nettime: The Perils of Techno-Globalism - Alan Tonelson

[Pit Schultz <pit@contrib.de>]

ISSUES IN SCIENCE AND TECHNOLOGY
Summer 1995
The Perils of Techno-Globalism
By Alan Tonelson

Don't get me wrong. I admire ideology as much as anyone. It's an integral
part of all public affairs. It enables us to organize our knowledge in
useful ways, and it gives essential direction not only to our planning but
to our speculation and investigation.

But there are ideologies that are grounded in nothing but dreams about the
future and ideologies that are grounded in observable present-day realities.
U.S. technology policy today is in danger of becoming dominated by the
former.

Techno-globalism is as good a name as any for the ascendant approach. Its
main ingredients: a not entirely coherent mixture of early 19th- century
economics; a corresponding contempt for national governments; an absolutist,
Wilsonian faith in international institutions; and the interdependence
theory embedded in Walt Disney's "It's a Small World" theme song. Its main
message: Americans should trust in the steadily accelerating forces of
international economic and technological integration to serve their national
and individual interests. P.S.: They have no real choice in the matter. And
any attempts by national authorities to influence these forces for their
country's benefit are bound to backfire to everyone's regret.

Since the 1994 elections awarded control of Congress to the Republican
party, techno-globalists in its ranks have been taking aim at many of the
U.S. government's programs for promoting the commercialization of new
technologies, at conditions that have been placed on foreign participation
in these programs, and at numerous export-promotion programs that spring
from these interventionist impulses.

None of these programs is beyond criticism, and in a period of budget
austerity, all expenditures of public funds should be scrutinized carefully
and held to the most exacting standards. But the rise of techno-globalism
heightens the odds that these programs will be judged not empirically--on
their record or capability for enhancing U.S. national interests--but
ideologically--on how closely they conform to a dogma that all but defines
national interest out of existence. As a result, many of the most effective
and promising tools for improving U.S. economic competitiveness could be
cavalierly cast aside.

WHO ARE THEY? Techno-globalists have strongly influenced government policy
since the end of World War II, and even since major popular concerns about
U.S. economic competitiveness first emerged in the early 1980s. They come in
several different varieties. Some, such as the quasi-libertarian analysts of
the Cato Institute and the only slightly less dogmatic laissez-faire
champions of the Heritage Foundation and the American Enterprise Institute,
deny that international economic or technological activity can be strategic
at all. They do not believe that countries can win or lose in any meaningful
sense in these interactions (provided all parties call themselves
capitalists), or that countries are even significant actors at all. These
analysts have also indiscriminately endorsed all forms of international
capital flows as beneficial to investor and recipient alike, and they have
criticized recent government initiatives in trade and technology development
that question the belief that markets never fail. In the 15 months, their
attacks on the very notion of national competitiveness have been joined by
Stanford University economist Paul Krugman, whose pioneering work in
strategic trade theory gave impetus to the competitiveness movement.

Other analysts bolster techno-globalism by arguing that technology
development is rapidly pushing humanity into a new era that will alter our
politics, our work, our families, and our values beyond recognition. Their
techno-utopias differ in some important details, but whether it is Japanese
management-guru-turned-political reformer Kenichi Ohmae; free- market
crusader George Gilder; or Newt Gingrich's prophets of choice, the Tofflers,
all foresee an age in which the dizzying pace of technological change will
place a premium on smallness, individualism, and improvisation rather than
on bigness, institutions, and order. We are living, in other words, in a
modern Cretaceous period, in which agile economic mammals are about to
dethrone lumbering economic dinosaurs.

Finally, techno-globalism has been greatly strengthened by the writings of
Labor Secretary Robert Reich. Struggling throughout the 1980s to reconcile
his concern for faltering U.S. competitiveness and his desire to avoid a
protectionist label, he squared the circle by sharply distinguishing between
the U.S. workforce and the U.S. companies that had always provided the bulk
of their jobs. In his influential Harvard Business Review article "Who is
Us?" he insisted that multinational corporations and the globalization of
economic and technological activity had greatly loosened the link between
the prosperity of a nation and that of its companies. Therefore, Reich
argued, competitiveness policy should focus on upgrading the workforce, on
the assumption that multinationals from all countries are equally inclined
to perform manufacturing, research and development (R&D), engineering, and
design wherever qualified workers can be found.

