ations, to here is the job and we want your best input, advice about how to do it right. And we want you to take pride in what you have accomplished. We are involving the entire work force if you will.

Mr. RITTER. Is this revolutionary or is this evolutionary?

Dr. NAGEL. I believe it is evolutionary. It is happening here now. Mr. RITTER. I mean its impact on competitiveness, on our standard of living, on our jobs, on our work life? Is it revolutionary, this quality movement? Is it, or have we ridden the crest of the wave of the machines, and now we are seeking to gain the best from people? We placed a lot of stock in machines, but all of a sudden we realized that, hey, we have this plant with 5,200 people in it, and we pay 200 people to think-we paid them real well to think and to tell the other 5,000 what to do. But all of a sudden now we are saying, all of them-is that revolutionary?

Mr. JACKSON. I think it is both. You have got to have the workers doing just what he said to make a product as it is designed and made today to meet today's needs. But to meet tomorrow's needs, it may take new technologies they are talking about here, changing the whole process. Just like the gentleman from Bethlehem said that we changed the whole process in making steel in the last 2 or 3 years. So that takes technologies.

Mr. ROE. What we are basically talking about is-I think it is a misnomer to say quality-there are countless automobiles out there that are good quality, which ones do I want, which ones can I afford to buy. I do not buy-I buy a car within my area that I am trying to buy. Whether it is manufactured in the United States or Japan, it is the one that I buy. That is your customer aspect of it. So it is really a systems approach you are taking to the whole thing rather than the idea that there is one particular issue. Because I can remember before you were born in World War II when the Japanese said, made in USE or USA which was the name they just made up. And everything they put out came out like in crackerjack boxes and so forth and so on.

So in fact, and you mentioned the point that OK, you know, we sent Deming and others over there in the resurrection after World War II to help to teach them. They are doing a better job than we are, but that does not mean that we are not capable of doing the job.

Mr. JACKSON. That is true.

Mr. ROE. Now, is that part-I do not think it is just the idea of the smokestack situation at all. I think it went right across the board. Now, the question is that they are making good products as fast as we are, and are we going to be able to make good products and keep up with them or go ahead of them? That also does not just have to do with corporate decisions, if corporations should make the decisions unilaterally or academic decisions, it has to do with a national decision. Because some of the determinations that are being made by Congress are four in which we are trying to deal with quality production. We talked about that this morning. I mean, do we go ahead and do work with superconductivity? Do we provide the resources to do that? The Japanese are already talking about how to, one, how to produce the best material superconduc

tively, they are already talking about how they are going to market the product.

And we are cutting back at Federal level. We are cutting back on the research moneys, moneys that are going into a whole host of fields of superconductivity. When we start talking about competitiveness, we start talking about the future of this country and our productivity.

Should we not be saying that proportionate shares of Gross National Products have got to be devoted to these particular areas? We've got to change the way we teach the youngsters in school. If we want to teach them science, space and technology, we've got to start in the first grade. That is not complicated. Why is it so complicated? I mentioned this morning, you know, the kids with these scientific toys they can play, they can make them up at 3 years old better than the parents can. So the capability apparently is there. Why don't we do it? Why should that take three generations to decide? Because there are about 30 different ways that we spend educational money. The media suggests anything about spending educational money, you get them down on your back. Then we do the space program-I mean the whole battle-I fought on the floor the other day to save the space station, they want to cut $400 million out of it-more housing, we need more housing, to take provisions and help the elderly. We need to help the elderly. We need to help the homeless.

The point we made, and we won the point, is based on the fact that if we do not go ahead and pull our best interests together and collaborate on what we are doing, then we are not going to be able to create the new wealth that is going to be needed to provide the resources that we need sociologically for the needs of people.

So, somehow I do not think it is-and the point you are making, I do not think it is an area that we can be a fiat from government, where government says you should do it my way. That is the last thing to say to our people, because if anybody said that to me, I wouldn't do it either.

But I do think that the psyche is beginning to develop, the attitude throughout the country where people are kind of proud if they can do something.

