Give Richard Gephardt credit. He's crystallized an issue that nags most Americans. We feel bewildered and threatened by an increasingly competitive world. The Democratic presidential candidate has fashioned his campaign around the theme that we're a nation slipping economically and that lax trade policies are to blame. The temptation is to get tough: to be more restrictive on foreign trade, investment, and, indeed, almost anything foreign.
It's the wrong impulse -- maybe good politics, but surely bad economics.
Our global entanglements boggle the imagination. They spring not only from trade and investment but also immigration, banking, technology and much more. Even if we could undo all these connections -- and we can't -- we'd risk doing ourselves more harm than good. The first step toward wisdom is to recognize what can't be changed. The second step is to acknowledge that many benefits of our growing international involvement come mixed with drawbacks.
Consider this: About half the doctoral candidates in engineering at U.S. universities are foreigners; roughly another 25,000 foreign students are earning undergraduate engineering degrees. Are we foolishly educating our global competitors? Well, yes and no. A majority of these students go home, where at least some of them try to beat our brains out. But many of the best students (including 60 percent of the PhDs) stay here. American companies and universities couldn't do without them. Nearly one of five U.S. engineers is foreign born. Most are naturalized Americans.
The openness of American society is our glory and curse. It helps keep us from becoming stagnant. One of our best researchers in superconductors, C.W. Chu of the University of Houston, was born in China. Stiff foreign competition has forced U.S. manufacturers to cut costs and improve quality. The new competitive realities have compelled us to reexamine our schools. But the same pressures are threatening. They disrupt our industries and settled ways of thinking.
The trouble is that we exaggerate the menace because it comes from abroad. Even Gephardt concedes that, at most, 20 percent of the U.S. trade deficit reflects "unfair" foreign practices. Nor will you learn from him that the volume of our exports has risen a third since late 1985. The notion that we're becoming a second-rate economic power is simplistic. True, we've lost our commanding superiority. As Europe and Asia adopted our technology, this was inevitable. But the picture of broad-based decline doesn't fit the facts: The U.S. economy is more than twice as large as Japan's and 15 percent larger than that of the European Community (whose population is a third greater than ours).
Average American living standards are still the highest among major nations. German and Japanese living standards are roughly 70 percent to 75 percent of the U.S. level.
The dollar's depreciation is re-establishing the United States as the largest exporter of manufactured goods. By 1989 the U.S. share of the world market is projected to hit 18 percent, compared with West Germany's 13 percent and Japan's 12 percent, according to the Organization for Economic Cooperation and Development.
We are a magnet for foreign immigrants, investors and students precisely because we are so wealthy and open. Foreigners love the U.S. market for the same reason our companies do: It's the world's biggest. In 1986 it absorbed 39 percent of South Korea's exports, 67 percent of Mexico's and 22 percent of India's. Competition is easier here, because our institutions are so accessible. Foreign executives go to U.S. business schools as much for assimilation as for class work. "I'm supposed to 'learn' American culture," a Japanese student told The Washington Post last year.
To some, the porousness of our society seems the source of our troubles. But the truth is that most of our major economic problems are homegrown. The severe 1981-82 recession resulted from the 1970s' high inflation. Stagnating living standards in the 1970s reflected poor productivity growth. The idea that living standards have gone into an unending slide is a myth: Since 1982 higher productivity has raised family incomes by about 11 percent.
It's understandable, though, that we feel betrayed by the world about us. After World War II, Americans championed an open global economy. We assumed harmony and pro-Americanism would follow. Everyone would be grateful to us for creating prosperity. It hasn't quite worked out that way. The process of promoting democracy and economic growth fostered global competitors and subverted our own power.
The next president can surely improve our international economic policies. Foreigners need to open up their markets more. But the spirit of our policies matters as much as the details. All nations have lost some power to larger global economic forces: everything from shifting exchange rates to the availability of oil. No nation alone can control these forces. Together, the major nations can sometimes influence them. But cooperation requires trust and a sense of shared interests. We break these bonds at our peril.
What Gephardt and others offer is a national policy that's the equivalent of an obscene gesture toward the rest of the world. This pseudo-toughness may inspire some macho satisfaction. But it is dangerous, because it proceeds from a false view of the world economy. The image is of a game in which some countries win and others lose. The truth is more awkward. What's at stake is global economic stability. The world economy is a game that, if played mindlessly, everyone can lose.