In the conventional wisdom of popular economics, commerce is like warfare. That's a core belief of economic nationalism: If they are winning, then we must be losing.
If you believe this, then you probably believe that foreigners generally, and the Japanese particularly, are attacking and laying waste to America's industrial base. In fact, the truth is just the opposite. Foreign competition and investment, notably Japanese competition and investment, are revitalizing the U.S. industrial base. In steel, American companies are competitive again after decades of disinvestment and obsolescence. In their 1991 study of the industry, Richard Florida, a professor of public policy at Carnegie Mellon University, and Martin Kenney, a sociologist at the University of California at Davis, found that $7 billion in Japanese investment played a key role in bringing cutting-edge technology to the U.S. "Without Japanese investment, technology and manufacturing organization," they wrote, "we would likely find ourselves with a much smaller domestic steel industry, if any at all." In the automobile industry, relentless competitive pressure has made the Big Three miserable, but it has also taught them to build a better car. What's true for steel and automobiles has also been true for electronics. In St. Louis, an executive of MEMC Electronics Materials told me how processes that his company learned in Japan have made the company's U.S. plants 20 percent more efficient. And Japan's quality revolution has forced companies such as Motorola to reduce defects from 6,000 per million to 40 per million. The pattern holds even for convenience stores. Japanese 7-Eleven stores are half the size, yet sell twice as much as their U.S. counterparts. Now they're teaching some of these techniques to American 7-Eleven, whose parent company, Southland Corp., they bought in 1991. International commerce, unlike war, is a positive-sum game: In the long run, everyone wins. We shouldn't be surprised, then, that figures on manufacturing output and productivity counter the idea that the U.S. industrial base is being eviscerated by foreigners. Unquestionably, Japan has particular trade policies and practices that are harmful and ought to be changed (as does Europe and America). There are plenty of issues to complain to the Japanese about. But destroying the U.S. industrial base is certainly not one of them.