The Boston Globe from Boston, Massachusetts • 46

Lessons from Japan tMARTIN AND KATHLEEN FELDSTEIN vjjapan's economy continues to outshine all other Jmajor industrial countries of the world. Although a Jsharp rise in the value of the yen during the past three years has caused a decline in Japan's exports Sand an increase in its imports, Japan's GNP is ex-'pected to grow at about 4 percent this year, double Jthe rate of growth in Europe and more than 1 'percent higher than the US growth rate. I This enviable performance is, of course, nothing new. The Japanese economy has had a much stron-jrger average growth rate than the United States and (Europe for three decades now. As Americans have observed this record and have felt growing competition from Japan in both domestic and foreign markets, there have been increasing efforts to find les-sons for the United States in the Japanese experience.

Ihe key to Japan's economic success is the high rate of increase of productivity, not the The lesson that high saving begets high growth is demonstrated repeatedly in country after country. Countries that save and invest more have higher increases in productivity and real incomes. Thus Korea, with a saving rate even higher than Japan's, enjoys even faster economic growth. The United States has had a very poor record of savings and investment for several decades. For the past quarter-century, net saving and investment in the United States have averaged only about 7 percent of GNP, a startling contrast to average Japanese ratios of about 20 percent.

By devoting this high share of GNP to capital accumulation, the Japanese have achieved their fast rate of economic growth. There is no simple explanation for the lower rate of saving in the United States. While cultural differences undoubtedly play a role, the different incentives provided by the governments of the two countries are also important. Japan has a low rate of tax on savings, with substantial scope for tax-free savings like our IRAs, but on a much larger scale. Japan has no tax on the capital gains realized on stocks.

And much saving is through insurance companies that issue special savings policies that receive very favorable tax treatment. Of course, a high rate of savings and investment is not enough to assure rapid growth. Japanese managers have been able to take the long view necessary to develop new products and new markets because the abundance of saving has kept Japanese interest rates low. Japan has also demonstrated an ability to adjust to rapid changes in economic conditions. A year ago the Japanese economy seemed to falter under the sharp rise in the value of the yen.

The higher yen was threatening Japanese exports and causing a substantial rise in imports from abroad. But within months Japanese managers, recognizing the need to rely less on exports, had shifted to production for the domestip market and had restored economic growth. Unemployment in Japan today is less than 3 percent. Japan's high rate of economic growth should be seen as a challenge and not as a threat. Policy makers who are concerned about America's competitiveness and economic growth should focus on increasing national savings and maintaining labor market flexibility.

Martin Feldstein, the former chairman of the Council of Economic Advisers, and his wife Kathleen, who is also an economist, write frequently to-getheron economics. Their column appears monthly on this page. Jong work week. In fact, the kerage hours worked by a typical Japanese have been declining in recent years. LETTERS Maine PUC member shows little foresight The most significant lesson for Americans is the importance of a high rate of saving and investment in plant and equipment.

A higher rate of investment means a more-rapid increase in the amount of new equipment per worker. And more equipment per worker means higher productivity, i The key to Japan's economic success is the high of increase of productivity, not the long work week. It is true the Japanese do work more hours per than their American and European counterparts, but this cannot be the source of Japan's faster Irate of growth. Only if the number of hours worked increased from year to year could the rising GNP be attributed to that factor. In fact, the average hours worked by a typical Japanese have been declining in recent years.

But the productivity of each hour 'worked continues to rise rapidly. the fact that 'electric utilities operate under "the obligation to serve." Since utlities can't know the future, they have to predict it as best they can. All of the Canadian power sources that Moskovitz claims are "conspicuously absent" from utility forecasts have been only "proposed." "Pending regulatory approval" is not the same as actually being approved ask the folks at Seabrook. Moskovitz also notes the "significant promise for the future" from independent power producers. He forgot to add that while utilities are required to purchase power from these private entities regardless of who they are these producers are not required to provide any guarantees their power will be available to the utilities in the fu1 ture.