Reich and other techno-globalists vigorously deny that they are ideologues
at all. Their analyses, they insist, reflect nothing more than unblinkered
descriptions of objective reality. Their prescriptions flow as logically and
inevitably from their descriptions as a sum flows from two addends.

But economics and public policy are not hard sciences, and it is precisely
because techno-globalists have so successfully cultivated images of
neutrality and detachment that the subjective bases of their
positions--their ideology--must be spotlighted and scrutinized.

GOOD STORYTELLERS The superficial appeal of techno-globalism today, and
especially its sweeping disparagement of the public sector, is easily
understood. A government that struggles to deliver the mail on time seems a
poor candidate to manage exploding amounts of information and instantaneous,
multibillion-dollar capital movements. Moreover, the benefits of largely
uncontrolled technology advance and diffusion are visible in every shopping
mall in the country. The media is filled with the kinds of Horatio Alger
stories that Americans love of individuals winning high-tech fame and
fortune armed with nothing but great ideas, pluck, and a little venture
capital. Those left behind are easily dismissed as too dumb or lazy to
invest in an education.

In this environment, concepts such as the national interest seem downright
retrograde, and the abdication of core public responsibilities is readily
described as visionary leadership. The techno-globalists find receptive
audiences for their position that the only proper purpose of government
economic and technology policy is to promote the fastest possible global
diffusion of technology and the greatest possible degree of capital
mobility, irrespective of how these flows affect individual countries or
groups within countries, or of other countries' efforts to gain advantage.

Meanwhile, powerful political, media, and financial elites in the United
States, who are benefiting the most from the new global economy, are
especially attracted to the benign techno-globalist view of international
economic and technological relations. True to the assumptions of
19th-century neoclassical economic thinking (but contrary to the remarkably
nuanced writings of Adam Smith), the techno-globalists maintain that even
unilateral laissez-faire policies will leave the United States better off
than will a policy of unilateral countermoves. In their view, the United
States does not need to worry about its relative international position as
long as the open world economy to which it belongs is growing healthily.

When disputes among countries do threaten to slow growth for all, the
techno-globalists say, they should be resolved by impartial international
bodies applying universally accepted principles of equity and efficiency.
These organizations, moreover, should seek to prevent such disputes from
breaking out to start with and work proactively to enhance global well-being
by organizing international technology cooperation programs.

As shown by the latest developments in the U.S. debate over technology
policy, and over economic policy in general, techno-globalism has mounted a
comeback in Washington. Just a few short years ago, competitiveness concerns
had generated strong bipartisan support for the judicious use of trade and
technology policies to improve the United States' relative economic
performance. But today, even these limited programs are on the chopping
block. Relatively new initiatives such as the Advanced Technology Program
and the Technology Reinvestment Program, more established presences such as
export promotion efforts, and the Department of Commerce itself--in many
ways the lead U.S. competitiveness agency--have all found not only their
administrative competence but their very existence challenged.

Saving money and shrinking government for its own sake are clearly the
dominant concerns, but the techno-globalists have provided a crucial
intellectual fig leaf: the assurance that none of this is necessary anyway.
More specifically, they have attacked these programs' explicit attempts to
promote increases in the number of high-value jobs, chiefly in R&D,
engineering, and advanced manufacturing, in the United States.

THEORY TRUMPS REALITY Techno-globalist positions can be attacked on
relatively narrow policy grounds. For example, for entirely understandable
reasons, if Congress is going to appropriate public funds for technology
development, it is going to insist that most of the benefits flow to
Americans in readily identifiable ways. Those techno- globalists who do
favor a national government role in technology development may believe that
any addition to the world's stock of technology automatically will benefit
the United States. But in their current skeptical mood, taxpayers and
members of Congress will expect more direct payoffs.

Moreover, unfortunately for the techno-globalists, most of them live in the
Anglo-Saxon countries. Their doctrine is neither practiced nor even taken
seriously elsewhere. Therefore, techno-globalists wishing to dismantle all
worldwide barriers to economic or technology flows face a major practical
problem: Their call for unilateral U.S. disarmament in technology policy
ignores the most elemental precepts of diplomacy. Without the leverage
created by U.S. conditions on these flows, what incentives will foreign
governments have to eliminate their own more formidable barriers?

