The Business of America

...Let us count the ways (1) Pressure for the 1973 pact came directly from the apparel industry, as a result of the rapid increase in imports throughout the '60s (2) The American textile industry supported the 1973 pact not simply out of concern for textile imports, but because it could ill afford to let its largest customer, the American apparel industry, go down the tubes (3) Higher prices for domestic textiles had nothing to do with apparel's difficulties, these were due to the low wages paid to Third World garment workers and to export-oriented development policies (4) Hong Kong, Korea and Taiwan did not have to shift into apparel manufacture, they were already there (5) While we are keeping score, the name of the pact is the Multi-Fiber Arrangement, not Agreement uch errors hardly inspire confidence in the facts presented throughout the rest of The Next American Frontier What is more, they cast doubt on Reich's entire position on the central issue of trade Among his key arguments against restrictions is the ratcheting effect If one uncompetitive industry is granted relief, its uncompetitiveness is passed on to all the industries it supplies in the form of higher prices, thereby weakening America's overall position in the world marketplace But as the true apparel/textile situation, not the one presented by Reich, indicates, ratcheting works in two directions Allowing a vulnerable sector to fall can bring down all of its suppliers One out of every six workers in the United States depends directly or indirectly on the automobile industry for his or her job Toyotas represent a problem not merely for the folks in Detroit Most troubling of all are the implications of Reich's strategy Like any thinker to the left of center, he is sensitive to the social and personal dislocations engendered by capitalism, and calls for more egalitarian, participatorial structures "Economic development is meaningful only when coupled with social membership " No one who has been touched by the values of the '60s will quarrel with this What does disturb is how Reich wants to go about re-establishing a sense of community He suggests a revitalization that stops at the nation's shores "We are losing the competitive struggle because we cannot work together " The next American frontier, it seems, could be a form of neomercantilism, with its implicit treadmill of national rivalries, and lurking behind neomercantilism is something worse We should not forget that people like Oswald Mosley began their careers as Socialists before discovering the demagogic potentialities of nationalism Old-fashioned liberals who make an absolute out of individualism are not without reasons for their dogmatism The reality is that America's present plight is part of a larger condition, a world recession, and that for every measurement showing the US to be falling behind its allies, another can be found to demonstrate the Europeans are in still worse shape (Yes, and the Japanese have their worries, too ) Cooperation, as Helmut Schmidt among others is reminding us, cannot be limited to national spheres We are all in this thing together, part of the same shrinking global community, and genuine solutions, if they are to be found, must be developed among countries, not within them...

...Writers & Writing THE BUSINESS OF AMERICA BY BARRY GEWEN In case you hadn't noticed, supply-side economics died last year Its demise was marked in at least two ways-first, by President Reagan's acceptance of Senator Robert Dole's 1982 " revenue enhancements" in the face of startling Federal deficits, second, by the White House's decision to tout its three-year tax cuts, originally passed to encourage investment and productivity, as a stimulus to demand Since those tax reductions were weighted heavily toward corporations and the rich, not toward middle-class consumers, Ronald Reagan may go down as history's most cockeyed Keynesian Whatever his future reputation, however, his Administration is at present utterly without any theory to justify its economic policies and limpingly subsists on monthly promises that prosperity is just around the corner No one speaks of the Republicans any longer as the party of ideas Appropriately, the ball has bounced back into the other court The liveliest economic debate currently taking place is an intraparty affair between "Atari Democrats," who advocate abandoning America's traditional industries for a high-technology, service-oriented society, and "Smokestack Democrats," who wish to revitalize and strengthen such basic sectors as autos, steel and textiles As in any dispute of this kind, to describe is to oversimplify Few participants adopt pure stands, most cluster around the murky middle, borrowing ideas from both camps (If there is a single issue that separates the sheep from the goats, no doubt it is trade Atans are, possibly without exception, free-traders, Smoke-stackers call for varying degrees of import restriction ) Nonetheless, the tensions between the perspectives are real enough, and something important is being decided in the balletic positioning going on among the Democrats One of the party's leading economic choreographers is Robert B Reich, formerly a staff member of Jimmy Carter's Federal Trade Commission, now a teacher at Harvard's John F Kennedy School of Government His byline is everywhere these days, only Lester Thurow and Felix Rohatyn rival him in prominence Apart from his numerous articles, Reich has co-authored with Ira C Magaziner Minding America's Business, a useful analysis outlining the need for a national industrial policy In his latest book, The Next American Frontier (Times Books, 324 pp ,$16 60), he provides a fuller exposition of his views Reich believes we must shift the focus of national debate Our choice is not between laissez-faire and government intervention, but between adapting to the realities of a global economy and attempting to shield America from the changes taking place around it While other nations, notably Japan, are making necessary adjustments in order to be able to compete in the emerging international arena, the Unted States is responding uncertainly and therefore declining, according to several measures, in relation to the rest of the industrialized world The proper course, Reich advises, is to create a new industrial system that turns out specialized, high-value products, one that relies less on mass-production techniques and rigid hierarchical organization than on an educated work force and flexible relations between management and labor Reich eschews protectionist measures to limit imports as well as efforts at capital controls Within the confines of the current arguments he can be said to side with the Atari Democrats, although his thinking is too philosophic and wide-ranging to be stuffed into any single cubbyhole There is much to admire in The Next American Frontier U S industrial development, with its emphasis on standardization, high volume and efficiency, is skillfully and critically sketched in the opening chapters, Reich's treatment of the economy's rationalization into oligopolistic organizations brings together many valuable insights on our managerial ethos With the author as a guide, a reader begins to understand how the most democratic society on earth created one of the most rigid and authoritarian industrial systems And the chapter on "Paper Entrepreneurialism" is a gem of a discussion about the methods corporate heads have devised for shuffling assets around instead of investing productively Anyone curious about tax straddles, earnings management, golden parachutes, or the mysterious matter of defeasance should be sure to read this section Finally, underpinning The Next American Frontier is a sensibility that is warm and humane, a democratic and communitarian temperament that draws on some of the best aspects of the American political tradition This is a book one wants to like Still, the doubts come They creep up and accumulate, building upon a misleading statistic here, an unsubstantiated assertion there, until the picture of Reich as a liberal humanist is obliged to share space with the image of a clever college debater who knows how to score points with hasty generalizations that do not reveal the whole story Reich states, for example, that the U S has been declining since the late'60s Yet since 1973 the nation hasn't done all that badly on a comparative basis, topping Britain and West Germany in output growth, trailing Italy and Canada by only one-tenth of a percentage point and France by only two-tenths Likewise, when he discusses unemployment, he neglects to mention the millions of undocumented workers in the United States who aggravate our problem, or the ease with which nations like Germany are able to ship Gastarbeiter home as a way of alleviating theirs One begins to wonder how many of the book's statistics rest on similarly shaky foundations Reich covers a lot of ground, making it impossible to track down all of his facts As it happens, however, I know something about the apparel/textile industry, and from Reich's remarks on the topic, he clearly does not Reich writes "Protection for American textile manufacturers, culminating in the Multi-Fiber Agreement of 1973, put U S clothing manufacturers at a competitive disadvantage in world trade since they had to pay higher prices for the textiles they used To compound the damage, these restraints encouraged foreign textile manufacturers to shift their production to apparel, thereby channeling their cheap textiles into the U S market through finished goods Hong Kong, Korea and Taiwan soon were flooding the U S market with cheap clothes, causing American apparel manufacturers in turn to seek protection " How is this wrong...