Highlights

Protectionist policies will not solve the U.S. tradedeficit, which totaled nearly $170 billion in I986, speakerssaid at the second annual Emerging Issues Forum. Instead,they called for massive reforms in public education; leader-ship dedicated to the efficient production of quality prod—ucts; renewed emphasis on research and development inmanufacturing processes; closer research alliancesbetween the universities, and industry, and governmentto enhance technology transfer; and reduction of thefederal deficit.

The forum drew I,500 leaders of business, govern-ment, and education to North Carolina State University'sMcKimmon Center in Raleigh Feb. II for an all-day con-ference on ”Winning in the Global Economy."

Every speaker hammered home the need for educa-tional reform. ”It is unacceptable that we're at the bottomof the educational ladder among industrialized nations,’Texas entrepreneur H. Ross Perot said in his keynoteaddress. The nation's first order of business, he said,should be to eliminate social promotion from the publicschool system. He called it ”the worst trick you can playon a disadvantaged child of any color."

Also sounding the theme were Lewis M. Branscomb,director of the Science, Technology, and Public PolicyProgram at Harvard University's Kennedy School ofGovernment; Admiral B.R. Inman, chairman and chiefexecutive officer of Westmark lnc.; Alice M. Rivlin, directorof the Economic Studies Program of the Brookings Institu-tion; Massachusetts Gov. Michael S. Dukakis, a potentialcandidate for the Democratic nomination for president;and North Carolina leaders Gov. James G. Martin, Lt.Gov. Robert B. Jordan III, University of North CarolinaPresident C.D. Spangler, Jr., NCSU Chancellor Bruce R.Poulton, and former Gov. James B. Hunt, Jr., chairmanof the forum.

Perot led the commission that revamped the Texaspublic school system and recommended its no-pass,no—play rule for athletes, but he is more widely known asthe founder of Electronic Data Systems Inc. and the manwho rescued two EDS employees from an Iranian jail.More recently, Perot made headlines in his battle overmanagement with General Motors Corporation. Twoyears ago GM bought EDS for $2.5 billion in a sale thatmade Perot GM's biggest stockholder and placed him onits board of directors. Last December GM bought outPerot's stock to quiet his persistent criticism of management.

The ploy has not worked. Although Perot avoidednaming GM, he told the forum that a decision to close IIfactories and layoff 30,000 employees—a reference torecent GM announcements—shows ”an absolute failure ofIeadershipf’

Lack of leadership has caused the current crisis inAmerican industry, Perot said. The country, he said, needsleaders who know the product and want to work withthe people on the factory floor to make it better andproduce it more efficiently.

Branscomb returned to the education theme as heled off a three-part panel discussion of specific means toimprove the U.S. trade position. ”As the centerpiece ofour economic revival,’ he said, ”we Americans shoulddedicate ourselves to deregulating our schools, empower-ing our teachers to teach, and challenging our childrento Iearnf’

America's ability to compete in the world economyrests on improving productivity, Inman said, and productiv-ity in turn rests on creating new technology and increasingthe speed with which that technology is put to use inmanufacturing. Education and industry must work togethertoward that end, he said.

Rivlin, however, warned that none of the measuresbeing discussed—no matter how right and necessarythey are—will reverse the trade imbalance so long as thecountry operates with a budget deficit. The budget deficitcreated the trade deficit by draining U.S. savings awayfrom industrial investments, she said. Only when thegovernment stops ”dis-saving,’ she said, can those savingsbe rechanneled into investments to increase productivity.

Dukakis, the featured luncheon speaker, shifted thefocus to initiatives the individual states can undertake toimprove economic conditions. Dukakis is credited withleading Massachusetts out of chronic depression. In thelast I2 years, the unemployment rate in Massachusettshas dropped from nearly I? percent to 3.5 percent asthe state has eliminated its budget deficit, pioneered localdevelopment programs, and created centers for thestudy of advanced technologies.

”We have had to face the prospect of change andmake it work for us:' Dukakis said. In his audience wasthe North Carolina General Assembly.

Response to the forum has been overwhelming,both Poulton and Hunt said. Hundreds of people whoasked to attend the conference had to be turned downbecause of limited seating capacity, and Poulton said hisoffice has received calls from around the country sinceportions of the forum were broadcast on the C-SPANcable television network.

