The Business of America/Corporatism Ousts Reaganomics
Stelzer, Irwin M.
changes have actually taken place. And even then, in a period of limited Western resources, we should keep in mind Senator Bill Bradley's unforgettable war cry: every dollar, deutschmark,...
...CREDIT CARD ORDERS: CALL 1-800-345-8112 a ciently, President Bush is permitting their American counterparts to undertake just such a role...
...They always want second opinions," he told Devroy...
...On at least one nomination, William Rehnquist's, the Senate bypassed the White House and told the Justice Department, the FBI's parent agency, what it wanted asked...
...Attitudes toward members of racial and ethnic minorities...
...is used up...
...The FBI thus worked exclusively for the administration—at least until recently...
...The funds involved are not by Irwin M. Stelzer trivial: $30 million (over two to three years) for HDTV, $100 million for semiconductors, $25 million for superconductors, $33 million (two years) for neural networks, and $67 million for chips...
...Finally, many observers worry that the infatuation with Japanese-like research consortiums is a serious diversion from the main business at hand: taking the hard steps necessary to improve the competitive environment in which American firms must operate...
...And some say that in doing so it siphons off human and other resources from private sector research, and therefore cripples America's efforts to develop competitive consumer and industrial products...
...Just when Mikhail Gorbachev is admitting that his bureaucrats aren't smart enough to direct the flow of research and investment funds effiTHE AMERICAN SPECTATOR MAY 1989 31 The Veagan everyone loves...
...Unwieldy conglomerates have been dissolved, with control often passing to a new breed of owner-manager, pressed by interest obligations to maximize efficiency...
...Clearly, the Pentagon can no longer go its own way, but must rely on the private sector to develop chips, materials, and other components for its increasingly sophisticated weapons and defense systems...
...firms with fewer than 500 employees have increased their share of total employment and of innovations...
...insistence on discipline in schools and on high educational and English language skills would raise the productivity of new immigrants...
...Average GNP per firm has fallen from $245,000 in 1980 to THE AMERICAN SPECTATOR MAY 1989 33 $210,000 in 1987...
...Previously an assistant to Presidents Nixon and Ford, he offers an insider's look at the workings of government and a behind-the-scenes perspective on policy-making in Washington...
...The bureau doesn't enjoy being burned...
...These industrial groups substitute cartel-like cooperation for competition as the driving force behind innovation...
...It would also provide high resolution screens for military uses such as spy photography, and be a boon to U.S...
...But rather than adopt this Dukakis-like policy openly, after full debate, Bush's "pragmatists" are doing it covertly, by acquiescing in a quiet expansion of the role of the Department of Defense...
...Date Name Address .00 R ead Pat Buchanan's pointed, insightful column about national affairs every week...
...Commerce Secretary Robert Mosbacher has joined Pentagon officials in calling for a government-industry consortium to develop HDTV in the United States...
...First, some context...
...And it is this absolute growth that permits it to sustain its military burdens as leader of the free world...
...Darpa programs are being mounted in semiconductors, superconductivity, neural networks (brain-like computers), and chips for communications systems, as well as in HDTV...
...And even then, in a period of limited Western resources, we should keep in mind Senator Bill Bradley's unforgettable war cry: every dollar, deutschmark, or yen that goes to the Soviet bloc is a dollar, deutschmark, or yen that is not being spent to advance the cause of democracy in Latin America...
...q Charge VISA/MasterCard #• Expires...
...Unless the Bush White House decides it's time to return the FBI to its constitutional place, within the executive branch, and tells the Senate to do its own investigations, there will be confirmation battles in which Senate committees again force the FBI to work for both branches of government...
...Name...
...Stand-Up Reagan is available right now, so don't delay...
...I asked whether he wanted me to speak on the record or off...
...That it has done so well in the face of what Kennedy terms its relative decline shows the fatal flaw in his thesis: it is not relative decline that matters...
...Now Mosbacher has joined Attorney General Richard Thornburgh's call to extend this exemption to some joint manufacturing and distribution ventures...
...It is also wrong...
...private sector companies, among them such well-heeled firms as AT&T, are unwilling to back the bureaucrats' hunches...
...Darpa, a small agency (160 staff, most of them highly trained), has been around for thirty years, dolloping out funds to finance military research...
...But there seems to be a problem...
...The bureau does a minimum of 34 THE AMERICAN SPECTATOR MAY 1989...
...interviewees aren't under oath...
...A "Special Inquiry Investigation"— "Spin," as it is called within the bureau—is designed to yield information on a great variety of subjects...
...To: Accuracy in Media 3533 1275 K St., N.W...
...And so forth...
...During the Reagan years the bureau sometimes acquired another boss: the Senate...
...He even enlists Nancy as his partner in mischief...