It seems what we're really facing is a shortage of regulators who can face facts, look to the future and make the difficult, and sometimes politically unpopular, decisions they were either appointed or elected to make. GILBERT J. BROWN Westford It's dismaying that a Maine Public Uutilities Commission member has as little foresight as David Moskovitz shows in his recent article. In painting a rosy picture of New England's electricity supplies, he left out a few facts. Last year the peak demand in New England was more than 12 percent higher than in 1986.

The New England Power Pool had to invoke its Operating Procedure Nov. 4, which is only one step short of rolling blackouts, in 1 1 months of 1987. During the summer alone it was invoked 2-. times. Also last year the poof had to reduce voltage three times and this year has issued public pleas to reduce demand.

In January New England hit a level of peak usage that wasn't expected until 1984, and Canada cut off delivery of electricity twice. To say that New England utilities have "created" the "crisis environment" in an effort to bring Seabrook on line and to protect their profits is a convenient way to promote the image of rapacious utilities. Always left out in such scenarios is Women's clothes sales suffer retailers' attitudes Karl Marx, meet Adam Smith bol printed boldly across the front. Most of the clothes in the stores are for play or party time. Most women work and want to be taken seriously at work.

This is a major contradiction. It is very difficult to find clothes that are appropriate for the many jobs women hold today. Most clothes in the stores are for teenagers and slim young women. Most women are over 25, and so is their waist. It is very difficult to find attractive clothing for full-figured, grown women, and I am not even talking fat here.

I am talking normal bust and thighs. Women are beginning to break rank with the fashion industry and it's a wide-open opportunity for new designers and retailers who are willing to do their market research and find out what women want. PATRICIA RACKOWSKI Dorchester It is apparent from "Come on down and shop us" (Business Extra, May 24) that the slump in women's clothing sales continues because designers and retailers still don't understand what women want. And even after sales have been down for almost a whole year, most of them still don't want to know what women want. The fashion industry seems to believe it can "educate" us or "seduce" us into buying whatever silly garments they want to sell us.

Even when we stop buying for a prolonged time, it finds any reason to explain it, except the most obvious one: women just don't like the clothes. I loved the comments by the New York fashion analyst who said: "The mid-winter blahs, mixed with confusion over the new tax law, kept women from buying." So that's why I didn't buy that leather mini or that imitation tie-dyed extra-long T-shirt with "REVOLUTION" and the peace sym Cartoon ridiculing Boston ad agency was a cheap shot The Bruce Hammond cartoon (Opinion, May 31) ridiculing ad agency Hill Holliday Connors Cosmopulos' unsuccessful bid for General Motors' $100 million Saturn account is a cheap shot. The folks at Hill Holliday don't need me to defend them, but as a businessman I question why your editors found it reasonable to parody an effort that, if successful, may have markedly strengthened Boston advertising and the community in general. According to earlier reports, some 50 agencies, including most of the big names in the industry, competed for the business. Is it really your judg ment (the cartoon appeared directly beneath the label, that Hill Holliday failed by emerging as one of three finalists for this hotly contested national account? Most of us want to win.

There is much to be however, for rolling up your sleeves and going after it. My guess is that there is not much hand wringing going on up at Hill Holliday. They understand the rules of the game and know how to play it. JESSE R. MOHOROVIC Vice president, corporate and industrial relations.

Eastern Gas and Fuel Associates Weston many Marxist leaders in Africa, for example, now welcome foreign investment. They have seen their economies shrivel under socialism, and they have watched living standards rise as the free market was invited to return. A number of Asian countries are already economic success stories because they vigorously followed free-market policies instead of socialism: Singapore, South Korea, Hong Kong and Taiwan.Thailand's per capita GNP is now four times higher than its neighbor, socialist Burma. Of course the most dramatic reversal has come from the sanctum sanctorums of communism: Moscow and Beijing. An ultimate goal of Gorbachev's perestroika (restructuring) is to let production be set by the market and by plant managers, instead of by central planners.