”People are requesting transcripts and asking howwe went about initiating such a conference,’ Poulton said.”They’re saying this is exactly the kind of discussion that'snecessary to shake up the country and get it movingforward againf’ '

”I think this shows that North Carolina State Univer—sity can become a leader in developing public policy notonly for our state, but for our nation. We are fortunatehere on this campus to be a part of one of the greatestresearch institutions in the country. We have spent I00years, since this University was founded in I887, buildingthis solid foundation and attracting the brightest minds toRaleigh, North Carolina. Now we're ready to use thatbrain power to help guide this country into a future ofgrowth and opportunityf'

Hunt credited Poulton with having the vision toestablish the forum in October 1985. The first conference,in January 1986, attracted 900 people with the theme, ”In—novation and Competitiveness: The Challenge to Americaf'

”But the job of this forum does not end after oneday of speeches and discussions,’ Hunt said. ”That is onlythe beginning. Now we have to go out and develop thepolicies that will put some of these ideas to work for usf’

”We have to be bold, to take the initiative and trysomething new. If we don’t, we're going to be left furtherand further behind in the world economy. We have astrong nation, and one capable of responding and goingto work and solving this problem. But we can't wait, andwe can't leave the iob for somebody else to do. We’veall got to get to work on thisf'

In opening the conference, Hunt brought up theissue of protectionist trade policies. ”Many of us havetaken the easy way out and blamed loss of jobs andtrade deficits on barriers to exports,’ he said. ”They doexist and must come downf'

But he went on to cite a recent study that showedthat only TO to 15 percent of the trade deficit with Japanwould be erased by the elimination of trade barriers.”We'd still have a $50 billion annual deficit,’ he said. ”Sowe've got to look to other things, to focus on our competi-tive position as a nation and as a statef'

During a question-and-answer session with iournalistsDavid S. Broder and Vern E. Smith, Rivlin noted that tradebarriers existed long before the U.S. trade deficit. Shesaid some protection might be in order while US. industryretools to become more competitive, but she opposedquotas. She said a better idea is a tariff set in place fora given number of years at a declining rate. That wouldgive industry some breathing space, she said, and gen-erate income for retraining workers.

During the Q&A, Branscomb and lnman respondedto a criticism Perot had made of corporate leaders—thatthey don’t understand how business operates. Branscombsaid Perot overstated the case but agreed. "There's toomuch emphasis on the tradition of the CEO as a managerof portfolio rather than running the companyf'

5

lnman suggested that the reward system favors short-term capital gain over long-term growth. When heattended a board of directors meeting for one companythat was losing money, he said, every question concernedprofits and stock value. No one asked about long-termplanning, he said.

North Carolina leaders responded to the day'sspeakers with enthusiasm. University President Spanglernoted the number of times education was mentioned andsaid the UNC system was dedicated to providing strongprograms in both technology and the liberal arts. Hesaid that education has long been a priority in NorthCarolina but needs a stronger national emphasis.

Both Governor Martin and Lieutenant GovernorJordan said the state cannot be satisfied with the statusquo. North Carolina needs to improve public education,provide aid to distressed localities, and provide the infra-structure for expanding businesses, they said.

”We must have courage, we must take risks, wemust make needed investments, and we must face thefuture without fear,’ Jordan said.

Martin, though, said the state must not forget theAmerican tradition of limited government. ”North Carolina,’he said, ”must rediscover and adapt to our time the secretof what it has always done best: provide the tools andthe opportunity for our people to improve their qualityof life and raise their standard of living through anexpanding economyf'

In closing out the conference, Hunt reiterated theconference theme that America can regain its competitiveedge.”Our leaders must bring about change by becomingmore innovative and by developing new products andservices of high value that are in demand throughout theworld,’ he said.”We can do that, not with cheap, ineffi-cient labor but with brain powerf' And he challengedNorth Carolina to lead the way, saying, ”We have doneit before, and I believe we can do it againf'

Entrepreneur

MaiorbackerofNextInc.

FounderofElectronicDataSystemsInc.

Formermemberoftheboardofdirectorsfor

GeneralMotorsCorporation

RecipientoftheDefenseMedalof

DistinguishedPublicServicefromtheU.S.

DepartmentofDefense

RecipientoftheWinstonChurchillAwardfromthe

WinstonChurchillFoundationofthe

UnitedStates

ChairmanoftheTexasSelectCommitteeonPublicEducation

ChairmanoftheTexans’WaronDrugs

Committee

H.RossPerot

H.RossPerotthrewthequestiontohisaudience:”Areourbestdaysinthefuture,oraretheyinthepast?"

HisanswerchastisedtheU.S.leadershesaidhaveallowedthecountry'sindustrialstrengthtodecline,but

thefounderofElectronicDataSystemsalsoheldouthopeashegavethekeynoteaddressoftheEmergingIsues

Forum.TheUnitedStateswhippedtheoddswhenitdefeatedtheworld'smightiestnationintheAmerican

Revolution,hesaid.ItdidsoagaininbuildingthePanamaCanalandthetranscontinentalrailroad.Americanshave

thesamepotentialtoovercomethecurrenteconomiccrisis,hesaid,iftheyrecognizethatboththeproblemandthesolutionlieinleadership.

