I:ic decline in Anieriean power was inevitablernas Ejurope and Japan rebuilt afterrnVVorid War II. Yet this thesis impliesrnthat either technologv reached a plateaurnor markets failed to expand, allowingrnothers to catch up as the United Statesrnwas blocked from advancing further.rnHowever, the real world has demonstratedrnthe opposite of these static conditions.rnThe rebuilding was completedrnin the 1960’s, after which the strugglernfor supremacy began. That the UnitedrnStates has not staed well in the lead inrnthis dynamic contest must be Ijlamedrnnot on fate but on misguided policy.rnReal economic growth averaged onKrn2 percent during the period 1975-1991,rncompared to 3.6 percent for the periodrn1950-1972. Even the best period sincern1975, President Reagan’s second term,rndid not attain the 195()-1973acrage.rnBoth real wage rates at home and thernvalue of the dollar overseas hacrndropped since 1973. Besides having anrnadverse impact on American liying standards,rnthis trend has made the projectionrnof American power in the worldrnmore difficult. The United States usedrnto earn trade surpluses and substantialrnnet returns on foreign investments, paidrnin a strong currency. It could afford overseasrntroop deployments, bases, and aidrnto allies. Now trade deficits, a weakerrndollar, and a net debtor status have madernactive policy a burden many feel is toornheavy to bear.rnBetween 1965 and 1990, the UnitedrnStates dropped from first to eighth placernin manufacturing GDP per capitarnamong the 25 richest nations. Andrnbetween 1970 and 1990 the Americanrnlead in GDP over the second and thirdrnlargest economies dropped from a 4-1rnratio to mere parity.rnI .osscs in traditional industries werernonce considered acceptable becausernthey released resources for more productivernfields. I lowever, America hasrnalso been losing ground in capital goods,rnadvanced materials, and high-tech sectors.rnBRIE disputes the notion of “sunset”rnand “sunrise” industries as well asrnthe alleged substitutabilit’ of servicesrnfor manufacturing; “High-tech sunrisernsectors largch’ make producer goods:rnequipment, components, subsstems,rnmachincr^ and advanced materials usedrnto produce final products for consumers.rnThe sunrise sector goods are appliedrnacross the economy to help transformrnproduction and products in traditionalrnindustries. The traditional industriesrnare vital clients.” As to services, “Criticalrnareas of the ser’iee sector arc linkedrnto manufacturing, and their capacitv tornsupport income growth will erode asrnmanufacturing loses position.”rnSteven Vogel devotes his cssa’ tornthe militar implications of Japan’srncommercial technology. A BRIE themernis that the trade wars hac alread’rnspawned new generations of militarih’rnrelevant technology: microchip devicesrnthat arc highly sophisticated, er reliable,rnand inexpensive. Steve Weber andrnJohn Zvsman argue that “it is now therncivilian sector that will freciuentl generaternthe suppK base of skills, productrnknowledge, process know-how, componentsrnand subsstems required to producernthe military products. Withoutrnthe related commercial industry it willrnnot be possible to |5roducc the specializedrnmilitary goods.” Japan’s top defenserncontractors are also its leadingrncommercial conrbines: Mitsubishi,rnKawasaki, ‘I()shiba, Komatsu, Fuji, Hitachi.rnJay Stowskx assesses the role of suchrn”spin-ons” in the American militarv. Ifrnhandled correctly, the conversion of therndefense industry to commercial productionrnwill actually strengthen the military-rnindustrial base—provided thatrnAmerican commercial enterprises canrnbe made strong enough to surie attacksrnby foreign rivals. Wavne Sandholtzrnand Zvsman discuss Europe’srnemergence as a global contender in reactionrnto the changing balance befw ecurnthe United States and Japan. Ken Concarnanahzcs the nulitarv-industrial revolutionrnin the Third Wodd.rnAs is common in the burgeoning literaturernon strategic economic policy,rnBRIE pays lip service to the liberal idealrnof a peaceful wodd of free trade wJierernnational rivalries have faded and no onernneed worry about seeuritv or dcpendencv.rnHowever, the logic of their argumentrnleads back to the real world orrnto contending states where trade is lessrnabout mutual gain than about creatingrnnational advantages: strategic trade isrnnot simply a matter of one-time gainsrnor losses resulting when one government’srnpolicy assists its firms to gain arnshare in global markets to the disadvantagernof its trading partners. Nationalrnposition for particular firms is not thernonly issue, nor is the current position ofrnone nation in the international economvrnits final reward. Euture gains and lossesrnin terms of each nation’s dynamic potentialrnare also at stake.rnTrade and industrial policies affect arnnation’s “trajectory” because much ofrntechnology is the product of incrementalrndevelopment, proprietary knowledge,rnand “learning bv doing.” Losing keyrnsectors of the tcchno-industrial matrixrnmay sidetrack an entire economy, makingrnit dependent on others for criticalrncontributions and developments. It cannotrncontrol what it cannot produce. Itrnbecomes a follower rather than a leader,rna status that translates from economiesrninto politics and becomes a threat to seeuritvrnas well as to prosperitv.rnUnder the misnamed “supplv-side”rnprogram, taxes were shifted from individualsrnto businesses, incentives for capitalrnfornration and investment in researchrnand production were eliminated,rnand strategies for managed trade andrnindustrial promotion were mocked—allrnin the name of liberal principles thatrnhad already failed elsewhere, includingrnin their country of origin. Yet it is arnfunction of competition to expose selfdelusionrnand to punish with defeatrnthose who refuse to learn.rnIn the late 1980’s, productivity wasrnstagnant and real nonresidential investmentrnfell; the weakness of the underlyingrneconomv slowed recovery from thern1991 recession. In order to achieve nationalrneconomic recovery, both Americanrnpolitical parties must abandon theirrnfutile posturing and learn from the workrnbeing done by BRIE and other strategicrnthinkers. Ideologues mav be willing tornlose rather than compromise their petrntheories, but statesmen are rememberedrnfor discovering ways for their countrv tornprevail.rnWilliam R. I lawkins /s director of thernKeonoiiiic Security Action Center of thernU.S. Business and hidiistrial Council.rn42/CHRONiCLESrnrnrn