'No Way Out' of Global Markets

A GROWING paradox faces the United States. It is the simultaneous rise of a new spirit of isolationism amid the increasing globalization of economic activity. The end of the cold war brought on a widespread expectation that the US could safely concentrate on domestic matters. There is no shortage of urgent national issues to occupy our attention, ranging from welfare reform to crime control to deficit reduction to tax reform. But it is becoming clear that the rest of the world is affecting the workers and managers of America's businesses and their families.

Isolationists overlook some basic facts. Americans do not have to do anything or change anything to be part of the global marketplace. Even if a business does not export a thing and has no overseas locations, its owners, managers, and employees are still part of the world economy. The combination of fax machines, universal telephone service (including cellular), low-cost, high-speed copiers and computers, and speedy-jet airline service enable money, goods, services, and people to cross most borders rapidly and often instantly. And that applies especially to the most strategic resource: information.

American businesses of any consequence are no longer insulated from foreign producers due to vast distances. Every American is subject to competition from overseas. As a result, employees, customers, suppliers, and investors in US companies are participating in the international economy. Many American companies have already deployed a majority of their assets overseas. Examples include Bankers Trust, Chevron, Citicorp, Digital Equipment, Exxon, Gillette, Manpower Inc., and Mobil.

To underscore the point, a recent Conference Board survey shows that becoming an internationally oriented company pays off. Firms with foreign operations have higher profits and sales that grow at twice the rate of those with no foreign activities. This is true in every industry.

The attraction of overseas locations is increasing. Government policy in the "emerging" countries welcomes foreign investment. They encourage the formation of new domestic enterprises. The contrast with the US is striking - and ironic. While these present or former communist and totalitarian countries are moving toward capitalism, we have been moving in the opposite direction. Despite initial efforts by the House of Representatives, the US is still expanding government regulation of business, making it more difficult and more costly for private enterprise to prosper.

Legislation and political pressures to "buy local" may be popular, but they fly in the face of economic reality. Our concern for the losers in the domestic marketplace requires a constructive response: Make the US a more attractive place to hire people and to do business. After all, the American economy is still the strongest in the world and our prospects are impressive. In a great many sectors, American firms continue to be the world leaders. US firms rank No. 1 (in sales volume) in industries ranging from aerospace to food products to soap and cosmetics.

Of course, these are not laurels to rest on. The point is that there is no need to take the low road of protectionism to deal with foreign competition. We should take the necessary actions - in both the public and private sectors - that make American business and labor more productive and hence more competitive in this globalized marketplace.

History tells us that trying to shut ourselves off from "foreign" influences does not work. When imperial China tried to do that some 500 years ago, it went quickly from being the world's most advanced and powerful nation to becoming a poor backwater of the globe. It is futile to say, "Stop the world, I want to get off!"

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