A few weeks ago, The New York Times reported that the National Security Agency -- one of our main spy shops -- is considering more economic spying as a way of boosting U.S. global competitiveness. Precisely what could be learned isn't clear: other countries' trade strategies or industrial secrets might be targets. What is clear is that the spying, aside from antagonizing our allies, wouldn't much help our economy.
Consider the Soviet Union. It has been stealing high-technology secrets from the West for years. Its economy is a mess. A few odd technological secrets can't cure deep problems. As for trade strategies, they're typically not terribly secret.
What we have here is a prime example of a nutty idea being justified as furthering our "economic security." Until recently, economic security meant "job security" (a hangover from the Great Depression, when jobs were scarce), but now it has a more cosmic meaning. With threats to our military security allegedly fading, we're urged to protect ourselves against foreign economic threats. It sounds sensible, but mostly the clamor for economic security is an exercise in nostalgia.
It's a plea for policies that will restore the good old days when U.S. companies reigned supreme and our society was (or seemed) more self-contained. This won't happen. In the 1980s, the volume of worldwide trade rose about 50 percent. In 1989, U.S. private investors increased their investments in foreign stocks and bonds by $33 billion and their direct investments in foreign factories, companies and real estate by $40 billion, the Commerce Department reports. Meanwhile, foreigners raised their investments in U.S. stocks and bonds by $128 billion and their direct investments here by $72 billion.
Halting these huge flows of goods, investments and technology would require extreme -- and probably destructive -- measures. No one wants that. Most Americans, for example, would like higher U.S. exports. Since 1985, they've actually increased more than 80 percent. But the more we export, the more dependent we become on other countries' prosperity.
Nor is the United States going to reestablish its preeminence in all major industries. The economic security crowd has an answer for that, too. We are told that we (meaning the government in cooperation with private companies) must nourish a few "strategic industries" -- electronics or biotechnology, for example. By this argument, a few major industries are critical to creating future economic growth and higher living standards. If other countries control these vital industries, our economy will inevitably languish. The theory is seductive, but wrong.
A country does not have to be a "leader" in any industry to prosper. Consider Singapore, population 2.6 million. Its income per person has risen at a 7 percent annual rate since 1965. In 1988, it stood at $9,070, ahead of Israel ($8,650), Spain ($7,740) and Greece ($4,800). Although Singapore does not lead any industry, it does have a good business climate and a skilled work force. It attracts foreign investment and generates enough exports to buy the imports necessary for high living standards.
Growing global trade and investment mean that countries benefit from good products and ideas elsewhere. Global companies sell or produce wherever there are markets. The Cuisinart, invented in France, was popularized in the United States. American auto companies have declined, but we are driving better cars because the Japanese -- through exports and investments here -- have raised the entire industry's standards. The truth is that we could fall behind other countries in many industries and still become far more prosperous than we are today.
If economic security is to be a useful concept, we should see it in narrow, not sweeping, terms. Are there specific economic harms to the nation (and not individual industries) that we can prudently guard against? At least four dangers suggest themselves:
A spasm of protectionism or the breakdown of world financial markets -- the collapse of multinational banks or the Eurodollar markets -- could hurt economic growth everywhere.
A catastrophic cutoff of Mideast oil, which represents a quarter of the world's supply, could cripple the global economy.
We could suffer environmental damage from unregulated worldwide economic growth. The most obvious danger is the "greenhouse effect," which threatens to raise global temperatures.
Some companies we need for key military technology could be driven out of business -- or damaged -- by foreign competitors.
Some of these problems are new, some old. Global negotiations on trade or banking try to create rules that allow commerce to proceed smoothly without crises. We are debating what to do about the greenhouse effect and have a strategic petroleum reserve of 586 million barrels (it's equal to 2.5 months of imports and is still too small). The trickiest issue involves industries with military importance. Japanese supremacy in computers might harm us only slightly economically but could leave us dangerously dependent on outsiders for crucial military hardware. If we are to protect industries, we should do so on defense grounds alone.
In the end, however, all the chatter about economic security is not about these matters. It's about something else -- national pride. What really bothers us is our global status. In an era when a nation's prestige is increasingly measured by economic statistics, we feel insecure. We worry about Japan, Germany and Korea. We want to be Number One. We want to be the leader in new technologies. It would reflect well on our vitality as a nation. It would make us feel good.
It's also unrealistic. Just as we don't win every Olympic Gold Medal, we will have to share economic leadership in a prosperous world. There's nothing wrong with that. Advances elsewhere can benefit us. What we can expect -- and should demand of ourselves -- is the national competence to lead in some areas and stay abreast in all. But doing that requires sharper management, wiser investments and improved schools. It's a bigger and tougher job than spying on your competitors.