Dr. NAGEL. I think that is true. I guess I would like to add that knowledge is becoming a resource that is very important in competitiveness. I think we have an advantage in the infrastructure for providing education here if we use it well. And that is a comment I wanted to make back to you there.

Mr. ROE. If we apply it.

Mr. JACKSON. I acknowledge that and the environment where people want to do what you say are two resources we need to really nurture.

Mr. ROE. I think the federal government, for example, as we unfold what the space-what the space policy is going to be for this nation is going to trigger a whole forum on different technologies. They are going to be essential, and when we get to Mars, unless we have certain advanced technologies, these will be the points I am thinking of; fuel, materials, research, so forth and so on. We will never get there unless we do that. So I think as you make national

policies, in particular areas, it also is going to drive our economic base as I would see it and the competitiveness of the issue.

Mr. ALKIRE. But your national policy is――

Mr. ROE. Speak up, I can hardly hear you.

Mr. ALKIRE. Your national policies must come from national goals. One thing that was missing in all of our commentary was any mention of the fact that we had national goals, which we do not.

Mr. ROE. Well, I do not agree with that. Some people do not have a goal. I have a national policy goal for space in this country. We can make it work. We intend to see that we stay in space. So, I think we are coming down on the same side.

Mr. ALKIRE. Yes.

Mr. ROE. We are talking inspirationally. You know when John Kennedy made his speech about going to the moon, we did it in 9 years, unless it was 8 years, wasn't it, and so forth and so on. So, that there is-I think as we can stimulate the productivity, improvement of-we are talking about manufacturing, if we strengthen our goals is what you are saying.

Mr. ALKIRE. Yes.

Mr. ROE. I agree with you.

Mr. RITTER. I think his point is really well taken, because you know it is important that if you set a goal, you stick to it and you accomplish it and you go do it. That is what happen with the moon program. But if we can all remember, that as soon as we did that, we dropped it. Then we had a thing called Skylab, and we did it, and we dropped it. As a matter of fact, let the thing fall out of orbit. It is still a better space station then the so-called Mir, the Soviet space station. So the idea of setting goals and then having pretty much the majority go along with that over time, preserving is very important. I think this manufacturing area, and its connection with quality, it is kind of the machine and man and person together, needs to be a national goal not just a small piece of the action, because it really does-it really does serve as the linchpin for the creation of national wealth; manufacturing matters. The best service jobs are connected with manufacturing. You cannot send all that manufacturing overseas and expect to have the services.

So a national goal of manufacturing and quality is something I think we do not quite have yet, and that is what these hearings are about, to try to generate some of that consensus.

Mr. ROE. Two good questions. One is if anyone is looking for the federal government to lead the way in changing manufacturing technology? The government does not work that way or that fast. Business has to answer the question, how do we sell long-term quality awareness to a business community that traditionally has focused on quarterly short-term profits? That is a ringer. Go ahead, who wants to try it?

Dr. NAGEL. I will take the first one. I do not think we want the government to make the difference. I think we want the government to coordinate and provide a central focus.

Mr. ROE. OK.

Dr. NAGEL. And I think the answer to the second one is going to be the impact it has on the long-term health and meeting short

quarterly results is beginning to be less and less the right thing to do as you find out that the company does not stay competitive long. I think the marketplace is helping to bring that impact around.

Mr. ALKIRE. Air Products is devoting a considerable amount of manpower and funds, expenses to the education of all 12,000 of its people. And further to get them working on this process of continuous improvement without really seeing immediate short-term benefits. But the commitment is there. And as long as management will make that commitment and wait for the benefits to accrue and come 2, 3, 5 years down the road, that is what needs to be done. And the companies that are in a leadership role in this country; companies like Eastman Kodak, 3M, IBM, and Milliken and others, are doing that. They are making an investment now at the expense of short-term earnings with the knowledge that it is going to pay dividends in the future.