...But not only is the relationship of industry to government being transformed...
...Governments are not, after all, famously good at picking winners in the high-tech sweepstakes...
...Much of the panic stems from the view that America's prosperity and world position are somehow threatened by its relative decline, a vague notion best expressed by Paul Kennedy in his spectacularly successful The Rise and Fall of the Great Powers.' His thesis—elegantly stated, apparently scholarly—is the meat on which the New York Review of Books and the Times Literary Supplement feed...
...so is the relationship of private sector businesses to each other...
...Read Buchanan's "Dividing Line" feature in every CONSERVATIVE CHRONICLE along with George F. Will, William F. Buckley, Jr., Donald Lambro, Jeane Kirkpatrick and many others...
...Washington, D.C...
...Either way, there's a continuing separation of powers story here, one taking place not in the courts but in the political arena...
...Reduction of the budget deficit would drive down interest rates, lowering industry's cost of capital...
...Some committees requested that the administration direct the bureau to ask more questions (typically more specific queries) regarding certain nominees...
...Now Darpa intends to expand its reach by cooperating with newly emerging private sector consortiums of once competing, now cooperating firms...
...Sam Nunn, had specific questions it wanted the bureau to ask...
...He's Ronald "Dutch" Reagan, one of the country's most beloved leaders...
...Address...
...Any instances of alcohol abuse or illegal drug use...
...City, State, Zip...
...Secretary of State Baker has yet to define his positions, but it is worth recalling that Treasury Secretary Baker was not a tower of strength in this field...
...A famous song by country singer Kenny Rogers points out that a good gambler must "know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run...
...These fears count for little in the Bush Administration...
...For one thing, the pace of technological change is now so rapid, and the changes so fundamental, that old distinctions between private and military research may not be appropriate...
...Keep in mind that the National Cooperative Research Act, passed in 1984, already provides antitrust exemption for some 110 research consortiums...
...America grew at about the same rate as did Japan in the 1980s...
...These Bush "pragmatists" aren't inclined to defend competitive principles: if replacement of competition with cartels, and of free enterprise with government-industry cooperation, seems expedient, no outdated devotion to a free-market ideology will stand in their way...
...John Shenefield, a vigorous antitruster and one of the few to emerge from the Carter Administration with reputation intact (he was head of the Justice Department's Antitrust Division), describes a widespread feeling among industrialists that (a) joint ventures are legally risky, without explicit antitrust exemptions such as those proposed by Mosbacher...
...nfortunately, public policy issues are not easily solved...
...The alternative is for Bush to decide not to pick Tower-types who invite Nunns to come knocking on the bureau's door...
...But these programs arouse noisy opposition, before which politicians quail...
...He was opposed even to high-level Alliancewide discussions of the national security implications of West-East lending...
...More important, the American economy has, in the past decade, been transformed...
...And one of its greatest storytellers...
...They point out that Irwin M Stelzer is chairman of the Regulated Industries Group...
...There is a solid congressional consensus against unrestricted lending to the Warsaw Pact, and any effort to cut a "Save Gorbachev" financial deal would be vigorously challenged from Capitol Hill...
...Indeed, in the case of HDTV, the consortium plans to extend its cooperation beyond the research stage into the manufacturing and marketing of the next generation of television sets, and of broadcasting and transmission equipment...
...Indeed the Bushmen feel that they already have a MITI clone—Darpa (Defense Advanced Research Project Agency)—and need only expand it...
...Mosbacher and the Pentagon are determined that this market not be lost to the Japanese, and are prepared to emulate what they see as the Japanese government's successful history of public and private sector cooperation...
...and it retains supremacy in the computer and science-based industries of the next century...
...20005 (202) 371-6710 Send me a videotape of Stand-Up Reagan (VHS format only) q One copy: $19.95 plus $3.00 handling q Two copies: $37.90 plus $4.00 handling q My check is enclosed...
...It's an ideal keepsake that his fans will cherish for a lifetime...
...In short, we are seeing the development of an "industrial policy," a longloved liberal euphemism for economic planning...
...And as with the Rehnquist nomination, the committee on several occasions directly transmitted its questions to the Justice Department, as if it were part of the legislative branch...
...In fact, if one peers beneath the surface of the concern about the trade deficit, it comes down to one thesis: Japan is on the verge of overwhelming the United States in the race for economic supremacy, and will end up owning large pieces of the American economy...
...If Bush and his cabinet stick to the President's announced principles, and think through the endgame, we may yet grab the trophy for the winner of the Great Twilight Struggle...
...Given these perceptions, at least the first of which he feels is a mistaken one, Shenefield sees little harm, and some possible gain, in formalizing already-permissible areas of cooperation...
...As the Economist recently pointed out, "In America . . . small has indeed become more beautiful...