”Oneofthegreatestmythsinthiscountryisthatwe'reindeepwatereconomicallybecauseofthe

Americanworker,’hesaid.”That'siustnottruef’Perotillustratedhispointwithananalogy,sayingAmericansunderstandsportsbetterthantheydobusiness.”Let'sassumeIhadalosingNFLfootballteam,’he

said,”andyouwerethepartowners,andIcamein,andIsaidit'sallaproblemwiththeplayers.Rightaway,

you'dsay,We'vegottoreplacethecoach.We'vegottoreplacethequarterback:

”Notinindustry.We'dbuildthemagoldenpara-chute...buythemanother(3-3.Hell,thecompanygoesbankruptandwekeepthem.Yousay,Well,whydoyou

keeptheseguys?Isitthatnobodyelsewilltaketheiob?'Maybeitwouldbebettertoleavetheiobempty.These

aretheguysthattookthethingdown.Theemployees'pensionfundisunderwater,theemployeesdon'tget

theirhealthbenefits—allbecauseofmismanagement.Yetwekeepthecoachf'

Manyindustryleadersdon'trecognizethenewrulesofthegame,hesaid.Theyignoreinternationalcompeti-

tionandhopeitwillgoaway.Itwon't,Perotsaid,andAmericawillcontinuetoloseunlesstheleadershipchanges.Alosingteamneedstohuddletogetherandplotanewgameplan,hesaid.Withthecurrentindustrialleader-ship,hesaid,”Guesswhatthesolutionwouldbe?Let'sbuynewuniformsandhelmetssowelookgoodnext

Saturday.Let'sgomakeacapitalinvestmentsomewhere.Let'sproveourmanhoodbyspendingabilliondollarsonsomethingthatwon'tmeanathingstous.Getafew

headlines,haveamediaevent.Maybethestockholderswillholdsteadyforsixmonths.Whatthehell,I'mgonna

retirein18months,gethalfamilliondollarsayearfortherestofmylifef'That'sthementalitythat'stheref’

Corporateleaderstodaymaynotevenunderstandbusiness,Perotsaid.Theyrisetothetopbyfollowing

procedures.Hecriticizedbusinessschoolsthathesaidteachstudentstheirmaingoalshouldbetomakemoneyand”sendthebestandbrightesttoWallStreettoshuffle

papersf’Bycontrast,hesaid,Japansendsitsbestandbrightesttothefactoryfloortolearnhowtomake

theproduct.

Itiswrongandunfairtoblametheworkerfortoday'seconomicproblems,Perotsaid.”Theworkerdoesn'tmakethepolicy.Hedoesn'tgettodesignthefactory.Hedoesn'tgettodesigntheassemblyline...How

intheworldcanwedumpallthisontheworker?NowI'vehadsomebusinessmanheresay,’Yeah,butyou

don'tknowthoseunionleaders.'Well,nowwe'rebacktoleadersf’

Americanindustry,hesaid,needsleaderswhounderstandhowbusinessoperates,whoinvolvethem-

selveswiththeirproduct,andwhorecognizethepotentialoftheindividual.

HecitedtheexampleofToyotainJapan.Thirtyyearsago,thecompanywasbankrupt,hesaid,andnowit'sthe

automotivecapitaloftheworld.Intheplant,alargebannerproclaims,”Everyemployeeisabrotherf'Tenmillionemployeesuggestionshavebeenincorporatedintothe

Toyotacar,hesaid,andanyonewhovisitstheplantwon'tfind”Mr.Toyota"intheexecutivediningroom.He'llbeonthefactoryfloor,dressedexactlyliketheworker,with

partsinhishand,talkingtothemabouthowtoimprovethecar,Perotsaid.”Nowthat'sleadershipf’

Americahaslostsightofthepotentialoftheindi-vidual,hesaid,inventinganotherstorytoillustrate

hispoint.Now,then,let'sassumewedidn'thaveanairplane.

Well,we'dhavetohaveone,right?Whatwouldwedonow?Well,bothhousesofCongresswouldprobablymeetiniointsession.We'dhavetoputatleast10billionintothat,right?Oh,forsure.Otherwise,itwouldn'tbe

commitment.Then,we'dgetabunchofguystogetherthathadgood-soundingcredentials,orwerefriendsand

relatives,oratleasthadn'tstolenanything.Andthatwouldbeourpanelthatwouldparcelthismoneyout.

Andwe'dhaveallthebestandbrightestbecause10billionwouldattracteverybody.Sofinallyacoupleof

guysshowup.”OK,whoareyou?"

”We'retheWrightbrothersi’”Whereareyoufrom?"”We'refromDaytonf’

”DidyougotoCalTech,MIT?"”No,wedidn'tgettogotoschoolf'”Andyou'rehere?Youwanttoinventtheairplane?"

”Yeah,that'skindofourideaf'”Whatbusinessareyouin?"”Wefixbicyclesf’

”Next!"TheWrightbrothersdidn'tknowanybetterandso

theymadetheairplanework,Perotsaid.Theyfailedseveraltimesfirst,hesaid,andsodidEdison—provingeverywayhecouldn'tinventtheelectriclightbeforefind-

ingtherightanswer.Buttheyallfoundtheanswer.