Global Economy and Government
There is a growing tension between the increasingly global nature of modern economic life and the far more restricted territorial orientation of government decision-makers. The global village envisioned by the writer Marshall McLuhan may not yet be here, but the global enterprise surely is.
Already, about one-half of all U.S. imports and exports are transactions between U.S. firms and their foreign affiliates or parents. What from the viewpoint of public policy is an international economic transaction turns out to be so often just an internal transfer within an individual business firm. Thus, the traditional geopolitical map and the dynamic techno-economic map are out of sync. Government policy still responds in a very static way to the desires of voters who live in a given city or state or country.
The global enterprise is not merely a high-blown phrase. Unisys is a good example of this development. Half of its sales are overseas, covering more than 100 advanced and developing nations. The company uses components produced in virtually every continent, and its financing is worldwide.
The company is simultaneously a customer of--and a supplier to--Fujitsu, Hitachi, IBM, Honeywell, Phillips and Siemens. Together these companies (headquartered in five different nations on three continents) engage in joint ventures, serve as sources for each other, share output and compete.
Unisys is not unique. Corning Glass gets more than half of its profit from joint ventures. Two-thirds of the ventures are with foreign companies, such as Samsung in South Korea, Ciba Geigy in Switzerland and Asahi Glass in Japan.
Here is an interesting turnabout: In 1986, Texas Instruments sued Hitachi for patent infringement. Today, the two companies are jointly developing the next generation of memory chips. One more example of the new global economy: Ford and Volkswagen--tough competitors in our domestic market--merged their operations in Brazil and Argentina a few years ago to form Autolatina.
But the political debates--in any country--seem to be taking place in a different, perhaps earlier world. Ironically, 19th Century-style protectionist concerns are rising as we prepare for the 21st Century. Some business and labor leaders are pushing hard to limit imports into the United States. It seems that competition is always nicer to contemplate in the abstract. The battles over international air landing rights always ignore the needs of the consumer--the passenger.
Other “defenders” of the private enterprise system want to restrict exports, especially items containing new technology. Still others worry about all the foreign investment coming into the United States (although they get even more upset if the foreign funds are invested in some other country, making their industries more competitive). This new wave of protectionist sentiment is reminiscent of the plaintive plea of that mythical business executive who yelled, “Stop the world, I want to get off.”
Some historical perspective is useful. The rise of Japan and the other Pacific rim countries as global economic powers in recent years has a parallel in the changing role of the United States in the middle of the 19th Century. At first, the major European countries dominated world trade. However, their citizens invested heavily in our railroads, canals and heavy industry.
The result was the birth of a new economic giant in North America that broke for all time the historic European monopoly in world trade. Fortunately for all concerned, the Europeans did not try to prevent this change, although never again have they dominated international commerce. The United States joined the club of advanced economies. In the years that followed, the trade--and output and living standard--of each nation rose. The benefits of competition were impressive.
A similar process is at work today. Japan followed by South Korea, Taiwan, Hong Kong and Singapore are gaining important positions in many product lines. The United States is unlikely ever again to be No. 1 across the spectrum of world markets.
However, if we do not try to prevent the current round of change, the odds are that we, too, will enjoy rising absolute amounts of production, trade and investment in a growing world economy. The alternative is to try to maintain a constant share of what would be a diminishing world economic “pie.”
It is always difficult, however, to adopt new ways of thinking. On reflection, it is natural--perhaps inevitable--that political officials reflect the views and concerns of their constituents. Thus, we can expect government to take parochial “territorial” stands on matters of international commerce as long as the voters they represent continue to do so.
Thus, the challenge facing us in truly a task of economic education, to help citizens/voters/taxpayers understand the increasingly global nature of economic life. True, it is easier to see the impact of foreign money in the United States than it is to visualize the role of American investment in other nations. Yet the effects flow in both directions.
Less than a quarter of a century ago, the citizens of France and other Western European nations were complaining about making the world one big Coca-Cola franchise. The “American challenge” was a popular topic for public debates. Our reply was that U.S. investment benefited them by creating employment, income and tax collections in their countries. That was true then and it is true now. But the shoe is now on the other foot.
Nevertheless, the results are very similar. Foreign investment is creating jobs and income and tax revenue in this country. With the financing of our outsized budget deficits draining off so much of our domestic savings, that foreign money is a key factor in the continued prosperity of the United States.
In this light, it is fascinating to contrast the economic with the political views of many Americans. Often the very same people who urge their legislators to take “tough” restrictionist positions on issues of foreign trade and investment act very differently as consumers.
In spending their own money, they buy items from anywhere in the world, caring more about quality and price than country of origin. They go to movies made in a great variety of countries and they watch television performers from every part of the globe. Without thinking about it too deeply, most consumers are adapting to an increasingly global economy. The sooner local, state and national politicians understand that, the brighter will be our prospects for the future.
