The Unemployed Worker Is Half the Story : Economy: As industrial jobs vanish, the 'knowledge industry' grows vibrant. Making the shift is hard, but we can't turn back.

I saw two stories on the television news recently that together describe the state of the American economy.

The first report was about a young steelworker and his family. He had lost his job and was on unemployment; his wife was packaging bread at a local store for a wage far less than a steelworker's. The size of the industrial sector has shrunk under the onslaught of foreign competition and the number of jobs has declined as well. The steelworker was a high school graduate and willing to work, but his future looked bleak.

I changed the channel, and there was another report. This time a journalist was interviewing a research scientist at St. Mary's Hospital in London, who with his entire research team was leaving for a new position in Tampa, Fla. The report indicated that the British scientist was the leading researcher in the world on Alzheimer's disease and that he could get on with his work more rapidly and more effectively in this country. It was not clear to me whether the doctor's new position was funded by a pharmaceutical company or a university or a research institute. What was important was that the research team would have better facilities in Tampa, and that their salaries and living standards would improve. The loser, if there was one, was the British economy, as a productive member departed for greener pastures.

These reports are more important and more revealing together than they are separately. We are in the middle of a major structural shift in the American economy. There are winners and losers as resources are reallocated from one industry to another and from one section of the country to another.

But this is not new; we have been here before. One has only to drive through the old mill towns of New England to see the results of past structural shifts. While the human costs were high and we struggled to find means to lessen the burden for those who bore those costs, we would not return to that era. The textiles that were once made in New England are now more cheaply produced abroad, and we have come to accept this fact.

The current shifts are no different and we will learn to live with them as well. As in the past, we will do what we can to improve the lot of the unemployed steelworker, but we will not go back to making the same quantity of steel that we once did unless we can find a way to do so more efficiently.

In contrast, we have a "knowledge industry" in this country that is the best in the world. It is closely tied to graduate education, and one has only to count the vast number of foreign graduate students in American research universities to see this superiority recognized throughout the world. In the past decade, I have had students from nearly every country in the world in my graduate classes, and I am not unique. They come here because American graduate studies are superior, and many remain permanently or for long periods in the United States. The medical scientist moving to Tampa is merely another reminder of American superiority in the production of knowledge.

The knowledge industry is not like many others. Its product is amorphous and difficult to define. Its impact on the balance of payments is less apparent. And it has special problems of its own. At the same time, we are willing to invest the required resources in this industry and we know how to organize them into effective and efficient operations. We have done so and have seen the rewards of these efforts.

In the midst of recession, we face vast economic problems. Whatever the solutions, we must focus on the industries of the future, not those of the past.

We would not be served by artificially protecting those industries in decline, just as we would disdain efforts to impede the transfer of the British scientist to Florida. Protectionism is a backward-looking posture. It will block our path to the future.

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