In addition, the techno-globalist argument that investment conditions and
performance standards will scare foreign capital and technology away from
the U.S. market (see Richard Florida, "Technology Policy for a Global
Economy," Issues, Spring 1995) is a triumph of theory over reality. No
country on earth provides a more open investment climate, a deeper, more
diversified capital market, and such a rich variety of investment
opportunities as the United States. A country that still accounts for nearly
one-fourth of world output (representing a $6.8 trillion annual market for
goods and services), that boasts international technology leadership in
numerous sectors, and that offers tens of millions of highly skilled (and
increasingly cheap) workers in a remarkably stable political climate will
always loom large in any international company's investment plans. To argue
that conditioning foreign companies' access to a handful of miniscule
government technology programs will lead them to boycott this market ignores
fundamental economic and business realities.

DUBIOUS ASSUMPTIONS Techno-globalism's major weaknesses are its assumptions
about the workings of international politics and economics.
Techno-globalists persuasively describe a world that sounds highly desirable
but, like history's other failed ideologies, bears little relation to the
world we live in. And techno-globalism gives us no realistic advice on how
to get there.

The most important and weakest of these assumptions are: *Inward foreign
direct investment (FDI) is always good for the recipient; therefore any
attempts to restrict or channel it are foolish. *Globalization,
interdependence, and integration can either only assume one form or can be
influenced constructively only by market forces and not by governments.
*Ceding sovereignty to multilateral dispute-resolution systems is always in
the interest of the United States.

The first assumption is at one level trivial and at another misleading. It
is trivial because increases in the world's capital stock are, of course,
generally good. FDI certainly can and has added not only to recipient
countries' wealth but to their wealth-creating capabilities (the real
measure of an economic policy's worth). This has been true when the
investments have been made voluntarily as well as when they have been
induced through performance requirements imposed by recipient countries.

But not surprisingly, a phenomenon as large as FDI (flows of which, after
all, now significantly exceed worldwide trade flows) comes in many different
varieties. As a result, the broader the generalization about FDI's effects,
the less accurate it will be. For example, a "greenfield" investment,
involving the construction of a new facility, usually adds more to an
economy than does a takeover of an existing facility. Only 15 percent of the
FDI in the United States during the foreign investment boom of the 1980s was
greenfield investment.

The reasons may not be obvious to techno-globalists, but they are obvious to
businessmen and policymakers around the world. Already- existing successful
companies are very attractive investment targets. Successful companies with
leading-edge technologies or those that provide key components to U.S.
industries upstream in the manufacturing process are even more appealing
targets or partners. Recall, for example, the 1988 takeover of Monsanto
Electronic Materials (the only U.S. merchant manufacturer of eight-inch
silicon chips) by the German company Heuls A.G.

Similarly, investments in manufacturing, design, or R&D add more to an
economy than does investment in distribution networks, whose main effect is
to pull in imports that often displace domestically made products. Further,
transplant factories that engage in assembly of imported parts and
components can hurt an economy when their products capture market share from
indigenous factories that engage in higher-value manufacturing, perform more
R&D and engineering, and use more local content. This is precisely what has
happened in the U.S. auto industry.

The competitive effects of FDI are not always positive, either. As Laura D.
Tyson, chair of the National Economic Council, noted in her 1992 study Who's
Bashing Whom?, FDI can sometimes not only displace or deter indigenous
investment by U.S. producers (as the auto industry discovered), it can also
reduce overall market competition both nationally and globally by creating a
more concentrated industry able to exercise market power. Last but not
least, the acquisition of essential military or militarily relevant
technologies can threaten U.S. autonomy in matters of national security.

Finally, investors from different countries tend to behave in different
ways, frequently reflecting the different kinds of capitalist systems they
come from. The most striking differences among foreign direct investors in
the U.S. economy are found between West European and Japanese entities.
Investments by the former are heavily concentrated in manufacturing and R&D;
investments by the latter are more evenly split between manufacturing and
R&D facilities on the one hand and distribution networks on the other.

European manufacturers in the United States also usually use many more
locally made parts and components than do their Japanese counterparts. By a
similar token, local content levels achieved by Japanese direct investors in
Europe lag well behind those achieved by U.S. companies, although European
Union efforts to push for higher local content levels seem to be making
progress.

The most important point, however, is that national policy must address the
varying real world consequences of different kinds of FDI. Policy