And Chinese pragmatists under Deng Xiaoping have begun to energize the population, through the broad-scaled abandonment of Mao's rigid economics. Both leaders, like socialists elsewhere, are also looking for more trade with capitalist countries and both recognize the benefits that can flow equally to trading partners. Can it be that these doctrinaire communists have finally seen the light? Hardly. Nobody expects them to disavow communism. But they are redefining it, so latter-day interpretations of Karl Marx sound more and more like free-market economist Adam Smith.

Many now believe that this economic revolution has grown too large to be snuffed out. We fervently hope history proves this view correct for the good of the capitalists and communists alike who share this planet. American fast-food symbols beckon the Moscow heirs squabble over whether China's entire Pacific Coast will become a freewheeling free-enterprise zone. state subsidized firms in Yugoslavia face Western socialist states are cutting taxes and phasing out government subsidies of Can this be socialism? Yes, indeed, 1980s style. Workers of the world are uniting in demanding a better life.

But what Marx failed to predict was that socialism would have to borrow heavily from capitalism on the road to implementing its view of a more perfect social structure. Think about it: A "workers' state" where workers can't strike or even form independent labor unions? A workers' paradise where two or three hours a day are spent queuing up for such luxuries as toilet paper and withered vegetables? Marx's once-radical "solutions" have simply gone stale, particularly for the nations that were the first to try them. Even his pet targets oligarchs, feudal landowners and largely passed from the scene. In more recent years, Western voters have reversed many socialist-inspired aspects of the democratic welfare state. Since 1979, in many lands, tax rates have been lowered, industries deregulated, and parties espousing a traditional socialist line have been defeated.

At the same time, communism, which once seemed poised to dominate large parts of Europe, has quietly faded. The same is true in the Third World, where socialist ideas might have been expected to bear more fruit. Instead, Initiative to close N-plants keyed to economic factors is economic, in addition to the fact that Pilgrim and Rowe are already more expensive than conventional power plants or available alternatives, there is no way of estimating how much it will cost to keep their nuclear waste from contaminating the environment for the 240,000 years it remains radioactive. As the initiative states: "It is both uneconomical and unwise to continue to generate electric power in the commonwealth by means which result in the production of nuclear waste." MATT WILSON Field director, Massachusetts Citizens for Safe Energy Boston In a Charles Stein article on Boston Edison's financial troubles and in an out-of-context quote attributed to me in a May 22 story, the November ballot Initiative to close the Pilgrim and Yankee Rowe nuclear plants is incorrectly characterized as based on safety issues. Many citizens will surely vote for the initiative because of Pilgrim's well-deserved reputation of being one of the worst-run and least-safe plants in the country, and because Rowe's status as the oldest operating nuclear plant makes it one of the five US plants most likely to have a serious accident, according to the Union of Concerned Scientists.

However, the primary concern of the Initiative Brokers, investment houses are no friend of the small investor I had to chuckle a bit over US Rep. Edward Markey's remarks, in the May 19 Money section Investors wary of 1 agree with Markey wholeheartedly when he says "main street is rejecting the casino environment of Wall Street," and "the little guy got pum-meled on Oct. 19 and he knows who dealt him the blows." This Is all true. The small Investor has been stabbed In the back by brokers, Investment houses and programmed trading. However, who does the little guy have to thank for the change in the capital gains law, the "kiddle tax" and the phantom Income tax on mutual fund proceeds? Who "dealt us the blow" on minimum interest rates on US Savings Bonds, the loss of the IRA and taxes on savings Interest.

Who Indeed? Let's face it. When It comes to money, the little guy doesn't have a friend in the world, not on Wall Street, and certainly not In Washington. JAMES F. SMITH New Haven I Mobil 1988 Mobil Corporation.