...I know...
...He said I could speak either way...
...recall the Ginsburg nomination in 1987, when reporters found out about drug use the bureau never even heard about...
...Coincidentally, on the day Tower was voted down, I got a call from an agent doing a check on a Bush nominee...
...To some, the change is a welcome recognition of the new realities of world trade and the international economic power struggle...
...President Bush has said all the right things...
...He jokes with Congress, takes good-natured potshots at the media, and spins witty yarns with the legendary master's touch...
...the portion of the work force that is self-employed has risen...
...The White House felt it would be politically difficult to refuse, so the new questions were forwarded to the FBI, whose agents in turn asked them as part of the background investigation...
...Such episodes have made the bureau ask more and more questions...
...But, given current hysteria about the prowess of "Japan, Inc.," and politicians' desire to blame the trade deficit on Japan's unfair trading tactics, political blessing of the arrangement seems highly likely...
...Indeed, even in relative terms the U.S...
...The Washington Post's Ann Devroy did a good job reporting this trend, plucking a fine quote from a knowledgeable political scientist to the effect that FBI agents, like doctors, are fearful of malpractice suits...
...And, like it or not, private sector "perceptions" must be dealt with...
...Since the line between research for military and for purely commercial applications is indistinct, the Department of Defense has little difficulty in justifying its keen interest and its expenditures in many areas...
...and (b) private firms, acting independently of each other and the government, are no match for the determination and deep pockets of MITI-led Japan, Inc...
...There's never been a video like this for the millions of Reagan admirers across the country...
...Still, one can't help wondering about this enthusiasm for so fundamental a change in the organization of the American economy...
...Now, for the first time, Reagan's most humorous tales and most amusing anecdotes are combined on one delightfully entertaining collector's video -- Stand-Up Reagan...
...Any details of private life that could be used for blackmail...
...We will no doubt have to remind the Armand Hammers and Dwayne Andreases of these basic principles on several occasions in the next year or two (and let's hope that Commerce Secretary Mosbacher proves tougher minded than his two predecessors, both of whom came to believe they were appointed in order to expand trade with the Soviet bloc...
...semiconductor manufacturers...
...q AX q Bill Me Card # Exp...
...All the research efforts involve joint ventures by various companies, organized into consortiums...
...Besides, the medicine being prescribed to cure the disease of America's "lack of competitiveness" may be based on a misdiagnosis of the nature and causes of the ailment...
...So I asked why anyone would want to go off the record...
...So it needs a vibrant private research sector, and might get more bang for its buck by subsidizing such private efforts than by developing its own research teams...
...Payment Method q Check Enclosed q Visa q M.C...
...Those willing to throw (someone else's) good money after bad are quite common...
...Whether he's with the press or the public, at conferences or official dinners, the Reagan warmth and congeniality shine through -- and Stand-Up Reagan is the man at his affable best...
...its budget deficit was a far lower portion of its GNP (although its savings rate was disturbingly lower...
...if one takes either the prewar period or the 1970s as a base, America's share of world product has re'Reviewed by Paul Johnson in TAS, July 1988...
...This will bring to power a new set of decision-makers: the bureaucrats and politicians who have demonstrated their management skills by running the business they are supposed to know something about—government— at a $170 billion annual loss...
...Any business investments that might involve a possible conflict of interest...
...rr he facts are these...
...I- Order now...
...X and send him up to the Senate for confirmation without doing any kind of inquiry into the nominee's fitness, past, and so on...
...The FBI isn't trying to discover the truth about what's said...
...True, Japan's investment in America is increasing...
...While America does indeed command a smaller share of the world's GNP than it did in 1950—when most other countries were only beginning to recover from World War II— its economy is larger and more prosperous than ever...
...Any contacts with representatives of a foreign country (especially a hostile one...
...Or so its advocates, particularly those in government, argue...
...Bureaucrats willing to admit error and walk away are rare indeed...
...The Armed Services Committee, under Sen...
...Exactly how this tale will unfold is difficult to predict...
...Nor is it clear that the cure for what ails America is the consolidation of small-firm efforts into consortiums...
...Now, because a background inquiry can also include specific follow-up questions that originate on Capitol Hill, it tends to be more searching than ever before...
...Now, when you subscribe to the CONSERVATIVE CHRONICLE, you get two Buchanan columns printed in full every week along with the opinions of over 24 other distinguished columnists and 20 cartoonists with conservative appeal...
...So far, so good...
...It may be that the world looks different to him now, having moved from Pennsylvania Avenue to Foggy Bottom, and his intimate friendship with the President gives reason for optimism, as does his attention to prevailing political wind direction...
...mained constant...
