Are American businesses disinvesting in the US?
Election or no election, some analysts see a collapse of the ''old economics'' in America just ahead.Skip to next paragraph
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They liken it to the coming of Franklin Roosevelt to Washington 50 years ago and argue that - like it or not - the country is at the frontier of new economic thinking.
Whether President Reagan or somebody else sits in the White House, they maintain, is almost incidental; what they fear is that business-as-usual isn't going to come back to America without prodding.
There is general agreement on the problem:
* There is 10.1 percent unemployment and 12 million unemployed, a number which seems to be going higher.
* Corporate stagnation means only about 68 percent of factory capacity is being used.
* Low productivity and expensive relief programs keep the deficit at unprecedented heights.
* Stimulus to the economy by cutting taxes has been of doubtful value.
* And since mid-1960, American factories have migrated abroad, sending back lower-cost goods made by less expensive foreign labor and threatening a worldwide trade war.
Economic crises produce new schools of thought: John Maynard Keynes came 50 years ago; more recently the country sharply debated ''supply-side economics.''
Now the challenge is identified as ''de-industrialization,'' meaning that big US industries have been moving from home factories to cheap labor abroad and that the structure of American industry is in flux. The new philosophy is set forth by Bennett Harrison of MIT and Barry Bluestone of Boston College in their book, ''The Deindustrialization of America; Plant Closings, Community Abandonment, and the Dismantling of Basic Industries.''
''American management has defaulted in its responsibility for maintaining the health of the economy. Rather than invest in restructuring American industry and retraining workers, American managers have forsaken America for quicker profits abroad,'' writes Robert Reich of Harvard's Kennedy School of Government, paraphrasing the theme of ''The Deindustrialization of America'' in his review of the work. The review appears in the latest issue of The New Republic.
President Reagan argues that the situation is curing itself and points to the sharp drop in inflation growth and other favorable signs. But the battle seems likely to resume shortly after the election. Recession is worldwide, financial credit is deteriorating, and many fear a global trade war.
In a recent New York Times article, several noted economists commented on the deindustrialization issue, including:
* Felix Rohatyn, adviser to New York City in its financial municipal crisis in the '70s, who said, ''Management has not been alert. Labor is asking too much. Now we have to pay for it by restructuring, or rolling back.''
* Paul A. Samuelson, MIT economist, who said the structural problems ''would not just go away. If we go on with business as usual, what we will have is more of the stop-and-go driving, more stagnation.''
* Robert Zevin of the US Trust Company in Boston, who said that the US reached a kind of technological turning point in the mid-1960s. Up until then, he argues, plants grew bigger and were more labor efficient and real prices and unit prices came down. Now the situation has changed.
Mr. Reich's review also noted, ''Since 1969 the US steel industry has been protected from competition; it is now demanding even high levels of protection. So, too, with American textiles, apparel, footwear, and television. . . . In short, all industrialized nations are responding to the worldwide economic decline by opting for employment over free trade. America is leading the pack.''
Reich, citing the Bluestone-Harrison study, says that ''one by one America's basic industries are abandoning America. . . . Between mid-1975 and early 1981, 24 tire plants shut down in the US: 20,000 permanent layoffs.'' Since the early 1970s the steel industry has been diversifying out of steel. The result: 120,000 dismissals.
As for automobiles, Reich points to the otherfindings in the study: ''American plants are closing at the same time foreign facilities are being established, by 1979, 94 percent of the profits of the Ford Motor Company came from its overseas operations.
In summary, Reich says, ''The authors estimate that, in total, 30 million American jobs were destroyed during the 1970s as a direct result of plant, store and office shutdowns. When added to permanent cutbacks and capacity short of complete closure, the number is closer to 50 million.''