Mr. RITTER. By the way, Quality Valley, U.S.A. has its next program to bring in somebody from Hewlett Packard who has started-who has developed a system to try to connect this kind of spiritual, educational side of this quality movement to balance sheets and has developed a system what he calls "cost riders" to get other countries and the bureaucrats in the company realizing, a ha, this stuff really does make a difference. And so, you are all invited to that session. I think it is after the July 4th weekend.

Mr. ROE. Another question, Dr. Seymour Melman of Columbia University has argued that the Department of Defense penchant for maximizing performance heedless of costs has damaged the U.S. manufacturing center or sector. Does that make any sense?

Mr. JACKSON. No, it does not. I do not-I am not sure I understood the question.

Mr. ROE. They are coming back and saying that basically they are arguing that the Department of Defense's penchant for maximizing performance heedless of costs has damaged the U.S. manufacturing sector. I think what they are saying there basically is that when we look at the military procurement the money does not matter if you question the end result that they are trying to achieve. Now, how does that relate to other manufacturing centers?

Mr. JACKSON. I guess my response would be if the Defense Department would look at the quality of what they are getting, not the lowest costs

Mr. RITTER. It is hard to hear you.

Mr. JACKSON. If they would look at the quality of what they are getting from industry rather than the lowest price, you will find out in a long run that in fact will be more cost-effective for them. So that would be my response. If I understood the question correctly.

Dr. NAGEL. His implication that it is damaging manufacturing, I would have to hear more of his argument. There has been a suggestion which was just made, that it would be wise for DOD to look at the life cycle performance instead of the performance of the one time it might work in its life cycle. And that would probably be the healthiest thing to do.

Mr. ROE. That is a paramount issue right now. OK.

Dr. NAGEL. A comment you mentioned earlier, which I think you mentioned about some of the changes in the tax law that have discouraged industry from investing in research. That is something that we really need to look at because that in essence would encourage industry to do more of what they have done historically and need to do to maintain a competitive edge of being able to first make a profit, and then take some of that profit and put it back into technical investments.

Mr. ROE. Well, it is my personal opinion that when that tax bill was written-first of all, part of it is a bomb, people are just beginning to understand it now. In my judgment both from the point of view of the manufacturer, there was a number of points there that were important to the country, that the country was benefiting from in the levels and percentiles of resurgence, and also the new entrepreneurs, where they could take advantage of capital gains and so forth which now of course is being wiped out. Where the citizen was involved, all of us as individual tax payers, the assumption that there would be one level tax rate-there are three different level tax rates, and the highest is what 28 percent, I believe, and therefore, everybody would be much better off, is just sheer nonsense when you look at it in retrospect, particularly when they had to devise the IRA program, where people could set aside part of their funding, which was an enormous success in this country in a matter of a year and half's time. It was the biggest saving device ever devised in the history of this country. And that was wiped out completely. So I think that when we talk about productivity, also we've got to talk about other government policies that is work productivity. You know what I am trying to say?

Mr. JACKSON. Yes, I agree with you.

Mr. ROE. OK.

Mr. RITTER. Well, of course, we will have to comment on that one just a little bit, because we lost the IRA over the battle for state and local tax deductibility. It was one or the other.

Mr. ROE. It should not have been.

Mr. RITTER. It should not have been. There was a more powerful political constituency for state and local tax deductibility, especially on the Ways and Means Committee.

Dr. NAGEL. I neglected to ask a motion that my advance testimony be made a part of the record.

Mr. ROE. No objection. No objection to it. All the testimony, the formal testimony is made part of the record. Thank you. Do you have any further questions?

Mr. RITTER. None for these gentlemen.

Mr. ROE. Any further thoughts that you would like to make? [No response.]

Mr. ROE. OK, we want to thank you very much for your testimony. It has been a big help to us, and we will be back in touch with you further, I am sure.

Now, our second panel for today-that is panel No. 2, and it is the panel on superconductivity. And we have with us as our witnesses today, Dr. Kay Rhyne, program manager for ceramics and superconductivity, Defense Advanced Research Projects, Department of Defense, and Dr. Michael Notis, director of Ceramics Re