Why Should Anyone Care Who Owns American Technology?
The question is one that concerns a lot of people these days: Does it really make a difference to Americans, to their future and their children’s future, if industrial technology is owned by a U.S. company?
A leading member of the Bush Administration suggests that ownership makes no difference as long as you get the work. Michael Boskin, chief economic adviser to the President, has said, as recently quoted by Newsweek magazine: “Whether it’s American-owned, Japanese-owned, German-owned or who-owned, manufacturing in America in the ‘90s is going to be strong.” Boskin is in Poland and unavailable to elaborate on the comment, according to his office.
His statement aroused opposition in the electronics industry: “He doesn’t know what he’s talking about and there’s not going to be that much work,” said an industry consultant--amid concern that Perkin-Elmer Corp. would sell its semiconductor equipment division to Nikon of Japan, weakening U.S. industry in yet another part of the business. (Nikon said that out of concern for American reaction it is not in talks with Perkin-Elmer, but has held negotiations in the past).
The stakes are high, and at least one member of the Bush Administration is worried. White House Science Adviser D. Allan Bromley testified to Congress last week that, “In many ways, what is happening to the semiconductor industry is a paradigm for what could happen to other U.S. industries, such as computers and telecommunications.”
So who’s right? Bromley, the worried science adviser, or Boskin, the indifferent economic adviser? Bromley, emphatically. It certainly matters whether U.S. companies own and keep up in technology. They must hold their own in the global economy.
If you stop making products you lose the ability to innovate, and then you lose whole industries.
The United States lost consumer electronics when its companies stopped making television sets. Sure, Japanese companies manufactured TV sets in the United States. But did that inspire U.S. companies to make VCRs, compact discs or high-definition TV? Or are U.S. industry and government facing prohibitive costs if there is to be a U.S. entry in HDTV?
U.S. electronics companies dropped memory chips in the early 1980s under a siege of Japanese price cutting and now must spend billions to get back in because memory chips are a key to the $350-billion computer and electronics industries.
Losing industries has a domino effect. Motorola and Intel semiconductors used to go into every Ford automobile engine. But lately, some Ford cars have Mazda engines--and fewer U.S. chips.
It’s not a question of nationality but of industrial organization. Japanese companies, and German and French companies, too, are often organized in business groups--as U.S. companies were before 1911 when the Supreme Court broke them up. Those antitrust rulings ensured rational, competitive markets in the United States. But markets are now global, and often less than rational.
Countries protect their home industries, and business groups form closed markets of their own. Nikon, for example, the $1.3-billion (sales) maker of cameras and semiconductor equipment, is part of the 42-company Mitsubishi Group. If Nikon should buy Perkin-Elmer’s business, which represents an essential step in chip making, its first allegiance would be to group members. “If you compete with any of the Mitsubishis,” says the head of a U.S. computer company, “it’s naive to depend on one of them to supply you the latest technology.”
U.S. chip makers and users would suffer because the only other global supplier of Perkin-Elmer’s process is Canon of Japan, and because U.S. companies--having ceded so many industries--are no longer the biggest semiconductor customers, and can’t expect the best terms. Lack of a customer base is the reason that Perkin-Elmer is selling out, why no U.S. company wants to buy, and why IBM is scrambling to share technology with U.S. firms. Global as it is, IBM fears loss of a home customer base--an advantage that its rivals Fujitsu and NEC possess.
Loss of industries means more assembly work and lower productivity growth and wages in your society. “If we define competitiveness as growth in productivity, real wage gains, return on capital and our position in world trade, then the United States is not keeping pace with our trading partners,” said John Akers, chairman of IBM in a speech earlier this month.
Finally, when you lose industry you lose the power to set the agenda--what will be produced and where, and who works and who doesn’t.
The big debate in Washington today is how much support government should provide to industry--with members of the Bush Administration opposed to aid, saying markets should govern.
But that is industrial policy by abdication when markets are not rational. And it’s a clear departure from a U.S. tradition that has seen government provide support for industry, from canals in the 1830s to the interstate highway system in the 1950s; from the first computer in World War II, to advances in integrated circuits developed under the space program.
The real bottom line for all this: It’s important that U.S. companies hold their own in the global economy. The Bush Administration may be indifferent to that, but the American people should not be.
