FOREIGN AID THAT KEEPS AIDING

How to Export Home-Grown Prosperity

In all the $43 billion of economic (i.e., nonmilitary) aid dealt around the world since World War II, the U.S. has seldom known quite how to play its trump economic cards against the Communists and Socialists. The trumps are those dynamic qualities of production and distribution which make U.S.-type capitalism demonstrably the best pathway to a higher standard of living. Last week TIME Correspondent Robert Christopher reported on an experiment in the province of Vicenza, Italy, where a group of imaginative U.S. foreign-aiders played the trumps with signal success, to the profit of Italian management, labor and the free world.

ON the Fourth of July 1952, two officials of the U.S. Mutual Security Agency in Italy were driving north from Rome to the Italian industrial city of Vicenza (pop. 82,000). One was Walter C. McAdoo, 56, a Philadelphian and former pulp-mill executive, and the other was James L. Hockenberry, 54, a onetime agent for Prudential Insurance in Lebanon, Pa. and wartime specialist in on-the-job industrial training. Their mission: to find an Italian plant willing to try out American methods of increasing productivity.

As they drove along, Hockenberry was struck with a better idea: if the benefits of productivity were to get a real U.S.-type demonstration, why not expand the experiment to include several plants in the Vicenza area, instead of just one? McAdoo agreed, and so, later, did the Italian National Productivity Council. Vicenza province was ideal for an area-sized trial--a relatively prosperous district dependent on no single industry but bulging with small and medium-sized businesses.

MSA and the council decided to limit the experiment to plants that 1) employed 500 men or less, 2) had good labor relations, and 3) were capable of expanding production 100-400% without running into marketing difficulties. Using these conditions, they jointly selected five plants that turned out a variety of products, including motorcycles, compressors, pumps, liquid-gas bottles, agricultural equipment, woolen cloth and pharmaceuticals.

THE DOCTRINE OF MORE JOBS

Vicenza's labor unions were deeply suspicious that increased productivity might turn out to be no more than a newfangled way of cutting employment. MSA insisted that all the pilot plants publicly agree that they would share increased earnings, if any, with the workers, that they would hold periodic management-labor conferences on the experiment and that they would fire no workers as a result of increased productivity. These were not simply concessions to union fears. Productivity, as MSA preached it in the experimental plants, is a dynamic concept which holds that by increasing efficiency a manufacturer can cut unit costs and thereby expand sales and thereby create jobs for more workers.

In October 1952 the Vicenza experiment got under way. As a first step, MSA sent into each factory an Italian in-plant trainer, generally an engineer trained under U.S. guidance. The in-plant trainer's job is to break down the resistance of foremen and low-level supervisors to new production ideas. Since Italian factories are frequently caste-bound, the in-plant trainer starts off with a course in labor relations.

During one informal swing around the shop, the in-plant trainer at the Ceccato plant found a foreman in high dudgeon: the women in his crew were once again refusing to put on the plain, utilitarian caps they were supposed to wear as a safety measure. The trainer whipped out his little pink card on "How to handle a problem." (Rule No. 1 is "Get the facts.") "Have you got all the facts?" he asked. "Why not have the women elect a committee to tell you exactly why they don't like the caps?" When the foreman broached this notion to the women they seized upon it and elected a committee whose members, in the process of telling each other why they didn't like the caps, evolved a design that they did like. Ceccato bought caps of the new design, the women put them on, and the foreman was hailed by all hands as a Solomon.

After an Italian in-plant trainer has been at work for about three months, the two U.S. productivity experts assigned to Vicenza put in an appearance at the plant. They begin by checking quickly but thoroughly such matters as materials handling, work distribution, records and control, quality of supervision and production methods. The U.S. Foreign Operations Administration (successor to MSA) insists that Italian production engineers work along with the Americans, thus helping to train a corps of Italian productivity specialists.

It is at this stage that the most dramatic results are usually achieved. For example, at the Laverda Brothers foundry (agricultural equipment) the FOAman found primitive quality control and a bad personnel problem resulting from bitter rivalry between the old up-from-the-ranks foundry boss and a young technical-school graduate who had been hired to introduce "modern" methods. The American tactfully changed the composition of the metal and the type of casting sand used. He also persuaded the old foundryman to concentrate on bossing labor and the younger man to concentrate on records and quality control. The results: greatly improved castings and 30% greater production with no additional capital investment.

THE HOPE FOR ABUNDANCE

Results in the first five Vicenza plants to participate, according to FOA estimates:

P: Production and sales: up 23%.

P: Employment: up 23% (from 1,385 to 1,707).

P: Wage rates: up 10% (mostly in production bonuses).

P: Prices: no overall figure, but some cuts have been made, e.g., Ceccato dropped the price of its motorcycles from 180,000 to 150,000 lire ($288 to $240).

Six months after the project began, five more Vicenza plants were added to the experiment; next month FOA will add another five.

There have been important gains not measurable in statistics. The Communist-dominated CGIL (Italian General Confederation of Labor) last November won four out of seven seats on the Internal Committee, which represents the Ceccato plant's workers in all negotiations with management. After the election, Owner Pietro Ceccato informed the committee that while he did not intend to interfere with democratic processes he felt that since CGIL opposed the productivity experiment he was now honor-bound to withdraw Ceccato from the project. Two months ago, after chewing on this idea for a bit, two of the four CGIL representatives turned in their CGIL cards and joined the anti-Communist union CISL (Italian Confederation of Workers' Trade Unions), thereby giving it control of the committee.

The Americans directly concerned with the Vicenza project are not particularly interested in boosting exports. Most of what marketing guidance Vicenza plants have received has consisted of advice to develop home markets. "The big thing," says Hockenberry, "is to find some way to fix it so that South Italians can buy what North Italians make." The real purpose of the Vicenza experiment, in other words, goes way beyond closing the dollar gap. The ultimate hope is that the corps of Italian productivity experts created by Vicenza-style projects will revolutionize Italian industry and eventually create in Italy something approaching the economy of abundance that has been developed in the U.S.

This is a huge dream castle to rest on the foundation of current accomplishments at Vicenza. But no doubts trouble FOA's James Hockenberry. "For some people this kind of work is just a job," he says. "For me it's a religion. I tell these Italian engineers: 'You're like teachers or priests. You must have some idea about what kind of Italy you'd like to live in or what kind of Italy you'd like your children to live in. Well, this way you can help make that kind of Italy.' "

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