...heavy industries of the nineteenth century, while once again prosperous, have been superseded in relative importance by industries of the twenty-first century: services, computers, genetic engineering...
...You can say whatever you want, and you can say it anonymously...
...economy has not slipped...
...The change is most obvious in the field of high definition television (HDTV), an area in which successful research would culminate in the manufacture of flat, wall-hung television screens as large as three feet by five feet...
...and works only for him...
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...And America has also managed, during this period, to restore its military base after years of neglect...
...This was a story of constitutional significance, and while some reporters stabbed at it, no one really got it...
...But it can never overwhelm American ownership, and this is in any event a good not a bad thing for America, creating jobs and introducing new manufacturing techniques...
...The President can nominate Mr...
...Buchanan revived his respected column after serving on the Reagan administration as communications director and assistant to the president...
...So the FBI received the Senate's questions and asked them...
...Such a policy would, he says, make American entrepreneurs more willing to commit their capital to a competitive struggle with Japan...
...Any civil lawsuits...
...Beware," warns the Economist, "of arguments for the rationalization of industries...
...The constitutionally significant fact about the Tower background investigation was that once again the bureau served two masters even though, on paper, it is subordinate to the President Terry Eastland is resident scholar at the National Legal Center for the Public Interest...
...Most likely, more government-financed consortiums will emerge, injecting government into the high-tech business...
...q PRESSWATCH MISSING THE TOWER by Terry Eastland Fr he media told the Tower story 1 from many angles but failed to report a key aspect involving the FBI...
...This aspect of the Tower story deserved reporting, not only for its own sake but also for its implications...
...manufacturers can't yet produce a large HDTV set for under $100,000, that even if the sets could be economically made, they would have to be sold in competition with foreign companies that have established international distribution systems and recognized brand names, and that the Japanese will in any event out-subsidize the American government...
...Harvard University, and an American correspondent for the London Sunday Times...
...Even those who believe most in the competitive organization of American industry can't help wondering whether a bit of coordination within the private sector and with government is needed...
...This hardly sounds like the performance of a nation whose supremacy is coming to an end...
...And it is a prosperity very widely shared by that portion of the population capable of participating in the market economy...
...And they tend to keep doubling their bets when the initial investment 32 THE AMERICAN SPECTATOR MAY 1989 killOMNSaENRVDA=TIVE Box 29 Hampton, Iowa 50441 CALL TOLL FREE 1-800-558-1244 Phone hours: Monday-Friday 8 to 5 CTZ YES I accept your subscription offer of 1 year (52 issues) for $36.00 (add $20.00 for foreign postage...
...For support they cite a recent study by an industry advisory committee that called for the establishment of an "American equivalent" of Japan's Ministry of International Trade and Industry (MITI) to coordinate and assist private sector research...
...There is no legal requirement here, but over the years, as a protective measure, Presidents adopted the practice of routinely asking the bureau, the government's premier investigative agency, to do a "background investigation" on nominees...
...Any job dismissals...
...In short, HDTV has the look of a technological "winner," one that could resurrect the domestic consumer electronics industry, provide hundreds of thousands of jobs, and contribute to the nation's defense...
...The point to understand is that the bureau is out to learn what lots of people feel, think, and know about all those things it now feels compelled to ask...
...to others, it is another nail in the coffin of Reaganomics, and marks a renewed trend away from market capitalism and toward corporatism...
...I understand I can obtain a full refund on unmailed copies at any time...
...restructuring of Social Security would encourage productive, experienced workers to remain in the work force, rather than retire...
...The White House was deeply—perhaps too deeply— committed to the Tower nomination and couldn't say no...
...Any personal and business credit matters...
...He's the Great Communicator...the soft-spoken man with the twinkle in his eye who made America feel proud again...
...America remains in the midst of the longest peacetime expansion in its history, one that has brought its unemployment rate down and its capacity utilization rate up to Tecord levels with only minor inflation...
...Whether Congress will approve this plan for cooperation among AT&T, IBM, Apple Computer, and several smaller firms remains to be seen...
...T here's another element to the FBI 1 story that was underreported: how such an investigation is virtually guaranteed to come up with dirt—or at least "rumors" of dirt—on a nominee...
...q THE BUSINESS OF AMERICA CORPORATISM OUSTS REAGANOMICS A little-noticed but profound change in the relationship between government and business is taking shape—a change that expands the role of the federal government and further blurs the line between taxpayers and shareholders, bureaucrats and private sector managers...
...consumption taxes and savings incentives would increase the savings rate...
...After a straightforward interview in which I said all I knew—and it was all positive—I was asked whether there was anything I might wish to add...
...I was told that if interviewees wished to say something derogatory, they usually did so anonymously...
...Like other fears, this one does not withstand close examination...
Vol. 22 • May 1989 • No. 5
